Tempur-Pedic Reports Fourth Quarter and Full Year Earnings
LEXINGTON, Ky., Jan 22, 2009 /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, 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.
Conference Call Information
Tempur-Pedic International will host a live conference call to discuss financial results today, January 22, 2009 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 888-203-7667. 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 22, 2009 at 8:00 p.m. Eastern Time through January 29, 2009. To listen to the replay, dial 888-203-1112, participant code 4171447.
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. These forward-looking statements include, without limitation, statements relating to the Company's plans to repatriate foreign earnings and further improve financial flexibility and its business; the Company's initiatives to drive sales and position the Company for growth; and the Company's expectations regarding net sales and earnings per share for 2009. All forward looking statements 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, financial and industry conditions, particularly in the retail sector, as well as consumer confidence and the availability of consumer financing; the Company's ability to reduce expenses to align with reduced sales levels; 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 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, 2008 2007 Chg % 2008 2007 Chg % Net sales $189,121 $288,954 (35)% $927,818 $1,106,722 (16)% Cost of sales 107,752 147,966 526,861 571,896 Gross profit 81,369 140,988 (42)% 400,957 534,826 (25)% Selling and marketing expenses 34,444 48,944 172,350 193,574 General, administrative and other expenses 21,604 24,363 94,743 97,138 Operating income 25,321 67,681 (63)% 133,864 244,114 (45)% Other expense, net: Interest expense, net (5,493) (9,090) (25,123) (30,484) Other expense, net (324) (220) (1,319) (756) Total other expense (5,817) (9,310) (26,442) (31,240) Income before income taxes 19,504 58,371 (67)% 107,422 212,874 (50)% Income tax provision 18,449 18,441 48,554 71,415 Net income $1,055 $39,930 (97)% $58,868 $141,459 (58)% Earnings per common share: Basic $0.01 $0.53 $0.79 $1.77 Diluted $0.01 $0.52 $0.79 $1.74 Weighted average common shares outstanding: Basic 74,833 74,815 74,737 79,831 Diluted 74,920 76,190 74,909 81,256 TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) December 31, December 31, 2008 2007 Chg % ASSETS Current Assets: Cash and cash equivalents $15,385 $33,315 Accounts receivable, net 99,811 163,730 Inventories 60,497 106,533 Prepaid expenses and other current assets 9,233 11,133 Deferred income taxes 11,888 11,924 Total Current Assets 196,814 326,635 (40)% Property, plant and equipment, net 185,843 208,370 Goodwill 192,569 198,286 Other intangible assets, net 66,823 68,755 Deferred financing costs and other non-current assets 4,482 4,386 Total Assets $646,531 $806,432 (20)% LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $41,355 $56,206 Accrued expenses and other current liabilities 65,316 66,080 Income taxes payable 7,783 4,060 Current portion of long-term debt - 288 Total Current Liabilities 114,454 126,634 (10)% Long-term debt 419,341 601,756 Deferred income taxes 28,371 29,645 Other non-current liabilities 11,922 259 Total Liabilities 574,088 758,294 (24)% Stockholders' Equity: Common stock, $.01 par value; 300,000 shares authorized; 99,215 shares issued as of December 31, 2008 and December 31, 2007 992 992 Additional paid in capital 291,018 283,564 Retained earnings 281,422 241,812 Accumulated other comprehensive (loss)/income (12,590) 13,550 Treasury stock, at cost; 24,382 and 24,681 shares as of December 31, 2008 and December 31, 2007, respectively (488,399) (491,780) Total Stockholders' Equity 72,443 48,138 51% Total Liabilities and Stockholders' Equity $646,531 $806,432 (20)% TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES Consolidated Statement of Cash Flows (In thousands) Twelve Months Ended December 31, 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $58,868 $141,459 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 32,756 33,414 Amortization of deferred financing costs 1,060 1,029 Amortization of stock-based compensation 8,041 6,728 Bad debt expense 8,110 5,997 Deferred income taxes 2,423 (8,961) Foreign currency adjustments (1,183) 423 Loss on sale of equipment 666 324 Changes in operating assets and liabilities: Accounts receivable 51,231 (20,536) Inventories 45,758 (38,216) Prepaid expenses and other current assets 1,695 (3,226) Accounts payable (15,676) 1,861 Accrued expenses and other current liabilities 535 3,532 Income taxes 4,110 2,533 Net cash provided by operating activities 198,394 126,361 CASH FLOWS FROM INVESTING ACTIVITIES: Payments for trademarks and other intellectual property (870) (1,057) Purchases of property, plant and equipment (10,494) (16,149) Acquisition of businesses, net of cash acquired (1,529) (5,805) Proceeds from sale of equipment 384 140 Proceeds from escrow settlement 7,141 - Net cash used by investing activities (5,368) (22,871) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term revolving credit facility 127,383 420,547 Repayments of long-term revolving credit facility (251,536) (146,293) Repayments of long-term debt (1,359) (45,488) Proceeds from Series A Industrial Revenue Bonds - 15,380 Repayments of Series A Industrial Revenue Bonds (57,785) (5,760) Proceeds from the issuance of common stock 695 8,175 Excess tax benefit from stock based compensation 399 11,073 Treasury stock repurchased - (319,884) Dividends paid to stockholders (17,933) (23,811) Payments for deferred financing costs and other (14) (1,581) Net cash used by financing activities (200,150) (87,642) NET EFFECT OF EXCHANGE RATE CHANGES ON CASH (10,806) 1,679 (Decrease) increase in cash and cash equivalents (17,930) 17,527 CASH AND CASH EQUIVALENTS, beginning of period 33,315 15,788 CASH AND CASH EQUIVALENTS, end of period $15,385 $33,315
Summary of Channel Sales
The Company generates sales through four distribution channels: retail, direct, healthcare and third party. The retail channel sells to furniture, specialty and department stores globally. The direct channel sells directly to consumers. The healthcare channel sells to hospitals, nursing homes, healthcare professionals and medical retailers. The third party channel sells to distributors in countries where Tempur-Pedic International does not operate its own distribution company.
