Tempur-Pedic Reports Third Quarter EPS of $0.34
- Achieves Record Quarterly Net Sales of $241 Million Up 17%
LEXINGTON, Ky., Oct. 19 /PRNewswire-FirstCall/ -- Tempur-Pedic International Inc. (NYSE: TPX), the leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, today announced record earnings per share and net sales for the third quarter ended September 30, 2006.
- Earnings per share (EPS) doubled to $0.34 per diluted share in the third quarter of 2006 from $0.17 per diluted share in the third quarter of 2005. Net income in the third quarter of 2006 increased 66% to $28.9 million from $17.4 million in the third quarter of 2005.
- Net sales rose 17% to $240.9 million in the third quarter of 2006 from $206.1 million in the third quarter of 2005. Retail sales increased 25% worldwide. Domestic retail sales increased 31% and international retail sales increased 12%. Sales in the U.S. furniture and bedding retail channel were especially strong, with an increase of 43%.
- Worldwide, mattress unit growth increased 14%. Domestic mattress unit growth was particularly strong, increasing 26%.
- Cash flow provided by operations increased 56% to $46.6 million in the third quarter of 2006 from $30.0 million in the third quarter of 2005. The increase was principally driven by improved net income and working capital. For the nine months ended September 30, 2006, cash flow provided by operations increased 68% to $133.1 million from $79.1 million for the nine months ended September 30, 2005.
- Within the quarter, total debt declined by $43.7 million to $373.5 million reflecting net principal payments of $25.4 million on its U.S. facilities, $17.7 million on its European term loan and the impact of favorable foreign exchange rates on its international borrowings.
President and Chief Executive Officer H. Thomas Bryant commented, "Tempur- Pedic International turned in another solid quarter of net sales and earnings representing quarterly records for net sales, EPS and mattress units. We believe the initiatives put in place to accelerate growth are continuing to gain momentum, new products are being well received and efforts to control costs and further increase productivity are succeeding. In addition, our business continues to show its strong cash flow dynamics with operating cash flow up 56% to nearly $47 million."
Bryant continued, "Our U.S. operations delivered strong performance, resulting in significantly improved mattress unit growth, account productivity and operating leverage. Recent new product introductions and the refreshing of the Classic model helped to increase our retail floor space and improve market share. In addition, domestic pillow sales improved based primarily on sales of existing models. The new Symphony pillow line started shipping at the end of the quarter and is expected to be more widely distributed in the fourth quarter.
"Internationally, many of our key European markets experienced strong growth and achieved record sales levels. Excluding Japan and certain third party distributors, our international business continues to perform generally as expected and capture additional market share. However, we experienced modest growth in total as Japan continues to under-perform and we are in the process of replacing certain third party distributors."
Chief Financial Officer Dale Williams noted, "While our strategy to grow the retail channel and gain share in mattresses has accelerated growth, gross margins continue to be adversely affected by channel and product mix. However, initiatives to generate productivity improvements and cost reductions continue to yield significant benefits. In addition, the geographic earnings mix varied from our expectations, which resulted in a higher effective tax rate for the Company."
Bryant concluded, "The specialty bedding category led by Tempur-Pedic continues to expand and take market share from traditional innerspring mattress manufacturers. We are pleased with our performance in the quarter and believe we are taking the necessary steps to continue growth and improve productivity going forward."
The Company confirmed its prior guidance ranges for GAAP diluted earnings per share and net sales for full year 2006. The Company currently expects to be towards the high-end of its full year 2006 GAAP diluted earnings per share guidance range of $1.26 to $1.31, an increase of 30% to 35% over the Company's GAAP EPS for 2005. The Company currently expects to be towards the low-end of its full year 2006 net sales guidance range of $940.0 million to $970.0 million, an increase of 12% to 16% over 2005. The Company notes that 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 with President and Chief Executive Officer H. Thomas Bryant and Chief Financial Officer Dale Williams to discuss financial results today, October 19, 2006 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 866-362-4832, conference ID#77994461. The call is also being webcast, and can be accessed at http://www.tempurpedic.com/ir.
