April 16, 2009

Tempur-Pedic Reports First Quarter Earnings


-- Reports EPS of $0.18 -- Gross Profit Margin Increases 250 Basis Points to 46.2% -- Maintains EPS Guidance, Reduces Sales Guidance

LEXINGTON, Ky., April 16, 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 first quarter ended March 31, 2009. The Company also updated financial guidance for 2009.

FIRST QUARTER FINANCIAL SUMMARY

    --  Earnings per share (EPS) were $0.18 per diluted share in the first
        quarter of 2009 as compared to $0.18 per diluted share in the first
        quarter of 2008. The Company reported net income of $13.3 million for
        the first quarter of 2009 as compared to net income of $13.5 million in
        the first quarter of 2008. Net income results for the first quarter of
        2009 include a non-recurring $1.3 million tax charge resulting from a
        change to a foreign tax law.

    --  Net sales declined 28% to $177.1 million in the first quarter of 2009
        from $247.2 million in the first quarter of 2008. On a constant currency
        basis, net sales declined 24%. Net sales in the domestic segment
        declined 28%, while international segment net sales declined 29%. On a
        constant currency basis, international segment net sales declined 18%.

    --  Mattress sales declined 29% globally. Mattress sales declined 29% in the
        domestic segment and 29% in the international segment. On a constant
        currency basis, international mattress sales declined 17%. Pillow sales
        declined 27% globally. Pillow sales declined 25% domestically and 29%
        internationally. On a constant currency basis, international pillow
        sales declined 20%.

    --  Gross profit margin was 46.2% as compared to 43.7% in the first quarter
        of 2008. The gross profit margin increased as a result of lower
        commodity and transportation costs, improved efficiencies in
        manufacturing, and pricing actions taken during the quarter, partially
        offset by fixed cost de-leverage related to lower production volumes.

    --  Operating profit margin was 14.6% as compared to 11.9% in the first
        quarter of 2008. Operating profit margin improvement resulted from the
        expansion in gross profit margin and lower operating expenses. The
        Company reduced operating expenses by $22.7 million to $56.0 million in
        the first quarter of 2009 from $78.7 million in the first quarter of
        2008.

    --  Reflecting the Company's continued focus on generating cash, the
        Company generated $26.0 million of operating cash flow in the first
        quarter of 2009 as compared to $24.6 million in the first quarter of
        2008.

    --  During the quarter, the Company reduced Total debt by $19.3 million to
        $400.0 million. As of March 31, 2009, the Company's ratio of Funded
        debt to EBITDA was 2.38 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.

Chief Executive Officer Mark Sarvary commented, "We executed well during the first quarter. We made solid progress on our long-term initiatives most notably our initiative to drive gross margins. An easing commodity environment and our productivity initiatives have generated substantial margin improvement despite lower volumes. Importantly, we continued to drive balance sheet improvement by paying down debt."

Chief Financial Officer Dale Williams commented, "Sales in the first quarter were modestly below our expectations. In the domestic segment, while sales were essentially flat to the fourth quarter run rate, we did not experience the normal seasonal lift. In the international segment, sales were down from the fourth quarter reflecting a weakened run rate. As visibility continues to be low, we have established our revised sales guidance assuming only a modest seasonal benefit to first quarter unit volumes. Accordingly, we continue to adjust our production plans and operating expenses. Our drive to expand margins has generated substantial benefit and we are confirming our prior EPS guidance. In addition, we continue to project we will remain in compliance with the covenants in our credit facility."

2009 Financial Guidance

The Company maintained its EPS guidance to range from $0.70 to $0.90 per diluted share, but reduced its net sales guidance to range from $700 million to $740 million. 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, April 16, 2009 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 888-430-8669. 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 April 16, 2009 at 8:00 p.m. Eastern Time through April 23, 2009. To listen to the replay, dial 888-203-1112, participant code 9148257.

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 improve its balance sheet and margins and further improve financial flexibility and its business; its ability to maintain compliance with its credit facility covenants; the Company's initiatives to align costs with anticipated sales levels; 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 and specialty 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
    Condensed Consolidated Statements of Income
    (In thousands, except per common share amounts)

                                         Three Months Ended
                                               March 31,
                                          2009          2008        Chg%
    Net sales                          $177,104      $247,222      (28%)
    Cost of sales                        95,243       139,141
    Gross profit                         81,861       108,081      (24%)
    Selling and marketing expenses       33,872        53,163
    General, administrative and other
     expenses                            22,108        25,585

    Operating income                     25,881        29,333      (12%)

    Other income (expense), net:
       Interest expense, net             (4,571)       (7,691)
       Other income (expense), net          348        (1,019)
         Total other expense             (4,223)       (8,710)

    Income before income taxes           21,658        20,623        5%
    Income tax provision                  8,320         7,109
         Net income                     $13,338       $13,514       (1%)

    Earnings per common share:
       Basic                              $0.18         $0.18
       Diluted                            $0.18         $0.18
    Weighted average common shares
     outstanding:
       Basic                             74,874        74,591
       Diluted                           74,959        75,188




    TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
    Condensed Consolidated Balance Sheets
    (In thousands)

                                            March 31,  December 31,
                                              2009         2008         Chg %
    ASSETS

    Current Assets:
         Cash and cash equivalents           $21,127     $15,385
         Accounts receivable, net             90,500      99,811
         Inventories                          60,791      60,497
         Prepaid expenses and other current
          Assets                              12,284       9,233
         Deferred income taxes                16,475      11,888
    Total Current Assets                     201,177     196,814          2%

