EX-99.1 2 exhibit991.htm PRESS RELEASE exhibit991.htm
 
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TEMPUR-PEDIC REPORTS FOURTH QUARTER AND FULL YEAR EARNINGS
 
 
- Net Sales Up 13% in Fourth Quarter
 
 
- Full Year Net Sales Exceed $1.1 Billion

LEXINGTON, KY, January 24, 2008– Tempur-Pedic International Inc. (NYSE: TPX), the leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, today announced financial results for the fourth quarter and year ended December 31, 2007. The Company also announced financial guidance for 2008.

FOURTH QUARTER 2007 FINANCIAL SUMMARY
·  
Earnings per share (EPS) increased to $0.52 per diluted share in the fourth quarter of 2007 as compared to $0.36 per diluted share in the fourth quarter of 2006. EPS in the fourth quarter of 2006 was reduced by a $10.7 million pre-tax charge to income for a loss on extinguishment of debt.

·  
Net sales rose 13% to $289.0 million in the fourth quarter of 2007 from $256.6 million in the fourth quarter of 2006. Retail sales increased 17% worldwide.

·  
The Company achieved net sales growth across all product lines both domestically and abroad. Worldwide mattress revenue increased 14%.

FULL YEAR 2007 FINANCIAL SUMMARY
·  
EPS was $1.74 per diluted share for the full year 2007 as compared to $1.28 per diluted share for the full year 2006, an increase of 36%.

·  
Net sales for the full year 2007 totaled $1.107 billion, 17% higher than net sales for the full year 2006. Retail channel sales worldwide increased 21%.

The Company reported net income of $141.5 million for the full year 2007 as compared to $112.3 million in the full year 2006. Net income results include stock-based compensation expense, which increased 76% to $6.7 million in 2007 as compared to $3.8 million in 2006. In addition, net income results in 2007 reflect a one-time favorable tax rate reduction related to the elimination of certain valuation allowances for net operating loss carry forwards in two foreign tax jurisdictions.

President and Chief Executive Officer H. Thomas Bryant commented, “Tempur-Pedic achieved outstanding results in 2007 and we are pleased that we exceeded the goals we established at the beginning of the year. The company delivered growth across all product lines both domestically and abroad. In the retail channel, we substantially improved account productivity while expanding floor space. We introduced several new products around the world, which have been received very positively. And, most important to our long term objectives, we improved brand awareness, increased market share and expanded capacity by opening the world’s largest mattress factory. In addition, we maintained the profitability of the business while absorbing the increased cost of starting up our Albuquerque manufacturing facility.

“In the fourth quarter, despite a slowing macro environment, Tempur-Pedic achieved double digit retail sales growth driven by solid mattress sales growth. Gross profit margin trended to the highest quarterly level of the year, although channel and product mix modestly impacted it relative to our prior expectations.
“We approach 2008 with confidence, yet a degree of caution as a result of the uncertainty in the U.S. economy. Given this uncertainty, we believe it is prudent to plan more conservatively in terms of 2008 sales growth. However, as noted before, we strongly believe the mattress industry is in the early stages of a long-term shift away from innersprings to specialty bedding. In addition, while Tempur-Pedic is already the industry leader for profitability, we remain focused on our goal of ultimately becoming the worldwide bedding leader in terms of both sales and profitability.

“In 2008, our aim is to build on the progress made in 2007. We will continue our efforts to expand market share around the world driven by growing brand awareness. We plan to accomplish this by continuing to implement our advertising campaign in the U.S. and introduce it into international markets. We will also focus on expanding floor space as this is a key driver of market share.

“In addition, we believe expanding product offerings will help Tempur-Pedic continue to substantially outperform the industry. We are planning to unveil several new mattresses and pillows around the world during 2008. For example, next week, we will introduce a new mattress model in the U.S., The AlluraBed by Tempur-Pedic™. This model, featuring a very luxurious pillow-top made from our world renowned TEMPUR-HD™, will have a suggested retail price point of $3,999 for a queen size mattress.

