2014

Tempur-Pedic Reports Second Quarter Earnings - Reports EPS of $0.45

- Updates Financial Guidance for 2012

LEXINGTON, Ky., July 24, 2012 /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 second quarter ended June 30, 2012. The Company also updated financial guidance for 2012.

SECOND QUARTER FINANCIAL SUMMARY

  • Earnings per diluted share (EPS) were $0.45 in the second quarter of 2012 as compared to EPS of $0.76 per diluted share in the second quarter of 2011. The Company reported net income of $29.1 million for the second quarter of 2012 as compared to net income of $53.1 million in the second quarter of 2011.

  • Net sales decreased 4% to $329.5 million in the second quarter of 2012 from $342.2 million in the second quarter of 2011. On a constant currency basis, net sales decreased 1%. Net sales in the North American segment decreased 8% and international segment net sales increased 8%. On a constant currency basis, international segment net sales increased 17%.

  • Mattress sales decreased 4% globally. Mattress sales decreased 8% in the North American segment and increased 11% in the international segment. On a constant currency basis, international mattress sales increased 20%. Pillow sales decreased 2% globally. Pillow sales decreased 10% in North America and increased 5% internationally. On a constant currency basis, international pillow sales increased 12%.

  • Gross profit margin was 50.7% as compared to 52.9% in the second quarter of 2011. The gross profit margin decreased primarily as a result of increased promotions and discounts, deleverage and product mix, offset partially by geographic mix.

  • Operating profit margin was 14.4% as compared to 24.2% in the second quarter of 2011 reflecting deleverage throughout the income statement.

  • The Company generated $42.0 million of operating cash flow as compared to $48.2 million in the second quarter of 2011.

  • During the second quarter of 2012, the Company purchased 4.9 million shares of its common stock for a total cost of $138 million. As of June 30, 2012, the Company had $100 million available under its existing share repurchase authorization.

Chief Executive Officer Mark Sarvary commented, "As we stated on June 6, 2012, changes in the competitive environment in North America during the second quarter had an adverse impact on our performance. We are taking actions across our operations to realign our expense structure appropriately. At the same time we are focused on a series of new initiatives designed to strengthen our competitive position. At next week's industry tradeshow in Las Vegas we will unveil several of these new initiatives to our customers. We are very confident in our Company's growth potential and our strong brand, and as a result remain committed to our long-term strategic plan."

Financial Guidance
On June 6, 2012, the Company revised its full year 2012 guidance. Today, the Company maintained its outlook for full year 2012 net sales to be approximately $1.43 billion. In addition, the Company updated its full year 2012 earnings guidance and currently expects diluted earnings per share to be approximately $2.80, principally reflecting a lower weighted average shares outstanding for 2012. 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, July 24, 2012 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 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, information concerning our plans; objectives; goals; strategies; future events; future revenues or performance; the impact of the macroeconomic environment in both the U.S. and internationally on sales and our business segments; strategic long-term investments; changes in capital expenditures; the impact of consumer confidence; litigation and similar issues; pending tax assessments; financial flexibility; the impact of initiatives to respond to increased levels of competition in our industry; the impact of initiatives to accelerate growth, expand market share and attract sales from the standard mattress market; efforts to expand business within established accounts, improve account productivity, reduce costs and operating expenses and improve manufacturing productivity;  initiatives to improve gross margin; the vertical integration of our business; the development, rollout and market acceptance of new products; our ability to further invest in the business and in brand awareness; our ability to meet financial obligations and continue to comply with the terms of our Senior Credit Facility, including its financial ratio covenants; effects of changes in foreign exchange rates on our reported earnings; our expected sources of cash flow; our ability to effectively manage cash; our ability to align costs with sales expectations; plan to introduce new initiatives and plans and expectations for net sales and earnings per share for the full year 2012; and other information that is not historical information. 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. Important factors, many of which are beyond the Company's control, could cause actual results to differ materially from those expressed as forward-looking statements. 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® 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® and Tempur-Pedic® 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




Six Months Ended




June 30,




June 30,





2012



2011


Chg %



2012




2011


Chg %

Net sales

$

329,461


$

342,212


-3.7%


$

713,854



$

668,050


6.9%

Cost of sales


162,578



161,194





340,985




316,722




















Gross profit


166,883



181,018


-7.8%



372,869




351,328


6.1%


















Selling and marketing expenses


83,672



67,980





166,971




132,350



General, administrative and other

   expenses


35,662



30,208





72,284




60,868




















Operating income


47,549



82,830


-42.6%



133,614




158,110


-15.5%


















Other expense, net:

















Interest expense, net


(4,167)



(2,646)





(8,233)




(5,185)



Other income (expense), net


486



(118)





45




(721)



Total other expense


(3,681)



(2,764)





(8,188)




(5,906)




















Income before income taxes


43,868



80,066


-45.2%



125,426




152,204


-17.6%

Income tax provision


14,745



26,982





40,085




50,860



    Net income

$

29,123


$

53,084




$

85,341



$

101,344




















Earnings per common share:

















