UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
report (Date of earliest event reported) April 17, 2008
TEMPUR-PEDIC
INTERNATIONAL INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
001-31922
|
33-1022198
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer Identification No.)
|
1713
Jaggie Fox Way
Lexington,
Kentucky 40511
(Address
of principal executive offices) (Zip Code)
(800)
878-8889
(Registrant’s
telephone number, including area code)
N/A
(Former
name or former address, if changed since last report)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions (see General Instruction
A.2. below):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
|
Item
2.02 Results from Operations and Financial
Condition
|
On April 17, 2008, Tempur-Pedic
International Inc. (the “Company”) issued a press release to announce its
financial results for the first quarter ended March 31, 2008. The Company also
announced revised financial guidance for the 2008 fiscal year. This
press release is furnished herewith as Exhibit 99.1 and incorporated by
reference herein.
The information in this report
(including Exhibit 99.1) shall not be deemed to be “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or otherwise subject to the liability of that section, and shall not be
incorporated by reference into any registration statement or other document
filed under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such
filing.
|
|
Item
7.01 Regulation FD
Disclosure
|
The information furnished under Item
2.02 of this Form 8-K, including Exhibit 99.1 furnished herewith, is hereby
incorporated by reference under this Item 7.01 as if fully set forth
herein.
|
|
Item
9.01 Financial Statements and
Exhibits
|
(d) Exhibits
|
Exhibit
|
Description
|
|
99.1
|
Press
Release dated April 17, 2008, entitled “Tempur-Pedic Reports First Quarter
Earnings”
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
Date: April 17,
2008
|
|||
| Tempur-Pedic International Inc. | |||
|
|
By:
|
/s/ H. Thomas Bryant | |
| Name: H. Thomas Bryant | |||
| Title: President and Chief Executive Officer | |||
|
EXHIBIT
INDEX
|
|
Exhibit
|
Description
|
|
99.1
|
Press
Release dated April 17, 2008, entitled “Tempur-Pedic
Reports First Quarter Earnings”
|
TEMPUR-PEDIC
REPORTS FIRST QUARTER EARNINGS
|
|
|
-
EPS Declines 49% to $0.18 In A Tough Economic
Environment
|
|
|
|
-
Announces Most Extensive New Product Launch in Company
History
|
LEXINGTON, KY, April 17, 2008
– 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, 2008. The
Company also announced revised financial guidance for 2008.
FINANCIAL
SUMMARY
|
·
|
Earnings
per share (EPS) decreased to $0.18 per diluted share in the first quarter
of 2008 as compared to $0.35 per diluted share in the first quarter of
2007.
|
|
·
|
Net
sales declined 7% to $247.2 million in the first quarter of 2008 from
$266.0 million in the first quarter of 2007. Net sales in the domestic
segment declined 16%, while international segment net sales increased 10%.
On a constant currency basis, international segment net sales decreased
3%.
|
|
·
|
The
Company generated $24.6 million of cash from operating activities,
compared to $28.6 million for the first quarter of
2007.
|
|
·
|
During
the quarter, the Company reduced total debt, net of cash by $18.2 million
to $550.5 million as compared to year end net debt of $568.7
million.
|
The
Company reported net income of $13.5 million for the first quarter of 2008 as
compared to $29.8 million in the first quarter of 2007. Net income results for
2008 include a $0.6 million severance-related benefits charge for restructuring
activities in the Company’s U.S. operations.
President
and Chief Executive Officer H. Thomas Bryant commented, “The U.S. macroeconomic
environment deteriorated during the quarter and contributed to what we believe
is a slowdown in the mattress industry. Based on industry data and retailer
feedback, we believe average selling prices in the industry are trending lower
as many consumers defer high-end mattress purchases. We believe the foregoing
factors are the primary reason our domestic segment net sales were below prior
expectations. In addition, our international segment experienced weakening
consumer trends in several European markets.
“With
lower than planned sales and an inflationary cost environment, profitability was
considerably impacted. First quarter operating expenses were planned and
incurred to support a much higher sales level, which negatively impacted
operating income.
“While
we are disappointed in the first quarter results, we generated significant cash
flow and reduced our net debt position. Going forward, we have taken decisive
actions to align operating expenses with revised sales expectations, and we are
executing on a comprehensive plan to improve cash flow and substantially reduce
inventories.
