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) July 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 July 17, 2008, Tempur-Pedic
International Inc. (the “Company”) issued a press release to announce its
financial results for the second quarter ended June 30, 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
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Exhibit
|
Description
|
|
99.1
|
Press
Release dated July 17, 2008, entitled “Tempur-Pedic Reports
Second 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: July 17,
2008
|
|||
| Tempur-Pedic International Inc. | |||
|
|
By:
|
/s/ Dale E. Williams | |
| Name: Dale E. Williams | |||
| Title: Executive Vice President, Chief Financial Officer & Secretary | |||
|
EXHIBIT
INDEX
|
TEMPUR-PEDIC
REPORTS SECOND QUARTER EARNINGS
|
|
|
-
EPS Declines 31% to $0.27 As Challenging Economic Environment
Continues
|
|
|
|
-
Generates Record Quarterly Operating Cash
Flow
|
|
|
|
-
Lowers 2008 Financial Guidance
|
LEXINGTON, KY, July 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 second quarter
ended June 30, 2008. The Company also announced revised financial guidance for
2008.
FINANCIAL
SUMMARY
|
·
|
Earnings
per share (EPS) were $0.27 per diluted share in the second quarter of 2008
as compared to $0.39 per diluted share in the second quarter of 2007. The
Company reported net income of $20.2 million for the second quarter of
2008 as compared to $32.9 million in the second quarter of
2007.
|
|
·
|
Net
sales declined 7% to $238.7 million in the second quarter of 2008 from
$257.6 million in the second quarter of 2007. Net sales in the domestic
segment declined 13%, while international segment net sales increased 4%.
On a constant currency basis, international segment net sales decreased
9%.
|
|
·
|
Reflecting
the Company’s focus on improving working capital, operating cash flow
increased 57% to $71.7 million in the second quarter of 2008 from $45.6
million in the second quarter of
2007.
|
|
·
|
During
the quarter, the Company reduced total debt by $40.6 million to $556.5
million. In addition, the Company increased its cash balance by $21.8
million to $68.4 million.
|
President
and Chief Executive Officer H. Thomas Bryant commented, “In the second quarter,
domestic mattress industry trends continued to decline and many international
markets continued to weaken, particularly towards the end of the quarter. Given
this backdrop and our commitment to the company’s long term strategy, we
continue to implement our plan to align variable costs with sales expectations,
reduce fixed costs and improve productivity in our factories. These actions
resulted in substantially improved operating and net income results as compared
to the first quarter.”
Mr.
Bryant continued, “Last quarter, we outlined our plan to improve cash flow and
substantially reduce inventories to increase financial flexibility. In the
second quarter, we made solid progress and see more opportunity for improvement.
As a result, we reduced debt by over $40 million while increasing our cash
balance by nearly $22 million.
“We
are firmly committed to our business model, focus on premium products and
driving innovation. 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. At the Las Vegas furniture show this month, we will unveil two new
mattress models and an upgraded DeluxeBed. Internationally, we are in the early
stage of rolling out several new mattress and pillow models.
Mr.
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.”
As
previously disclosed, the Company has named Mark Sarvary as Chief Executive
Officer and President, succeeding Mr. Bryant effective August 4, 2008. In
February 2008, the Company announced Mr. Bryant’s intention to retire
following an orderly transition to a new CEO.
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 $0.98 billion to $1.02
billion, a decrease of 11% to 8% as compared to 2007. It currently expects EPS
for 2008 to range from $1.05 to $1.20 per diluted share. This guidance reflects
a decrease of 39% to 31% 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.
Executive
Vice President and Chief Financial Officer Dale Williams commented, “In
reviewing our plans for the rest of the year, we are mindful of macroeconomic
conditions, including low consumer confidence generally, and that our retail
partners report traffic continues to be down sharply. We believe it is prudent
to reduce our short-term expectations, while maintaining our focus on ultimately
becoming the worldwide bedding leader. During the balance of 2008, we will
continue to drive working capital improvements and anticipate reducing debt.
