October 20, 2011

Tempur-Pedic Reports Record Third Quarter 2011 Sales and Earnings


-- Reports Sales Up 30%
-- EPS Up 45% at $0.90
-- Raises Financial Guidance for 2011
-- Increases Share Repurchase Authorization

LEXINGTON, Ky., Oct. 20, 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 third quarter ended September 30, 2011. The Company also increased full year 2011 financial guidance and announced an increase to its existing share repurchase authorization.

Financial Summary

  • Earnings per diluted share (EPS) increased 45% to $0.90 in the third quarter of 2011 as compared to $0.62 in the third quarter of 2010. The Company reported net income of $61.9 million in the third quarter of 2011 as compared to $44.2 million in the third quarter of 2010.

  • Net sales increased 30% to $383.1 million in the third quarter of 2011 from $295.8 million in the third quarter of 2010. On a constant currency basis, net sales increased 26%. Net sales in the North American segment increased 30%, while International segment net sales increased 28%. On a constant currency basis, International segment net sales increased 15%.  

  • Mattress sales increased 28% globally. Mattress sales increased 28% in the North American segment and 31% in the International segment. On a constant currency basis, International mattress sales increased 18%. Pillow sales increased 12% globally. Pillow sales increased 5% in North America and 21% in the International segment. On a constant currency basis, International pillow sales increased 9%.

  • Gross profit margin was 52.4% as compared to 51.0% in the third quarter of 2010. The gross profit margin increased as a result of improved efficiencies in manufacturing, favorable mix and fixed cost leverage related to higher production volumes, partially offset by commodity costs and new product introductions.

  • Operating profit margin was 25.2% as compared to 23.0% in the third quarter of 2010. The increase was driven by improved gross profit margin and operating expense leverage, partially offset by increased marketing investments.

  • The Company generated $75.0 million of operating cash flow in the third quarter of 2011 as compared to $71.9 million in the third quarter of 2010. In addition, the Company increased its cash balance by $16.3 million to $103.0 million in the third quarter.

Chief Executive Officer Mark Sarvary commented, "We are pleased with our third quarter results globally. Our strategic investments in brand awareness and new products continue to deliver growth. We remain confident of the potential to grow sales and earnings over the long term."

Chief Financial Officer Dale Williams commented, "We are pleased with our sales and earnings in the quarter, and our continued improvement in margins. However, gross margins declined sequentially this quarter primarily related to a transitory productivity issue at our Danish manufacturing facility."

Share Repurchase Program

During the third quarter of 2011, the Company purchased 1.34 million shares of its common stock for a total cost of $80.0 million. During the first three quarters of 2011, the Company purchased 4.25 million shares of its common stock for a total cost of $240.0 million.

The Company announced the Board of Directors has expanded the Company's existing repurchase program by $80.0 million for a total authorization of up to $280.0 million. Reflecting share repurchases made during the third quarter, the Company currently has $200.0 million remaining under this authorization. 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 may be limited, suspended or terminated at any time without prior notice.

Updated Financial Guidance

The Company updated financial guidance for the full year 2011. The Company currently expects net sales for 2011 to range from $1.405 billion to $1.425 billion and EPS for 2011 to range from $3.12 to $3.17 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, October 20, 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 potential to grow sales and earnings over the long term and expectations 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; the effects of strategic investments on our operations; 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




Nine Months Ended




September 30,




September 30,





2011



2010


Chg %



2011




2010


Chg %

Net sales

$

383,085


$

295,785


29.5%


$

1,051,135



$

812,718


29.3%

Cost of sales


182,491



145,031





499,213




409,114



Gross profit


200,594



150,754


33.1%



551,922




403,604


36.7%

Selling and marketing expenses


72,439



53,215





204,789




146,273



General, administrative and other expenses


31,548



29,385





92,416




83,037



Operating income


96,607



68,154


41.7%



254,717




174,294


46.1%


















Other expense, net:

















Interest expense, net


(3,265)



(4,068)





(8,450)




(11,043)



Other expense, net


(229)



(564)





(950)




(569)



Total other expense


(3,494)



(4,632)





(9,400)




(11,612)




















Income before income taxes


93,113



63,522


46.6%



245,317




162,682


50.8%

Income tax provision


31,164



19,324





82,024




51,830



   Net income

$

61,949


$

44,198




$

163,293



$

110,852




















Earnings per common share:

















Basic

$

0.93


$

0.64




$

2.41



$

1.56



Diluted

$

0.90


$

0.62




$

2.34



$

1.51



Weighted average common shares outstanding:

















Basic


66,655



69,199





67,722




71,065



Diluted


68,571



71,433





69,847




73,450






TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)



September 30,


December 31,



2011


2010


ASSETS
















Current Assets:








    Cash and cash equivalents

$

103,015



$

53,623


    Accounts receivable, net


151,419




115,630


    Inventories


91,046




69,856


    Prepaid expenses and other current assets


23,456




18,646


    Deferred income taxes


11,522




13,725


Total Current Assets


380,458




271,480










    Property, plant and equipment, net


158,567




159,807


    Goodwill


212,768




212,468


    Other intangible assets, net


67,715




68,745


    Other non-current assets


9,128




3,503


Total Assets

$

828,636



$

716,003










LIABILITIES AND STOCKHOLDERS' EQUITY
















Current Liabilities:








    Accounts payable

$

70,411



$

48,288


    Accrued expenses and other current liabilities


89,456




85,469


    Income taxes payable


26,173




12,477


Total Current Liabilities


186,040




146,234










    Long-term debt


508,500




407,000


    Deferred income taxes


29,368




32,315


    Other non-current liabilities


5,291




4,421


Total Liabilities


729,199




589,970










Total Stockholders' Equity


99,437




126,033










Total Liabilities and Stockholders' Equity

$

828,636



$

716,003













TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)



Nine Months Ended


September 30,



2011




2010


CASH FLOWS FROM OPERATING ACTIVITIES:








Net income

$

163,293



$

110,852


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








Depreciation and amortization


25,340




23,870


Amortization of stock-based compensation


11,135




7,953


Amortization of deferred financing costs


689




517


Bad debt expense


1,285




2,072


Deferred income taxes


(480)




2,604


Foreign currency adjustments and other


911




(423)


Changes in operating assets and liabilities


(23,194)




(7,731)


Net cash provided by operating activities


178,979




139,714










CASH FLOWS FROM INVESTING ACTIVITIES:








Acquisition of business, net of cash acquired


(4,566)




(18,692)


Acquisition of trademarks and other


(1,980)




(152)


Purchases of property, plant and equipment


(18,841)




(12,330)


Net cash used by investing activities


(25,387)




(31,174)










CASH FLOWS FROM FINANCING ACTIVITIES:








Proceeds from long-term revolving credit facility


682,000




289,336


Repayments of long-term revolving credit facility


(580,500)




(149,313)


Payments of deferred finance costs


(6,192)




-


Proceeds from issuance of common stock


24,419




22,015


Excess tax benefit from stock-based compensation


17,956




3,282


Treasury shares repurchased


(240,000)




(250,000)


Net cash used by financing activities


(102,317)




(84,680)










NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS


(1,883)




146










Increase in cash and cash equivalents


49,392




24,006










CASH AND CASH EQUIVALENTS, beginning of period


53,623




14,042










CASH AND CASH EQUIVALENTS, end of period

$

103,015



$

38,048












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


September 30,

September 30,

September 30,


2011

2010

2011

2010

2011

2010














Retail

$

342,804

$

260,351

$

257,049

$

197,586

$

85,755

$

62,765

Direct


25,405


18,146


19,588


14,192


5,817


3,954

Healthcare


8,076


8,158


2,690


2,909


5,386


5,249

Third Party


6,800


9,130


-


-


6,800


9,130


$

383,085

$

295,785

$

279,327

$

214,687

$

103,758

$

81,098




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


September 30,

September 30,

September 30,


2011

2010

2011

2010

2011

2010














Mattresses

$

255,805

$

199,165

$

192,683

$

150,941

$

63,122

$

48,224

Pillows


38,119


33,959


19,182


18,307


18,937


15,652

Other


89,161


62,661


67,462


45,439


21,699


17,222


$

383,085

$

295,785

$

279,327

$

214,687

$

103,758

$

81,098




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




Three Months Ended

Twelve Months
Ended



December
31, 2010

March 31,
2011

June 30,
2011

September
30, 2011

September 30,
2011








GAAP Net income

$

46,292

$            48,260

$        53,084

$    61,949

$           209,585

Plus:







  Interest expense


3,458

2,539

2,646

3,265

11,908

  Income taxes


21,890

23,878

26,982

31,164

103,914

  Depreciation & Amortization


12,146

11,070

13,239

12,166

48,621

EBITDA

$

83,786

$            85,747

$        95,951

$   108,544

$           374,028




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 September 30, 2011:






As of



September 30, 2011




GAAP basis Total debt

$

508,500

Plus:



Letters of credit outstanding


990

Funded debt

$

509,490


Calculation of Funded debt to EBITDA




As of



September 30, 2011




Funded debt

$

509,490

EBITDA


374,028



1.36 times





SOURCE Tempur-Pedic International Inc.

News Provided by Acquire Media


Close window | Back to top

Copyright 2017 Tempur Sealy International, Inc.