July 20, 2010

Tempur-Pedic Reports Second Quarter 2010 Earnings


- Reports Sales Up 42% and EPS Up 109% at $0.46 - Raises Financial Guidance for 2010 - Announces New $100 Million Share Repurchase Authorization

LEXINGTON, Ky., July 20, 2010 /PRNewswire via COMTEX News Network/ -- Tempur-Pedic International Inc. (NYSE: TPX), the leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, today announced financial results for the second quarter ended June 30, 2010. The Company also increased full year 2010 financial guidance and announced a new $100.0 million share repurchase authorization.

Financial Summary

  • Earnings per share (EPS) were $0.46 per diluted share in the second quarter of 2010 as compared to $0.22 per diluted share in the second quarter of 2009. The Company reported net income of $33.5 million for the second quarter of 2010 as compared to $16.9 million in the second quarter of 2009.
  • Net sales increased 42% to $263.0 million in the second quarter of 2010 from $185.2 million in the second quarter of 2009. On a constant currency basis, net sales increased 44%. Net sales in the North American segment increased 59%, while International segment net sales increased 10%. On a constant currency basis, International segment net sales increased 14%.
  • Mattress sales increased 44% globally. Mattress sales increased 58% in the North American segment and 10% in the International segment. On a constant currency basis, International mattress sales increased 15%. Pillow sales increased 16% globally. Pillow sales increased 27% in North America and 7% internationally. On a constant currency basis, International pillow sales increased 10%. Other product sales increased 53% globally. Other product sales increased 77% in North America and 12% internationally. On a constant currency basis, International other product sales increased 16%.
  • Gross profit margin was 48.7% as compared to 46.6% in the second quarter of 2009. The gross profit margin increased as a result of fixed cost leverage related to higher production volumes and improved efficiencies in manufacturing, partially offset by geographic mix, new product introductions and higher commodity costs.
  • Operating profit margin was 20.5% as compared to 15.7% in the second quarter of 2009. The increase was driven by operating expense leverage and improved gross profit margin.
  • The Company generated $44.5 million of operating cash flow as compared to $39.5 million in the second quarter of 2009.

Chief Executive Officer Mark Sarvary commented, "We are very pleased with the continued substantial growth in our North American business and we are also pleased with the improved performance of our International business, particularly on a local currency basis. Our focus on improving gross margins and operating costs continues to be effective. Although the macroeconomic environment is still uncertain we remain confident of the potential to significantly grow sales and earnings over the coming years. We will continue to invest in initiatives that will drive growth over the long term."

Current Share Repurchase Authorization Completed and New Authorization Announced

During the second quarter of 2010, the Company purchased 3.0 million shares of its common stock at an average price of $33.42 for a total cost of $100.0 million. During the first half of 2010, the Company purchased 6.7 million shares of its common stock at an average price of $29.91 for a total cost of $200.0 million.

The Company announced that the Board of Directors has authorized a new share repurchase program of up to an incremental $100.0 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 replaces the Company's prior share repurchase authorization, and may be limited, suspended or terminated at any time without prior notice.

Chief Financial Officer Dale Williams stated, "As we require limited capital to support our growth initiatives, we continue to view share repurchases as an excellent means to return value to stockholders."

Financial Guidance

The Company increased its full year 2010 guidance for net sales and earnings per share. It currently expects net sales for 2010 to range from $1.06 billion to $1.10 billion. It currently expects EPS for 2010 to range from $1.85 to $2.00 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 EPS guidance does not assume any benefit from a potential reduction in shares outstanding related to its new share repurchase authorization.

Conference Call Information

Tempur-Pedic International will host a live conference call to discuss financial results today, July 20, 2010 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 888-293-6960. The dial-in number for international callers is 719-325-2289. 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," "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 potential to significantly grow sales and earnings over the coming years, investment in initiatives that will drive growth over the long term, the new share repurchase authorization, and the Company's expectations for net sales and earnings per share for 2010. 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; 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 North American 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(R) 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(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.

