Tempur-Pedic Reports Earnings

Furniture World Magazine

Tempur-Pedic International Inc. (NYSE: TPX - News), the leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, announced financial results for the fourth quarter and year ended December 31, 2008. The Company also announced financial guidance for 2009. FOURTH QUARTER FINANCIAL SUMMARY -- Adjusted earnings per share (EPS) were $0.17 per diluted share in the fourth quarter of 2008 as compared to GAAP EPS of $0.52 per diluted share in the fourth quarter of 2007. GAAP EPS in the fourth quarter of 2008 was $0.01, and reflects the tax provision related to the previously announced repatriation of foreign earnings. The Company reported adjusted net income of $12.7 million for the fourth quarter of 2008 as compared to GAAP net income of $39.9 million in the fourth quarter of 2007. GAAP net income in the fourth quarter of 2008 was $1.1 million. For additional information regarding adjusted EPS and adjusted net income (which are non-GAAP measures), please refer to the reconciliation and other information included in the attached schedule. -- Net sales declined 35% to $189.1 million in the fourth quarter of 2008 from $289.0 million in the fourth quarter of 2007. Net sales in the domestic segment declined 39%, while international segment net sales declined 27%. On a constant currency basis, international segment net sales decreased 19%. -- Mattress units declined 31% globally. Mattress units declined 39% domestically and 21% internationally. Pillow units declined 37% globally. Pillow units declined 48% domestically and 24% internationally. -- Gross profit margin was 43.0% as compared to 48.8% in the fourth quarter of 2007. The gross profit margin declined as a result of increased commodity costs, fixed cost de-leverage related to lower production volumes, and a significant net sales decline in the higher margin Direct channel, partially offset by efficiencies in manufacturing productivity. -- Operating profit margin was 13.4% as compared to 23.4% in the fourth quarter of 2007. Operating profit margin decline resulted from gross profit margin declines and operating expense de-leverage related to lower sales levels. The Company reduced operating expenses by $17.3 million to $56.0 million in the fourth quarter of 2008 from $73.3 million in the fourth quarter of 2007. -- Reflecting the Company's continued focus on generating cash, operating cash flow increased to $29.5 million in the fourth quarter of 2008 from a use of $3.5 million in the fourth quarter of 2007. -- During the quarter, the Company reduced Total debt by $99.4 million to $419.3 million. As of December 31, 2008, the Company's ratio of Funded debt to EBITDA was 2.44 times, well within the covenant in its credit facility, which requires that this ratio not exceed 3.00 times. For additional information about EBITDA and Funded debt (which are non-GAAP measures), please refer to the reconciliation and other information included in the attached schedule. -- During the quarter, the Company executed the first phase of its previously announced repatriation of foreign earnings. Currently, the Company anticipates repatriating approximately $150.0 million, up from the previously announced $140.0 million. The Company has recorded an $11.6 million tax provision associated with the entire $150.0 million repatriation initiative. FULL YEAR 2008 FINANCIAL SUMMARY -- Adjusted earnings per share (EPS) were $0.94 per diluted share for the full year 2008 as compared to GAAP EPS of $1.74 per diluted share for the full year 2007. GAAP EPS was $0.79 for the full year 2008, and includes the tax provision effect related to the previously announced repatriation of foreign earnings. -- Net sales declined 16% to $927.8 million for the full year 2008 from $1,106.7 million for the full year 2007. Net sales in the domestic segment declined 21%, while international segment net sales declined 6%. On a constant currency basis, international segment net sales decreased 11%. -- Operating cash flow was $198.4 million for the full year 2008 up from $126.4 million for the full year 2007. -- For the full year 2008, the Company lowered Total debt by $182.7 million to $419.3 million. Chief Executive Officer Mark Sarvary commented, "During the fourth quarter we executed well in a challenging environment. While consumer spending worsened, we responded quickly to improve earnings. At the same time we substantially improved our balance sheet through a focus on working capital and other cash generating initiatives, including our repatriation. As a result we enter 2009 well positioned financially. Mr. Sarvary concluded, "As we continue to face this challenging economic environment our goal is to further strengthen our competitive position. Across our operations, we are taking steps to improve margins and reduce costs. At the same time we are focused on a series of strategic initiatives to drive sales in the short term and to position us for growth when the economy recovers." Chief Financial Officer Dale Williams commented, "In this economic environment, sales visibility is low. We have established our 2009 sales guidance assuming unit volumes will not improve from the fourth quarter rate coupled with a modest benefit from seasonality and price increases. We are positioned to improve gross margins through productivity and easing commodity costs. We project we will remain in compliance with the covenants in our credit facility." 2009 Financial Guidance The Company issued full year 2009 guidance for net sales and earnings per share. It currently expects net sales for 2009 to range from $770 million to $790 million. It currently expects EPS for 2009 to range from $0.70 to $0.90 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. About the Company: Tempur-Pedic International Inc. (NYSE: TPX - News) manufactures and distributes mattresses and pillows made from its proprietary TEMPUR® pressure-relieving material. It is the worldwide leader in premium sleep. 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 headquarters for Tempur-Pedic International is in Lexington, KY. For more information, visit http://www.tempurpedic.com or call 800-805-3635.