Tempur-Pedic Reports Fourth Quarter and Full Year Earnings

-- Reports Fourth Quarter EPS of $0.38

-- Company Announces $100 Million Share Repurchase Program

Jan 26, 2010, 16:05 ET from Tempur-Pedic International Inc.

LEXINGTON, Ky., Jan. 26 /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 fourth quarter and year ended December 31, 2009. The Company also announced a $100 million share repurchase program and confirmed its financial guidance for 2010.

FOURTH QUARTER FINANCIAL SUMMARY

  • Earnings per share (EPS) were $0.38 per diluted share in the fourth quarter of 2009 as compared to adjusted EPS of $0.17 per diluted share in the fourth quarter of 2008. GAAP EPS in the fourth quarter of 2008 was $0.01, and reflects the $11.6 million tax provision related to the Company's repatriation of foreign earnings. The Company reported net income of $29.1 million for the fourth quarter of 2009 as compared to adjusted net income of $12.7 million in the fourth quarter of 2008. GAAP net income in the fourth quarter of 2008 was $1.1 million. For additional information regarding adjusted EPS and adjusted net income (which are non-GAAP measures), please refer to the reconciliation and other information included in the attached schedule.
  • Net sales increased 29% to $244.8 million in the fourth quarter of 2009 from $189.1 million in the fourth quarter of 2008. On a constant currency basis, net sales increased 24%. Net sales in the domestic segment increased 40%, while international segment net sales increased 15%. On a constant currency basis, international segment net sales increased 3%.  
  • Mattress sales increased 26% globally. Mattress sales increased 34% in the domestic segment and 12% in the international segment. On a constant currency basis, international mattress sales were essentially unchanged. Pillow sales increased 23% globally. Pillow sales increased 39% domestically and 13% internationally. On a constant currency basis, international pillow sales increased 1%.
  • Gross profit margin was 48.5% as compared to 43.0% in the fourth quarter of 2008. The gross profit margin increased as a result of improved efficiencies in manufacturing, lower commodity costs, fixed cost leverage related to higher production volumes and improved pricing, partially offset by geographic mix and new product introductions.
  • Operating profit margin was 19.3% as compared to 13.4% in the fourth quarter of 2008.
  • The Company generated $14.6 million of operating cash flow in the fourth quarter of 2009.  
  • During the quarter, the Company reduced Total debt by $17.5 million to $297.5 million. As of December 31, 2009, the Company's ratio of Funded debt to EBITDA was 1.68 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.

FULL YEAR 2009 FINANCIAL SUMMARY

  • Earnings per share (EPS) were $1.12 per diluted share for the full year 2009 as compared to adjusted EPS of $0.94 per diluted share for the full year 2008. GAAP EPS was $0.79 for the full year 2008, and includes the $11.6 million tax provision related to the repatriation of foreign earnings.
  • Net sales declined 10% to $831.2 million for the full year 2009 from $927.8 million for the full year 2008. On a constant currency basis, net sales declined 9%. Net sales in the domestic segment declined 8%, while international segment net sales declined 14%. On a constant currency basis, international segment net sales declined 11%.  
  • Gross profit margin was 47.4% for the full year 2009 as compared to 43.2% for the full year 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 17.4% as compared to 14.4% for the full year 2008.
  • For the full year 2009, the Company lowered Total debt by $121.9 million to $297.5 million.

Chief Executive Officer Mark Sarvary commented, "Our fourth quarter and full year results reflect a gradual improvement in the macro environment together with success from sales and marketing initiatives. Our recent product introductions and our new advertising campaign combined with continued productivity improvements should allow us to build on this performance in 2010."

Chief Financial Officer Dale Williams commented, "With respect to the authorization of a new share repurchase program, we note that during 2009 we substantially reduced both our total debt and leverage ratio. We view share repurchases as an excellent means to return value to stockholders over the long term."  

Share Repurchase Program

The Board of Directors authorized the repurchase of up to $100 million of shares of the Company's common stock. Stock repurchases under this program may be made through open market transactions, negotiated purchases or otherwise, at times and in such amounts as management and a committee of the Board deem appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, financing and regulatory requirements and other market conditions. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. This share repurchase program replaces the Company's prior share repurchase authorization, and may be limited, suspended or terminated at any time without prior notice.