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

                                          Three Months
                                              Ended
                                            June 30,
                                            --------
                                            2010            2009      Chg %
                                            ----            ----      -----
    Net sales                           $263,044        $185,176       42.1%
    Cost of sales                        135,003          98,845
                                         -------          ------

    Gross profit                         128,041          86,331       48.3%

    Selling and marketing
     expenses                             46,827          35,191
    General,
     administrative and
     other expenses                       27,364          21,978

    Operating income                      53,850          29,162       84.7%

    Other expense, net:
        Interest expense, net             (3,786)         (4,477)
        Other (expense)
         income, net                         (64)            270
                                             ---             ---
            Total other expense           (3,850)         (4,207)

    Income before income
     taxes                                50,000          24,955      100.4%
    Income tax provision                  16,485           8,098
                                          ------           -----
        Net income                       $33,515         $16,857
             Less: Net income
              attributable to the
              noncontrolling
              interest                                         -
                                                             ---
                                               9
                                             ---
        Net income
         attributable to
         common stockholders         $                   $16,857       98.8%
                                   ===                   =======
                                          33,506


    Earnings per common
     share:
        Basic                              $0.47           $0.23
                                           =====           =====
        Diluted                            $0.46           $0.22
                                           =====           =====
    Weighted average
     common shares
     outstanding:
        Basic                             70,730          74,894
                                          ======          ======
        Diluted                           73,152          75,493
                                          ======          ======



                                       Six Months
                                         Ended
                                       June 30,
                                       --------
                                          2010               2009       Chg %
                                          ----               ----       -----
    Net sales                         $516,933           $362,280        42.7%
    Cost of sales                      264,083            194,088
                                       -------            -------

    Gross profit                       252,850            168,192        50.3%

    Selling and marketing
     expenses                           93,058             69,063
    General,
     administrative and
     other expenses                     53,652             44,086

    Operating income                   106,140             55,043        92.8%

    Other expense, net:
        Interest expense, net           (6,975)            (9,048)
        Other (expense)
         income, net                        99                618
                                           ---                ---
            Total other expense         (6,876)            (8,430)

    Income before income
     taxes                              99,264             46,613       113.0%
    Income tax provision                32,506             16,418
                                        ------             ------
        Net income                     $66,758            $30,195
             Less: Net income
              attributable to the
              noncontrolling
              interest                     104                  -
                                           ---                ---
        Net income
         attributable to
         common stockholders           $66,654            $30,195       120.7%
                                       =======            =======

    Earnings per common
     share:
        Basic                            $0.93              $0.40
                                         =====              =====
        Diluted                          $0.90              $0.40
                                         =====              =====
    Weighted average
     common shares
     outstanding:
        Basic                           72,014             74,884
                                        ======             ======
        Diluted                         74,438             75,036
                                        ======             ======


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

                                        June          December
                                           30,               31,
                                              2010             2009
                                              ----             ----
    ASSETS

    Current Assets:
         Cash and cash
          equivalents                   $15,367             $14,042
         Accounts receivable, net       112,338             105,576
         Inventories                     65,310              57,686
         Prepaid expenses and
          other current assets           14,174              11,268
         Deferred income taxes           20,462              20,411
                                         ------              ------
    Total Current Assets                227,651             208,983

         Property, plant and
          equipment, net                159,528             172,497
         Goodwill                       210,475             193,391
         Other intangible assets,
          net                            69,985              64,717
         Other non-current
          assets                          4,298               3,791
                                          -----               -----
    Total Assets                       $671,937            $643,379
                                       ========            ========

    LIABILITIES AND
     STOCKHOLDERS' EQUITY

    Current Liabilities:
         Accounts payable               $48,664             $47,761
         Accrued expenses and
          other current
          liabilities                    79,481              81,452
         Income taxes payable            14,584               7,312
    Total Current
     Liabilities                        142,729             136,525

