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Tempur-Pedic Reports Third Quarter Earnings
LEXINGTON, Ky., Oct 15, 2009 /PRNewswire-FirstCall 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 third quarter ended September 30, 2009. In addition, the Company increased full year 2009 financial guidance.
THIRD QUARTER FINANCIAL SUMMARY
-- Earnings per share (EPS) were $0.34 per diluted share in the third
quarter of 2009 as compared to $0.32 per diluted share in the third
quarter of 2008. The Company reported net income of $25.7 million for
the third quarter of 2009 as compared to net income of $24.1 million in
the third quarter of 2008.
-- Net sales declined 11% to $224.1 million in the third quarter of 2009
from $252.8 million in the third quarter of 2008. On a constant currency
basis, net sales declined 10%. Net sales in the domestic segment
declined 12%, while international segment net sales declined 10%. On a
constant currency basis, international segment net sales declined 7%.
-- Mattress sales declined 14% globally. Mattress sales declined 15% in the
domestic segment and 13% in the international segment. On a constant
currency basis, international mattress sales declined 9%. Pillow sales
declined 10% globally. Pillow sales declined 9% domestically and 10%
internationally. On a constant currency basis, international pillow
sales declined 9%.
-- Gross profit margin was 47.6% as compared to 41.7% in the third quarter
of 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 19.0% as compared to 17.0% in the third
quarter of 2008.
-- Reflecting the Company's continued focus on generating cash, the Company
generated $55.0 million of operating cash flow in the third quarter of
2009.
-- During the quarter, the Company reduced Total debt by $54.0 million to
$315.0 million. As of September 30, 2009, the Company's ratio of Funded
debt to EBITDA was 1.96 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.
Chief Executive Officer Mark Sarvary commented, "Our 2009 strategic initiatives continued to generate improved results during the third quarter. While the macro environment remains challenging, our sales have grown and our margins have improved. Our results continue to demonstrate the Company's strong cash flow. Through the first nine months, we have reduced debt by over $100 million. Our recent product introductions and our new advertising campaign combined with continued productivity improvements will allow us to build on this performance as we move into 2010."
2009 Financial Guidance
Given the Company's improving performance through the first three quarters of 2009 and its continued positive outlook for the year, the Company is increasing 2009 full year financial guidance. The Company expects EPS to range from $1.00 to $1.05 per diluted share. The Company expects net sales to range from $790 million to $805 million. 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.
Conference Call Information
Tempur-Pedic International will host a live conference call to discuss financial results today, October 15, 2009 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 877-857-6147. The call is also being webcast and can be accessed on the investor relations section of the Company's website, www.tempurpedic.com. For those who cannot listen to the live broadcast, a webcast replay will be available for 30 days on the Company's website.
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 on building on 2009 performance in 2010 and the Company's expectations regarding net sales and earnings per share for 2009. 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; the Company's ability to reduce expenses to align with reduced sales levels; 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
Condensed Consolidated Statements of Income
(In thousands, except per common share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------ ------------
2009 2008 Chg % 2009 2008 Chg %
---- ---- ----- ---- ---- -----
Net sales $224,082 $252,814 (11%) $586,362 $738,697 (21%)
Cost of sales 117,373 147,323 311,461 419,109
------- ------- ------- -------
Gross profit 106,709 105,491 1% 274,901 319,588 (14%)
Selling and
marketing
expenses 39,272 39,956 108,335 137,906
General,
administrative
and other
expenses 24,761 22,644 68,847 73,139
------ ------ ------ ------
Operating
income 42,676 42,891 (1%) 97,719 108,543 (10%)
Other expense,
net:
Interest
expense, net (4,311) (6,294) (13,359) (19,630)
Other
(expense)
income, net (214) 96 404 (995)
--- -- --- ----
Total other
expense (4,525) (6,198) (12,955) (20,625)
Income before
income taxes 38,151 36,693 4% 84,764 87,918 (4%)
Income tax
provision 12,467 12,622 28,885 30,105
------ ------ ------ ------
Net income $25,684 $24,071 7% $55,879 $57,813 (3%)
======= ======= ======= =======
Earnings per
common share:
Basic $0.34 $0.32 $0.75 $0.77
===== ===== ===== =====
Diluted $0.34 $0.32 $0.74 $0.77
===== ===== ===== =====
Weighted
average
common shares
outstanding:
Basic 74,938 74,815 74,902 74,704
====== ====== ====== ======
Diluted 76,166 74,992 75,396 74,944
====== ====== ====== ======
TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
September 30, December 31,
2009 2008
---- ----
ASSETS
Current Assets:
Cash and cash
equivalents $20,003 $15,385
