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Tempur-Pedic Reports Fourth Quarter and Full Year Earnings
LEXINGTON, Ky., Jan 26, 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 fourth quarter and year ended December 31, 2009. The Company also announced a $100 million share repurchase program and confirmed its financial guidance for 2010.
FOURTH QUARTER FINANCIAL SUMMARY
- Earnings per share (EPS) were $0.38 per diluted share in the fourth quarter of 2009 as compared to adjusted EPS of $0.17 per diluted share in the fourth quarter of 2008. GAAP EPS in the fourth quarter of 2008 was $0.01, and reflects the $11.6 million tax provision related to the Company's repatriation of foreign earnings. The Company reported net income of $29.1 million for the fourth quarter of 2009 as compared to adjusted net income of $12.7 million in the fourth quarter of 2008. GAAP net income in the fourth quarter of 2008 was $1.1 million. For additional information regarding adjusted EPS and adjusted net income (which are non-GAAP measures), please refer to the reconciliation and other information included in the attached schedule.
- Net sales increased 29% to $244.8 million in the fourth quarter of 2009 from $189.1 million in the fourth quarter of 2008. On a constant currency basis, net sales increased 24%. Net sales in the domestic segment increased 40%, while international segment net sales increased 15%. On a constant currency basis, international segment net sales increased 3%.
- Mattress sales increased 26% globally. Mattress sales increased 34% in the domestic segment and 12% in the international segment. On a constant currency basis, international mattress sales were essentially unchanged. Pillow sales increased 23% globally. Pillow sales increased 39% domestically and 13% internationally. On a constant currency basis, international pillow sales increased 1%.
- Gross profit margin was 48.5% as compared to 43.0% in the fourth quarter of 2008. The gross profit margin increased as a result of improved efficiencies in manufacturing, lower commodity costs, fixed cost leverage related to higher production volumes and improved pricing, partially offset by geographic mix and new product introductions.
- Operating profit margin was 19.3% as compared to 13.4% in the fourth quarter of 2008.
- The Company generated $14.6 million of operating cash flow in the fourth quarter of 2009.
- During the quarter, the Company reduced Total debt by $17.5 million to $297.5 million. As of December 31, 2009, the Company's ratio of Funded debt to EBITDA was 1.68 times, well within the covenant in its credit facility, which requires that this ratio not exceed 3.00 times. For additional information about EBITDA and Funded debt (which are non-GAAP measures) please refer to the reconciliation and other information included in the attached schedule.
FULL YEAR 2009 FINANCIAL SUMMARY
- Earnings per share (EPS) were $1.12 per diluted share for the full year 2009 as compared to adjusted EPS of $0.94 per diluted share for the full year 2008. GAAP EPS was $0.79 for the full year 2008, and includes the $11.6 million tax provision related to the repatriation of foreign earnings.
- Net sales declined 10% to $831.2 million for the full year 2009 from $927.8 million for the full year 2008. On a constant currency basis, net sales declined 9%. Net sales in the domestic segment declined 8%, while international segment net sales declined 14%. On a constant currency basis, international segment net sales declined 11%.
- Gross profit margin was 47.4% for the full year 2009 as compared to 43.2% for the full year 2008. The gross profit margin increased as a result of improved efficiencies in manufacturing, lower commodity costs, and improved pricing, partially offset by fixed cost de-leverage related to lower production volumes.
- Operating profit margin was 17.4% as compared to 14.4% for the full year 2008.
- For the full year 2009, the Company lowered Total debt by $121.9 million to $297.5 million.
Chief Executive Officer Mark Sarvary commented, "Our fourth quarter and full year results reflect a gradual improvement in the macro environment together with success from sales and marketing initiatives. Our recent product introductions and our new advertising campaign combined with continued productivity improvements should allow us to build on this performance in 2010."
Chief Financial Officer Dale Williams commented, "With respect to the authorization of a new share repurchase program, we note that during 2009 we substantially reduced both our total debt and leverage ratio. We view share repurchases as an excellent means to return value to stockholders over the long term."
Share Repurchase Program
The Board of Directors authorized the repurchase of up to $100 million of shares of the Company's common stock. 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.
Financial Guidance
The Company confirmed its full year 2010 guidance for net sales and earnings per share. It currently expects net sales for 2010 to range from $950 million to $970 million. It currently expects EPS for 2010 to range from $1.40 to $1.50 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 share repurchase program.
