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Press release from PR Newswire

Tempur-Pedic Reports Fourth Quarter And Full Year 2012 Results

Thursday, January 24, 2013

Tempur-Pedic Reports Fourth Quarter And Full Year 2012 Results16:05 EST Thursday, January 24, 2013- Reports Fourth Quarter GAAP EPS of $0.39; Adjusted EPS of $0.60 - Issues Financial Guidance for 2013LEXINGTON, Ky., Jan. 24, 2013 /PRNewswire/ -- Tempur-Pedic International Inc. (NYSE: TPX), a leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, today announced financial results for the fourth quarter and year ended December 31, 2012. The Company also issued financial guidance for 2013.FOURTH QUARTER FINANCIAL SUMMARYEarnings per diluted share (EPS) under U.S. generally accepted accounting principles (GAAP) in the fourth quarter of 2012 were $0.39, and reflect the tax provision recorded in connection with the anticipated repatriation of foreign earnings together with certain transaction and integration costs related to the proposed Sealy acquisition, and other restructuring costs. Adjusted EPS were $0.60 in the fourth quarter of 2012 as compared to GAAP EPS of $0.84 in the fourth quarter of 2011. GAAP net income in the fourth quarter of 2012 was $23.5 million. The Company reported adjusted net income of $36.4 million for the fourth quarter of 2012 as compared to GAAP net income of $56.3 million in the fourth quarter of 2011. For additional information regarding adjusted EPS and adjusted net income (which are non-GAAP measures), please refer to the reconciliation and other information included in the attached schedule. Net sales decreased 7% to $341.1 million in the fourth quarter of 2012 from $366.8 million in the fourth quarter of 2011. Net sales in the North American segment decreased 9% and International segment net sales decreased 4%. Mattress sales decreased 5% globally in the fourth quarter of 2012. Mattress sales decreased 5% in the North American segment and decreased 7% in the International segment. Pillow sales decreased 8% globally. Pillow sales decreased 26% in North America and increased 11% internationally. Gross profit margin was 50.0% as compared to 52.1% in the fourth quarter of 2011. The gross profit margin decreased primarily as a result of product mix and higher new product costs, offset partially by improved efficiencies in manufacturing and distribution. Operating income was $51.3 million, or 15.0% of sales as compared to $85.8 million, or 23.4% of sales in the fourth quarter of 2011 reflecting the Company's reduced gross margin and deleverage of certain operating expenses related to lower sales. Operating income in the fourth quarter of 2012 included $7.6 million of transaction and integration costs related to the proposed Sealy acquisition, as well as $1.5 million of restructuring charges. The Company generated $36.2 million of operating cash flow as compared to $69.7 million in the fourth quarter of 2011.FULL YEAR FINANCIAL SUMMARYGAAP EPS for the full year 2012 were $1.70, and reflect the tax provision recorded in connection with the anticipated repatriation of foreign earnings together with certain transaction and integration costs related to the proposed Sealy acquisition, and other restructuring costs. Adjusted EPS were $2.61 for the full year 2012 as compared to GAAP EPS of $3.18 for the full year 2011. GAAP net income for the full year 2012 was $106.8 million. The Company reported adjusted net income of $164.1 million for full year 2012 as compared to GAAP net income of $219.6 million for the full year 2011. For additional information regarding adjusted EPS and adjusted net income (which are non-GAAP measures), please refer to the reconciliation and other information included in the attached schedule. Net sales decreased 1% to $1,402.9 million for the full year 2012 from $1,417.9 million for the full year 2011. Net sales in the North American segment decreased 4% and International segment net sales increased 6%. Gross profit margin was 50.9% for the full year 2012 as compared to 52.4% for the full year 2011. The gross profit margin decreased primarily as a result of product mix and increased promotions and discounts. Operating income for the full year 2012 was $248.3 million, or 18% of sales as compared to $340.5 million, or 24.0% of sales for the full year 2011. Operating income for the full year 2012 included $11.1 million of transaction and integration costs related to the proposed Sealy acquisition, $1.5 million of restructuring charges, and $10.3 million of benefit related to an adjustment to long-term incentive stock compensation following a re-evaluation of the probability of meeting certain required financial metrics. The Company generated $189.9 million of operating cash flow for the full year 2012 as compared to $248.7 million for the full year 2011. The Company repurchased 5.0 million shares for $150.0 million during 2012.Chief Executive Officer Mark Sarvary commented, "Our performance during the fourth quarter was in line with our projections, both in North America and Internationally. We continued to see signs of stabilization in our North American business driven by initiatives we launched in the third quarter. Next week at the Las Vegas Market industry show we will announce further initiatives, including several new products that we believe will return Tempur-Pedic to growth in North America in 2013. Internationally, our fourth quarter results were consistent with our recent projections, but reflect a softening in demand due to macroeconomic weakness in Europe as expected. We are excited about new product introductions in our international business in 2013.  