Tempur-Pedic Reports Fourth Quarter And Full Year 2012 Results

        Tempur-Pedic Reports Fourth Quarter And Full Year 2012 Results

- Reports Fourth Quarter GAAP EPS of $0.39; Adjusted EPS of $0.60

- Issues Financial Guidance for 2013

PR Newswire

LEXINGTON, Ky., Jan. 24, 2013

LEXINGTON, Ky., Jan. 24, 2013 /PRNewswire/ -- Tempur-Pedic International Inc.
(NYSE: TPX), a leading manufacturer, marketer and distributor of premium
mattresses and pillows worldwide, today announced financial results for the
fourth quarter and year ended December 31, 2012. The Company also issued
financial guidance for 2013.

FOURTH QUARTER FINANCIAL SUMMARY

  oEarnings per diluted share (EPS) under U.S. generally accepted accounting
    principles (GAAP) in the fourth quarter of 2012 were $0.39, and reflect
    the tax provision recorded in connection with the anticipated repatriation
    of foreign earnings together with certain transaction and integration
    costs related to the proposed Sealy acquisition, and other restructuring
    costs. Adjusted EPS were $0.60 in the fourth quarter of 2012 as compared
    to GAAP EPS of $0.84 in the fourth quarter of 2011.
  oGAAP net income in the fourth quarter of 2012 was $23.5 million. The
    Company reported adjusted net income of $36.4 million for the fourth
    quarter of 2012 as compared to GAAP net income of $56.3 million in the
    fourth quarter of 2011. 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.
  oNet sales decreased 7% to $341.1 million in the fourth quarter of 2012
    from $366.8 million in the fourth quarter of 2011. Net sales in the North
    American segment decreased 9% and International segment net sales
    decreased 4%.
  oMattress sales decreased 5% globally in the fourth quarter of 2012.
    Mattress sales decreased 5% in the North American segment and decreased 7%
    in the International segment. Pillow sales decreased 8% globally. Pillow
    sales decreased 26% in North America and increased 11% internationally.
  oGross profit margin was 50.0% as compared to 52.1% in the fourth quarter
    of 2011. The gross profit margin decreased primarily as a result of
    product mix and higher new product costs, offset partially by improved
    efficiencies in manufacturing and distribution.
  oOperating income was $51.3 million, or 15.0% of sales as compared to $85.8
    million, or 23.4% of sales in the fourth quarter of 2011 reflecting the
    Company's reduced gross margin and deleverage of certain operating
    expenses related to lower sales. Operating income in the fourth quarter of
    2012 included $7.6 million of transaction and integration costs related to
    the proposed Sealy acquisition, as well as $1.5 million of restructuring
    charges.
  oThe Company generated $36.2 million of operating cash flow as compared to
    $69.7 million in the fourth quarter of 2011.

FULL YEAR FINANCIAL SUMMARY

  oGAAP EPS for the full year 2012 were $1.70, and reflect the tax provision
    recorded in connection with the anticipated repatriation of foreign
    earnings together with certain transaction and integration costs related
    to the proposed Sealy acquisition, and other restructuring costs. Adjusted
    EPS were $2.61 for the full year 2012 as compared to GAAP EPS of $3.18 for
    the full year 2011.
  oGAAP net income for the full year 2012 was $106.8 million. The Company
    reported adjusted net income of $164.1 million for full year 2012 as
    compared to GAAP net income of $219.6 million for the full year 2011. 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.
  oNet sales decreased 1% to $1,402.9 million for the full year 2012 from
    $1,417.9 million for the full year 2011. Net sales in the North American
    segment decreased 4% and International segment net sales increased 6%.
  oGross profit margin was 50.9% for the full year 2012 as compared to 52.4%
    for the full year 2011. The gross profit margin decreased primarily as a
    result of product mix and increased promotions and discounts.
  oOperating income for the full year 2012 was $248.3 million, or 18% of
    sales as compared to $340.5 million, or 24.0% of sales for the full year
    2011. Operating income for the full year 2012 included $11.1 million of
    transaction and integration costs related to the proposed Sealy
    acquisition, $1.5 million of restructuring charges, and $10.3 million of
    benefit related to an adjustment to long-term incentive stock compensation
    following a re-evaluation of the probability of meeting certain required
    financial metrics.
  oThe Company generated $189.9 million of operating cash flow for the full
    year 2012 as compared to $248.7 million for the full year 2011.
  oThe Company repurchased 5.0 million shares for $150.0 million during 2012.