Even at the low end of our EPS guidance, we remain in full compliance with the
financial covenants in our senior credit facility for the entire
year.”
Conference
Call Information
Tempur-Pedic
International will host a live conference call to discuss financial results
today, July 17, 2008 at 5:00 p.m. Eastern Time. The dial-in number for the
conference call is 888-283-6901. 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 July 17, 2008 at 8:00 p.m. Eastern Time through July 24,
2008. To listen to the replay, dial 888-203-1112, participant code
7247817.
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 align variable costs,
reduce fixed costs and improve productivity, reduce inventories, increase cash
flow, and rollout new products, and the Company’s expectations regarding net
sales and earnings per share for 2008, reducing debt and the Company’s
compliance with the financial 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
|
Six
Months Ended
|
|||||||||||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||||||||||
|
2008
|
2007
|
Chg
%
|
2008
|
2007
|
Chg
%
|
|||||||||||||||||||
| Net sales | $ | 238,661 | $ | 257,642 | (7 | )% | $ | 485,883 | $ | 523,674 | (7 | )% | ||||||||||||
|
Cost
of sales
|
132,645 | 133,073 | 271,786 | 271,446 | ||||||||||||||||||||
|
Gross
profit
|
106,016 | 124,569 | (15 | )% | 214,097 | 252,228 | (15 | )% | ||||||||||||||||
|
Selling
and marketing expenses
|
44,787 | 47,320 | 97,950 | 95,800 | ||||||||||||||||||||
|
General
and administrative expenses and other
|
24,910 | 22,119 | 50,495 | 47,544 | ||||||||||||||||||||
|
Operating
income
|
36,319 | 55,130 | (34 | )% | 65,652 | 108,884 | (40 | )% | ||||||||||||||||
|
Other
expense, net:
|
||||||||||||||||||||||||
|
Interest
expense, net
|
(5,645 | ) | (6,272 | ) | (13,336 | ) | (13,133 | ) | ||||||||||||||||
|
Other
expense, net
|
(72 | ) | (214 | ) | (1,091 | ) | (503 | ) | ||||||||||||||||
|
Total
other expense
|
(5,717 | ) | (6,486 | ) | (14,427 | ) | (13,636 | ) | ||||||||||||||||
|
Income
before income taxes
|
30,602 | 48,644 | (37 | )% | 51,225 | 95,248 | (46 | )% | ||||||||||||||||
|
Income
tax provision
|
10,374 | 15,713 | 17,483 | 32,537 | ||||||||||||||||||||
|
Net
income
|
$ | 20,228 | $ | 32,931 | (39 | )% | $ | 33,742 | $ | 62,711 | (46 | )% | ||||||||||||
|
Earnings
per common share:
|
||||||||||||||||||||||||
|
Basic
|
$ | 0.27 | $ | 0.40 | $ | 0.45 | $ | 0.75 | ||||||||||||||||
|
Diluted
|
$ | 0.27 | $ | 0.39 | $ | 0.45 | $ | 0.74 | ||||||||||||||||
|
Weighted
average per common share outstanding:
|
||||||||||||||||||||||||
|
Basic
|
74,740 | 82,963 | 74,665 | 83,452 | ||||||||||||||||||||
|
Diluted
|
74,931 | 84,222 | 74,872 | 85,041 | ||||||||||||||||||||
TEMPUR-PEDIC
INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated
Balance Sheets
(In
thousands, except per share amounts)
|
June
30,
|
December
31,
|
|||||||||||
|
2008
|
2007
|
Chg
%
|
||||||||||
|
ASSETS
|
||||||||||||
|
Current
Assets:
|
||||||||||||
|
Cash
and cash equivalents
|
$ | 68,353 | $ | 33,315 | ||||||||
|
Accounts
receivable, net
|
132,555 | 163,730 | ||||||||||
|
Inventories
|
93,520 | 106,533 | ||||||||||
|