We remain very confident in our Company's growth potential and our strong brand, and are very excited about our proposed combination with Sealy Corporation."Financial GuidanceThe Company issued full year 2013 guidance for net sales and adjusted earnings per share. It currently expects net sales for 2013 to be approximately $1.425 billion. It currently expects adjusted EPS for 2013 to be approximately $2.55 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 adjusted EPS guidance does not include tax provisions expected to be recorded in 2013 in connection with the decision to repatriate foreign earnings and transaction and integration costs related to the proposed Sealy acquisition. In addition, the Company's net sales and adjusted EPS guidance does not assume any contribution from the potential Sealy transaction. The Company continues to expect the acquisition to be completed in the first half of 2013 and plans to issue updated guidance for the combined entity after the transaction is completed.Conference Call InformationTempur-Pedic International will host a live conference call to discuss financial results today, January 24, 2013 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 StatementsThis 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," "proposed," "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 proposed initiatives and product introductions; the Company's growth potential and strong brand; the proposed merger with Sealy Corporation, and expectations regarding the Company's net sales and adjusted EPS for 2013. 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.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; 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 the Company's  operations; changes in foreign tax rates and changes in tax laws generally, including the ability to utilize tax loss carry forwards; changing commodity costs; and the effect of future legislative or regulatory changes. 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." In addition, the proposed merger with Sealy presents risk factors including the ability of the parties to complete the proposed merger in a timely manner or at all; satisfaction of the conditions precedent to the proposed merger, the ability to secure regulatory approvals; the possibility of litigation (including relating to the merger itself); and the ability to successfully integrate Sealy into Tempur-Pedic's operations and realize synergies from the proposed transaction.  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 CompanyTempur-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 SUBSIDIARIESConsolidated Statements of Income(In millions, except per common share amounts) Three Months EndedTwelve Months EndedDecember 31,December 31,20122011Chg %20122011Chg %Net sales$341.1$366.8-7.0%$1,402.9$1,417.9-1.1%Cost of sales170.5175.6688.3674.8Gross profit170.6191.2-10.8%714.6743.1-3.8%Selling and marketing expenses75.972.1319.1276.9General, administrative and    other expenses43.433.3147.2125.7Operating income51.385.8-40.2%248.3340.5-27.1%Other expense, net:     Interest expense, net(5.8)(3.5)(18.8)(11.9)     Other (expense) income, net(0.7)0.8(0.3)(0.2)          Total other expense(6.5)(2.7)(19.1)(12.1)Income before income taxes44.883.1-46.1%229.2328.4-30.2%Income tax provision21.326.8122.4108.8     Net income$23.5$56.3$106.8$219.6Earnings per commonshare:     Basic$0.39$0.86$1.74$3.27     Diluted$0.39$0.84$1.70$3.18Weighted average common shares outstanding:     Basic59.665.161.567.1     Diluted60.867.062.969.1 TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIESConsolidated Balance Sheets(In millions, except par value) December 31, 2012December 31, 2011ASSETSCurrent Assets:     Cash and cash equivalents$179.3$111.4     Accounts receivable, net129.8142.4     Inventories93.091.2     Receivable from escrow375.0--     Prepaid expenses and other current assets41.420.1     Deferred income taxes2.614.7Total Current Assets821.1379.8     Property, plant and equipment, net186.0160.5     Goodwill216.1213.3     Other intangible assets, net63.166.5     Deferred income taxes10.49.1     Other non-current assets16.39.0Total Assets$1,313.0$838.2LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:     Accounts payable$85.8$69.9     Accrued expenses and other current liabilities84.376.6     Deferred income taxes26.50.6     Income taxes payable15.520.5Total Current Liabilities212.1167.6     Long-term debt1,025.0585.0     Deferred income taxes31.433.3     Other non-current liabilities22.221.5Total Liabilities1,290.7807.4Stockholders' Equity:Common stock, $0.01 par value; 300.0 shares authorized; 99.2 shares issued as of        December 31, 2012 and 20111.01.0Additional paid in capital379.0361.8Retained earnings849.3742.5Accumulated other comprehensive loss(7.6)(14.7)Treasury stock at cost; 39.5 and 35.4 shares as of         December 31, 2012 and 2011, respectively(1,199.4)(1,059.8)Total Stockholders' Equity22.330.8Total Liabilities and Stockholders' Equity$1,313.0$838.2 TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows(in millions) Twelve Months Ended December 31,20122011CASH FLOWS FROM OPERATING ACTIVITIES:     Net income$106.8$219.6     Adjustments to reconcile net income to net cash provided by      operating activities:          Depreciation and amortization36.334.3          Amortization of stock-based