form8k.htm


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) October 15, 2009

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 October 15, 2009, Tempur-Pedic International Inc. (the Company) issued a press release to announce its financial results for the third quarter, ended September 30, 2009.  The Company also issued revised financial guidance for the fiscal year 2009. A copy of 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
 
 
 

 

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.
 
  Tempur-Pedic International Inc.  
       
Date:  October 15, 2009
By:
/s/ DALE E. WILLIAMS  
    Name: Dale E. Williams  
    Title: Executive Vice President, Chief Financial Officer & Secretary  
       
 
 
 

 

EXHIBIT INDEX

Exhibit
Description
 
ex991.htm
Graphic

 
TEMPUR-PEDIC REPORTS THIRD QUARTER EARNINGS
 - Reports EPS of $0.34
 - Gross Profit Margin Increases 590 Basis Points to 47.6%
 - Year-To-Date Debt Reduction Exceeds $100 Million
 - Company Raises Financial Guidance for 2009

LEXINGTON, KY, October 15, 2009 – Tempur-Pedic International Inc. (NYSE: TPX), the leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, today announced financial results for the third quarter ended September 30, 2009. In addition, the Company increased full year 2009 financial guidance.
 
THIRD QUARTER FINANCIAL SUMMARY
·  
Earnings per share (EPS) were $0.34 per diluted share in the third quarter of 2009 as compared to $0.32 per diluted share in the third quarter of 2008. The Company reported net income of $25.7 million for the third quarter of 2009 as compared to net income of $24.1 million in the third quarter of 2008.
 
·  
Net sales declined 11% to $224.1 million in the third quarter of 2009 from $252.8 million in the third quarter of 2008. On a constant currency basis, net sales declined 10%. Net sales in the domestic segment declined 12%, while international segment net sales declined 10%. On a constant currency basis, international segment net sales declined 7%.
 
·  
Mattress sales declined 14% globally. Mattress sales declined 15% in the domestic segment and 13% in the international segment. On a constant currency basis, international mattress sales declined 9%. Pillow sales declined 10% globally. Pillow sales declined 9% domestically and 10% internationally. On a constant currency basis, international pillow sales declined 9%.
 
·  
Gross profit margin was 47.6% as compared to 41.7% in the third quarter of 2008. The gross profit margin increased as a result of improved efficiencies in manufacturing, lower commodity costs, and improved pricing, partially offset by fixed cost de-leverage related to lower production volumes.
 
·  
Operating profit margin was 19.0% as compared to 17.0% in the third quarter of 2008.
 
·  
Reflecting the Company’s continued focus on generating cash, the Company generated $55.0 million of operating cash flow in the third quarter of 2009.

·  
During the quarter, the Company reduced Total debt by $54.0 million to $315.0 million. As of September 30, 2009, the Company’s ratio of Funded debt to EBITDA was 1.96 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, “Our 2009 strategic initiatives continued to generate improved results during the third quarter. While the macro environment remains challenging, our sales have grown and our margins have improved. Our results continue to demonstrate the Company’s strong cash flow. Through the first nine months, we have reduced debt by over $100 million. Our recent product introductions and our new advertising campaign combined with continued productivity improvements will allow us to build on this performance as we move into 2010.”

2009 Financial Guidance
Given the Company’s improving performance through the first three quarters of 2009 and its continued positive outlook for the year, the Company is increasing 2009 full year financial guidance. The Company expects EPS to range from $1.00 to $1.05 per diluted share. The Company expects net sales to range from $790 million to $805 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, October 15, 2009 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 877-857-6147. 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 webcast replay will be available for 30 days on the Company’s website.