         Long-term debt                 435,000             297,470
         Deferred income taxes           30,689              29,865
         Other non-current
          liabilities                     8,211               7,226
                                          -----               -----
    Total Liabilities                   616,629             471,086

    Equity attributable to
     common stockholders                 53,979             172,293
    Equity attributable to
     the noncontrolling
     interest                             1,329                   -
    Total Stockholders'
     Equity                              55,308             172,293

    Total Liabilities and
     Stockholders' Equity              $671,937            $643,379
                                       ========            ========




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

                                                  Six Months
                                                    Ended
                                                  June 30,
                                                  --------
                                               2010                  2009
                                               ----                  ----
    CASH FLOWS FROM OPERATING
     ACTIVITIES:
       Net income                           $66,758               $30,195
        Adjustments to reconcile
         net income to net cash
         provided by operating
         activities:
            Depreciation and
             amortization                    15,706                15,514
            Amortization of stock-
             based compensation               5,339                 4,093
            Amortization of deferred
             financing costs                    345                   345
            Bad debt expense                  1,278                 3,864
            Deferred income taxes            (2,697)               (6,148)
            Foreign currency
             adjustments and other           (2,150)                  148
        Changes in operating
         assets and liabilities,
         net of effects of
         acquired business                  (16,757)               17,439
                                            -------                ------
    Net cash provided by
     operating activities                    67,822                65,450

    CASH FLOWS FROM INVESTING
     ACTIVITIES:
       Acquisition of business,
        net of cash acquired                (18,692)                    -
       Purchases of property,
        plant and equipment                  (6,698)               (4,728)
       Payments for other                      (184)                 (155)
                                               ----
    Net cash used by
     investing activities                   (25,574)               (4,883)

    CASH FLOWS FROM FINANCING
     ACTIVITIES:
       Proceeds from long-term
        revolving credit
        facility                            222,336                83,797
       Repayments of long-term
        revolving credit
        facility                            (83,313)             (133,036)
        Proceeds from issuance of
         common stock                        19,470                     -
       Excess tax benefit from
        stock-based
        compensation                          2,613                     -
       Treasury shares
        repurchased                        (200,000)                    -
                                           --------                   ---
    Net cash used by
     financing activities                   (38,894)              (49,239)

    NET EFFECT OF EXCHANGE
     RATE CHANGES ON CASH AND
     CASH EQUIVALENTS                        (2,029)               (1,739)
                                             ------                ------

    Increase in cash and cash
     equivalents                              1,325                 9,589

    CASH AND CASH
     EQUIVALENTS, beginning
     of period                               14,042                15,385
                                             ------                ------

    CASH AND CASH
     EQUIVALENTS, end of
     period                                 $15,367               $24,974
                                            =======               =======





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.

On April 1, 2010, the Company purchased its third party distributor in Canada. Accordingly, net sales in the Canadian market are reported in the appropriate channels within the North American segment. As Canada represented essentially all sales through the North American third party channel, the Company will no longer be reporting third party sales in this segment.

The following table highlights net sales information, by channel and by segment, for the second quarter of 2010 compared to 2009:


    (In thousands)

                         CONSOLIDATED
                      Three Months Ended
                           June 30,
                         2010          2009
                         ----          ----

    Retail           $227,151      $155,575
    Direct             18,127        10,785
    Healthcare          7,898         8,261
    Third
     Party              9,868        10,555
                        -----        ------
                     $263,044      $185,176



                       NORTH AMERICA
                    Three Months Ended
                          June 30,
                       2010           2009
                       ----           ----

    Retail         $173,166       $105,576
    Direct           16,203          9,428
    Healthcare        2,853          2,686
    Third
     Party                -          3,054
                        ---          -----
                   $192,222       $120,744



                        INTERNATIONAL
                     Three Months Ended
                           June 30,
                        2010          2009
                        ----          ----