Conference Call Information
Tempur-Pedic International will host a live conference call to discuss financial results today, January 26, 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 Company's expectations for building on its 2009 performance in 2010, and 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 domestic 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
Consolidated Statements of Income
(In thousands, except per common share amounts)
Three Months
Ended
December 31,
------------
2009 2008 Chg %
---- ---- -----
Net sales $244,794 $189,121 29%
Cost of sales 125,953 107,752
------- -------
Gross profit 118,841 81,369 46%
Selling and
marketing
expenses 45,105 34,444
General,
administrative
and other
expenses 26,510 21,604
------ ------
Operating income 47,226 25,321 87%
Other expense,
net:
Interest expense,
net (3,990) (5,493)
Other income
(expense), net 37 (324)
--- ----
Total other
expense (3,953) (5,817)
Income before
income taxes 43,273 19,504 122%
Income tax
provision 14,159 18,449
------ ------
Net income $29,114 $1,055 2,660%
======= ======
Earnings per
common share:
Basic $0.39 $0.01
===== =====
Diluted $0.38 $0.01
===== =====
Weighted average
common shares
outstanding:
Basic 75,029 74,833
====== ======
Diluted 77,028 74,920
====== ======
Twelve Months
Ended
December 31,
------------
2009 2008 Chg %
---- ---- -----
Net sales $831,156 $927,818 (10%)
Cost of sales 437,414 526,861
------- -------
Gross profit 393,742 400,957 (2%)
Selling and
marketing
expenses 153,440 172,350
General,
administrative
and other
expenses 95,357 94,743
------ ------
Operating income 144,945 133,864 8%
Other expense,
net:
Interest expense,
net (17,349) (25,123)
Other income
(expense), net 441 (1,319)
--- ------
Total other
expense (16,908) (26,442)
Income before
income taxes 128,037 107,422 19%
Income tax
provision 43,044 48,554
------ ------
Net income $84,993 $58,868 44%
======= =======
Earnings per
common share:
Basic $1.13 $0.79
===== =====
Diluted $1.12 $0.79
===== =====
Weighted average
common shares
outstanding:
Basic 74,934 74,737
====== ======
Diluted 76,048 74,909
====== ======
TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
December December
31, 31,
2009 2008
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $14,042 $15,385
Accounts receivable, net 105,576 99,811
Inventories 57,686 60,497
Prepaid expenses and other
current assets 11,268 9,233
Deferred income taxes 20,411 11,888
------ ------
Total Current Assets 208,983 196,814
Property, plant and
equipment, net 172,497 185,843
Goodwill 193,391 192,569
Other intangible assets,
net 64,717 66,823
Other non-current assets 3,791 4,482
----- -----
Total Assets $643,379 $646,531
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $47,761 $41,355
Accrued expenses and other
current liabilities 81,452 65,316
Income taxes payable 7,312 7,783
----- -----
Total Current Liabilities 136,525 114,454
Long-term debt 297,470 419,341
Deferred income taxes 29,865 28,371
Other non-current
liabilities 7,226 11,922
----- ------
Total Liabilities 471,086 574,088
Stockholders' Equity:
Common stock, $.01 par
value; 300,000 shares
authorized; 99,215 shares
issued as of December 31,
2009 and 2008,
respectively 992 992
Additional paid in capital 298,842 291,018
Retained earnings 365,727 281,422
Accumulated other
comprehensive loss (8,004) (12,590)
Treasury stock at cost;
24,103 and 24,382 shares
as of December 31, 2009
and 2008, respectively (485,264) (488,399)
-------- --------
Total Stockholders' Equity 172,293 72,443
------- ------
Total Liabilities and
Stockholders' Equity $643,379 $646,531
======== ========
TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Twelve Months
Ended
December 31,
------------
2009 2008
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $84,993 $58,868
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 31,424 32,756
Amortization of stock-
based compensation 8,789 8,041
Amortization of deferred
financing costs 692 1,060
Bad debt expense 5,936 8,110
Deferred income taxes (9,810) 2,423
Foreign currency
adjustments (115) (1,183)
Loss on sale of equipment
and other 564 666
Changes in operating
assets and liabilities:
Accounts receivable (10,542) 51,231
Inventories 3,738 45,758
Prepaid expenses and other
current assets (1,884) 1,695
Accounts payable 7,808 (15,676)
Accrued expenses and other 14,044 535
Income taxes payable (651) 4,110
---- -----
Net cash provided by
operating activities 134,986 198,394
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property,
plant and equipment (14,303) (10,494)
Acquisition of business,
net of cash acquired - (1,529)
Proceeds from escrow
settlement - 7,141
Other - (486)
--- ----
Net cash used by investing
activities (14,303) (5,368)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term