“From an operational perspective, we have several initiatives underway to continue improving productivity and drive margin gains. These initiatives cross all areas of our company including manufacturing, distribution, and sourcing as well as staying lean in terms of operational expenses. As a result, we anticipate expanding operating leverage will help drive earnings per share growth.

Bryant concluded, “We enter 2008 with a solid operating and financial position. We have a diverse business model and a growing assortment of compelling products. Because our products are sold in over 70 countries, our financial performance is geographically diverse. Our go-to-market strategy of building brand awareness and focusing on premium price points has proven to be a significant competitive advantage. We are focused on long term growth opportunities and will continue to invest in new products, new markets, and research and development. In summary, we are very confident in our long term prospects and look forward to what we expect will be a very successful new year.”

Share Repurchase Program
During the fourth quarter of 2007, the Company purchased 0.7 million shares of its common stock for a total cost of $19.9 million. Under its existing share repurchase authorization, the Company has $280.1 million available for repurchase.

2008 Financial Guidance
The Company issued full year 2008 guidance for net sales and earnings per share. It currently expects net sales for 2008 to range from $1.195 billion to $1.250 billion, an increase of 8% to 13% over 2007. It currently expects EPS for 2008 to range from $2.03 to $2.20 per diluted share. This guidance reflects an increase of 17% to 26% compared to 2007 EPS of $1.74 per diluted share. The Company’s earnings guidance reflects the Company’s traditional practice of incurring heavier marketing expenditures as a percentage of sales in the first quarter of each year. The Company also noted its expectations are based on information available at the time of this release, and are subject to changing conditions, many of which are outside the Company’s control.

This guidance does not take into account the anticipated effect of any additional share repurchases.
Conference Call Information
Tempur-Pedic International will host a live conference call with President and Chief Executive Officer H. Thomas Bryant and Chief Financial Officer Dale Williams to discuss financial results today, January 24, 2008 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 877-675-4749. The call is also being webcast and can be accessed on the investor relations section of the Company’s website, www.tempurpedic.com.
 
For those who cannot listen to the live broadcast, a telephone replay of the call will be available from January 24, 2008at 8:00 p.m. Eastern Time through January 31, 2008. To listen to the replay, dial 888-203-1112, participant code 1191674.
 
Forward-looking Statements
This release contains "forward-looking statements,” within the meaning of federal securities laws, which include information concerning one or more of the Company's plans, objectives, goals, strategies, and other information that is not historical information. When used in this release, the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including without limitation, statements relating to the Company’s goal of becoming the worldwide bedding leader, its plans to grow brand awareness, roll out the Company’s new advertising campaign, expand floor space and introduce new products, initiatives to continue improving productivity and drive margin gains and earnings per share growth, and net sales and earnings per share for 2008, are based upon current expectations and beliefs and various assumptions. There can be no assurance that the Company will realize these expectations or that these beliefs will prove correct.

There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements contained in this release. Numerous factors, many of which are beyond the Company's control, could cause actual results to differ materially from those expressed as forward-looking statements. These risk factors include general economic and industry conditions, particularly in the retail sector, as well as consumer confidence; uncertainties arising from global events; the effects of changes in foreign exchange rates on the Company’s reported earnings; consumer acceptance of the Company’s products; industry competition; the efficiency and effectiveness of the Company’s advertising campaigns and other marketing programs; the Company’s ability to increase sales productivity within existing retail accounts and to further penetrate the US retail channel, including the timing of opening or expanding within large retail accounts; the Company’s ability to address issues in certain underperforming international markets; the Company’s ability to continuously improve and expand its product line, maintain efficient, timely and cost-effective production and delivery of its products, and manage its growth; changes in foreign tax rates, including the ability to utilize tax loss carry forwards; and rising commodity costs. Additional information concerning these and other risks and uncertainties are discussed in the Company's filings with the Securities and Exchange Commission, including without limitation the Company's annual report on Form 10-K under the headings "Special Note Regarding Forward-Looking Statements" and "Risk Factors." Any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update any forward-looking statements for any reason, including to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

About the Company
Tempur-Pedic International Inc. (NYSE:  TPX) manufactures and distributes mattresses and pillows made from its proprietary TEMPUR® pressure-relieving material.It is the worldwide leader in premiumsleep, the fastest growing segment of the estimated $13 billion global mattress market. The Company is focused on developing, manufacturing and marketing advanced sleep surfaces that help improve the quality of life for people around the world. The Company’s products are currently sold in over 70 countries under the TEMPUR® and Tempur-Pedic® brand names. World headquartersfor Tempur-Pedic International is in Lexington, KY.For more information, visit http://www.tempurpedic.com or call 800-805-3635.