Chief Executive Officer Mark Sarvary commented, "Our performance during the
fourth quarter was in line with our projections, both in North America and
Internationally. We continued to see signs of stabilization in our North
American business driven by initiatives we launched in the third quarter. Next
week at the Las Vegas Market industry show we will announce further
initiatives, including several new products that we believe will return
Tempur-Pedic to growth in North America in 2013. Internationally, our fourth
quarter results were consistent with our recent projections, but reflect a
softening in demand due to macroeconomic weakness in Europe as expected. We
are excited about new product introductions in our international business in
2013. We remain very confident in our Company's growth potential and our
strong brand, and are very excited about our proposed combination with Sealy
Corporation."

Financial Guidance
The Company issued full year 2013 guidance for net sales and adjusted earnings
per share. It currently expects net sales for 2013 to be approximately $1.425
billion. It currently expects adjusted EPS for 2013 to be approximately $2.55
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
adjusted EPS guidance does not include tax provisions expected to be recorded
in 2013 in connection with the decision to repatriate foreign earnings and
transaction and integration costs related to the proposed Sealy acquisition.
In addition, the Company's net sales and adjusted EPS guidance does not assume
any contribution from the potential Sealy transaction. The Company continues
to expect the acquisition to be completed in the first half of 2013 and plans
to issue updated guidance for the combined entity after the transaction is
completed.

Conference Call Information
Tempur-Pedic International will host a live conference call to discuss
financial results today, January 24, 2013 at 5:00 p.m. Eastern Time. The
dial-in number for the conference call is 800-850-2903. The dial-in number for
international callers is 224-357-2399. 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," "proposed,"
"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
proposed initiatives and product introductions; the Company's growth potential
and strong brand; the proposed merger with Sealy Corporation, and expectations
regarding the Company's net sales and adjusted EPS for 2013. 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.

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 retail channel, including the timing of opening or
expanding within large retail accounts; the Company's ability to expand brand
awareness, distribution and new products; 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; the effects of strategic investments on the Company's operations;
changes in foreign tax rates and changes in tax laws generally, including the
ability to utilize tax loss carry forwards; changing commodity costs; and the
effect of future legislative or regulatory changes.

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." In addition, the proposed merger with Sealy presents risk
factors including the ability of the parties to complete the proposed merger
in a timely manner or at all; satisfaction of the conditions precedent to the
proposed merger, the ability to secure regulatory approvals; the possibility
of litigation (including relating to the merger itself); and the ability to
successfully integrate Sealy into Tempur-Pedic's operations and realize
synergies from the proposed transaction. 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.comor call 800-805-3635.





TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In millions, except per common share amounts)


                     Three Months Ended          Twelve Months Ended
                     December 31,                December 31,
                     2012       2011     Chg %   2012       2011       Chg %
Net sales            $  341.1   $ 366.8  -7.0%   $ 1,402.9  $ 1,417.9  -1.1%
Cost of sales           170.5     175.6            688.3      674.8
Gross profit            170.6     191.2  -10.8%    714.6      743.1    -3.8%
Selling and             75.9      72.1             319.1      276.9
marketing expenses
General,
administrative and
 other expenses      43.4      33.3             147.2      125.7
Operating income        51.3      85.8   -40.2%    248.3      340.5    -27.1%
Other expense, net:
 Interest           (5.8)     (3.5)            (18.8)     (11.9)
expense, net
 Other (expense)    (0.7)     0.8              (0.3)      (0.2)
income, net
 Total         (6.5)     (2.7)            (19.1)     (12.1)
other expense
Income before income    44.8      83.1   -46.1%    229.2      328.4    -30.2%
taxes
Income tax provision    21.3      26.8             122.4      108.8
 Net income      $  23.5    $ 56.3           $ 106.8    $ 219.6
Earnings per common
share:
 Basic           $  0.39    $ 0.86           $ 1.74     $ 3.27
 Diluted         $  0.39    $ 0.84           $ 1.70     $ 3.18
Weighted average
common
shares outstanding:
 Basic              59.6      65.1             61.5       67.1
 Diluted            60.8      67.0             62.9       69.1



TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In millions, except par value)


