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Tempur-Pedic International Inc. Second Quarter Net Sales Rise 14%

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Tempur-Pedic International Inc., a leading manufacturer, marketer and distributor of viscoelastic and premium mattresses and pillows worldwide, announced net sales and earnings for the second quarter ended June 30, 2006. Second Quarter 2006 Summary - Net sales rose 14% to $219.0 million from $192.6 million in the second quarter of 2005. Retail channel sales increased 21% in the U.S. and 21% worldwide. Sales in the U.S. furniture retail channel were especially strong, with an increase of 29%. Sales in the international retail channel increased 20%. - Earnings per share (EPS) rose 25% to $0.30 per diluted share in the second quarter of 2006 from $0.24 per diluted share in the second quarter of 2005. Share repurchases completed in the second quarter of 2006 contributed less than half a cent to second quarter 2006 fully diluted EPS. - Worldwide, mattress unit growth increased 17%. Domestic mattress unit growth was especially strong increasing 22%. - Cash flow provided by operations increased to $35.0 million in the second quarter of 2006 from $15.0 million in the second quarter of 2005. The increase was principally driven by improved working capital. For the six months ended June 30, 2006, cash flow provided by operations increased to $86.5 million from $49.1 million for the six months ended June 30, 2005. - The Company made a voluntary prepayment of $20.5 million on its European term loan, in excess of its scheduled principal payment of $4.9 million, for a total principal reduction of $25.4 million. This is the second consecutive quarter during which the Company has made a voluntary prepayment in excess of $20 million on its European term loan. - During the second quarter, the Company purchased 3.3 million shares of its common stock at a total cost of $45.8 million. President and Chief Executive Officer H. Thomas Bryant commented, "Tempur- Pedic International turned in another solid quarter of net sales and earnings in the second quarter. We believe the initiatives we put in place to accelerate growth are gaining momentum and we are succeeding in our efforts to control costs. In addition, we continued to selectively add high quality retail partner stores reflecting our strategy to ensure improved established account and new store productivity. Bryant continued, "We benefited from ongoing efforts to improve the overall financial strength of the business in the second quarter. Strong performance throughout our operations generated significantly improved mattress unit growth, working capital and productivity. "Late in the second quarter, we began shipping our two new high-end U.S. mattresses, 'The GrandBed by Tempur-Pedic(TM)' and 'The RhapsodyBed by Tempur- Pedic(TM)'. Dealer interest in both models has exceeded our expectations and we experienced stock outs. As a result, we had to allocate new products to select dealers. We anticipate fulfilling these orders in the third quarter. "In July, we began shipping the redesigned Classic model following a successful close-out program on remaining inventory of the old Classic. Dealer and consumer interest for all of our new models continues to be strong and we currently expect to expand floor space throughout the second half of the year. "Internationally, we continue to experience strong mattress growth across our retail markets. Our premium products are enjoyed by consumers throughout the world, and, in fact, we believe no U.S. bedding manufacturer has more substantial company-owned foreign operations than Tempur-Pedic. Reflecting international strength, we voluntarily prepaid $20.5 million on our European term loan, which coupled with our scheduled principal payment reduced international debt by $25.4 million." Chief Financial Officer Dale Williams noted, "While our strategy for growth through retail and mattress share gains has been effective, we continue to be affected by channel and product mix. Direct sales are down and pillow sales are flat versus prior year, which has negative implications for gross margin. In addition, gross margin was slightly impacted by the close-out of the old Classic. However, initiatives to generate productivity improvements and cost reductions throughout our manufacturing and supply chain operations have yielded significant benefits. As a result of these initiatives, we currently expect gross margin to improve during the second half of the year." Bryant concluded, "The viscoelastic bedding category created by Tempur- Pedic 15 years ago continues to expand and take market share from innerspring mattress manufacturers. As Tempur-Pedic scales toward our goal of becoming the world's largest mattress manufacturer, we will continue to ensure we have the business infrastructure and management team aligned to support this growth. To that end, I am pleased to announce the appointment of Rick Anderson to the newly created position of Executive Vice President and President, North America. Rick brings more than 23 years of global management, marketing and sales experience. In this new role, Rick will lead our North American sales and marketing organizations." Share Repurchase Program: During the second quarter of 2006, the Company purchased 3.3 million shares of its common stock for a total cost of $45.8 million. From the commencement of the repurchase program on October 20, 2005 through the end of the second quarter of 2006, the Company has purchased 18.1 million shares of its common stock for a total cost of $220.0 million. 2006 Guidance: The Company confirmed its previous guidance for net sales and increased guidance for GAAP diluted earnings per share for full year 2006. The Company continues to expect full year 2006 net sales to range from $940.0 million to $970.0 million, an increase of 12% to 16% over 2005. The Company increased its full year 2006 guidance for GAAP diluted earnings per share to reflect shares repurchased during the second quarter of 2006, interest expense on associated borrowings and charges related to recent incentive stock option grants. Compared to the Company's previous GAAP EPS guidance of $1.24 to $1.29, the Company currently expects GAAP diluted earnings per share for 2006 to range from $1.26 to $1.31, which would represent an increase of 30% to 35% over the Company's GAAP EPS for 2005. The Company also notes that 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. About the Company: Tempur-Pedic International Inc. (NYSE:TPX) manufactures and distributes Swedish Mattresses and Neck Pillows(TM) made from its TEMPUR(R) pressure- relieving material: a proprietary material that conforms to the body to provide support and help alleviate pressure points. Products are currently sold in over 70 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.

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