Investor Relations Contact:
Barry Hytinen
Vice President, Investor Relations and Financial Planning & Analysis
800-805-3635

TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share amounts)

 
Three Months Ended
      
Twelve Months Ended
    
 
December 31,
      
December 31,
    
   
2007
    
2006
  
Chg %
    
2007
      
2006
  
Chg %
Net sales
$
288,954
  
$
256,580
  
13%
  
$
1,106,722
    
$
945,045
  
17%
Cost of sales
  
147,966
    
129,835
        
571,896
      
484,507
    
Gross profit
  
140,988
    
126,745
  
11%
    
534,826
      
460,538
  
16%
Selling and marketing expenses
  
48,944
    
44,557
        
193,574
      
171,787
    
General and administrative expenses
  
22,715
    
20,197
        
91,212
      
75,718
    
Research and development expenses
  
1,648
    
697
        
5,926
      
3,728
    
Operating income
  
67,681
    
61,294
  
10%
    
244,114
      
209,305
  
17%
                                 
Other expense, net:
                                
Interest expense, net
  
(9,090
)
  
(6,518
)
      
(30,484
)
    
(23,920
)
  
Loss on extinguishment of debt
  
—
    
(10,722
)
      
(126
)
    
(10,722
)
  
Other income (expense), net
  
(220
)
  
244
        
(630
)
    
102
    
Total other expense
  
(9,310
)
  
(16,996
)
      
(31,240
)
    
(34,540
)
  
Income before income taxes
  
58,371
    
44,298
  
32%
    
212,874
      
174,765
  
22%
Income tax provision
  
18,441
    
13,844
        
71,415
      
62,443
    
Net income
$
39,930
  
$
30,454
  
31%
  
$
141,459
    
$
112,322
  
26%
                                 
Earnings per share:
                                
Basic
$
0.53
  
$
0.37
      
$
1.77
    
$
1.32
    
Diluted
$
0.52
  
$
0.36
      
$
1.74
    
$
1.28
    
Weighted average shares outstanding:
                                
Basic
  
74,815
    
83,110
        
79,831
      
84,922
    
Diluted
  
76,190
    
85,653
        
81,256
      
87,530
    




TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)

 
December 31,
  
December 31,
      
 
2007
  
2006
  
Chg %
  
ASSETS
                    
                     
Current Assets:
                    
     Cash and cash equivalents
$
33,315
    
$
15,788
        
     Accounts receivable, net
  
163,730
      
142,059
        
     Inventories
  
106,533
      
61,736
        
     Prepaid expenses and other current assets
  
11,133
      
8,002
        
     Income taxes receivable
  
—
      
588
        
     Deferred income taxes
  
11,924
      
9,383
        
Total Current Assets
  
326,635
      
237,556
    
37%
  
     Property, plant and equipment, net
  
208,370
      
215,428
        
     Goodwill
  
198,286
      
198,207
        
     Other intangible assets, net
  
68,755
      
70,826
        
     Deferred financing costs and other non-current assets, net
  
4,386
      
3,649
        
Total Assets
$
806,432
    
$
725,666
    
11%
  
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY
                    
                     
Current Liabilities:
                    
     Accounts payable
$
56,206
    
$
51,220
        
     Accrued expenses and other
  
66,080
      
61,050
        
     Income taxes payable
  
4,060
      
—
        
     Current portion of long-term debt
  
288
      
19,497
        
Total Current Liabilities
  
126,634
      
131,767
    
(4%
)
     Long-term debt
  
601,756
      
341,635
        
     Deferred income taxes
  
29,645
      
38,536
        
     Other non-current liabilities
  
259
      
380
        
Total Liabilities
  
758,294
      
512,318
    
48%
  
                     
Stockholders’ Equity:
                    
