January 24, 2012

Tempur-Pedic Reports Record Fourth Quarter and Full Year Sales and Earnings


-- Reports Fourth Quarter Sales Up 25% and EPS Up 27% at $0.84
-- Announces New $250 Million Share Repurchase Program
-- Issues Financial Guidance For 2012

LEXINGTON, Ky., Jan. 24, 2012 /PRNewswire/ -- 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, 2011. The Company also announced a $250 million share repurchase program and issued financial guidance for 2012.

FOURTH QUARTER FINANCIAL SUMMARY

  • Earnings per diluted share (EPS) were $0.84 in the fourth quarter of 2011 as compared to EPS of $0.66 per diluted share in the fourth quarter of 2010. The Company reported net income of $56.3 million for the fourth quarter of 2011 as compared to net income of $46.3 million in the fourth quarter of 2010.

  • Net sales increased 25% to $366.8 million in the fourth quarter of 2011 from $292.7 million in the fourth quarter of 2010. On a constant currency basis, net sales increased 24%. Net sales in the North American segment increased 26% and international segment net sales increased 25%. On a constant currency basis, international segment net sales increased 21%.  

  • Mattress sales increased 26% globally. Mattress sales increased 24% in the North American segment and increased 33% in the international segment. On a constant currency basis, international mattress sales increased 29%. Pillow sales increased 16% globally. Pillow sales increased 15% in North America and 17% internationally. On a constant currency basis, international pillow sales increased 13%.

  • Gross profit margin was 52.1% as compared to 51.9% in the fourth quarter of 2010. The gross profit margin increased as a result of favorable mix, improved efficiencies in manufacturing and distribution, and fixed cost leverage related to higher production volumes, partially offset by higher commodity costs and costs associated with US shipments to support the Company's Danish manufacturing facility.

  • Operating profit margin was 23.4% as compared to 24.5% in the fourth quarter of 2010 reflecting the Company's strategic investments to drive growth, including brand advertising.

  • The Company generated $69.7 million of operating cash flow as compared to $44.5 million in the fourth quarter of 2010.  

  • During the fourth quarter of 2011, the Company purchased 2.3 million shares of its common stock for a total cost of $128.5 million.

FULL YEAR FINANCIAL SUMMARY

  • Earnings per share (EPS) were $3.18 per diluted share for the full year 2011 as compared to EPS of $2.16 per diluted share for the full year 2010. The Company reported net income of $219.6 million for the full year 2011 as compared to net income of $157.1 million for the full year 2010.

  • Net sales increased 28% to $1,417.9 million for the full year 2011 from $1,105.4 million for the full year 2010. On a constant currency basis, net sales increased 25%. Net sales in the North American segment increased 30% and international segment net sales increased 24%. On a constant currency basis, international segment net sales increased 16%.  

  • Gross profit margin was 52.4% for the full year 2011 as compared to 50.2% for the full year 2010. The gross profit margin increased as a result of favorable mix, improved efficiencies in manufacturing and distribution, and fixed cost leverage related to higher production volumes, partially offset by higher commodity costs, new product introductions, and costs associated with US shipments to support the Company's Danish manufacturing facility.

  • Operating profit margin was 24.0% as compared to 22.2% for the full year 2010.

  • The Company generated $248.7 million of operating cash flow as compared to $184.1 million for the full year 2010.  

  • During 2011, the Company purchased 6.5 million shares of its common stock for a total cost of $368.5 million.

Chief Executive Officer Mark Sarvary commented, "In 2011, we delivered strong financial performance, strengthened our competitiveness and implemented a range of strategic growth initiatives. Over the next year, we plan to increase our rate of investment in areas that will drive growth including a major new product launch, increased advertising, and expanded distribution. In addition, to ensure Tempur continues to deliver the best sleep, our R&D team is focused on executing a broad technology strategy that includes a focus on improving existing product performance and lowering costs as well as another major new product launch in 2013."

Share Repurchase Program

The Company announced the Board of Directors has authorized a new share repurchase program of up to $250.0 million. This share repurchase program replaces the Company's prior share repurchase authorization, and may be limited, suspended or terminated at any time without prior notice. Stock repurchases under this program may be made through open market transactions, negotiated purchases or otherwise, at times and in such amounts as management and a committee of the Board deem appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, financing and regulatory requirements and other market conditions. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws.

