Tempur-Pedic International Inc.: Rough Quarter Signals Wake-Up Call

Oct. 22, 2008
Consumers give bedding purchases a rest during economic downturn; company responds with several cost-cutting initiatives.

If the current economic conditions continue, Tempur-Pedic International Inc. executives and shareholders might find themselves tossing and turning on the same mattresses that have brought them financial success in the past. The Lexington, Ky.-based manufacturer and distributor of mattresses and pillows saw profit decline 38%, falling to $24.1 million from $38.8 million during the year-earlier period.

Sales dropped 14% to $252.8 million from $294.1 million last year.

CEO Mark Savary attributed the difficult quarter to the struggling economy.

"During the third quarter we executed well," he said in an Oct. 16 statement. "The economic climate worsened, and we responded quickly to improve earnings. We reduced our operating expenses and improved our balance sheet by substantially reducing debt."

The IW 50 Best Manufacturer for 2008 reduced total debt in the third quarter by $37.8 million to $518.8 million. It also increased its cash balance by $19.3 million to $87.7 million.

The company looks to reduce its debt further with a series of cost-cutting measures aimed at creating financial flexibility. One initiative includes the return of approximately $140 million of foreign earnings to the United States to reduce its outstanding debt. The company says it expects the move will result in an after-tax charge of approximately $13 million.

Tempur-Pedic International Inc.
At A Glance

Tempur-Pedic International Inc.
Lexington, Ky.
Primary Industry: Furniture & Fixtures
Number of Employees: 1,400
2007 In Review
Revenue: $1.1 billion
Profit Margin: 12.78%
Sales Turnover: 1.37
Inventory Turnover: 6.80
Revenue Growth: 7.11%
Return On Assets: 19.49%
Return On Equity: 66.30%

The company also plans to suspend its cash dividend and use those funds to reduce debt. The cost-cutting efforts should help the company meet its credit obligations and ensure its ability to invest in R&D and marketing, says Chief Financial Officer Dale Williams.

For the remainder of the fiscal year, the company expects sales will fall below prior expectations, reaching $930 million to $950 million. Earnings per share are projected to range between 90 cents and $1 per share.

Interested in information related to this topic? Subscribe to our weekly Leadership Insights From The IW 50 eNewsletter.

Popular Sponsored Recommendations

Food and Beverage 2024 Trends and Outlook for North America

Oct. 29, 2023
Ready to hear what 200 of your peers said are the top challenges and opportunities in 2024? Don’t fall behind. Uncover actionable insights to better prepare for 2024 in this whitepaper...

Digitally Transforming Data and Processes With Product Lifecycle Management

Oct. 29, 2023
Manufacturers face increasing challenges in product development as they strive to consistently deliver improved results. Discover how industry leaders are improving time-to-market...

Navigating Disruption: A Leader’s Guide to Strategy Under Uncertainty

Nov. 1, 2023
AI, sustainability, digital--industrials are facing disruptive forces that are redefining what it takes to win. What got your company where it is today won’t get you where you...

How Digital Twin Technology is Empowering Manufacturers

Sept. 27, 2023
This FAQ delves into why this technology offers business value and considerations toward implementation.

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!