“We
are firmly committed to our business model, focus on premium products and
driving innovation. In the past, we have seen retailers and consumers respond
exceptionally well to our new product development and technological superiority.
Over the next few quarters, we will begin the most extensive new product launch
in our company’s history. This launch will include new mattress models, advanced
technological innovations and new pillow concepts as well as an upgrade to the
most widely distributed mattress model in our lineup. We anticipate this launch
will be well received by retailers and consumers.
Bryant
concluded, “We are executing on our business plan and focused on maximizing
shareholder value. In summary, we believe we have acted decisively to position
the company to gain market share and improve profitability as the macroeconomic
environment improves.”
2008
Financial Guidance
The
Company revised full year 2008 guidance for net sales and earnings per share. It
currently expects net sales for 2008 to range from $1.01 billion to $1.07
billion, a decrease of 9% to 3% as compared to 2007. It currently expects EPS
for 2008 to range from $1.20 to $1.45 per diluted share. This guidance reflects
a decrease of 31% to 17% compared to 2007 EPS of $1.74 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.
This
guidance does not take into account the effect of any additional share
repurchases.
Executive
Vice President and Chief Financial Officer Dale Williams commented, “As sales
trends continue to be weak, we are planning for a scenario where conditions do
not improve. Therefore, the low end of our revised guidance is based on
assumptions that our U.S. sales trends do not meaningfully change from the
declines we experienced in the first quarter, coupled with an assumption that
our international business weakens modestly from first quarter trends. We are
carefully monitoring business conditions and will be prepared to take additional
actions to protect profitability if necessary. We also note that, even at the
low end of our sales and EPS guidance, we currently expect to remain in full
compliance with the covenants in our senior credit facility for the entire
year.”
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, April 17, 2008 at 5:00 p.m. Eastern Time. The
dial-in number for the conference call is 877-440-5784. 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 17, 2008 at 8:00 p.m. Eastern Time through April
24, 2008. To listen to the replay, dial 888-203-1112, participant code
5419528.
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. All forward-looking statements, including without
limitation, statements relating to the Company’s plans to improve profitability
and cash flow, reduce inventories and rollout new products, and net sales and
earnings per share for 2008, and the Company’s expectations regarding compliance
with the covenants in its senior credit facility, 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; 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® 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® and
Tempur-Pedic® 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.
Investor
Relations Contact:
Barry
Hytinen
Vice
President, Investor Relations and Financial Planning & Analysis
800-805-3635
TEMPUR-PEDIC
INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated
Statements of Income
(In
thousands, except per share amounts)
|
Three
Months Ended
|
||||||||||||
|
March
31
|
||||||||||||
|
2008
|
2007
|
Chg%
|
||||||||||
|
Net
sales
|
$ | 247,222 | $ | 266,032 |
(7%)
|
|||||||
|
Cost
of sales
|
139,141 | 138,373 | ||||||||||
|
Gross
profit
|
108,081 | 127,659 |
(15%)
|
|||||||||