Financial Guidance

The Company issued full year 2012 guidance for net sales and earnings per share. It currently expects net sales for 2012 to range from $1.60 billion to $1.65 billion. It currently expects EPS for 2012 to range from $3.80 to $3.95 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. The Company noted its EPS guidance does not assume any benefit from a potential reduction in shares outstanding related to its share repurchase program.

Conference Call Information

Tempur-Pedic International will host a live conference call to discuss financial results today, January 24, 2012 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 800-850-2903. The dial-in number for international callers is 224-357-2399. The call is also being webcast and can be accessed on the investor relations section of the Company's website, http://www.tempurpedic.com. After the conference call, a webcast replay will remain available on the investor relations section of the Company's website for 30 days.

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 increase its rate of investment in areas to drive growth, the Company's R&D strategy and expected product launches and expectations for net sales and earnings per share for 2012. 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; 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 Company's retail channel, including the timing of opening or expanding within large retail accounts; the Company's ability to expand brand awareness, distribution and new products in 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; the effects of strategic investments on our operations; 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 80 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 common share amounts)



Three Months Ended





Twelve Months Ended




December 31,





December 31,





2011



2010


Chg %




2011




2010


Chg %

Net sales

$

366,803


$

292,703


25.3%



$

1,417,938



$

1,105,421


28.3%

Cost of sales


175,635



140,880






674,848




549,994





















Gross profit




191,168



151,823


25.9%




743,090




555,427


33.8%



















Selling and marketing expenses


72,081



53,449






276,870




199,722



General, administrative and other expenses


33,273



26,766






125,689




109,803





















Operating income


85,814



71,608


19.8%




340,531




245,902


38.5%



















Other expense, net:


















Interest expense, net


(3,498)



(3,458)






(11,948)




(14,501)



Other income (expense), net


758



32






(192)




(536)



Total other expense


(2,740)



(3,426)






(12,140)




(15,037)





















Income before income taxes


83,074



68,182


21.8%




328,391




230,865


42.2%

Income tax provision


26,759



21,890






108,783




73,720



   Net income

$

56,315


$

46,292





$

219,608



$

157,145





















Earnings per common share:


















Basic

$

0.86


$

0.68





$

3.27



$

2.23



Diluted

$

0.84


$

0.66





$

3.18



$

2.16



Weighted average common shares outstanding:


















Basic


65,113



68,220






67,070




70,348



Diluted


66,953



70,619






69,149




72,792






TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands)


December 31,


December 31,



2011


2010


ASSETS
















Current Assets:








    Cash and cash equivalents

$

111,367



$

53,623


    Accounts receivable, net


142,412




115,630


    Inventories


91,212




69,856


    Prepaid expenses and other current assets


20,088




18,646


    Deferred income taxes


14,391




13,725


Total Current Assets


379,470




271,480










    Property, plant and equipment, net


160,502




159,807


    Goodwill


213,273




212,468


    Other intangible assets, net


66,491




68,745


    Other non-current assets


8,904




3,503


Total Assets

$

828,640



$

716,003










LIABILITIES AND STOCKHOLDERS' EQUITY
















Current Liabilities:








    Accounts payable

$

69,936



$

48,288


    Accrued expenses and other current liabilities


92,737




85,469


    Income taxes payable


20,506




12,477


Total Current Liabilities


183,179




146,234










    Long-term debt


585,000




407,000


    Deferred income taxes


24,227




32,315


Other non-current liabilities


5,443




4,421


Total Liabilities


797,849




589,970










Stockholders' Equity:








Common stock, $0.01 par value; 300,000 shares

authorized; 99,215 shares issued as of December 31, 2011 and 2010


992




992


Additional paid in capital


361,807




320,952


Retained earnings


742,480




522,872


Accumulated other comprehensive loss


(14,686)




(6,188)


Treasury stock at cost; 35,445 and 30,731 shares as of

 December 31, 2011 and 2010, respectively


(1,059,802)




(712,595)


Total Stockholders' Equity


30,791




126,033










Total Liabilities and Stockholders' Equity

$

828,640



$

716,003













TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)


Twelve Months Ended


December 31,



2011




2010


CASH FLOWS FROM OPERATING ACTIVITIES:








Net income

$

219,608



$

157,145


Adjustments to reconcile net income to net cash provided     by operating activities:








       Depreciation and amortization


34,295




32,361


       Amortization of stock-based compensation


16,693




11,608


       Amortization of deferred financing costs


1,034




690


       Bad debt expense


1,563




531


       Deferred income taxes


(8,528)




4,946


       Foreign currency adjustments and other


1,248




(465)


Changes in operating assets and liabilities








Accounts receivable


(30,198)




(12,752)


Inventories


(18,473)




(6,710)


Prepaid expense and other current assets


(2,772)




(6,519)


Accounts payable


21,675




(1,145)


Accrued expenses and other


3,867




(370)


Income taxes payable


8,694




4,802


Net cash provided by operating activities


248,706




184,122










CASH FLOWS FROM INVESTING ACTIVITIES:








Acquisition of business, net of cash acquired


(4,566)




(18,692)


Acquisition of trademarks and other


(2,044)




(684)


Purchases of property, plant and equipment


(29,466)




(18,141)


Net cash used by investing activities


(36,076)




(37,517)










CASH FLOWS FROM FINANCING ACTIVITIES:








Proceeds from long-term revolving credit facility


821,500




308,836


Repayments of long-term revolving credit facility


(643,500)




(197,813)


Payments of deferred finance costs


(6,217)




-


Proceeds from issuance of common stock


26,256




28,551


Excess tax benefit from stock-based compensation


19,192




5,590


Treasury shares repurchased


(365,928)




(250,000)


Other


(173)




(1,540)


Net cash used by financing activities


(148,870)




(106,376)










NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS


(6,016)




(648)










Increase in cash and cash equivalents


57,744




39,581










CASH AND CASH EQUIVALENTS, beginning of period


53,623




14,042










CASH AND CASH EQUIVALENTS, end of period

$

111,367



$

53,623





















Summary of Channel Sales


The following table highlights net sales information, by channel and by segment:


(In thousands)


CONSOLIDATED

NORTH AMERICA

INTERNATIONAL


Three Months Ended

Three Months Ended

Three Months Ended


December 31,

December 31,

December 31,


2011

2010

2011

2010

2011

2010














Retail

$

319,334

$

254,565

$

225,197

$

180,756

$

94,137

$

73,809

Direct


28,609


19,184


21,143


14,718


7,466


4,466

Healthcare


8,987


9,212


2,953


3,090


6,034


6,122

Third Party


9,873


9,742


-


-


9,873


9,742


$

366,803

$

292,703

$

249,293

$

198,564

$

117,510

$

94,139




Summary of Product Sales


The following table highlights net sales information, by product and by segment:


(In thousands)


CONSOLIDATED

NORTH AMERICA

INTERNATIONAL


Three Months Ended

Three Months Ended

Three Months Ended


December 31,

December 31,

December 31,


2011

2010

2011

2010

2011

2010














Mattresses

$

238,590

$

188,732

$

166,009

$

134,186

$

72,581

$

54,546

Pillows


43,971


37,934


22,067


19,234


21,904


18,700

Other


84,242


66,037


61,217


45,144


23,025


20,893


$

366,803

$

292,703

$

249,293

$

198,564

$

117,510

$

94,139




TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Reconciliation of EBITDA to Net Income and Total debt to Funded debt

Non-GAAP Measures

(In thousands)


The Company provides information regarding Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) and Funded debt which are not recognized terms under U.S. GAAP (Generally Accepted Accounting Principles) and do not purport to be alternatives to Net income as a measure of operating performance or Total debt. A reconciliation of EBITDA to the Company's Net income and a reconciliation of Total debt to Funded 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 Net income to EBITDA



The following table sets forth the reconciliation of the Company's reported Net income to the calculation of EBITDA for the twelve months ended December 31, 2011:






Twelve Months Ended



December 31, 2011




GAAP Net income

$

219,608

Plus:



  Interest expense


11,948

  Income taxes


108,783

  Depreciation  &  

  Amortization


50,988

EBITDA

$

391,327




Reconciliation of Total debt to Funded 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, 2011:






As of



December 31, 2011




GAAP basis Total debt

$

585,000

Plus:



  Letters of credit outstanding


990

Funded debt

$

585,990




Calculation of Funded debt to EBITDA





As of



December 31, 2011




Funded debt

$

585,990

EBITDA


391,327



1.50 times



SOURCE Tempur-Pedic International Inc.

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