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 expectations on building on 2009 performance in 2010 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 Company’s domestic 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 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® 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
Condensed Consolidated Statements of Income
(In thousands, except per common share amounts)

 
Three Months Ended
     
Nine Months Ended
   
 
September 30,
     
September 30,
   
   
2009
   
2008
 
Chg %
   
2009
   
2008
 
    Chg %
Net sales
$
224,082
 
$
252,814
 
(11%)
 
$
586,362
 
$
738,697
 
(21%)
Cost of sales
 
117,373
   
147,323
       
311,461
   
419,109
   
Gross profit
 
106,709
   
105,491
 
1%
   
274,901
   
319,588
 
(14%)
Selling and marketing expenses
 
39,272
   
39,956
       
108,335
   
137,906
   
General, administrative and other expenses
 
24,761
   
22,644
       
68,847
   
73,139
   
Operating income
 
42,676
   
42,891
 
(1%)
   
97,719
   
108,543
 
(10%)
                               
Other expense, net:
                             
Interest expense, net
 
(4,311
)
 
(6,294
)
     
(13,359
)
 
(19,630
)
 
Other (expense) income, net
 
(214
)
 
96
       
404
   
(995
)
 
Total other expense
 
(4,525
)
 
(6,198
)
     
(12,955
)
 
(20,625
)
 
                               
Income before income taxes
 
38,151
   
36,693
 
4%
   
84,764
   
87,918
 
(4%)
Income tax provision
 
12,467
   
12,622
       
28,885
   
30,105
   
Net income
$
25,684
 
$
24,071
 
7%
 
$
55,879
 
$
57,813
 
(3%)
                               
Earnings per common share:
                             
Basic
$
0.34
 
$
0.32
     
$
0.75
 
$
0.77
   
Diluted
$
0.34
 
$
0.32
     
$
0.74
 
$
0.77
   
Weighted average common shares outstanding:
                             
Basic
 
74,938
   
74,815
       
74,902
   
74,704
   
Diluted
 
76,166
   
74,992
       
75,396
   
74,944
   

 
 

 

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

 
September 30,
 
December 31,
 
2009
 
2008
ASSETS
         
           
Current Assets:
         
     Cash and cash equivalents
$
20,003
 
$
15,385
     Accounts receivable, net
 
105,397
   
99,811
     Inventories
 
48,456
   
60,497
     Prepaid expenses and other current assets
 
11,456
   
9,233
     Deferred income taxes
 
19,839
   
11,888
Total Current Assets
 
205,151
   
196,814
           
     Property, plant and equipment, net
 
175,817
   
185,843
     Goodwill
 
193,456
   
192,569
     Other intangible assets, net
 
65,318
   
66,823
     Other non-current assets
 
2,919
   
4,482
Total Assets
$
642,661
 
$
646,531
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
         
           
Current Liabilities:
         
     Accounts payable
$
46,625
 
$
41,355
     Accrued expenses and other current liabilities
 
87,824
   
65,316
     Income taxes payable
 
14,533
   
7,783
Total Current Liabilities
 
148,982
   
114,454
           
     Long-term debt
 
315,000
   
419,341
     Deferred income taxes
 
29,142
   
28,371
     Other non-current liabilities
 
8,952
   
11,922
Total Liabilities
 
502,076
   
574,088
Total Stockholders’ Equity
 
140,585
   
72,443
Total Liabilities and Stockholders’ Equity
$
642,661
 
$
646,531



 
 

 

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

 
Nine Months Ended
 
September 30,
   
2009
     
2008
 
CASH FLOWS FROM OPERATING ACTIVITIES:
             
Net income
$
55,879
   
$
57,813
 
Adjustments to reconcile net income to net cash provided by operating activities:
             
          Depreciation and amortization
 
23,526
     
24,847
 
          Amortization of stock-based compensation
 
6,448
     
6,101
 
          Amortization of deferred financing costs
 
518
     
888
 
          Bad debt expense
 
4,659
     
5,859
 
          Deferred income taxes
 
(8,006
)
   
(1,634
)
          Foreign currency adjustments
 
53
     
74
 
          (Gain) Loss on sale of equipment and other
 
(19
)
   