    Retail           $53,985       $49,999
    Direct             1,924         1,357
    Healthcare         5,045         5,575
    Third
     Party             9,868         7,501
                       -----         -----
                     $70,822       $64,432


 

Summary of Product Sales

The following table highlights net sales information, by product and by segment, for the second quarter of 2010 compared to 2009:


    (In thousands)

                             CONSOLIDATED
                          Three Months Ended
                               June 30,
                            2010            2009

    Mattresses          $178,622        $124,344
    Pillows               27,926          24,006
    Other                 56,496          36,826
                        $263,044        $185,176



                            NORTH AMERICA
                         Three Months Ended
                               June 30,
                           2010            2009

    Mattresses         $136,686         $86,300
    Pillows              14,058          11,029
    Other                41,478          23,415
                       $192,222        $120,744



                             INTERNATIONAL
                          Three Months Ended
                                June 30,
                             2010            2009

    Mattresses            $41,936         $38,044
    Pillows                13,868          12,977
    Other                  15,018          13,411
                          $70,822         $64,432


 

TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Reconciliation of Adjusted EBITDA to Net Income and Funded debt to Total debt

Non-GAAP Measures

(In thousands)

The Company provides information regarding 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 EBITDA to the Company's Net income and a reconciliation of Funded debt to Total debt are provided below. Management believes that the use of Adjusted EBITDA and Funded debt provides investors with useful information with respect to the terms of the Company's credit facility.

Reconciliation of Net income to Adjusted EBITDA

The following table sets forth the reconciliation of the Company's reported Net income to the calculation of Adjusted EBITDA for each of the three months ended September 30, 2009, December 31, 2009, March 31, 2010 and June 30, 2010, as well as the twelve months ended June 30, 2010:

 
                                            Three Months Ended
                                            ------------------
                           September   December 31,     March 31,    June 30,
                           30, 2009         2009           2010         2010
                          ----------  -------------    ----------   ---------

    GAAP Net
     income
     attributable
     to common
     stockholders         $25,684         $29,114       $33,148     $33,506
    Plus:
       Interest
        expense                4,311           3,990         3,189       3,786
       Income
        taxes                 12,467          14,159        16,021      16,485
        Depreciation
         &                    10,367          10,239         9,996      11,049
       Amortization
       Other (1)                   -               -           361         202
    Adjusted
     EBITDA                  $52,829         $57,502       $62,715     $65,028



                       Twelve Months
                           Ended
                       -------------
                      June 30, 2010
                      -------------

    GAAP Net
     income
     attributable
     to common
     stockholders           $121,452
    Plus:
       Interest
        expense               15,276
       Income
        taxes                 59,132
        Depreciation
         &                    41,651
       Amortization
       Other (1)                 563
    Adjusted
     EBITDA                 $238,074


    (1) Includes professional costs incurred in connection with the
    acquisition of the Company's Canadian distributor, which closed on
    April 1, 2010. In
    accordance with the Company's credit facility, this amount is
    excluded from the calculation of Adjusted EBITDA for purposes of
    calculating
    compliance with the ratio of Funded debt to Adjusted EBITDA.


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 June 30, 2010:



                                              As of
                                          June 30, 2010
                                          -------------

    GAAP basis Total debt                         $435,000
    Plus:
       Letters of credit
        outstanding                                 11,827
                                                    ------
    Funded debt                                   $446,827
                                                  ========



Calculation of Funded debt to Adjusted EBITDA



                                              As of
                                          June 30, 2010
                                          -------------

    Funded debt                                   $446,827
    Adjusted EBITDA                                238,074
                                                   -------
                                                1.88 times
                                                ==========



SOURCE Tempur-Pedic International Inc.

Copyright (C) 2010 PR Newswire. All rights reserved


Close window | Back to top

Copyright 2017 Tempur Sealy International, Inc.