                                                   December 31,  December 31,
                                                   2012          2011
ASSETS
Current Assets:
 Cash and cash equivalents                     $  179.3      $  111.4
 Accounts receivable, net                         129.8         142.4
 Inventories                                      93.0          91.2
 Receivable from escrow                           375.0         --
 Prepaid expenses and other current assets        41.4          20.1
 Deferred income taxes                            2.6           14.7
Total Current Assets                                  821.1         379.8
 Property, plant and equipment, net               186.0         160.5
 Goodwill                                         216.1         213.3
 Other intangible assets, net                     63.1          66.5
 Deferred income taxes                            10.4          9.1
 Other non-current assets                         16.3          9.0
Total Assets                                       $  1,313.0    $  838.2
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
 Accounts payable                              $  85.8       $  69.9
 Accrued expenses and other current               84.3          76.6
liabilities
 Deferred income taxes                            26.5          0.6
 Income taxes payable                             15.5          20.5
Total Current Liabilities                             212.1         167.6
 Long-term debt                                   1,025.0       585.0
 Deferred income taxes                            31.4          33.3
 Other non-current liabilities                    22.2          21.5
Total Liabilities                                     1,290.7       807.4
Stockholders' Equity:
Common stock, $0.01 par value; 300.0 shares
                                                      1.0           1.0
authorized; 99.2 shares issued as of
 December 31, 2012 and 2011
Additional paid in capital                            379.0         361.8
Retained earnings                                     849.3         742.5
Accumulated other comprehensive loss                  (7.6)         (14.7)
Treasury stock at cost; 39.5 and 35.4 shares as
of                                                  (1,199.4)     (1,059.8)
 December 31, 2012 and 2011, respectively
Total Stockholders' Equity                            22.3          30.8
Total Liabilities and Stockholders' Equity         $  1,313.0    $  838.2



TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in millions)


                                                        Twelve Months Ended
                                                        December 31,
                                                        2012       2011
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                         $ 106.8    $ 219.6
 Adjustments to reconcile net income to net cash
provided by
 operating activities:
 Depreciation and amortization                   36.3       34.3
 Amortization of stock-based compensation        5.7        16.7
 Amortization of deferred financing costs        1.4        1.0
 Bad debt expense                                2.5        1.6
 Deferred income taxes                           38.4       (8.5)
 Foreign currency adjustments and other          2.1        1.2
 Changes in operating assets and liabilities
 Accounts receivable                         11.8       (30.2)
 Inventories                                 0.1        (18.5)
 Prepaid expense and other current assets    (29.4)     (2.8)
 Accounts payable                            14.3       21.7
 Accrued expenses and other                  5.1        3.9
 Income taxes payable                        (5.2)      8.7
Net cash provided by operating activities                 189.9      248.7
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property, plant and equipment           (50.5)     (29.5)
 Acquisition of businesses, net of cash acquired      (4.5)      (4.6)
 Other                                                --         (2.0)
Net cash used in investing activities                     (55.0)     (36.1)
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from long-term revolving credit facility    352.0      821.5
 Repayments of long-term revolving credit facility    (287.0)    (643.5)
 Payments of deferred finance costs                   (2.3)      (6.2)
 Proceeds from issuance of common stock               11.4       26.3
 Excess tax benefit from stock based compensation     10.5       19.2
 Treasury shares repurchased                          (152.6)    (365.9)
 Other                                                (2.8)      (0.3)
Net cash used in financing activities                     (70.8)     (148.9)
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH      3.8        (5.9)
EQUIVALENTS
Increase in cash and cash equivalents                     67.9       57.8
CASH AND CASH EQUIVALENTS, beginning of period            111.4      53.6
CASH AND CASH EQUIVALENTS, end of period                $ 179.3    $ 111.4



Summary of Channel Sales

The following table highlights net sales information, by channel and by
segment:

(in millions)
               CONSOLIDATED        NORTH AMERICA       INTERNATIONAL
               Three Months Ended  Three Months Ended  Three Months Ended
               December 31,        December 31,        December 31,
               2012       2011     2012       2011     2012       2011
Retail         $  295.7   $ 319.3  $  207.8   $ 225.2  $  87.9    $ 94.1
Direct            29.8      28.6      17.5      21.1      12.3      7.5
Healthcare        8.1       9.0       2.5       3.0       5.6       6.0
Third Party       7.5       9.9       —         —         7.5       9.9
               $  341.1   $ 366.8  $  227.8   $ 249.3  $  113.3   $ 117.5