679
 
          Changes in operating assets and liabilities
 
37,345
     
74,287
 
Net cash provided by operating activities
 
120,403
     
168,914
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
             
Purchases of property, plant and equipment
 
(8,961
)
   
(7,844
)
Acquisition of business, net of cash acquired
 
     
(1,529
)
Other
 
(87
)
   
(428
)
Net cash used by investing activities
 
(9,048
)
   
(9,801
)
               
CASH FLOWS FROM FINANCING ACTIVITIES:
             
Proceeds from long-term revolving credit facility
 
85,797
     
65,429
 
Repayments of long-term revolving credit facility
 
(189,036
)
   
(89,691
)
Repayments of long-term debt
 
     
(1,359
)
Repayment of Series A Industrial Revenue Bonds
 
     
(57,785
)
Proceeds from issuance of common stock
 
129
     
695
 
Excess tax benefit from stock based compensation
 
     
301
 
Dividend paid to stockholders
 
     
(17,933
)
Other
 
     
(14
)
Net cash used by financing activities
 
(103,110
)
   
(100,357)
 
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH
 
(3,627
)
   
(4,394
)
Increase in cash and cash equivalents
 
4,618
     
54,362
 
CASH AND CASH EQUIVALENTS, beginning of period
 
15,385
     
33,315
 
CASH AND CASH EQUIVALENTS, end of period
$
20,003
   
$
87,677
 
               




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 third quarter of 2009 compared to 2008:

(In thousands)
 
   
CONSOLIDATED
   
DOMESTIC
   
INTERNATIONAL
 
   
Three Months Ended
   
Three Months Ended
   
Three Months Ended
 
   
September 30,
   
September 30,
   
September 30,
 
   
2009
   
2008
   
2009
   
2008
   
2009
   
2008
 
Retail
  $ 191,012     $ 216,226     $ 129,883     $ 147,992     $ 61,129     $ 68,234  
Direct
    12,245       11,230       10,600       9,169       1,645       2,061  
Healthcare
    8,942       11,636       2,804       3,727       6,138       7,909  
Third Party
    11,883       13,722       2,990       5,000       8,893       8,722  
Total
  $ 224,082     $ 252,814     $ 146,277     $ 165,888     $ 77,805     $ 86,926  

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
 
   
September 30,
   
September 30,
   
September 30,
 
   
2009
   
2008
   
2009
   
2008
   
2009
   
2008
 
Mattresses
  $ 149,810     $ 174,869     $ 103,122     $ 121,356     $ 46,688     $ 53,513  
Pillows
    28,386       31,414       13,216       14,476       15,170       16,938  
Other
    45,886       46,531       29,939       30,056       15,947       16,475  
Total
  $ 224,082     $ 252,814     $ 146,277     $ 165,888     $ 77,805     $ 86,926  


 
 

 

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 December 31, 2008, March 31, 2009, June 30, 2009 and September 30, 2009 as well as the twelve months ended September 30, 2009:

   
Three Months Ended
   
Twelve Months Ended
 
   
December 31, 2008
   
March 31, 2009
   
June 30, 2009
   
September 30, 2009
   
September 30, 2009
 
                               
GAAP Net income
  $ 1,055     $ 13,338     $ 16,857     $ 25,684     $ 56,934  
Plus:
                                       
   Interest expense
    5,493       4,571       4,477       4,311       18,852  
   Income taxes
    18,449       8,320       8,098       12,467       47,334  
   Depreciation  & amortization
    9,849       9,630       9,977       10,367       39,823  
                                         
EBITDA
  $ 34,846     $ 35,859     $ 39,409     $ 52,829     $ 162,943  

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 September 30, 2009:

   
As of
 
   
September 30, 2009
 
       
GAAP basis Total debt
  $ 315,000  
Plus:
       
   Letters of credit outstanding
    3,748  
Funded debt
  $ 318,748  

Calculation of Funded debt to EBITDA

   
As of
 
   
September 30, 2009
 
       
       
Funded debt
  $ 318,748  
EBITDA
    162,943  
   
1.96 times