Tempur-Pedic Reports Fourth Quarter and Full Year Earnings
LEXINGTON, Ky., Jan 24, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- 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(TM). This model, featuring a very luxurious pillow- top made from our world renowned TEMPUR-HD(TM), 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, 2008 at 8:00 p.m. Eastern Time through January 31, 2008. To listen to the replay, dial 888-203-1112, participant code 1191674.
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(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.
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 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
SOURCE Tempur-Pedic International Inc.
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