Tempur-Pedic Reports Constant First Quarter Earnings

Furniture World Magazine

Tempur-Pedic International Inc., a leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, announced financial results for the first quarter ended March 31, 2009. The Company also updated financial guidance for 2009. FIRST QUARTER FINANCIAL SUMMARY - Earnings per share (EPS) were $0.18 per diluted share in the first quarter of 2009 as compared to $0.18 per diluted share in the first quarter of 2008. The Company reported net income of $13.3 million for the first quarter of 2009 as compared to net income of $13.5 million in the first quarter of 2008. Net income results for the first quarter of 2009 include a non-recurring $1.3 million tax charge resulting from a change to a foreign tax law. - Net sales declined 28% to $177.1 million in the first quarter of 2009 from $247.2 million in the first quarter of 2008. On a constant currency basis, net sales declined 24%. Net sales in the domestic segment declined 28%, while international segment net sales declined 29%. On a constant currency basis, international segment net sales declined 18%. - Mattress sales declined 29% globally. Mattress sales declined 29% in the domestic segment and 29% in the international segment. On a constant currency basis, international mattress sales declined 17%. Pillow sales declined 27% globally. Pillow sales declined 25% domestically and 29% internationally. On a constant currency basis, international pillow sales declined 20%. - Gross profit margin was 46.2% as compared to 43.7% in the first quarter of 2008. The gross profit margin increased as a result of lower commodity and transportation costs, improved efficiencies in manufacturing, and pricing actions taken during the quarter, partially offset by fixed cost de-leverage related to lower production volumes. - Operating profit margin was 14.6% as compared to 11.9% in the first quarter of 2008. Operating profit margin improvement resulted from the expansion in gross profit margin and lower operating expenses. The Company reduced operating expenses by $22.7 million to $56.0 million in the first quarter of 2009 from $78.7 million in the first quarter of 2008 - Reflecting the Company's continued focus on generating cash, the Company generated $26.0 million of operating cash flow in the first quarter of 2009 as compared to $24.6 million in the first quarter of 2008. - During the quarter, the Company reduced Total debt by $19.3 million to $400.0 million. As of March 31, 2009, the Company's ratio of Funded debt to EBITDA was 2.38 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, "We executed well during the first quarter. We made solid progress on our long-term initiatives most notably our initiative to drive gross margins. An easing commodity environment and our productivity initiatives have generated substantial margin improvement despite lower volumes. Importantly, we continued to drive balance sheet improvement by paying down debt." Chief Financial Officer Dale Williams commented, "Sales in the first quarter were modestly below our expectations. In the domestic segment, while sales were essentially flat to the fourth quarter run rate, we did not experience the normal seasonal lift. In the international segment, sales were down from the fourth quarter reflecting a weakened run rate. As visibility continues to be low, we have established our revised sales guidance assuming only a modest seasonal benefit to first quarter unit volumes. Accordingly, we continue to adjust our production plans and operating expenses. Our drive to expand margins has generated substantial benefit and we are confirming our prior EPS guidance. In addition, we continue to project we will remain in compliance with the covenants in our credit facility." 2009 Financial Guidance The Company maintained its EPS guidance to range from $0.70 to $0.90 per diluted share, but reduced its net sales guidance to range from $700 million to $740 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. About the Company: Tempur-Pedic International Inc. (NYSE:TPX) manufactures and distributes mattresses and pillows made from its proprietary TEMPUR(R) 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 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.