Tempur-Pedic Reports Third Quarter Earnings

-- Reports EPS of $0.34 -- Gross Profit Margin Increases 590 Basis Points to 47.6% -- Year-To-Date Debt Reduction Exceeds $100 Million -- Company Raises Financial Guidance for 2009


LEXINGTON, Ky., Oct. 15  /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 third quarter ended September 30, 2009. In addition, the Company increased full year 2009 financial guidance.

  THIRD QUARTER FINANCIAL SUMMARY

  --  Earnings per share (EPS) were $0.34 per diluted share in the third
      quarter of 2009 as compared to $0.32 per diluted share in the third
      quarter of 2008. The Company reported net income of $25.7 million for
      the third quarter of 2009 as compared to net income of $24.1 million
      in the third quarter of 2008.


  --  Net sales declined 11% to $224.1 million in the third quarter of 2009
      from $252.8 million in the third quarter of 2008. On a constant
      currency basis, net sales declined 10%. Net sales in the domestic
      segment declined 12%, while international segment net sales declined
      10%. On a constant currency basis, international segment net sales
      declined 7%.


  --  Mattress sales declined 14% globally. Mattress sales declined 15% in
      the domestic segment and 13% in the international segment. On a
      constant currency basis, international mattress sales declined 9%.
      Pillow sales declined 10% globally. Pillow sales declined 9%
      domestically and 10% internationally. On a constant currency basis,
      international pillow sales declined 9%.


  --  Gross profit margin was 47.6% as compared to 41.7% in the third
      quarter of 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 19.0% as compared to 17.0% in the third
      quarter of 2008.


  --  Reflecting the Company's continued focus on generating cash, the
      Company generated $55.0 million of operating cash flow in the third
      quarter of 2009.


  --  During the quarter, the Company reduced Total debt by $54.0 million to
      $315.0 million. As of September 30, 2009, the Company's ratio of
      Funded debt to EBITDA was 1.96 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, "Our 2009 strategic initiatives continued to generate improved results during the third quarter. While the macro environment remains challenging, our sales have grown and our margins have improved. Our results continue to demonstrate the Company's strong cash flow. Through the first nine months, we have reduced debt by over $100 million. Our recent product introductions and our new advertising campaign combined with continued productivity improvements will allow us to build on this performance as we move into 2010."

2009 Financial Guidance

Given the Company's improving performance through the first three quarters of 2009 and its continued positive outlook for the year, the Company is increasing 2009 full year financial guidance. The Company expects EPS to range from $1.00 to $1.05 per diluted share. The Company expects net sales to range from $790 million to $805 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.

Conference Call Information

Tempur-Pedic International will host a live conference call to discuss financial results today, October 15, 2009 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 877-857-6147. The call is also being webcast and can be accessed on the investor relations section of the Company's website, http://www.tempurpedic.com/. For those who cannot listen to the live broadcast, a webcast replay will be available for 30 days on the Company's website.

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 on building on 2009 performance in 2010 and the Company's expectations regarding net sales and earnings per share for 2009. 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; the Company's ability to reduce expenses to align with reduced sales levels; 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® 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.com/ or call 800-805-3635.

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

                      Three Months                  Nine Months
                         Ended                         Ended
                      September 30,                 September 30,
                      ------------                  ------------
                   2009        2008    Chg %     2009        2008   Chg %
                   ----        ----    -----     ----        ----   -----
  Net sales      $224,082    $252,814   (11%) $586,362    $738,697   (21%)
  Cost of sales   117,373     147,323          311,461     419,109
                  -------     -------          -------     -------

  Gross profit    106,709     105,491     1%   274,901     319,588   (14%)

  Selling and
   marketing
   expenses        39,272      39,956          108,335     137,906
  General,
   administrative
   and other
   expenses        24,761      22,644           68,847      73,139
                   ------      ------           ------      ------

  Operating
   income          42,676      42,891    (1%)   97,719     108,543   (10%)

