April 20, 2010

Tempur-Pedic Reports First Quarter 2010 Earnings


Reports EPS of $0.44

LEXINGTON, Ky., April 20, 2010 /PRNewswire via COMTEX News Network/ -- -- Completed Prior $100 Million Share Repurchase Authorization

-- Announces New $100 Million Share Repurchase Authorization

-- Company Raises Financial Guidance for 2010

Tempur-Pedic International Inc. (NYSE: TPX), the leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, today announced financial results for the first quarter ended March 31, 2010. The Company also announced a new $100 million share repurchase program and increased full year 2010 financial guidance.

Financial Summary

  • Earnings per share (EPS) were $0.44 per diluted share in the first quarter of 2010 as compared to $0.18 per diluted share in the first quarter of 2009. The Company reported net income of $33.1 million for the first quarter of 2010 as compared to $13.3 million in the first quarter of 2009.
  • Net sales increased 43% to $253.9 million in the first quarter of 2010 from $177.1 million in the first quarter of 2009. On a constant currency basis, net sales increased 40%. Net sales in the domestic segment increased 57%, while international segment net sales increased 24%. On a constant currency basis, international segment net sales increased 15%.
  • Mattress sales increased 42% globally. Mattress sales increased 55% in the domestic segment and 19% in the international segment. On a constant currency basis, international mattress sales increased 10%. Pillow sales increased 33% globally. Pillow sales increased 44% domestically and 26% internationally. On a constant currency basis, international pillow sales increased 18%.
  • Gross profit margin was 49.2% as compared to 46.2% in the first 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 20.6% as compared to 14.6% in the first quarter of 2009. The increase was driven by improved gross profit margin and operating expense leverage driven by higher sales.
  • The Company generated $23.3 million of operating cash flow in the first quarter of 2010.

Chief Executive Officer Mark Sarvary commented, "We are very pleased with our first quarter results - we have increased sales and grown our market share while improving both our gross and operating margins. Our investments in marketing and research and development are driving our sales momentum and we believe they will continue to do so in the future."

Current Share Repurchase Authorization Completed and New Authorization Announced

During the first quarter of 2010, the Company purchased 3.7 million shares of its common stock at an average price of $27.07 for a total cost of $100.0 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, "In addition to our increased financial guidance for 2010 we believe we are well positioned for substantial growth in sales, earnings and cash flow, with limited capital expenditures, over the next several years. After considerable evaluation of our capital structure, we continue to view share repurchases as an excellent means to return value to shareholders over the long term."

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 $1.02 billion to $1.06 billion. It currently expects EPS for 2010 to range from $1.70 to $1.85 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 program.

Conference Call Information

Tempur-Pedic International will host a live conference call to discuss financial results today, April 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 Company's belief that its investment in marketing and research and development will continue to drive its sales momentum in the future, the Company's expectations regarding substantial sales, earnings and cash flow growth and limited capital expenditures, 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 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
                                             Ended
                                          March 31,
                                          ---------
                                        2010               2009      Chg%
                                        ----               ----      ----
    Net sales                       $253,889           $177,104        43%
    Cost of sales                    129,080             95,243
                                     -------             ------

    Gross profit                     124,809             81,861        53%
    Selling and marketing
     expenses                         46,231             33,872
    General,
     administrative and
     other expenses                   26,288             22,108
                                      ------             ------

    Operating income                  52,290             25,881       102%

    Other expense, net:
        Interest expense, net         (3,189)            (4,571)
        Other income, net                163                348
                                         ---                ---
            Total other expense       (3,026)            (4,223)

    Income before income
     taxes                            49,264             21,658       128%
    Income tax provision              16,021              8,320
                                      ------              -----
      Net income                      33,243             13,338
       Less: Net income
        attributable to the
        noncontrolling
        interest                          95                  -
                                         ---                ---
      Net income
       attributable to
       common stockholders           $33,148            $13,338       149%
                                     =======            =======

    Earnings per common
     share:
        Basic                          $0.45              $0.18
                                       =====              =====
        Diluted                        $0.44              $0.18
                                       =====              =====
    Weighted average
     common shares
     outstanding:
        Basic                         73,313             74,874
                                      ======             ======
        Diluted                       75,678             74,959
                                      ======             ======




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

                                                  December
                                March 31,                     31,
                                        2010       2009
                                        ----       ----
    ASSETS

    Current Assets:
         Cash and cash
          equivalents                $38,422               $14,042
         Accounts receivable,
          net                        118,997               105,576
         Inventories                  68,111                57,686
         Prepaid expenses and
          other current assets        15,888                11,268
         Deferred income taxes        20,276                20,411
                                      ------                ------
    Total Current Assets             261,694               208,983

         Property, plant and
          equipment, net             165,880               172,497
         Goodwill                    193,155               193,391
         Other intangible
          assets, net                 64,067                64,717
         Other non-current
          assets                       4,392                 3,791
                                       -----                 -----
    Total Assets                    $689,188              $643,379
                                    ========              ========

    LIABILITIES AND
     STOCKHOLDERS' EQUITY

    Current Liabilities:
         Accounts payable            $52,647               $47,761
         Accrued expenses and
          other current
          liabilities                 81,256                81,452
         Income taxes payable         14,362                 7,312
    Total Current
     Liabilities                     148,265               136,525