Prepaid
expenses and other current assets
|
14,320 | 11,133 | ||||||||||
|
Deferred
income taxes
|
13,978 | 11,924 | ||||||||||
|
Total
Current Assets
|
322,726 | 326,635 | (1 | )% | ||||||||
|
Property,
plant and equipment, net
|
203,709 | 208,370 | ||||||||||
|
Goodwill
|
198,877 | 198,286 | ||||||||||
|
Other
intangible assets, net
|
67,774 | 68,755 | ||||||||||
|
Deferred
financing costs and other non-current assets
|
5,104 | 4,386 | ||||||||||
|
Total
Assets
|
$ | 798,190 | $ | 806,432 | (1 | )% | ||||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||||||
|
Current
Liabilities:
|
||||||||||||
|
Accounts
payable
|
$ | 53,019 | $ | 56,206 | ||||||||
|
Accrued
expenses and other
|
65,148 | 66,080 | ||||||||||
|
Income
taxes payable
|
6,318 | 4,060 | ||||||||||
|
Current
portion of long-term debt
|
— | 288 | ||||||||||
|
Total
Current Liabilities
|
124,485 | 126,634 | (2 | )% | ||||||||
|
Long-term
debt
|
556,500 | 601,756 | ||||||||||
|
Deferred
income taxes
|
30,059 | 29,645 | ||||||||||
|
Other
non-current liabilities
|
1,436 | 259 | ||||||||||
|
Total
Liabilities
|
712,480 | 758,294 | (6 | )% | ||||||||
|
Stockholders’
Equity:
|
||||||||||||
|
Common
stock, $.01 par value; 300,000 shares authorized;
99,215 shares issued as of June 30, 2008 and December 31,
2007
|
992 | 992 | ||||||||||
|
Additional
paid in capital
|
287,146 | 283,564 | ||||||||||
|
Retained
earnings
|
262,283 | 241,812 | ||||||||||
|
Accumulated
other comprehensive income
|
24,294 | 13,550 | ||||||||||
|
Treasury
stock, at cost; 24,436 and 24,681 shares as of June 30, 2008 and December
31, 2007, respectively
|
(489,005 | ) | (491,780 | ) | ||||||||
|
Total
Stockholders’ Equity
|
85,710 | 48,138 | 78 | % | ||||||||
|
Total
Liabilities and Stockholders’ Equity
|
$ | 798,190 | $ | 806,432 | (1 | )% | ||||||
TEMPUR-PEDIC
INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated
Statement of Cash Flows
(In
thousands)
|
Six
Months Ended
|
||||||||||||
|
June
30,
|
||||||||||||
|
2008
|
2007
|
Chg
%
|
||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net
income
|
$ | 33,742 | $ | 62,711 | ||||||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
|
Depreciation
and amortization
|
16,685 | 16,870 | ||||||||||
|
Amortization
of deferred financing costs
|
714 | 667 | ||||||||||
|
Amortization
of stock-based compensation
|
4,041 | 3,380 | ||||||||||
|
Allowance
for doubtful accounts
|
3,439 | 3,508 | ||||||||||
|
Deferred
income taxes
|
(958 | ) | (1,426 | ) | ||||||||
|
Foreign
currency adjustments
|
524 | 535 | ||||||||||
|
Loss
(gain) on sale of equipment and other
|
345 | (37 | ) | |||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||
|
Accounts
receivable
|
32,642 | (1,298 | ) | |||||||||
|
Inventories
|
15,866 | (14,509 | ) | |||||||||
|
Prepaid
expenses and other current assets
|
(4,724 | ) | (4,582 | ) | ||||||||
|
Accounts
payable
|
(5,389 | ) | (3,445 | ) | ||||||||
|
Accrued
expenses and other
|
(2,560 | ) | 6,243 | |||||||||
|
Income
taxes
|
1,941 | 5,567 | ||||||||||
|
Net
cash provided by operating activities
|
96,308 | 74,184 | 30 | % | ||||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
|
Payments
