TEMPUR-PEDIC REPORTS SECOND QUARTER EARNINGS
– Reports EPS of $0.45
– Updates Financial Guidance for 2012
LEXINGTON, KY, July 24, 2012 – 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. |
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| ● | | 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%. |
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| ● | | 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%. |
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| ● | | 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. |
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| ● | | Operating profit margin was 14.4% as compared to 24.2% in the second quarter of 2011 reflecting deleverage throughout the income statement. |
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| ● | | The Company generated $42.0 million of operating cash flow as compared to $48.2 million in the second quarter of 2011. |
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| ● | | 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.
Investor Relations Contact:
Mark Rupe
Vice President
Tempur-Pedic International
800-805-3635
investor.relations@tempurpedic.com
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 | |
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| 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 | |