|
Selling
and marketing expenses
|
53,163 | 48,480 | ||||||||||
|
General
and administrative expenses and other
|
25,585 | 25,425 | ||||||||||
|
Operating
income
|
29,333 | 53,754 |
(45%)
|
|||||||||
|
Other
expense, net:
|
||||||||||||
|
Interest
expense, net
|
(7,691 | ) | (6,861 | ) | ||||||||
|
Other
expense, net
|
(1,019 | ) | (289 | ) | ||||||||
|
Total
other expense
|
(8,710 | ) | (7,150 | ) | ||||||||
|
Income
before income taxes
|
20,623 | 46,604 | ||||||||||
|
Income
tax provision
|
7,109 | 16,824 | ||||||||||
|
Net
income
|
$ | 13,514 | $ | 29,780 |
(55%)
|
|||||||
|
Earnings
per common share:
|
||||||||||||
|
Basic
|
$ | 0.18 | $ | 0.35 | ||||||||
|
Diluted
|
$ | 0.18 | $ | 0.35 | ||||||||
|
Weighted
average common shares outstanding:
|
||||||||||||
|
Basic
|
74,591 | 83,947 | ||||||||||
|
Diluted
|
75,188 | 85,775 | ||||||||||
TEMPUR-PEDIC INTERNATIONAL
INC. AND SUBSIDIARIES
Consolidated
Balance Sheets
(In
thousands, except per share amounts)
|
March
31,
|
December
31,
|
||||||||
|
2008
|
2007
|
Chg
%
|
|||||||
|
ASSETS
|
|||||||||
|
Current
Assets:
|
|||||||||
|
Cash
and cash equivalents
|
$
|
46,567
|
$
|
33,315
|
|||||
|
Accounts
receivable, net
|
152,581
|
163,730
|
|||||||
|
Inventories
|
112,001
|
106,533
|
|||||||
|
Prepaid
expenses and other current assets
|
15,116
|
11,133
|
|||||||
|
Deferred
income taxes
|
13,922
|
11,924
|
|||||||
|
Total
Current Assets
|
340,187
|
326,635
|
4%
|
||||||
|
Property,
plant and equipment, net
|
208,703
|
208,370
|
|||||||
|
Goodwill
|
198,372
|
198,286
|
|||||||
|
Other
intangible assets, net
|
68,028
|
68,755
|
|||||||
|
Deferred
financing costs and other non-current assets, net
|
5,345
|
4,386
|
|||||||
|
Total
Assets
|
$
|
820,635
|
$
|
806,432
|
2%
|
||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||||
|
Current
Liabilities:
|
|||||||||
|
Accounts
payable
|
$
|
56,332
|
$
|
56,206
|
|||||
|
Accrued
expenses and other
|
65,102
|
66,080
|
|||||||
|
Income
taxes payable
|
1,350
|
4,060
|
|||||||
|
Current
portion of long-term debt
|
277
|
288
|
|||||||
|
Total
Current Liabilities
|
123,061
|
126,634
|
(3%)
|
||||||
|
Long-term
debt
|
596,792
|
601,756
|
|||||||
|
Deferred
income taxes
|
30,248
|
29,645
|
|||||||
|
Other
non-current liabilities
|
294
|
259
|
|||||||
|
Total
Liabilities
|
750,395
|
758,294
|
(1%)
|
||||||
|
Stockholders’
Equity:
|
|||||||||
|
Common
stock, $.01 par value, 300,000 shares authorized;
99,215 shares issued as of March 31, 2008 and December 31,
2007
|
992
|
992
|
|||||||
|
Additional
paid in capital
|
284,779
|
283,564
|
|||||||
|
Retained
earnings
|
249,313
|
241,812
|
|||||||
|
Accumulated
other comprehensive income
|
25,341
|
13,550
|
|||||||
|
Treasury
stock, at cost; 24,541 and 24,681 shares as of March
31, 2008 and December 31, 2007, respectively
|
(490,185
|
)
|
(491,780
|
)
|
|||||
|
Total
Stockholders’ Equity
|
70,240
|
48,138
|
46%
|
||||||
|
Total
Liabilities and Stockholders’ Equity
|
$
|
820,635
|
$
|
806,432
|
2%
|
||||
TEMPUR-PEDIC
INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
(In
thousands)
|
Three
Months Ended
|
|||||||||
|
March
31,
|
|||||||||
|
2008
|
2007
|
Chg
%
|
|||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||||
|
Net
income
|
$
|
13,514
|
$
|
29,780
|
|||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||||
|
Depreciation
and amortization
|
8,334
|
8,645
|
|||||||
|
Amortization
of deferred financing costs
|
185
|
287
|
|||||||
|
Amortization
of stock-based compensation
|
1,979
|
1,791
|
|||||||
|
Allowance
for doubtful accounts
|
985
|
2,129
|
|||||||
|
Deferred
income taxes
|
(1,158
|
)
|
(2,082
|
)
|
|||||
|
Foreign
currency adjustments
|
1,156
|
301
|
|||||||
|
Loss