Common stock, $.01 par value; 300,000 shares
authorized; 99,215 shares issued as of December 31, 2007 and December 31, 2006
  
992
      
992
        
Additional paid in capital
  
283,564
      
264,709
        
Retained earnings
  
241,812
      
140,608
        
Accumulated other comprehensive income
  
13,550
      
3,992
        
Treasury stock, at cost; 24,681 and 15,993 shares as of December 31, 2007 and December 31, 2006, respectively
  
(491,780
)
    
(196,953
)
      
Total Stockholders’ Equity
  
48,138
      
213,348
    
(77%
)
Total Liabilities and Stockholders’ Equity
$
806,432
    
$
725,666
    
11%
  




TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(In thousands)
 

 
Twelve Months Ended
      
 
December 31,
      
   
2007
      
2006
    
Chg %
  
CASH FLOWS FROM OPERATING ACTIVITIES:
                    
Net income
$
141,459
    
$
112,322
        
Adjustments to reconcile net income to net cash provided by operating activities:
                    
          Depreciation and amortization
  
33,414
      
24,828
        
          Amortization of deferred financing costs
  
903
      
1,868
        
          Loss on extinguishment of debt
  
126
      
10,722
        
          Amortization of stock-based compensation
  
6,728
      
3,848
        
          Provision for doubtful accounts
  
5,997
      
3,464
        
          Deferred income taxes
  
(8,961
)
    
(3,828
)
      
          Foreign currency adjustments
  
423
      
40
        
          Loss on sale of equipment and other
  
324
      
488
        
          Changes in operating assets and liabilities:
                    
               Accounts receivable
  
(20,536
)
    
(27,608
)
      
               Inventories
  
(38,216
)
    
21,284
        
               Prepaid expenses and other current assets
  
(3,226
)
    
3,327
        
               Accounts payable
  
1,861
      
12,253
        
               Accrued expenses and other
  
3,532
      
4,066
        
               Income taxes
  
13,606
      
6,434
        
                 Excess tax benefit from stock based compensation
  
(11,073
)
    
(7,693
)
      
Net cash provided by operating activities
  
126,361
      
165,815
    
(24%
)
                     
CASH FLOWS FROM INVESTING ACTIVITIES:
                    
Payments for trademarks and other intellectual property
  
(1,057
)
    
(936
)
      
Purchases of property, plant and equipment
  
(16,149
)
    
(37,211
)
      
Acquisition of businesses
  
(5,805
)
    
—
        
Proceeds from sale of equipment
  
140
      
286
        
Net cash used by investing activities
  
(22,871
)
    
(37,861
)
  
40%
  
                     
CASH FLOWS FROM FINANCING ACTIVITIES:
                    
Proceeds from long-term revolving credit facility
  
420,547
      
277,772
        
Repayments of long-term revolving credit facility
  
(146,293
)
    
(92,500
)
      
Repayments of long-term debt
  
(45,488
)
    
(73,329
)
      
Proceeds from issuance of Series A Industrial Revenue Bonds
  
15,380
      
—
        
Repayment of Series A Industrial Revenue Bonds
  
(5,760
)
    
(5,760
)
      
      Repayments of Senior Subordinated Notes
  
—
      
(97,500
)
      
      Redemption premium on Senior Subordinated Notes
  
—
      
(7,620
)
      
Excess tax benefit from stock based compensation
  
11,073
      
7,693
        
      Common stock issued, including reissuances of Treasury stock
  
8,175
      
4,045
        
      Treasury stock purchased
  
(319,884
)
    
(144,000
)
      
Dividend paid to stockholders
  
(23,811
)
    
—
        
Payments for deferred financing costs
  
(1,581
)
    
(1,277
)
      
Net cash used by financing activities
  
(87,642
)
    
(132,476
)
  
34%
  
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH
  
1,679
      
2,455
        
Increase/(Decrease) in cash and cash equivalents
  
17,527
      
(2,067
)
      
CASH AND CASH EQUIVALENTS, beginning of year
  
15,788
      
17,855
        
CASH AND CASH EQUIVALENTS, end of year
$
33,315
    
$
15,788
    
111%
  


Summary of Channel Sales
The Company generates sales through four distribution channels: retail, direct, healthcare and third party.  The retail channel sells to furniture, specialty and department stores globally.  The direct channel sells directly to consumers.  The healthcare channel sells to hospitals, nursing homes, healthcare professionals and medical retailers.  The third party channel sells to distributors in countries where Tempur-Pedic International does not operate its own distribution company.