For those who cannot listen to the live broadcast, a replay of the call will be available from October 19, 2006 at 8:00 p.m. Eastern Time through October 26, 2006. To listen to the telephone replay, dial 888-286-8010, conference ID #69254260.
An archived webcast will also be available on the Tempur-Pedic International investor relations website at http://www.tempurpedic.com/ir.
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. All forward-looking statements, including without limitation, statements relating to the impact of initiatives to accelerate growth, maintain costs and improve productivity, the rollout and market acceptance of new products, and expectations regarding floor expansion in the retail channel, market share gains and net sales and net income for 2006, 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 and industry conditions and consumer confidence; 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 further penetrate the US retail furniture 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 its product line, maintain efficient, timely and cost-effective production and delivery of its products, and manage its growth; 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 premium mattresses and pillows made from its proprietary TEMPUR® pressure- relieving material. It is the worldwide leader in specialty sleep, the fastest growing segment of the estimated $12 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® 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 Consolidated Statements of Income (In thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 Chg % 2006 2005 Chg %
Net sales $240,917 $206,095 17% $688,465 $621,089 11% Cost of sales 124,894 103,577 354,672 305,793
Gross profit 116,023 102,518 13% 333,793 315,296 6%
Selling and marketing expenses 41,579 41,590 126,674 124,708 General and administrative expenses 19,465 17,483 55,870 51,849 Research and development expenses 1,240 627 3,031 1,944
Operating income 53,739 42,818 26% 148,218 136,795 8%
Other income (expense), net: Interest expense, net (6,728) (5,079) (17,402) (15,306) Loss on extinguishment of debt - - - (717) Other income (expense), net (201) (160) (349) 167 Total other expense (6,929) (5,239) (17,751) (15,856)
Income before income taxes 46,810 37,579 130,467 120,939 Income tax provision 17,947 20,211 48,599 51,971 Net income $28,863 $17,368 66% $81,868 $68,968 19%
Earnings per share: Basic $0.35 $0.18 $0.96 $0.70 Diluted $0.34 $0.17 $0.92 $0.67
Weighted average shares outstanding: Basic 82,946 99,090 85,533 98,770 Diluted 85,681 103,346 88,666 103,171
TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except per share amounts)
September 30, December 31, 2006 2005 Chg % ASSETS
Current Assets: Cash and cash equivalents $15,253 $17,855 Accounts receivable, net 136,236 111,726 Inventories 63,754 81,064 Prepaid expenses and other current assets 10,478 11,072 Income taxes receivable - 19 Deferred income taxes 8,288 6,532 Total Current Assets 234,009 228,268 3%
Property, plant and equipment, net 206,541 193,224 Goodwill 199,258 199,962 Other intangible assets, net 71,598 73,908 Deferred financing and other non-current assets, net 6,462 6,949 Total Assets $717,868 $702,311 2%
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities: Accounts payable $38,439 $33,639 Accrued expenses and other 65,747 56,570 Income taxes payable 23,090 - Current portion of long-term debt 19,051 30,770 Total Current Liabilities 146,327 120,979 21%
Long-term debt 354,425 313,711 Deferred income taxes 39,532 40,386 Other non-current liabilities 415 906 Total Liabilities 540,699 475,982 14%
Stockholders' Equity: Common stock, $.01 par value; 300,000 shares authorized; 99,215 shares issued as of September 30, 2006 and December 31, 2005 992 992 Additional paid in capital 261,973 255,369 Deferred stock compensation, net of amortization of $12,312 as of December 31, 2005 - (2,196) Retained earnings 111,705 46,245 Accumulated other comprehensive income 1,908 1,137 Treasury stock, at cost; 16,214 and 6,767 shares as of September 30, 2006 and December 31, 2005, respectively (199,409) (75,218) Total Stockholders' Equity 177,169 226,329 (22%)