         Property, plant and equipment, net  178,016     185,843
         Goodwill                            192,339     192,569
         Other intangible assets, net         66,328      66,823
         Other non-current assets              4,058       4,482
    Total Assets                            $641,918    $646,531         (1%)

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current Liabilities:
         Accounts payable                    $40,140     $41,355
         Accrued expenses and other current
          liabilities                         68,312      65,316
         Income taxes payable                  7,934       7,783
    Total Current Liabilities                116,386     114,454          2%

         Long-term debt                      400,000     419,341
         Deferred income taxes                28,667      28,371
         Other non-current liabilities        12,550      11,922
    Total Liabilities                        557,603     574,088         (3%)

    Total Stockholders' Equity                84,315      72,443         16%

    Total Liabilities and Stockholders'
     Equity                                 $641,918  $646,531           (1%)




    TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
    Condensed Consolidated Statements of Cash Flows
    (In thousands)

                                                          Three Months Ended
                                                               March 31,
                                                             2009     2008
    CASH FLOWS FROM OPERATING
     ACTIVITIES:
       Net income                                          $13,338  $13,514
       Adjustments to reconcile net income to net
        cash provided by operating activities:
           Depreciation and amortization                     7,727    8,334
           Amortization of stock-based compensation          1,903    1,979
           Amortization of deferred financing costs            172      185
           Bad debt expense    2,233 985
           Deferred income taxes                            (4,742)  (1,158)
           Foreign currency adjustments                       (311)   1,156
           Loss on sale of equipment and other                   --       41
           Changes in operating assets and liabilities       5,679     (451)
    Net cash provided by operating activities               25,999   24,585

    CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of property, plant and equipment           (1,423)  (2,793)
       Acquisition of business, net of cash acquired             --   (1,498)
       Payments for other                                     (218)    (145)
    Net cash used by investing activities                   (1,641)  (4,436)

    CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from long-term revolving credit facility    61,500    7,221
       Repayments of long-term revolving credit facility   (79,721) (12,233)
       Repayments of long-term debt                              --      (77)
       Proceeds from issuance of Common stock                    --      498
       Excess tax benefit from stock based compensation          --      323
       Dividend paid to stockholders                             --   (5,965)
       Payments for other                                        --      (14)
    Net cash used by financing activities                  (18,221) (10,247)

    NET EFFECT OF EXCHANGE RATE CHANGES ON CASH               (395)   3,350

    Increase in cash and cash equivalents                    5,742   13,252

    CASH AND CASH EQUIVALENTS, beginning of period          15,385   33,315

    CASH AND CASH EQUIVALENTS, end of period               $21,127  $46,567

Summary of Channel Sales

The Company generates sales through four distribution channels: retail, direct, healthcare and third party. The retail channel sells to furniture and bedding retailers, specialty stores, and department stores, among others. 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 first quarter of 2009 compared to 2008:


     (In thousands)
                      CONSOLIDATED          DOMESTIC         INTERNATIONAL
                   Three Months Ended   Three Months Ended Three Months Ended
                         March 31,           March 31,         March 31,
                     2009      2008      2009      2008     2009      2008

    Retail        $150,522  $207,903   $93,411  $129,120   $57,111   $78,783
    Direct           9,729    12,744     8,478    10,675     1,251     2,069
    Healthcare       8,902    12,257     2,694     3,822     6,208     8,435
    Third Party      7,951    14,318     1,851     4,301     6,100    10,017
                  $177,104  $247,222  $106,434  $147,918   $70,670   $99,304

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
                        March 31,            March 31,          March 31,
                     2009      2008      2009      2008      2009      2008

    Mattresses    $119,128  $168,050   $75,711  $106,872   $43,417   $61,178
    Pillows         23,061    31,616     9,845    13,121    13,216    18,495
    Other           34,915    47,556    20,878    27,925    14,037    19,631
                  $177,104  $247,222  $106,434  $147,918   $70,670   $99,304


    TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
    EBITDA to Net Income and Funded debt to Total debt
    Non-GAAP Measures
    (In thousands)

The Company provides information regarding 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 EBITDA to the Company's Net income and reconciliation of Funded debt to Total debt are provided below. Management 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 EBITDA to Net income

The following table sets forth the reconciliation of the Company's reported Net income to the calculation of EBITDA for each of the three months ended June 30, 2008, September 30, 2008 , December 31, 2008 and March 31, 2009, as well as the twelve months ended March 31, 2009:


                                      Three Months              Twelve Months
                                         Ended                      Ended
                         June 30,  Sept. 30,   Dec. 31,  March 31, March 31,
                           2008      2008       2008       2009      2009

    GAAP Net income       $20,228  $ 24,071   $ 1,055   $13,338  $ 58,692
    Plus:
       Interest expense     5,645     6,294     5,493     4,571    22,003
       Income taxes        10,374    12,622    18,449     8,320    49,765
       Depreciation  &
       Amortization        10,413    10,222     9,849     9,630    40,114

    EBITDA                $46,660  $ 53,209   $34,846   $35,859 $ 170,574

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 March 31, 2009:


                                                    As of
                                               March 31, 2009

          GAAP basis Total debt                    $400,000
          Plus:
             Letters of credit outstanding            5,573
          Funded debt                              $405,573

Calculation of Funded debt to EBITDA


                                                    As of
                                               March 31, 2009


          Funded debt                             $405,573
          EBITDA                                   170,574
                                                2.38 times

SOURCE Tempur-Pedic International Inc.

http://www.tempurpedic.com

Copyright (C) 2009 PR Newswire. All rights reserved


Close window | Back to top

Copyright 2017 Tempur Sealy International, Inc.