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Tempur-Pedic Reports Second Quarter 2010 Earnings
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.
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