Basic

$

0.46


$

0.78




$

1.35



$

1.48



Diluted

$

0.45


$

0.76




$

1.31



$

1.44



Weighted average common shares

   outstanding:

















Basic


62,851



67,959





63,366




68,257



Diluted


64,337



70,018





65,019




70,469



 

TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)






June 30,


December 31,


2012


2011

ASSETS














Current Assets:







     Cash and cash equivalents

$

134,198



$

111,367

     Accounts receivable, net


131,192




142,412

     Inventories


106,056




91,212

     Prepaid expenses and other current assets


24,148




20,088

     Deferred income taxes


17,161




14,391

Total Current Assets


412,755




379,470








     Property, plant and equipment, net


166,310




160,502

     Goodwill


213,150




213,273

     Other intangible assets, net


64,959




66,491

     Other non-current assets


8,366




8,904

Total Assets

$

865,540



$

828,640








LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY














Current Liabilities:







     Accounts payable

$

69,179



$

69,936

     Accrued expenses and other current liabilities


76,009




76,636

     Income taxes payable


8,632




20,506

Total Current Liabilities


153,820




167,078








     Long-term debt


681,500




585,000

     Deferred income taxes


19,568




24,227

     Other non-current liabilities


22,792




21,544

Total Liabilities


877,680




797,849








Total Stockholders' (Deficit) Equity


(12,140)




30,791








Total Liabilities and Stockholders' (Deficit) Equity

$

865,540



$

828,640

 

TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)




Six Months Ended


June 30,



2012




2011


CASH FLOWS FROM OPERATING ACTIVITIES:








Net income

$

85,341



$

101,344


Adjustments to reconcile net income to net cash provided

by operating activities:








          Depreciation and amortization


17,648




16,590


          Amortization of stock-based compensation


7,410




7,719


          Amortization of deferred financing costs


700




346


          Bad debt expense


1,260




1,137


          Deferred income taxes


(7,150)




(1,133)


          Foreign currency adjustments and other


779




826


Changes in operating assets and liabilities


(19,447)




(22,879)


Net cash provided by operating activities


86,541




103,950










CASH FLOWS FROM INVESTING ACTIVITIES:








Purchases of property, plant and equipment


(20,664)




(12,098)


Other


(1,669)




(1,970)


Net cash used by investing activities


(22,333)




(14,068)










CASH FLOWS FROM FINANCING ACTIVITIES:








Proceeds from long-term revolving credit facility


245,500




572,500


Repayments of long-term revolving credit facility


(149,000)




(504,500)


Payments of deferred finance costs


-




(6,109)


Proceeds from issuance of common stock


10,077




22,386


Excess tax benefit from stock-based compensation


9,678




14,133


Treasury shares repurchased


(152,565)




(160,010)


Other


(2,321)




-


Net cash used by financing activities


(38,631)




(61,600)










NET EFFECT OF EXCHANGE RATE CHANGES ON CASH

AND CASH EQUIVALENTS


(2,746)




4,834










Increase in cash and cash equivalents


22,831




33,116










CASH AND CASH EQUIVALENTS, beginning of period


111,367




53,623










CASH AND CASH EQUIVALENTS, end of period

$

134,198



$

86,739


 

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


 June 30,

 June 30,

 June 30,


2012

2011

2012

2011

2012

2011














Retail

$

288,061

$

299,024

$

205,901

$

227,186

$

82,160

$

71,838

Direct


25,439


22,884


17,733


17,296


7,706


5,588

Healthcare


7,379


8,000


2,979


2,630


4,400


5,370

Third Party


8,582


12,304


-


-


8,582


12,304


$

329,461

$

342,212

$

226,613

$

247,112

$

102,848

$

95,100

 

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


 June 30,

 June 30,

 June 30,


2012

2011

2012

2011

2012

2011














Mattresses

$

224,297

$

232,618

$

160,810

$

175,270

$

63,487

$

57,348

Pillows


34,103


34,886


15,067


16,731


19,036


18,155

Other


71,061


74,708


50,736


55,111


20,325


19,597


$

329,461

$

342,212

$

226,613

$

247,112

$

102,848

$

95,100


 

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 September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012, as well as the twelve months ended June 30, 2012:



Three Months Ended

Twelve Months Ended



September 30,

2011

December 31,

2011

March 31,

2012

June 30,

2012

June 30,

2012








GAAP Net income

$

61,949

$             56,315

$         56,218

$29,123

$203,605

Plus:







   Interest expense


3,265

3,498

4,066

4,167

14,996

   Income taxes


31,164

26,759

25,340

14,745

98,008

   Depreciation &

   Amortization


12,166

14,513

13,052

12,006

51,737

EBITDA

$

108,544

$           101,085

$         98,676

$60,041

$368,346

 

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 June 30, 2012:



As of



June 30, 2012




GAAP basis Total debt

$

681,500

Plus:



   Letters of credit outstanding


1,025

Funded debt

$

682,525

 

Calculation of Funded debt to EBITDA



As of



June 30, 2012




Funded debt

$

682,525

EBITDA


368,346



1.85 times

 

SOURCE Tempur-Pedic International Inc.



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