January 22, 2009

Tempur-Pedic Reports Fourth Quarter and Full Year Earnings


Reports Fourth Quarter Adjusted EPS of $0.17; GAAP EPS of $0.01

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.

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. 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.

http://www.tempurpedic.com

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