  Other expense,
   net:
    Interest
     expense, net  (4,311)     (6,294)         (13,359)    (19,630)
    Other
     (expense)
     income, net     (214)         96              404        (995)
                      ---          --              ---        ----
      Total other
       expense     (4,525)     (6,198)         (12,955)    (20,625)

  Income before
   income taxes    38,151      36,693     4%    84,764      87,918    (4%)
  Income tax
   provision       12,467      12,622           28,885      30,105
                   ------      ------           ------      ------
      Net income  $25,684     $24,071     7%   $55,879     $57,813    (3%)
                  =======     =======          =======     =======

  Earnings per
   common share:
    Basic           $0.34       $0.32            $0.75       $0.77
                    =====       =====            =====       =====
    Diluted         $0.34       $0.32            $0.74       $0.77
                    =====       =====            =====       =====
  Weighted
   average
   common shares
   outstanding:
    Basic          74,938      74,815           74,902      74,704
                   ======      ======           ======      ======
    Diluted        76,166      74,992           75,396      74,944
                   ======      ======           ======      ======



              TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
                    Condensed Consolidated Balance Sheets
                                (In thousands)

                                 September 30,        December 31,
                                     2009                2008
                                     ----                ----
  ASSETS

  Current Assets:
       Cash and cash
        equivalents                  $20,003            $15,385
       Accounts receivable, net      105,397             99,811
       Inventories                    48,456             60,497
       Prepaid expenses and
        other current assets          11,456              9,233
       Deferred income taxes          19,839             11,888
                                      ------             ------
  Total Current Assets               205,151            196,814

       Property, plant and
        equipment, net               175,817            185,843
       Goodwill                      193,456            192,569
       Other intangible assets, net   65,318             66,823
       Other non-current assets        2,919              4,482
                                       -----              -----
  Total Assets                      $642,661           $646,531
                                    ========           ========

  LIABILITIES AND STOCKHOLDERS' EQUITY

  Current Liabilities:
       Accounts payable              $46,625            $41,355
       Accrued expenses and
        other current liabilities     87,824             65,316
       Income taxes payable           14,533              7,783
                                      ------              -----
  Total Current Liabilities          148,982            114,454

       Long-term debt                315,000            419,341
       Deferred income taxes          29,142             28,371
       Other non-current
        liabilities                    8,952             11,922
                                       -----             ------
  Total Liabilities                  502,076            574,088

  Total Stockholders' Equity         140,585             72,443
                                     -------             ------

  Total Liabilities and
   Stockholders' Equity             $642,661           $646,531
                                    ========           ========



               TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
                Condensed Consolidated Statements of Cash Flows
                                (In thousands)

                                               Nine Months Ended
                                                 September 30,
                                                 -------------
                                              2009          2008
                                              ----          ----
  CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                             $55,879       $57,813
    Adjustments to reconcile net income
     to net cash provided by operating
     activities:
            Depreciation and amortization   23,526        24,847
            Amortization of stock-based
             compensation                    6,448         6,101
            Amortization of deferred
             financing costs                   518           888
            Bad debt expense                 4,659         5,859
            Deferred income taxes           (8,006)       (1,634)
            Foreign currency adjustments        53            74
            (Gain) Loss on sale of
             equipment and other               (19)          679
            Changes in operating assets
             and liabilities                37,345        74,287
                                            ------        ------
  Net cash provided by operating
   activities                              120,403       168,914

  CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of property, plant and
     equipment                              (8,961)       (7,844)
    Acquisition of business,
     net of cash acquired                        -        (1,529)
    Other                                      (87)         (428)
                                               ---          ----
  Net cash used by investing
   activities                               (9,048)       (9,801)

  CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from long-term revolving
     credit facility                        85,797        65,429
    Repayments of long-term revolving
     credit facility                      (189,036)      (89,691)
    Repayments of long-term debt                 -        (1,359)
    Repayment of Series A Industrial
     Revenue Bonds                               -       (57,785)
    Proceeds from issuance of common stock     129           695
    Excess tax benefit from stock based
     compensation                                -           301
    Dividend paid to stockholders                -       (17,933)
    Other                                        -           (14)
                                               ---           ---
  Net cash used by financing activities   (103,110)     (100,357)