Accounts receivable, net 105,397 99,811
Inventories 48,456 60,497
Prepaid expenses and
other current assets 11,456 9,233
Deferred income taxes 19,839 11,888
------ ------
Total Current Assets 205,151 196,814
Property, plant and
equipment, net 175,817 185,843
Goodwill 193,456 192,569
Other intangible assets, net 65,318 66,823
Other non-current assets 2,919 4,482
----- -----
Total Assets $642,661 $646,531
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $46,625 $41,355
Accrued expenses and
other current liabilities 87,824 65,316
Income taxes payable 14,533 7,783
------ -----
Total Current Liabilities 148,982 114,454
Long-term debt 315,000 419,341
Deferred income taxes 29,142 28,371
Other non-current
liabilities 8,952 11,922
----- ------
Total Liabilities 502,076 574,088
Total Stockholders' Equity 140,585 72,443
------- ------
Total Liabilities and
Stockholders' Equity $642,661 $646,531
======== ========
TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
September 30,
-------------
2009 2008
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $55,879 $57,813
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 23,526 24,847
Amortization of stock-based
compensation 6,448 6,101
Amortization of deferred
financing costs 518 888
Bad debt expense 4,659 5,859
Deferred income taxes (8,006) (1,634)
Foreign currency adjustments 53 74
(Gain) Loss on sale of
equipment and other (19) 679
Changes in operating assets
and liabilities 37,345 74,287
------ ------
Net cash provided by operating
activities 120,403 168,914
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (8,961) (7,844)
Acquisition of business,
net of cash acquired - (1,529)
Other (87) (428)
--- ----
Net cash used by investing
activities (9,048) (9,801)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term revolving
credit facility 85,797 65,429
Repayments of long-term revolving
credit facility (189,036) (89,691)
Repayments of long-term debt - (1,359)
Repayment of Series A Industrial
Revenue Bonds - (57,785)
Proceeds from issuance of common stock 129 695
Excess tax benefit from stock based
compensation - 301
Dividend paid to stockholders - (17,933)
Other - (14)
--- ---
Net cash used by financing activities (103,110) (100,357)
NET EFFECT OF EXCHANGE RATE CHANGES
ON CASH (3,627) (4,394)
------ ------
Increase in cash and cash equivalents 4,618 54,362
CASH AND CASH EQUIVALENTS,
beginning of period 15,385 33,315
------ ------
CASH AND CASH EQUIVALENTS,
end of period $20,003 $87,677
======= =======
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 2009 compared to 2008:
(In thousands)
CONSOLIDATED DOMESTIC INTERNATIONAL
------------ -------- -------------
Three Months Ended Three Months Ended Three Months Ended
September 30, September 30, September 30,
------------- ------------- -------------
2009 2008 2009 2008 2009 2008
---- ---- ---- ---- ---- ----
Retail $191,012 $216,226 $129,883 $147,992 $61,129 $68,234
Direct 12,245 11,230 10,600 9,169 1,645 2,061
Healthcare 8,942 11,636 2,804 3,727 6,138 7,909
Third Party 11,883 13,722 2,990 5,000 8,893 8,722
------ ------ ----- ----- ----- -----
Total $224,082 $252,814 $146,277 $165,888 $77,805 $86,926
======== ======== ======== ======== ======= =======
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,
------------- ------------- -------------
2009 2008 2009 2008 2009 2008
---- ---- ---- ---- ---- ----
Mattresses $149,810 $174,869 $103,122 $121,356 $46,688 $53,513
Pillows 28,386 31,414 13,216 14,476 15,170 16,938
Other 45,886 46,531 29,939 30,056 15,947 16,475
------ ------ ------ ------ ------ ------
Total $224,082 $252,814 $146,277 $165,888 $77,805 $86,926
======== ======== ======== ======== ======= =======
TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
EBITDA to Net Income and Funded debt to Total debt
Non-GAAP Measures
(In thousands)
The Company provides information regarding 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 EBITDA to the Company's Net income and reconciliation
of Funded debt to Total 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 EBITDA to Net income
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 December 31, 2008, March 31, 2009, June 30, 2009 and
September 30, 2009 as well as the twelve months ended September 30, 2009:
Twelve Months
Three Months Ended Ended
------------------ -------------
December 31, March 31, June 30, September 30, September 30,
2008 2009 2009 2009 2009
---- ---- ---- ---- ----
GAAP Net income $1,055 $13,338 $16,857 $25,684 $56,934
Plus:
Interest
expense 5,493 4,571 4,477 4,311 18,852
Income taxes 18,449 8,320 8,098 12,467 47,334
Depreciation &
amortization 9,849 9,630 9,977 10,367 39,823
----- ----- ----- ------ ------
EBITDA $34,846 $35,859 $39,409 $52,829 $162,943
======= ======= ======= ======= ========
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 September
30, 2009:
As of
September 30, 2009
------------------
GAAP basis Total debt $315,000
Plus:
Letters of credit outstanding 3,748
-----
Funded debt $318,748
========
Calculation of Funded debt to EBITDA
As of
September 30, 2009
------------------
Funded debt $318,748
EBITDA 162,943
-------
1.96 times
==========
SOURCE Tempur-Pedic International Inc.
http://www.tempurpedic.com
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