Financial Guidance

The Company confirmed its full year 2010 guidance for net sales and earnings per share. It currently expects net sales for 2010 to range from $950 million to $970 million. It currently expects EPS for 2010 to range from $1.40 to $1.50 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. The Company noted its EPS guidance does not assume any benefit from a potential reduction in shares outstanding related to its share repurchase program.

Conference Call Information

Tempur-Pedic International will host a live conference call to discuss financial results today, January 26, 2010 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 888-293-6960. The dial-in number for international callers is 719-325-2289. The call is also being webcast and can be accessed on the investor relations section of the Company's website, http://www.tempurpedic.com. After the conference call, a webcast replay will remain available on the investor relations section of the Company's website for 30 days.

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 for building on its 2009 performance in 2010, and for net sales and earnings per share for 2010. 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; 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(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 80 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.

TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per common share amounts)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2009

2008

Chg %

2009

2008

Chg %

Net sales

$

244,794 

$

189,121 

29%

$

831,156 

$

927,818 

(10%)

Cost of sales

125,953 

107,752 

437,414 

526,861 

Gross profit

118,841 

81,369 

46%

393,742 

400,957 

(2%)

Selling and marketing expenses

45,105 

34,444 

153,440 

172,350 

General, administrative and other expenses

26,510 

21,604 

95,357 

94,743 

Operating income

47,226 

25,321 

87%

144,945 

133,864 

8%

Other expense, net:

Interest expense, net

(3,990)

(5,493)

(17,349)

(25,123)

Other income (expense), net

37 

(324)

441 

(1,319)

Total other expense

(3,953)

(5,817)

(16,908)

(26,442)

Income before income taxes

43,273 

19,504 

122%

128,037 

107,422 

19%

Income tax provision

14,159 

18,449 

43,044 

48,554 

Net income

$

29,114 

$

1,055 

2,660%

$

84,993 

$

58,868 

44%

Earnings per common share:

Basic

$

0.39 

$

0.01 

$

1.13 

$

0.79 

Diluted

$

0.38 

$

0.01 

$

1.12 

$

0.79 

Weighted average common shares outstanding:

Basic

75,029 

74,833 

74,934 

74,737 

Diluted

77,028 

74,920 

76,048 

74,909 

TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands)

December 31,

December 31,

2009

2008

ASSETS

Current Assets:

    Cash and cash equivalents

$

14,042 

$

15,385 

    Accounts receivable, net

105,576 

99,811 

    Inventories

57,686 

60,497 

    Prepaid expenses and other current assets

11,268 

9,233 

    Deferred income taxes

20,411 

11,888 

Total Current Assets

208,983 

196,814 

    Property, plant and equipment, net

172,497 

185,843 

    Goodwill

193,391 

192,569 

    Other intangible assets, net

64,717 

66,823 

    Other non-current assets

3,791 

4,482 

Total Assets

$

643,379 

$

646,531 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

    Accounts payable

$

47,761 

$

41,355 

    Accrued expenses and other current liabilities

81,452 

65,316 

    Income taxes payable

7,312 

7,783 

Total Current Liabilities

136,525 

114,454 

    Long-term debt

297,470 

419,341 

    Deferred income taxes

29,865 

28,371 

    Other non-current liabilities

7,226 

11,922 

Total Liabilities

471,086 

574,088 

Stockholders' Equity:

Common stock, $.01 par value; 300,000 shares authorized; 99,215 shares issued as of December 31, 2009 and 2008, respectively

992 

992 

Additional paid in capital

298,842 

291,018 

Retained earnings

365,727 

281,422 

Accumulated other comprehensive loss

(8,004)

(12,590)

Treasury stock at cost; 24,103 and 24,382 shares as of December 31, 2009 and 2008, respectively

(485,264)

(488,399)

Total Stockholders' Equity

172,293 

72,443 

Total Liabilities and Stockholders' Equity

$

643,379 

$

646,531 

TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

Twelve Months Ended

December 31,

2009

2008

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

84,993 

$

58,868 

Adjustments to reconcile net income to net cash provided by operating activities:

         Depreciation and amortization

31,424 

32,756 

         Amortization of stock-based compensation

8,789 

8,041 

         Amortization of deferred financing costs

692 

1,060 

         Bad debt expense

5,936 

8,110 

         Deferred income taxes

(9,810)

2,423 

         Foreign currency adjustments

(115)

(1,183)

         Loss on sale of equipment and other

564 

666 

         Changes in operating assets and liabilities:

            Accounts receivable

(10,542)

51,231 

            Inventories

3,738 

45,758 

            Prepaid expenses and other current assets

(1,884)

1,695 

            Accounts payable

7,808 

(15,676)

            Accrued expenses and other

14,044 

535 

            Income taxes payable

(651)

4,110 

Net cash provided by operating activities

134,986 

198,394 

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

(14,303)

(10,494)

Acquisition of business, net of cash acquired

— 

(1,529)

Proceeds from escrow settlement

— 

7,141 

Other

— 

(486)

Net cash used by investing activities

(14,303)

(5,368)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term revolving credit facility

109,333 

127,383 

Repayments of long-term revolving credit facility

(230,036)

(251,536)

Repayments of long-term debt

— 

(1,359)

Repayment of Series A Industrial Revenue Bonds

— 

(57,785)

Proceeds from issuance of common stock

1,623 

695 

Excess tax benefit from stock based compensation

359 

399 

Dividend paid to stockholders

— 

(17,933)

Other

— 

(14)

Net cash used by financing activities

(118,721)

(200,150)

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

(3,305)

(10,806)

Decrease in cash and cash equivalents

(1,343)

(17,930)

CASH AND CASH EQUIVALENTS, beginning of period

15,385 

33,315 

CASH AND CASH EQUIVALENTS, end of period

$

14,042 

$

15,385 

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 fourth quarter of 2009 compared to 2008:

(In thousands)

CONSOLIDATED

DOMESTIC

INTERNATIONAL

Three Months Ended

Three Months Ended

Three Months Ended

December 31,

December 31,

December 31,

2009

2008

2009

2008

2009

2008

Retail

$

205,184

$

157,652

$

130,808

$

93,332

$

74,376

$

64,320

Direct

16,719

10,098

14,777

8,496

1,942

1,602

Healthcare

10,047

10,638

2,840

3,226

7,207

7,412

Third Party

12,844

10,733

3,444

3,342

9,400

7,391

Total

$

244,794

$

189,121

$

151,869

$

108,396

$

92,925

$

80,725

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

December 31,

December 31,

December 31,

2009

2008

2009

2008

2009

2008

Mattresses

$

156,665

$

124,755

$

101,792

$

75,695

$

54,873

$

49,060

Pillows

32,079

25,990

14,724

10,591

17,355

15,399

Other

56,050

38,376

35,353

22,110

20,697

16,266

Total

$

244,794

$

189,121

$

151,869

$

108,396

$

92,925

$

80,725

TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Reconciliation of Adjusted Net income, Adjusted Earnings per share,

EBITDA to Net Income and Funded debt to Total debt

Non-GAAP Measures

(In thousands, except per common share amounts)

The Company provides information regarding Adjusted Net income, Adjusted Earnings per share, 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 Adjusted Net income, Adjusted Earnings per share and EBITDA to the Company's Net income and Earnings per share and a reconciliation of Funded debt to Total debt are provided below. Management believes that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the impact of the repatriation of foreign earnings. Management also 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 Adjusted Net income to Net income

The following table sets forth the reconciliation of the Company's reported Net income for the twelve months ended December 31, 2008 to the calculation of Adjusted Net income for the three and twelve months ended December 31, 2008:

Three Months Ended

Twelve Months Ended

December 31, 2008

December 31, 2008

GAAP Net income

$

1,055

$

58,868

Plus:

Tax provision related to    

 repatriation of foreign earnings

11,631

11,631

Adjusted Net income

$

12,686

$

70,499

GAAP Earnings per share, diluted

$

0.01

$

0.79

Tax provision related to    

 repatriation of foreign earnings

0.16

0.15

Adjusted Earnings per share, diluted

$

0.17

$

0.94

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 the twelve months ended December 31, 2009:

Twelve Months Ended

December 31, 2009

GAAP Net income

$

84,993

Plus:

  Interest expense

17,349

  Income taxes

43,044

  Depreciation & amortization

40,213

EBITDA

$

185,599

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 December 31, 2009:

As of

December 31, 2009

GAAP basis Total debt

$

297,470

Plus:

  Letters of credit outstanding

14,048

Funded debt

$

311,518

Calculation of Funded debt to EBITDA

As of

December 31, 2009

Funded debt

$

311,518

EBITDA

185,599

1.68 times

SOURCE Tempur-Pedic International Inc.



RELATED LINKS

http://www.tempurpedic.com