compensation5.716.7          Amortization of deferred financing costs1.41.0          Bad debt expense2.51.6          Deferred income taxes38.4(8.5)          Foreign currency adjustments and other2.11.2          Changes in operating assets and liabilities              Accounts receivable11.8(30.2)              Inventories0.1(18.5)              Prepaid expense and other current assets(29.4)(2.8)              Accounts payable14.321.7              Accrued expenses and other 5.13.9              Income taxes payable(5.2)8.7Net cash provided by operating activities189.9248.7CASH FLOWS FROM INVESTING ACTIVITIES:     Purchases of property, plant and equipment(50.5)(29.5)     Acquisition of businesses, net of cash acquired(4.5)(4.6)     Other--(2.0)Net cash used in investing activities(55.0)(36.1)CASH FLOWS FROM FINANCING ACTIVITIES:     Proceeds from long-term revolving credit facility352.0821.5     Repayments of long-term revolving credit facility(287.0)(643.5)     Payments of deferred finance costs(2.3)(6.2)     Proceeds from issuance of common stock11.426.3     Excess tax benefit from stock based compensation10.519.2     Treasury shares repurchased(152.6)(365.9)     Other(2.8)(0.3)Net cash used in financing activities(70.8)(148.9)NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS3.8(5.9)Increase in cash and cash equivalents67.957.8CASH AND CASH EQUIVALENTS, beginning of period111.453.6CASH AND CASH EQUIVALENTS, end of period$179.3$111.4 Summary of Channel SalesThe following table highlights net sales information, by channel and by segment:(in millions)CONSOLIDATEDNORTH AMERICAINTERNATIONALThree Months EndedThree Months EndedThree Months EndedDecember 31,December 31,December 31,201220112012201120122011Retail $295.7$319.3$207.8$225.2$87.9$94.1Direct29.828.617.521.112.37.5Healthcare8.19.02.53.05.66.0Third Party7.59.9??7.59.9$341.1$366.8$227.8$249.3$113.3$117.5 Summary of Product SalesThe following table highlights net sales information, by product and by segment(in millions)CONSOLIDATEDNORTH AMERICAINTERNATIONALThree Months EndedThree Months EndedThree Months EndedDecember 31,December 31,December 31,201220112012201120122011Mattresses$225.8$238.6$158.0$166.0$67.8$72.6Pillows40.644.016.322.124.321.9Other74.784.253.561.221.223.0$341.1$366.8$227.8$249.3$113.3$117.5 TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIESReconciliation of Non-GAAP Measures (In millions, except per common share amounts)The Company provides information regarding adjusted net income, adjusted earnings per share, earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted 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 adjusted net income and adjusted earnings per share are provided below. Management believes that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the impact of the repatriation of foreign earnings, transaction and integration costs related to the proposed Sealy acquisition and restructuring costs. A reconciliation of EBITDA and adjusted EBITDA to the Company's net income and a reconciliation of total debt to funded debt are also provided below. Management believes that the use of EBITDA, adjusted EBITDA and funded debt provides investors with useful information with respect to the terms of the Company's debt agreements. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies.Reconciliation of Net Income to Adjusted Net IncomeThe following table sets forth the reconciliation of the Company's reported net income for the three months and year ended December 31, 2012 to the calculation of adjusted net income for the three months and year ended December 31, 2012:Three Months Ended December 31, 2012Year Ended December 31, 2012GAAP net income $23.5$106.8Plus:Tax provision related to repatriation of   foreign earnings 6.248.1Transaction costs related to proposed Sealy   acquisition, net of tax4.26.7Integration costs related to proposed Sealy   acquisition, net of tax1.51.5Restructuring costs, net of tax1.01.0Adjusted net income $36.4$164.1GAAP earnings per common share, diluted $0.39$1.70Tax provision related to repatriation of   foreign earnings 0.100.76Transaction costs related to proposed Sealy   acquisition, net of tax0.070.11Integration costs related to proposed Sealy   acquisition, net of tax0.020.02Restructuring costs, net of tax0.020.02Adjusted earnings per common share, diluted $0.60$2.61Diluted shares outstanding 60.862.9 Reconciliation of Net Income to EBITDA and Adjusted EBITDAThe following table sets forth the reconciliation of the Company's reported net income to the calculation of EBITDA and adjusted EBITDA for the year ended December 31, 2012:Year EndedDecember 31, 2012GAAP net income $106.8Plus:Interest expense18.8Income  tax provision122.4Depreciation and amortization42.0EBITDA290.0Plus:Transaction  costs related to proposed Sealy acquisition8.9Integration costs related to proposed Sealy acquisition2.2Restructuring costs1.5Adjusted EBITDA$302.6 Reconciliation of Total Debt to Funded DebtThe following table sets forth the reconciliation of the Company's reported total debt to the calculation of funded debt as of December 31, 2012:As of December 31, 2012GAAP basis total debt$1,025.0Less:Senior Notes(375.0)Plus:Letters of credit outstanding 1.0Funded debt$651.0 Calculation of Funded Debt to EBITDAAs of December 31, 2012Funded debt$651.0EBITDA290.02.24 times SOURCE Tempur-Pedic International Inc.For further information: Investor Relations, Mark Rupe, Vice President, Tempur-Pedic International, 1-800-805-3635, investor.relations@tempurpedic.com