  NET EFFECT OF EXCHANGE RATE CHANGES
   ON CASH                                  (3,627)       (4,394)
                                            ------        ------

  Increase in cash and cash equivalents      4,618        54,362

  CASH AND CASH EQUIVALENTS,
   beginning of period                      15,385        33,315
                                            ------        ------

  CASH AND CASH EQUIVALENTS,
   end of period                           $20,003       $87,677
                                           =======       =======


  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 third quarter of 2009 compared to 2008:


  (In thousands)
                  CONSOLIDATED            DOMESTIC          INTERNATIONAL
                  ------------            --------          -------------
               Three Months Ended    Three Months Ended  Three Months Ended
                 September 30,          September 30,       September 30,
                 -------------          -------------       -------------
                2009        2008      2009        2008     2009       2008
                ----        ----      ----        ----     ----       ----
  Retail      $191,012   $216,226   $129,883   $147,992  $61,129    $68,234
  Direct        12,245     11,230     10,600      9,169    1,645      2,061
  Healthcare     8,942     11,636      2,804      3,727    6,138      7,909
  Third Party   11,883     13,722      2,990      5,000    8,893      8,722
                ------     ------      -----      -----    -----      -----
  Total       $224,082   $252,814   $146,277   $165,888  $77,805    $86,926
              ========   ========   ========   ========  =======    =======


  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
                 September 30,          September 30,       September 30,
                 -------------          -------------       -------------
               2009        2008      2009        2008     2009       2008
               ----        ----      ----        ----     ----       ----
  Mattresses  $149,810   $174,869   $103,122   $121,356  $46,688    $53,513
  Pillows       28,386     31,414     13,216     14,476   15,170     16,938
  Other         45,886     46,531     29,939     30,056   15,947     16,475
                ------     ------     ------     ------   ------     ------
  Total       $224,082   $252,814   $146,277   $165,888  $77,805    $86,926
              ========   ========   ========   ========  =======    =======


                TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
               EBITDA to Net Income and Funded debt to Total debt
                              Non-GAAP Measures
                               (In thousands)

  The Company provides information regarding 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 EBITDA to the Company's Net income and reconciliation
  of Funded debt to Total debt are provided below. Management 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 EBITDA to Net income

  The following table sets forth the reconciliation of the Company's
  reported Net income to the calculation of EBITDA for each of the three
  months ended December 31, 2008, March 31, 2009, June 30, 2009 and
  September 30, 2009 as well as the twelve months ended September 30, 2009:


                                                             Twelve Months
                              Three Months Ended                 Ended
                              ------------------             -------------
                December 31, March 31, June 30, September 30, September 30,
                    2008      2009       2009      2009           2009
                    ----      ----       ----      ----           ----

  GAAP Net income  $1,055    $13,338   $16,857    $25,684        $56,934
  Plus:
    Interest
     expense        5,493      4,571     4,477      4,311         18,852
    Income taxes   18,449      8,320     8,098     12,467         47,334
    Depreciation &
     amortization   9,849      9,630     9,977     10,367         39,823
                    -----      -----     -----     ------         ------

  EBITDA          $34,846    $35,859   $39,409    $52,829       $162,943
                  =======    =======   =======    =======       ========



  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 September
  30, 2009:

                                            As of
                                     September 30, 2009
                                     ------------------
         GAAP basis Total debt               $315,000
         Plus:
           Letters of credit outstanding        3,748
                                                -----
         Funded debt                         $318,748
                                             ========



  Calculation of Funded debt to EBITDA

                                            As of
                                     September 30, 2009
                                     ------------------
         Funded debt                         $318,748
         EBITDA                               162,943
                                              -------
                                           1.96 times
                                           ==========


DATASOURCE: Tempur-Pedic International Inc.



CONTACT:  Investor Relations, Barry Hytinen, Vice President, Investor

Relations and Financial Planning & Analysis, 1-800-805-3635



Web Site:  http://www.tempurpedic.com/ 

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