The Urethane Blog

Tempur Sealy Posts Results

– Fourth Quarter: 2015 Net Sales Increase 3%; Margins Expand; Adjusted EPS Increases 15%  
– Sets leverage target of 3.5 times; Announces Share Repurchase Program
– Increases Reserve for ongoing Danish Tax Matter
– Issues Financial Guidance for 2016

LEXINGTON, KY, February 4, 2016 – Tempur Sealy International, Inc. (NYSE:TPX) today announced financial results for the fourth quarter and year ended December 31, 2015. The Company also announced a $200 million share repurchase program and issued financial guidance for the full year 2016.
Total net sales increased 2.9% to $767.3 million from $745.5 million in the fourth quarter of 2014. On a constant currency basis(1), total net sales increased 6.7%, with growth in both the North America and International business segments.
Gross margin under U.S. generally accepted accounting principles ("GAAP") was 40.8% as compared to 39.5% in the fourth quarter of 2014. Adjusted gross margin(1) was 41.1% as compared to 40.3% in the fourth quarter of 2014.
Earnings before interest, tax, depreciation and amortization ("EBITDA")(1) increased 2.8% to $115.1 million as compared to $112.0 million for the fourth quarter of 2014. Adjusted EBITDA(1) increased 14.4% to $132.7 million as compared to $116.0 million for the fourth quarter of 2014.
GAAP operating income was $91.8 million as compared to $76.5 million in the fourth quarter of 2014. Operating income was negatively impacted by $10.7 million of restructuring costs, $3.5 million of additional costs related to executive management transition and related retention compensation, $3.9 million of integration costs and $1.3 million of pension settlement costs. Operating income in the fourth quarter of 2014 included $19.9 million of integration and financing costs. Adjusted operating income(1) was $111.2 million, or 14.5% of net sales, as compared to $96.4 million, or 12.9% of net sales, in the fourth quarter of 2014.
GAAP net loss was $(11.3) million as compared to net income of $46.6 million in the fourth quarter of 2014. As a result of certain events that occurred during the fourth quarter of 2015, the Company recorded a change in estimate of its uncertain tax position regarding the previously disclosed Danish tax matter of approximately $60.7 million. Adjusted net income(1) increased 17.9% to $62.7 million as compared to $53.2 million in the fourth quarter of 2014.
GAAP (Loss) earnings per diluted share ("EPS") was $(0.18) as compared to $0.75 in the fourth quarter of 2014. Adjusted EPS(1) increased 15.1% to $0.99 as compared to adjusted EPS of $0.86 in the fourth quarter of 2014. On a constant currency basis, adjusted EPS increased 25.6%.
The Company ended the fourth quarter of 2015 with consolidated funded debt less qualified cash(1) of $1.4 billion. In addition, leverage based on the ratio of consolidated funded debt less qualified cash to Adjusted EBITDA(1) was 2.98 times, with no significant off balance sheet liability.
Tempur Sealy International, Inc. Chairman and CEO Scott Thompson commented, "Overall the worldwide markets for our products feel solid and the Team has made progress towards our goals. Fourth quarter adjusted EBITDA growth of 14% in a relatively low octane economic environment is more evidence of the positive attributes of the bedding industry in general and the strength of Company’s business model specifically."