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Tempur-Pedic Reports 18% Second Quarter Net Sales Increase

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Tempur-Pedic International Inc., a leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, announced financial results for the second quarter ended June 30, 2007. In addition, the Company increased full year 2007 financial guidance and announced a new share repurchase authorization. - Earnings per share (EPS) increased 30% to $0.39 per diluted share in the second quarter of 2007 as compared to $0.30 per diluted share in the second quarter of 2006. - Net sales rose 18% to $257.6 million in the second quarter of 2007 from $219.0 million in the second quarter of 2006. Retail sales increased 22% worldwide. Domestic retail sales increased 23% and international retail sales increased 18%. - Operating cash flow increased to $45.6 million in the second quarter of 2007 from $35.0 million in the second quarter of 2006. The increase was principally driven by net income growth. In addition, capital expenditures were $2.4 million in the second quarter of 2007 down from $9.3 million in the second quarter of 2006. - The Company achieved growth across all products and both geographic segments. Worldwide mattress revenue increased 20%. Domestic mattress revenue increased 21% driven by 17% unit volume growth. Pillow sales rose 9% worldwide driven by unit volume growth of 10%. Domestic pillow unit volumes were especially strong, up 19%. For the second quarter of 2007, the Company reported net income of $32.9 million as compared to $26.1 million in the second quarter of 2006. Net income results include stock-based compensation expense, which increased 122% to $1.6 million in the second quarter of 2007. President and Chief Executive Officer H. Thomas Bryant commented, "Tempur- Pedic International delivered another quarter of excellent results, with growth across all products and geographic segments. Through the first half, we are pleased with our results and see abundant opportunities to continue to gain market share." "Our sales and marketing teams continue to deliver outstanding results. Account productivity is improving and distribution of our products is expanding quickly. Our new mattress models began shipping during the second quarter and continue to roll-out across our retail partner base. Importantly, our existing product line also gained additional floor space within our established accounts. "The selective price increases we took in the first quarter have improved margins for both Tempur-Pedic and our retail partners. Late in the third quarter, we will increase the prices for our Deluxe and Classic models, once again improving margins for both Tempur-Pedic and retailers. "Our operations team continues to deliver strong performance, with our Albuquerque manufacturing facility ramping up production of our U.S. mattress line. Across our operations, we continue to identify and execute on productivity initiatives driving cost savings and improved efficiencies. However, margins were modestly impacted during the second quarter by new floor models and start-up costs in Albuquerque." Current Share Repurchase Authorization Completed and Announces New Authorization During the second quarter of 2007, the Company purchased 2.3 million shares of its common stock at an average price of $26.33 for a total cost of $60.8 million. From the commencement of the Company's current repurchase program on January 25, 2007 through the end of the second quarter of 2007, the Company has purchased 3.8 million shares of its common stock for a total cost of $100.0 million, thereby completing its prior repurchase authorization. The Company announced that the Board of Directors has authorized a new share repurchase of up to an incremental $200.0 million. 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 may be limited, suspended or terminated at any time without prior notice. Chief Financial Officer Dale Williams stated, "The strength of Tempur- Pedic's cash flow generation capabilities has been proven over a long period of time and with the recent completion of our third factory, we do not anticipate significant new capital expenditures over the next several years. As a result, we expect strong cash flow growth going forward. With this backdrop, we aggressively repurchased shares in the second quarter thereby completing our existing authorization. As we continue to view stock repurchases as an excellent means to return value to shareholders, we are pleased the Board has authorized a new buyback." Tax Rate As a result of recent reductions in statutory tax rates and updated expectations for geographic income mix, the Company currently anticipates its on-going effective tax rate for 2007 will be 34.5% as compared to prior guidance of 36%. 2007 Financial Guidance Given the Company's strong performance through the first half of 2007 and its continued positive outlook for the year, the Company is increasing 2007 full year financial guidance. The Company now expects net sales for 2007 to range from $1.065 billion to $1.085 billion, rather than $1.040 billion to $1.070 billion. This guidance reflects an increase of 13% to 15% compared to 2006 net sales of $945.0 million. The Company currently expects diluted earnings per share for 2007 to range from $1.63 to $1.66 compared to its previous guidance of $1.54 to $1.58. This guidance reflects an increase of 27% to 30% compared to 2006 EPS of $1.28. This guidance reflects incremental earnings resulting from increased sales expectations, shares repurchased through June 30, 2007, interest on associated borrowings and a lower full year tax rate. This guidance does not take into account the anticipated effect of any additional share repurchases. 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. Bryant concluded, "Over the long term, we expect to continue to gain market share as we lead the technology shift away from innersprings and ultimately reach our goal of becoming the worldwide bedding leader." 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.