(gain) on sale of equipment and other
|
41
|
(26
|
)
|
||||||
|
Changes
in operating assets and liabilities:
|
|||||||||
|
Accounts
receivable
|
14,304
|
(4,902
|
)
|
||||||
|
Inventories
|
(2,252
|
)
|
(11,286
|
)
|
|||||
|
Prepaid
expenses and other current assets
|
(4,583
|
)
|
(11,339
|
)
|
|||||
|
Accounts
payable
|
(2,547
|
)
|
8,655
|
||||||
|
Accrued
expenses and other
|
(2,354
|
)
|
3,212
|
||||||
|
Income
taxes
|
(2,696
|
)
|
12,576
|
||||||
|
Excess
tax benefit from stock based compensation
|
(323
|
)
|
(9,166
|
)
|
|||||
|
Net
cash provided by operating activities
|
24,585
|
28,575
|
(14%)
|
||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||||
|
Payments
for trademarks and other intellectual property
|
(182
|
)
|
(258
|
)
|
|||||
|
Purchases
of property, plant and equipment
|
(2,793
|
)
|
(2,430
|
)
|
|||||
|
Acquisition
of business
|
(1,498
|
)
|
(1,005
|
)
|
|||||
|
Proceeds
from sale of equipment
|
37
|
24
|
|||||||
|
Net
cash used by investing activities
|
(4,436
|
)
|
(3,669
|
)
|
(21%)
|
||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||||
|
Proceeds
from long-term revolving credit facility
|
7,221
|
77,571
|
|||||||
|
Repayments
of long-term revolving credit facility
|
(12,233
|
)
|
(61,047
|
)
|
|||||
|
Repayments
of Series A Industrial Revenue Bonds
|
—
|
(1,920
|
)
|
||||||
|
Repayments
of long-term debt
|
(77
|
)
|
(9,375
|
)
|
|||||
|
Common
stock issued, including reissuances of Treasury
stock
|
498
|
5,294
|
|||||||
|
Excess
tax benefit from stock based compensation
|
323
|
9,166
|
|||||||
|
Treasury
stock purchased
|
—
|
(39,181
|
)
|
||||||
|
Dividend
paid to stockholders
|
(5,965
|
)
|
(5,106
|
)
|
|||||
|
Payments
for deferred financing costs
|
(14
|
)
|
(51
|
)
|
|||||
|
Net
cash used by financing activities
|
(10,247
|
)
|
(24,649
|
)
|
58%
|
||||
|
NET
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
3,350
|
729
|
|||||||
|
Increase
in cash and cash equivalents
|
13,252
|
986
|
|||||||
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
33,315
|
15,788
|
|||||||
|
CASH
AND CASH EQUIVALENTS, end of period
|
$
|
46,567
|
$
|
16,774
|
178%
|
||||
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 first quarter of 2008 compared to 2007:
|
($
in thousands)
|
||||||||||||||||||||||||
|
CONSOLIDATED
|
DOMESTIC
|
INTERNATIONAL
|
||||||||||||||||||||||
|
Three
Months Ended
|
Three
Months Ended
|
Three
Months Ended
|
||||||||||||||||||||||
|
March
31,
|
March
31,
|
March
31,
|
||||||||||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||||||||
|
By
Sales Channel
|
||||||||||||||||||||||||
|
Retail
|
$ | 207,903 | $ | 218,964 | $ | 129,120 | $ | 149,995 | $ | 78,783 | $ | 68,969 | ||||||||||||
|
Direct
|
12,744 | 21,756 | 10,675 | 19,296 | 2,069 | 2,460 | ||||||||||||||||||
|
Healthcare
|
12,257 | 11,722 | 3,822 | 3,172 | 8,435 | 8,550 | ||||||||||||||||||
|
Third
Party
|
14,318 | 13,590 | 4,301 | 3,015 | 10,017 | 10,575 | ||||||||||||||||||
|
Total
|
$ | 247,222 | $ | 266,032 | $ | 147,918 | $ | 175,478 | $ | 99,304 | $ | 90,554 | ||||||||||||
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,
|
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|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
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|
Net
Sales
|
||||||||||||||||||||||||
|
Mattresses
|
$ | 168,050 | $ | 185,007 | $ | 106,872 | $ | 130,463 | $ | 61,178 | $ | 54,544 | ||||||||||||
|
Pillows
|
31,616 | 34,877 | 13,121 | 15,794 | 18,495 | 19,083 | ||||||||||||||||||
|
Other
|
47,556 | 46,148 | 27,925 | 29,221 | 19,631 | 16,927 | ||||||||||||||||||
|
Total
|
$ | 247,222 | $ | 266,032 | $ | 147,918 | $ | 175,478 | $ | 99,304 | $ | 90,554 | ||||||||||||