Summary of Product Sales

The following table highlights net sales information, by product and by
segment

(in millions)
               CONSOLIDATED        NORTH AMERICA       INTERNATIONAL
               Three Months Ended  Three Months Ended  Three Months Ended
               December 31,        December 31,        December 31,
               2012       2011     2012       2011     2012       2011
Mattresses     $  225.8   $ 238.6  $  158.0   $ 166.0  $  67.8    $ 72.6
Pillows           40.6      44.0      16.3      22.1      24.3      21.9
Other             74.7      84.2      53.5      61.2      21.2      23.0
               $  341.1   $ 366.8  $  227.8   $ 249.3  $  113.3   $ 117.5



TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
(In millions, except per common share amounts)

The Company provides information regarding adjusted net income, adjusted
earnings per share, earnings before interest, taxes, depreciation, and
amortization (EBITDA), adjusted EBITDA, and funded debt, which are not
recognized terms under U.S. GAAP (Generally Accepted Accounting Principles)
and do not purport to be alternatives to net income as a measure of operating
performance or total debt. A reconciliation of adjusted net income and
adjusted earnings per share 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, transaction and integration costs related to the proposed Sealy
acquisition and restructuring costs. A reconciliation of EBITDA and adjusted
EBITDA to the Company's net income and a reconciliation of total debt to
funded debt are also provided below. Management believes that the use of
EBITDA, adjusted EBITDA and funded debt provides investors with useful
information with respect to the terms of the Company's debt agreements.
Because not all companies use identical calculations, these presentations may
not be comparable to other similarly titled measures of other companies.

Reconciliation of Net Income to Adjusted Net Income

The following table sets forth the reconciliation of the Company's reported
net income for the three months and year ended December 31, 2012 to the
calculation of adjusted net income for the three months and year ended
December 31, 2012:

                                   Three Months           Year Ended December
                                   Ended December 31,     31, 2012
                                   2012
GAAP net income                  $ 23.5                 $ 106.8
Plus:
Tax provision related to
repatriation of                    6.2                    48.1

 foreign earnings
Transaction costs related to
proposed Sealy                     4.2                    6.7

 acquisition, net of tax
Integration costs related to
proposed Sealy                     1.5                    1.5

 acquisition, net of tax
Restructuring costs, net of tax    1.0                    1.0
Adjusted net income              $ 36.4                 $ 164.1
GAAP earnings per common share,  $ 0.39                 $ 1.70
diluted
Tax provision related to
repatriation of                    0.10                   0.76

 foreign earnings
Transaction costs related to
proposed Sealy                     0.07                   0.11

 acquisition, net of tax
Integration costs related to
proposed Sealy                     0.02                   0.02

 acquisition, net of tax
Restructuring costs, net of tax    0.02                   0.02
Adjusted earnings per common     $ 0.60                 $ 2.61
share, diluted
Diluted shares outstanding         60.8                   62.9



Reconciliation of Net Income to EBITDA and Adjusted EBITDA

The following table sets forth the reconciliation of the Company's reported
net income to the calculation of EBITDA and adjusted EBITDA for the year ended
December 31, 2012:

                                                                Year Ended

                                                                December 31,
                                                                2012
GAAP net income                                                 $     106.8
Plus:
   Interest expense                                                   18.8
   Income tax provision                                              122.4
   Depreciation and amortization                                      42.0
EBITDA                                                                290.0
Plus:
   Transaction costs related to proposed Sealy acquisition           8.9
   Integration costs related to proposed Sealy acquisition            2.2
   Restructuring costs                                                1.5
Adjusted EBITDA                                                 $     302.6



Reconciliation of Total Debt to Funded 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, 2012:

                                         As of December
                                         31, 2012
GAAP basis total debt                    $    1,025.0
Less:
      Senior Notes                            (375.0)
Plus:
      Letters of credit outstanding           1.0
Funded debt                              $    651.0



Calculation of Funded Debt to EBITDA

                 As of

                 December 31,
                 2012
Funded debt      $    651.0
EBITDA                290.0
                 2.24 times



SOURCE Tempur-Pedic International Inc.

Website: http://www.tempurpedic.com
Contact: Investor Relations, Mark Rupe, Vice President, Tempur-Pedic
International, 1-800-805-3635, investor.relations@tempurpedic.com
 
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