Total Liabilities and Stockholders' Equity $717,868 $702,311 2%
TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES Consolidated Statement of Cash Flows (In thousands)
Nine Months Ended September 30, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $81,868 $68,968 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,640 18,815 Amortization of deferred financing costs 1,479 1,804 Loss on extinguishment of debt - 717 Amortization of stock-based compensation 2,672 2,312 Allowance for doubtful accounts 2,813 2,286 Deferred income taxes (2,479) (909) Foreign currency adjustments 243 606 Loss on sale of equipment and other 359 574 Changes in operating assets and liabilities: Accounts receivable (23,696) (30,477) Inventories 18,545 (23,917) Prepaid expenses and other current assets 573 1,569 Accounts payable 2,572 6,275 Accrued expenses and other 6,765 2,078 Income taxes payable/receivable 22,737 28,375 Net cash provided by operating activities 133,091 79,076
CASH FLOWS FROM INVESTING ACTIVITIES: Payments for trademarks and other intellectual property (699) (1,520) Purchases of property, plant and equipment (24,159) (68,139) Proceeds from sale of equipment 83 327 Net cash used by investing activities (24,775) (69,332)
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term revolving credit facility 152,000 73,500 Repayments of long-term revolving credit facility (55,000) (22,000)
Repayments of long-term debt (70,622) (33,492) Repayments of Series A Industrial Revenue Bonds (3,840) - Common stock issued, including reissuances of treasury stock 3,401 2,204 Excess tax benefit from stock based compensation 6,189 - Treasury stock repurchased (144,000) - Payments for deferred financing costs (698) (250) Net cash (used) / provided by financing activities (112,570) 19,962
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,652 (5,673)
(Decrease) / Increase in cash and cash equivalents (2,602) 24,033
CASH AND CASH EQUIVALENTS, beginning of period 17,855 28,368
CASH AND CASH EQUIVALENTS, end of period $15,253 $52,401
Summary of Channel Sales
The Company generates sales through four distribution channels: retail, direct, healthcare and third party. The retail channel sells to furniture, specialty and department stores globally. The direct channel sells directly to consumers. The healthcare channel sells to hospitals, nursing homes, healthcare professionals and medical retailers. The third party channel sells to distributors in countries where Tempur-Pedic International does not operate its own distribution company.
The following table highlights net sales information, by channel and by segment, for the third quarter of 2006 compared to 2005:
($ in thousands) CONSOLIDATED DOMESTIC INTERNATIONAL Three Months Ended Three Months Ended Three Months Ended September 30, September 30, September 30, 2006 2005 2006 2005 2006 2005
By Sales Channel Retail $198,659 $159,446 $139,883 $106,937 $58,776 $52,509 Direct 20,608 23,694 18,214 20,085 2,394 3,609 Healthcare 10,522 10,748 3,099 2,725 7,423 8,023 Third Party 11,128 12,207 3,250 2,576 7,878 9,631 Total $240,917 $206,095 $164,446 $132,323 $76,471 $73,772
Summary of Product Sales A summary of net sales by product is reported below:
($ in thousands) CONSOLIDATED DOMESTIC INTERNATIONAL Three Months Ended Three Months Ended Three Months Ended September 30, September 30, September 30, 2006 2005 2006 2005 2006 2005 Net Sales Mattresses $169,334 $139,162 $122,117 $96,398 $47,217 $42,764 Pillows 29,934 30,950 14,863 12,985 15,071 17,965 Other 41,649 35,983 27,466 22,940 14,183 13,043 Total $240,917 $206,095 $164,446 $132,323 $76,471 $73,772
Units Sold(1) Mattresses 196,213 171,939 120,669 95,725 75,544 76,214 Pillows 576,194 650,934 295,022 277,262 281,172 373,672
(1) Units sold represent net sales after consideration of returned mattresses and pillows and excludes units shipped to fulfill warranty claims and promotional activities.
SOURCE Tempur-Pedic International Inc.
CONTACT: Tempur-Pedic Investor Relations,