Tempur-Pedic Reports First Quarter Earnings Decline

Furniture World Magazine

Tempur-Pedic International Inc., a leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, announced financial results for the first quarter ended March 31, 2008. The Company also announced revised financial guidance for 2008. FINANCIAL SUMMARY -Earnings per share (EPS) decreased to $0.18 per diluted share in the first quarter of 2008 as compared to $0.35 per diluted share in the first quarter of 2007. -Net sales declined 7% to $247.2 million in the first quarter of 2008 from $266.0 million in the first quarter of 2007. Net sales in the domestic segment declined 16%, while international segment net sales increased 10%. On a constant currency basis, international segment net sales decreased 3%. -The Company generated $24.6 million of cash from operating activities, compared to $28.6 million for the first quarter of 2007. -During the quarter, the Company reduced total debt, net of cash by $18.2 million to $550.5 million as compared to year end net debt of $568.7 million. The Company reported net income of $13.5 million for the first quarter of 2008 as compared to $29.8 million in the first quarter of 2007. Net income results for 2008 include a $0.6 million severance-related benefits charge for restructuring activities in the Company's U.S. operations. President and Chief Executive Officer H. Thomas Bryant commented, "The U.S. macroeconomic environment deteriorated during the quarter and contributed to what we believe is a slowdown in the mattress industry. Based on industry data and retailer feedback, we believe average selling prices in the industry are trending lower as many consumers defer high-end mattress purchases. We believe the foregoing factors are the primary reason our domestic segment net sales were below prior expectations. In addition, our international segment experienced weakening consumer trends in several European markets. "With lower than planned sales and an inflationary cost environment, profitability was considerably impacted. First quarter operating expenses were planned and incurred to support a much higher sales level, which negatively impacted operating income. "While we are disappointed in the first quarter results, we generated significant cash flow and reduced our net debt position. Going forward, we have taken decisive actions to align operating expenses with revised sales expectations, and we are executing on a comprehensive plan to improve cash flow and substantially reduce inventories. "We are firmly committed to our business model, focus on premium products and driving innovation. In the past, we have seen retailers and consumers respond exceptionally well to our new product development and technological superiority. Over the next few quarters, we will begin the most extensive new product launch in our company's history. This launch will include new mattress models, advanced technological innovations and new pillow concepts as well as an upgrade to the most widely distributed mattress model in our lineup. We anticipate this launch will be well received by retailers and consumers. Bryant concluded, "We are executing on our business plan and focused on maximizing shareholder value. In summary, we believe we have acted decisively to position the company to gain market share and improve profitability as the macroeconomic environment improves." 2008 Financial Guidance: The Company revised full year 2008 guidance for net sales and earnings per share. It currently expects net sales for 2008 to range from $1.01 billion to $1.07 billion, a decrease of 9% to 3% as compared to 2007. It currently expects EPS for 2008 to range from $1.20 to $1.45 per diluted share. This guidance reflects a decrease of 31% to 17% compared to 2007 EPS of $1.74 per diluted share. The Company 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 effect of any additional share repurchases. Executive Vice President and Chief Financial Officer Dale Williams commented, "As sales trends continue to be weak, we are planning for a scenario where conditions do not improve. Therefore, the low end of our revised guidance is based on assumptions that our U.S. sales trends do not meaningfully change from the declines we experienced in the first quarter, coupled with an assumption that our international business weakens modestly from first quarter trends. We are carefully monitoring business conditions and will be prepared to take additional actions to protect profitability if necessary. We also note that, even at the low end of our sales and EPS guidance, we currently expect to remain in full compliance with the covenants in our senior credit facility for the entire year." About the Company: Tempur-Pedic International Inc. (NYSE:TPX) manufactures and distributes mattresses and pillows made from its proprietary TEMPUR(R) pressure-relieving material. It is the worldwide leader in premium sleep, 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(R) and Tempur-Pedic(R) brand names. World headquarters for Tempur-Pedic International is in Lexington, KY. For more information, visit http://www.tempurpedic.com/ or call 800-805-3635 .