revolving credit facility 109,333 127,383
Repayments of long-term
revolving credit facility (230,036) (251,536)
Repayments of long-term
debt - (1,359)
Repayment of Series A
Industrial Revenue Bonds - (57,785)
Proceeds from issuance of
common stock 1,623 695
Excess tax benefit from
stock based compensation 359 399
Dividend paid to
stockholders - (17,933)
Other - (14)
--- ---
Net cash used by financing
activities (118,721) (200,150)
NET EFFECT OF EXCHANGE
RATE CHANGES ON CASH AND
CASH EQUIVALENTS (3,305) (10,806)
------ -------
Decrease in cash and cash
equivalents (1,343) (17,930)
CASH AND CASH EQUIVALENTS,
beginning of period 15,385 33,315
------ ------
CASH AND CASH EQUIVALENTS,
end of period $14,042 $15,385
======= =======
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 fourth quarter of 2009 compared to 2008:
(In thousands)
CONSOLIDATED DOMESTIC
------------ --------
Three Months Ended Three Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Retail $205,184 $157,652 $130,808 $93,332
Direct 16,719 10,098 14,777 8,496
Healthcare 10,047 10,638 2,840 3,226
Third Party 12,844 10,733 3,444 3,342
------ ------ ----- -----
Total $244,794 $189,121 $151,869 $108,396
======== ======== ======== ========
INTERNATIONAL
-------------
Three Months Ended
December 31,
------------
2009 2008
---- ----
Retail $74,376 $64,320
Direct 1,942 1,602
Healthcare 7,207 7,412
Third Party 9,400 7,391
----- -----
Total $92,925 $80,725
======= =======
Summary of Product Sales
A summary of net sales by product is reported below:
(In thousands)
CONSOLIDATED DOMESTIC
------------ --------
Three Months Ended Three Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Mattresses $156,665 $124,755 $101,792 $75,695
Pillows 32,079 25,990 14,724 10,591
Other 56,050 38,376 35,353 22,110
------ ------ ------ ------
Total $244,794 $189,121 $151,869 $108,396
======== ======== ======== ========
INTERNATIONAL
-------------
Three Months Ended
December 31,
------------
2009 2008
---- ----
Mattresses $54,873 $49,060
Pillows 17,355 15,399
Other 20,697 16,266
------ ------
Total $92,925 $80,725
======= =======
TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
Reconciliation of Adjusted Net income, Adjusted Earnings per share,
EBITDA to Net Income and Funded debt to Total debt
Non-GAAP Measures
(In thousands, except per common share amounts)
The Company provides information regarding Adjusted Net income, Adjusted Earnings per share, EBITDA and Funded debt which are not recognized terms under GAAP (Generally Accepted Accounting Principles) and do not purport to be alternatives to Net income as a measure of operating performance or Total debt. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. A reconciliation of Adjusted Net income, Adjusted Earnings per share and EBITDA to the Company's Net income and Earnings per share and a reconciliation of Funded debt to Total debt are provided below. Management believes that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the impact of the repatriation of foreign earnings. Management also 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 Adjusted Net income to Net income
The following table sets forth the reconciliation of the Company's reported Net income for the twelve months ended December 31, 2008 to the calculation of Adjusted Net income for the three and twelve months ended December 31, 2008:
Three Months Ended Twelve Months Ended
December 31, 2008 December 31, 2008
----------------- -----------------
GAAP Net income $1,055 $58,868
Plus:
Tax provision related to 11,631 11,631
repatriation of foreign
earnings ------ ------
Adjusted Net income $12,686 $70,499
======= =======
GAAP Earnings per share,
diluted $0.01 $0.79
Tax provision related to 0.16 0.15
repatriation of foreign
earnings ---- ----
Adjusted Earnings per
share, diluted $0.17 $0.94
===== =====
Reconciliation of EBITDA to Net income
The following table sets forth the reconciliation of the Company's reported Net income to the calculation of EBITDA for the twelve months ended December 31, 2009:
Twelve Months Ended
-------------------
December 31, 2009
-----------------
GAAP Net income $84,993
Plus:
Interest expense 17,349
Income taxes 43,044
Depreciation & amortization 40,213
EBITDA $185,599
========
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 December 31, 2009:
As of
December 31, 2009
-----------------
GAAP basis Total debt $297,470
Plus:
Letters of credit
outstanding 14,048
------
Funded debt $311,518
========
Calculation of Funded debt to EBITDA
As of
December 31, 2009
-----------------
Funded debt $311,518
EBITDA 185,599
-------
1.68 times
==========
SOURCE Tempur-Pedic International Inc.
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