-- 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., Oct.
15 /PRNewswire-FirstCall/ -- 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, http://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. TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (In thousands, except
per common share amounts) Three Months Nine Months Ended 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: Twelve Months Three Months Ended Ended ------------------
------------- December 31, March 31, June 30, September 30,
September 30, 2008 2009 2009 2009 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 ==========
DATASOURCE: Tempur-Pedic International Inc. CONTACT: Investor
Relations, Barry Hytinen, Vice President, Investor Relations and
Financial Planning & Analysis, 1-800-805-3635 Web Site:
http://www.tempurpedic.com/
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