         Long-term debt              392,695               297,470
         Deferred income taxes        28,827                29,865
         Other non-current
          liabilities                  6,222                 7,226
                                       -----                 -----
    Total Liabilities                576,009               471,086

    Equity attributable
     to common
     stockholders                    111,859               172,293
    Equity attributable
     to the
     noncontrolling
     interest                          1,320                     -
    Total Stockholders'
     Equity                          113,179               172,293

    Total Liabilities and
     Stockholders' Equity           $689,188              $643,379
                                    ========              ========





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

                                                    Three Months
                                                        Ended
                                                     March 31,
                                                     ---------
                                                   2010                 2009
                                                   ----                 ----
    CASH FLOWS FROM OPERATING
     ACTIVITIES:
              Net income                        $33,243              $13,338
              Adjustments to reconcile
               net income to net cash
               provided
                by operating activities:
              Depreciation and
               amortization                       7,585                7,727
              Amortization of stock-
               based compensation                 2,411                1,903
              Amortization of deferred
               financing costs                      173                  172
              Bad debt expense                      576                2,233
              Deferred income taxes              (1,534)              (4,742)
              Foreign currency
               adjustments and other               (844)                (311)
              Changes in operating
               assets and liabilities           (18,290)               5,679
    Net cash provided by
     operating activities                        23,320               25,999

    CASH FLOWS FROM INVESTING
     ACTIVITIES:
              Purchases of property,
               plant and equipment               (2,671)              (1,423)
              Payments for other                    (87)                (218)
    Net cash used by
     investing activities                        (2,758)              (1,641)

    CASH FLOWS FROM FINANCING
     ACTIVITIES:
              Proceeds from long-term
               revolving credit
               facility                         129,336               61,500
              Repayments of long-term
               revolving credit
               facility                         (33,749)             (79,721)
              Proceeds from issuance of
               Common stock                       8,308                    -
              Excess tax benefit from
               stock based compensation           1,289                    -
              Treasury shares
               repurchased                     (100,000)                   -
                                               --------                  ---
    Net cash provided (used)
     by financing activities                      5,184              (18,221)

    NET EFFECT OF EXCHANGE
     RATE CHANGES ON CASH                        (1,366)                (395)
                                                 ------                 ----

    Increase in cash and cash
     equivalents                                 24,380                5,742

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

    CASH AND CASH
     EQUIVALENTS, end of
     period                                     $38,422              $21,127
                                                =======              =======





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 first quarter of 2010 compared to 2009:


    (In thousands)

                    CONSOLIDATED          DOMESTIC        INTERNATIONAL
                                                           Three Months
                 Three Months Ended            Three Months Ended       Ended
                      March 31           March 31,             March 31,
                   2010        2009     2010     2009    2010      2009
                   ----        ----     ----     ----    ----      ----

    Retail     $212,740    $150,522 $143,217  $93,411 $69,523   $57,111
    Direct       16,614       9,729   14,555    8,478   2,059     1,251
    Healthcare    9,898       8,902    3,438    2,694   6,460     6,208
    Third
     Party       14,637       7,951    5,343    1,851   9,294     6,100
                 ------       -----    -----    -----   -----     -----
               $253,889    $177,104 $166,553 $106,434 $87,336   $70,670
               ========    ======== ======== ======== =======   =======




Summary of Product Sales

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


    (In thousands)

                   CONSOLIDATED           DOMESTIC        INTERNATIONAL
                                                           Three Months
                Three Months Ended             Three Months Ended       Ended
                     March 31,            March 31,            March 31,
                   2010        2009     2010     2009    2010      2009
                   ----        ----     ----     ----    ----      ----

    Mattresses $169,073    $119,128 $117,386  $75,711 $51,687   $43,417
    Pillows      30,746      23,061   14,129    9,845  16,617    13,216
    Other        54,070      34,915   35,038   20,878  19,032    14,037
                 ------      ------   ------   ------  ------    ------
               $253,889    $177,104 $166,553 $106,434 $87,336   $70,670
               ========    ======== ======== ======== =======   =======






                  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 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 Adjusted EBITDA to Net income

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 June 30, 2009, September 30, 2009, December 31, 2009 and March 31, 2010, as well as the twelve months ended March 31, 2010:




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

    GAAP Net
     income
     attributable
     to common
     stockholders      $16,857   $25,684       $29,114     $33,148    $104,803
    Plus:
       Interest
        expense          4,477     4,311         3,990       3,189      15,967
       Income taxes      8,098    12,467        14,159      16,021      50,745
       Depreciation
        &                9,977    10,367        10,239       9,996      40,579
       Amortization
       Other (1)             -         -             -         361         361


    Adjusted
     EBITDA            $39,409   $52,829       $57,502     $62,715    $212,455


    (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 March 31, 2010:




                                              As of
                                          March 31, 2010
                                          --------------

    GAAP basis Total debt                         $392,695
    Plus:
       Letters of credit
        outstanding                                 11,262
                                                    ------
    Funded debt                                   $403,957
                                                  ========




Calculation of Funded debt to Adjusted EBITDA




                                              As of
                                          March 31, 2010
                                          --------------

    Funded debt                                   $403,957
    Adjusted EBITDA                                212,455
                                                   -------
                                                1.90 times
                                                ==========





SOURCE Tempur-Pedic International Inc.

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