The following table highlights net sales information, by channel and by segment, for the fourth quarter of 2007 compared to 2006:

($ in thousands)
  
 
CONSOLIDATED
  
DOMESTIC
  
INTERNATIONAL
  
 
Three Months Ended
  
Three Months Ended
  
Three Months Ended
  
 
December 31,
  
December 31,
  
December 31,
  
 
2007
  
2006
  
2007
  
2006
  
2007
  
2006
  
By Sales Channel
                                    
Retail
   $ 238,556     $ 204,334     $ 153,498     $ 135,169     $ 85,058     $ 69,165  
Direct
     18,996       22,530       16,084       19,418       2,912       3,112  
Healthcare
     15,434       13,376       4,897       3,522       10,537       9,854  
Third Party
     15,968       16,340       4,295       5,045       11,673       11,295  
Total
   $ 288,954     $ 256,580     $ 178,774     $ 163,154     $ 110,180     $ 93,426  

Summary of Product Sales
A summary of net sales by product is reported below:

($ in thousands)
  
 
CONSOLIDATED
  
DOMESTIC
  
INTERNATIONAL
  
 
Three Months Ended
  
Three Months Ended
  
Three Months Ended
  
 
December 31,
  
December 31,
  
December 31,
  
 
2007
  
2006
  
2007
  
2006
  
2007
  
2006
  
Net Sales
                                    
Mattresses
   $ 196,614     $ 172,782     $ 129,054     $ 115,822     $ 67,560     $ 56,960  
Pillows
     41,020       38,872       19,987       19,471       21,033       19,401  
Other
     51,320       44,926       29,733       27,861       21,587       17,065  
Total
   $ 288,954     $ 256,580     $ 178,774     $ 163,154     $ 110,180     $ 93,426  


The following table highlights net sales information, by channel and by segment, for the full year of 2007 compared to 2006:

($ in thousands)
  
 
CONSOLIDATED
  
DOMESTIC
  
INTERNATIONAL
  
 
Twelve Months Ended
  
Twelve Months Ended
  
Twelve Months Ended
  
 
December 31,
  
December 31,
  
December 31,
  
 
2007
  
2006
  
2007
  
2006
  
2007
  
2006
  
By Sales Channel 
                                    
Retail
   $ 919,913     $ 759,792     $ 625,904     $ 517,917     $ 294,009     $ 241,875  
Direct
     79,748       85,482       68,865       75,239       10,883       10,243  
Healthcare
     50,846       45,205       15,725       12,610       35,121       32,595  
Third Party
     56,215       54,566       14,855       16,015       41,360       38,551  
Total
   $ 1,106,722     $ 945,045     $ 725,349     $ 621,781     $ 381,373     $ 323,264  

 
Summary of Product Sales
A summary of net sales by product is reported below:

($ in thousands)
  
 
CONSOLIDATED
  
DOMESTIC
  
INTERNATIONAL
  
 
Twelve Months Ended
  
Twelve Months Ended
  
Twelve Months Ended
  
 
December 31,
  
December 31,
  
December 31,
  
 
2007
  
2006
  
2007
  
2006
  
2007
  
2006
  
Net Sales
                                    
Mattresses
   $ 768,530     $ 651,901     $ 535,706     $ 455,666     $ 232,824     $ 196,235  
Pillows
     142,114       126,335       68,342       60,111       73,772       66,224  
Other
     196,078       166,809       121,301       106,004       74,777       60,805  
Total
   $ 1,106,722     $ 945,045     $ 725,349     $ 621,781     $ 381,373     $ 323,264