Tempur-Pedic Reports Second Quarter Earnings Decline

Furniture World Magazine

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 Tempur-Pedic International Inc., a manufacturer, marketer and distributor of premium mattresses and pillows worldwide, 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." 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 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(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.