The following table highlights net sales information, by channel and by segment, for the fourth quarter of 2008 compared to 2007:
($ in thousands) CONSOLIDATED DOMESTIC INTERNATIONAL Three Months Ended Three Months Ended Three Months Ended December 31, December 31, December 31, 2008 2007 2008 2007 2008 2007 Retail $157,652 $238,556 $93,332 $153,498 $64,320 $85,058 Direct 10,098 18,996 8,496 16,084 1,602 2,912 Healthcare 10,638 15,434 3,226 4,897 7,412 10,537 Third Party 10,733 15,968 3,342 4,295 7,391 11,673 Total $189,121 $288,954 $108,396 $178,774 $80,725 $110,180 Summary of Product Sales A summary of net sales by product is reported below: ($ in thousands) CONSOLIDATED DOMESTIC INTERNATIONAL Three Months Ended Three Months Ended Three Months Ended December 31, December 31, December 31, 2008 2007 2008 2007 2008 2007 Mattresses $124,755 $196,614 $75,695 $129,054 $49,060 $67,560 Pillows 25,990 41,020 10,591 19,987 15,399 21,033 Other 38,376 51,320 22,110 29,733 16,266 21,587 Total $189,121 $288,954 $108,396 $178,774 $80,725 $110,180
Summary of Channel Sales
The following table highlights net sales information, by channel and by segment, for the full year of 2008 compared to 2007:
($ in thousands) CONSOLIDATED DOMESTIC INTERNATIONAL Twelve Months Ended Twelve Months Ended Twelve Months Ended December 31, December 31, December 31, 2008 2007 2008 2007 2008 2007 Retail $781,105 $919,913 $500,513 $625,904 $280,592 $294,009 Direct 47,597 79,748 39,666 68,865 7,931 10,883 Healthcare 47,087 50,846 15,276 15,725 31,811 35,121 Third Party 52,029 56,215 15,249 14,855 36,780 41,360 Total $927,818 $1,106,722 $570,704 $725,349 $357,114 $381,373 Summary of Product Sales A summary of net sales by product is reported below: ($ in thousands) CONSOLIDATED DOMESTIC INTERNATIONAL Twelve Months Ended Twelve Months Ended Twelve Months Ended December 31, December 31, December 31, 2008 2007 2008 2007 2008 2007 Mattresses $631,308 $768,530 $412,295 $535,706 $219,013 $232,824 Pillows 117,900 142,114 50,772 68,342 67,128 73,772 Other 178,610 196,078 107,637 121,301 70,973 74,777 Total $927,818 $1,106,722 $570,704 $725,349 $357,114 $381,373 TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES Reconciliation of Adjusted Net income, Adjusted Earnings per share, EBITDA to Net Income and Funded debt to Total debt Non-GAAP Measures (In thousands, except per share amounts)
The Company provides information regarding Adjusted Net income, Adjusted Earnings per share, EBITDA and Funded debt which are not recognized terms under GAAP (Generally Accepted Accounting Principles) and do not purport to be alternatives to Net income as a measure of operating performance or Total debt. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. A reconciliation of Adjusted Net income, Adjusted Earnings per share and EBITDA to the Company's Net income and Earnings per share and a reconciliation of Funded debt to Total debt are provided below. Management believes that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the impact of the repatriation of foreign earnings. Management also believes that the use of EBITDA and Funded debt provides investors with useful information with respect to the terms of the Company's credit facility.
Reconciliation of Adjusted Net income to Net income
The following table sets forth the reconciliation of the Company's reported Net income for the twelve months ended December 31, 2008 to the calculation of Adjusted Net income for the three and twelve months ended December 31, 2008: Three Months Ended Twelve Months Ended December 31, 2008 December 31, 2008 GAAP Net income $1,055 $58,868 Plus: Tax provision related to repatriation of foreign earnings 11,631 11,631 Adjusted Net income $12,686 $70,499 GAAP Earnings per share, diluted $0.01 $0.79 Tax provision related to repatriation of foreign earnings 0.16 0.15 Adjusted Earnings per share, diluted $0.17 $0.94 Reconciliation of EBITDA to Net income
The following table sets forth the reconciliation of the Company's reported Net income for the twelve months ended December 31, 2008 to the calculation of EBITDA for the twelve months ended December 31, 2008:
Twelve Months Ended December 31, 2008 GAAP Net income $ 58,868 Plus: Interest expense 25,123 Income taxes 48,554 Depreciation & Amortization 40,797 EBITDA $ 173,342 Reconciliation of Funded debt to Total debt
The following table sets forth the reconciliation of the Company's reported Total debt to the calculation of Funded debt:
As of December 31, 2008 GAAP basis Total debt $ 419,341 Plus: Letters of credit outstanding 2,871 Funded debt $ 422,212 Calculation of Funded debt to EBITDA As of December 31, 2008 Funded debt $ 422,212 EBITDA 173,342 2.44 times
SOURCE Tempur-Pedic International Inc.
Copyright (C) 2009 PR Newswire. All rights reserved