for trademarks and other intellectual property
|
(463 | ) | (461 | ) | ||||||||
|
Purchases
of property, plant and equipment
|
(6,328 | ) | (4,833 | ) | ||||||||
|
Acquisition
of business
|
(1,522 | ) | (969 | ) | ||||||||
|
Proceeds
from sale of equipment
|
52 | 52 | ||||||||||
|
Net
cash used by investing activities
|
(8,261 | ) | (6,211 | ) | (33 | )% | ||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
|
Proceeds
from long-term revolving credit facility
|
70,732 | 148,102 | ||||||||||
|
Repayments
of long-term revolving credit facility
|
(57,244 | ) | (75,806 | ) | ||||||||
|
Repayments
of long-term debt
|
(1,359 | ) | (45,637 | ) | ||||||||
|
Proceeds
from issuance of Series A Industrial Revenue Bonds
|
— | 15,380 | ||||||||||
|
Repayment
of Series A Industrial Revenue Bonds
|
(57,785 | ) | (3,840 | ) | ||||||||
|
Common
stock issued, including reissuances of treasury
stock
|
695 | 5,573 | ||||||||||
|
Excess
tax benefit from stock based compensation
|
366 | 9,333 | ||||||||||
|
Treasury
stock repurchased
|
— | (100,000 | ) | |||||||||
|
Dividend
paid to stockholders
|
(11,946 | ) | (11,753 | ) | ||||||||
|
Payments
for deferred financing costs
|
(14 | ) | (1,269 | ) | ||||||||
|
Net
cash used by financing activities
|
(56,555 | ) | (59,917 | ) | 6 | % | ||||||
|
NET
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
3,546 | 988 | ||||||||||
|
Increase
in cash and cash equivalents
|
35,038 | 9,044 | ||||||||||
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
33,315 | 15,788 | ||||||||||
|
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 68,353 | $ | 24,832 | 175 | % | ||||||
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 second quarter of 2008 compared to 2007:
|
($
in thousands)
|
|||||||||||||||||||||||
|
CONSOLIDATED
|
DOMESTIC
|
INTERNATIONAL
|
|||||||||||||||||||||
|
Three
Months Ended
|
Three
Months Ended
|
Three
Months Ended
|
|||||||||||||||||||||
|
June
30,
|
June
30,
|
June
30,
|
|||||||||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
||||||||||||||||||
|
By
Sales Channel
|
|||||||||||||||||||||||
|
Retail
|
$ | 199,323 | $ | 210,941 | $ | 130,069 | $ | 145,039 | $ | 69,254 | $ | 65,902 | |||||||||||
|
Direct
|
13,527 | 20,987 | 11,328 | 18,345 | 2,199 | 2,642 | |||||||||||||||||
|
Healthcare
|
12,556 | 11,306 | 4,501 | 3,434 | 8,055 | 7,872 | |||||||||||||||||
|
Third
Party
|
13,255 | 14,408 | 2,603 | 3,828 | 10,652 | 10,580 | |||||||||||||||||
|
Total
|
$ | 238,661 | $ | 257,642 | $ | 148,501 | $ | 170,646 | $ | 90,160 | $ | 86,996 | |||||||||||
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
|
|||||||||||||||||||||
|
June
30,
|
June
30,
|
June
30,
|
|||||||||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
||||||||||||||||||
|
Net
Sales
|
|||||||||||||||||||||||
|
Mattresses
|
$ | 163,634 | $ | 179,568 | $ | 108,369 | $ | 126,968 | $ | 55,265 | $ | 52,600 | |||||||||||
|
Pillows
|
28,877 | 31,799 | 12,583 | 14,601 | 16,294 | 17,198 | |||||||||||||||||
|
Other
|
46,150 | 46,275 | 27,549 | 29,077 | 18,601 | 17,198 | |||||||||||||||||
|
Total
|
$ | 238,661 | $ | 257,642 | $ | 148,501 | $ | 170,646 | $ | 90,160 | $ | 86,996 | |||||||||||