July 26, 2011

Tempur-Pedic Reports Record Second Quarter 2011 Sales and Earnings


- Reports Sales Up 30% and EPS Up 65% at $0.76
- Raises Financial Guidance for 2011
- Announces New $200 Million Share Repurchase Program; $160 Million Repurchased in First Half of 2011

LEXINGTON, Ky., July 26, 2011 /PRNewswire/ -- 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, 2011. The Company also increased full year 2011 financial guidance and announced a new share repurchase authorization.

Financial Summary

  • Earnings per diluted share (EPS) were $0.76 in the second quarter of 2011 as compared to $0.46 in the second quarter of 2010. The Company reported net income of $53.1 million in the second quarter of 2011 as compared to $33.5 million in the second quarter of 2010.

  • Net sales increased 30% to $342.2 million in the second quarter of 2011 from $263.0 million in the second quarter of 2010. On a constant currency basis, net sales increased 25%. Net sales in the North American segment increased 29%, while International segment net sales increased 34%. On a constant currency basis, International segment net sales increased 18%.  

  • Mattress sales increased 30% globally. Mattress sales increased 28% in the North American segment and 37% in the International segment. On a constant currency basis, International mattress sales increased 20%. Pillow sales increased 25% globally. Pillow sales increased 19% in North America and 31% in the International segment. On a constant currency basis, International pillow sales increased 15%.

  • Gross profit margin was 52.9% as compared to 48.7% in the second quarter of 2010. The gross profit margin increased as a result of favorable mix, improved efficiencies in manufacturing and fixed cost leverage related to higher production volumes, partially offset by higher commodity costs and new product launches.

  • Operating profit margin was 24.2% as compared to 20.5% in the second quarter of 2010. The increase was driven by improved gross profit margin, partially offset by increased marketing investments.

  • The Company generated $48.2 million of operating cash flow in the second quarter of 2011 as compared to $44.5 million in the second quarter of 2010.  

Chief Executive Officer Mark Sarvary commented, "We are pleased with our second quarter performance. We executed well on new product rollouts across the globe, broadening our appeal to consumers. Productivity programs continue to expand our margins, and our strategic investments in advertising are driving awareness and are already driving growth."

Share Repurchase Program

During the second quarter of 2011, the Company purchased 1.59 million shares of its common stock at an average price of $61.19 for a total cost of $97.5 million. During the first half of 2011, the Company purchased 2.91 million shares of its common stock at an average price of $54.92 for a total cost of $160.0 million.

The Company announced the Board of Directors has authorized a new share repurchase program, of up to $200 million. 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. 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.

Financial Guidance

The Company increased its full year 2011 guidance for net sales and EPS. It currently expects net sales for 2011 to range from $1.37 billion to $1.40 billion. It currently expects EPS for 2011 to range from $3.07 to $3.14 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 further reduction in shares outstanding related to its share repurchase program.

Conference Call Information

Tempur-Pedic International will host a live conference call to discuss financial results today, July 26, 2011 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 800-850-2903. The dial-in number for international callers is 224-357-2399. The call is also available via webcast and can be accessed on the investor relations section of the Company's website, http://www.tempurpedic.com. After the conference call, a replay of the webcast 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 Company's expectations for building on its 2010 performance in 2011, and for net sales and earnings per share for 2011. 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 retail channel, including the timing of opening or expanding within large retail accounts; the Company's ability to expand brand awareness, distribution and new products in 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


Six Months Ended


June 30,


June 30,



2011



2010


Chg %



2011




2010


Chg %

Net sales

$

342,212


$

263,044


30.1%


$

668,050



$

516,933


29.2%

Cost of sales


161,194



135,003





316,722




264,083




















Gross profit


181,018



128,041


41.4%



351,328




252,850


38.9%


















Selling and marketing expenses


67,980



46,827





132,350




93,058



General, administrative and other expenses


30,208



27,364





60,868




53,652




















Operating income


82,830



53,850


53.8%



158,110




106,140


49.0%


















Other expense, net:

















Interest expense, net


(2,646)



(3,786)





(5,185)




(6,975)



Other expense, net


(118)



(73)





(721)




(5)



Total other expense


(2,764)



(3,859)





(5,906)




(6,980)




















Income before income taxes


80,066



49,991


60.2%



152,204




99,160


53.5%

Income tax provision


26,982



16,485





50,860




32,506



   Net income

$

53,084


$

33,506




$

101,344



$

66,654




















Earnings per common share:

















Basic

$

0.78


$

0.47




$

1.48



$

0.93



Diluted

$

0.76


$

0.46




$

1.44



$

0.90



Weighted average common shares outstanding:

















Basic


67,959



70,730





68,257




72,014



Diluted


70,018



73,152





70,469




74,438






TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)



June 30,


December 31,



2011


2010


ASSETS
















Current Assets:








    Cash and cash equivalents

$

86,739



$

53,623


    Accounts receivable, net


140,413




115,630


    Inventories


86,279




69,856


    Prepaid expenses and other current assets


24,333




18,646


    Deferred income taxes


12,199




13,725


Total Current Assets


349,963




271,480










    Property, plant and equipment, net


162,081




159,807


    Goodwill


213,602




212,468


    Other intangible assets, net


66,940




68,745


    Other non-current assets


9,439




3,503


Total Assets

$

802,025



$

716,003










LIABILITIES AND STOCKHOLDERS' EQUITY
















Current Liabilities:








    Accounts payable

$

63,246



$

48,288


    Accrued expenses and other current liabilities


85,803




85,469


    Income taxes payable


18,714




12,477


Total Current Liabilities


167,763




146,234










    Long-term debt


475,000




407,000


    Deferred income taxes


30,787




32,315


    Other non-current liabilities


4,512




4,421


Total Liabilities


678,062




589,970










Total Stockholders' Equity


123,963




126,033










Total Liabilities and Stockholders' Equity

$

802,025



$

716,003













TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)


Six Months Ended


June 30,



2011




2010


CASH FLOWS FROM OPERATING ACTIVITIES:








Net income

$

101,344



$

66,654


Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation and amortization


16,590




15,706


Amortization of stock-based compensation


7,719




5,339


Amortization of deferred financing costs


346




345


Bad debt expense


1,137




1,278


Deferred income taxes


(1,133)




1,275


Foreign currency adjustments and other


826




(2,150)


Changes in operating assets and liabilities


(22,879)




(20,625)


Net cash provided by operating activities


103,950




67,822










CASH FLOWS FROM INVESTING ACTIVITIES:








Acquisition of business, net of cash acquired


-




(18,692)


Acquisition of trademarks and other


(1,970)




(184)


Purchases of property, plant and equipment


(12,098)




(6,698)


Net cash used by investing activities


(14,068)




(25,574)










CASH FLOWS FROM FINANCING ACTIVITIES:








Proceeds from long-term revolving credit facility


572,500




222,336


Repayments of long-term revolving credit facility


(504,500)




(83,313)


Payments of deferred finance costs


(6,109)




-


Proceeds from issuance of common stock


22,386




19,470


Excess tax benefit from stock-based compensation


14,133




2,613


Treasury shares repurchased


(160,010)




(200,000)


Net cash used by financing activities


(61,600)




(38,894)










NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS


4,834




(2,029)










Increase in cash and cash equivalents


33,116




1,325










CASH AND CASH EQUIVALENTS, beginning of period


53,623




14,042










CASH AND CASH EQUIVALENTS, end of period

$

86,739



$

15,367





















Summary of Channel Sales

The following table highlights net sales information, by channel and by segment:


(In thousands)


CONSOLIDATED

NORTH AMERICA

INTERNATIONAL


Three Months Ended

Three Months Ended

Three Months Ended


June 30,

June 30,

June 30,


2011

2010

2011

2010

2011

2010














Retail

$

299,024

$

226,376

$

227,186

$

173,166

$

71,838

$

53,210

Direct


22,884


18,902


17,296


16,203


5,588


2,699

Healthcare


8,000


7,898


2,630


2,853


5,370


5,045

Third Party


12,304


9,868


-


-


12,304


9,868


$

342,212

$

263,044

$

247,112

$

192,222

$

95,100

$

70,822




Summary of Product Sales

The following table highlights net sales information, by product and by segment:


(In thousands)


CONSOLIDATED

NORTH AMERICA

INTERNATIONAL


Three Months Ended

Three Months Ended

Three Months Ended


June 30,

June 30,

June 30,


2011

2010

2011

2010

2011

2010














Mattresses

$

232,618

$

178,618

$

175,270

$

136,686

$

57,348

$

41,932

Pillows


34,886


27,925


16,731


14,058


18,155


13,867

Other


74,708


56,501


55,111


41,478


19,597


15,023


$

342,212

$

263,044

$

247,112

$

192,222

$

95,100

$

70,822




TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

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

Non-GAAP Measures

(In thousands)


The Company provides information regarding Earnings Before Interest Taxes Depreciation and Amortization (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 EBITDA to the Company's Net income and a reconciliation of Total debt to Funded 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 Net income to EBITDA


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 September 30, 2010, December 31, 2010, March 31, 2011 and June 30, 2011, as well as the twelve months ended June 30, 2011:



Three Months Ended

Twelve Months Ended



September 30,

2010

December 31,

2010

March 31,

2011

June 30,

2011

June 30, 2011








GAAP Net income

$

44,198

$             46,292

$         48,260

$    53,084

$           191,834

Plus:







  Interest expense


4,068

3,458

2,539

2,646

12,711

  Income taxes


19,324

21,890

23,878

26,982

92,074

  Depreciation  &  

  Amortization


10,778

12,146

11,070

13,239

47,233

EBITDA

$

78,368

$             83,786

$         85,747

$    95,951

$           343,852




Reconciliation of Total debt to Funded 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, 2011:




As of



June 30, 2011




GAAP basis Total debt

$

475,000

Plus:



  Letters of credit outstanding


990

Funded debt

$

475,990




Calculation of Funded debt to EBITDA




As of



June 30, 2011




Funded debt

$

475,990

EBITDA


343,852



1.38 times




SOURCE Tempur-Pedic International Inc.

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