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Tempur Sealy Results

Tempur Sealy Reports First Quarter 2019 Results

|PR Newswire|About: TPX
Q1: 05-02-19 Earnings Summary
EPS of $0.54 beats by $0.06
Revenue of $690.9M (6.62% Y/Y) beats by $24.48M

– Direct Sales Increased 38%, North America Direct Sales Increased 36%

– Net Income Increased 23%, EPS Increased 21%

– Increased Full Year 2019 Guidance

PR NewswireLEXINGTON, Ky., May 2, 2019 /PRNewswire/ — Tempur Sealy International, Inc. (TPX) announced financial results for the first quarter ended March 31, 2019. The Company also revised its financial guidance for the full year 2019.

FIRST QUARTER 2019 FINANCIAL SUMMARY(1)

  • Total net sales increased 8.4% to $690.9 million as compared to $637.4 million in the first quarter of 2018. On a constant currency basis(2), total net sales increased 10.4%, with an increase of 12.7% in the North America business segment and an increase of 3.0% in the International business segment.
  • Gross margin under U.S. generally accepted accounting principles (“GAAP”) was 40.8% as compared to 41.5% in the first quarter of 2018.
  • GAAP operating income increased 8.6% to $60.5 million as compared to $55.7 million in the first quarter of 2018. Operating income in the first quarter of 2019 included $3.3 million of acquisition-related and other costs.  Adjusted operating income(2) increased 14.5% to $63.8 million as compared to $55.7 million in the first quarter of 2018. The Company had no adjustments to operating income in the first quarter of 2018.
  • GAAP net income increased 22.9% to $28.4 million as compared to $23.1 million in the first quarter of 2018. Adjusted net income(2) increased 18.7% to $29.8 million as compared to $25.1 million in the first quarter of 2018.
  • Earnings before interest, tax, depreciation and amortization (“EBITDA”)(2) increased 16.2% to $96.3 million as compared to $82.9 million for the first quarter of 2018. Adjusted EBITDA(2) increased 8.3% to $92.8 million as compared to $85.7 million in the first quarter of 2018. In the first quarter of 2019, EBITDA(2) included other income of $7.2 million related to the sale of a certain interest in the Company’s Asia-Pacific joint venture. EBITDA(2) also included transaction costs of $3.3 million in the first quarter of 2019.
  • GAAP earnings per diluted share (“EPS”) increased 21.4% to $0.51 as compared to $0.42 in the first quarter of 2018. Adjusted EPS(2) increased 17.4% to $0.54 as compared to $0.46 in the first quarter of 2018.

KEY HIGHLIGHTS

(in millions, except percentages and per common
share amounts)
Three Months Ended % Reported
Change
% Constant
Currency Change(2)
March 31, 2019 March 31, 2018
Net sales $ 690.9 $ 637.4 8.4 % 10.4 %
Net income 28.4 23.1 22.9 % 34.6 %
EBITDA (2) 96.3 82.9 16.2 % 21.1 %
Adjusted EBITDA (2) 92.8 85.7 8.3 % 13.1 %
EPS 0.51 0.42 21.4 % 33.3 %
Adjusted EPS (2) 0.54 0.46 17.4 % 28.3 %

 

Tempur Sealy International, Inc. Chairman and CEO Scott Thompson commented, “The strength of our brands and product, supported by the power of our world-wide omni-distribution strategy, drove our operating results. North America was a major highlight with outstanding growth in our Tempur-Pedic products and a solid performance by Sealy and Stearns & Foster products.  While we recently introduced the most innovative product suite in our company’s history, we will be in market testing new revolutionary products that we expect will extend our leadership position. This aligns to our initiative to provide the most innovative bedding solutions in the world. Additionally, we continue to make progress toward optimizing our omni-distribution model, as we expanded both in wholesale and direct channels. A highlight for the quarter was global direct to consumer which grew to a record $75 million in the quarter while expanding margin. This channel represented 11% of global revenues.”

(1) All amounts presented for 2018 reflect reclassifications to previously reported amounts to adjust for discontinued operations.
(2) This is a non-GAAP financial measure. Please refer to “Non-GAAP Financial Measures and Constant Currency Information” below.

Business Segment Highlights

The Company’s business segments include North America and International. Corporate operating expenses are not included in either of the business segments and are presented separately as a reconciling item to consolidated results.

North America net sales increased 12.2% to $544.0 million as compared to $485.0 million in the first quarter of 2018. On a constant currency basis(2), North America net sales increased 12.7% as compared to the first quarter of 2018. GAAP gross margin was 37.6% as compared to 37.9% in the first quarter of 2018. GAAP operating margin was 11.8% as compared to 11.1% in the first quarter of 2018.

North America net sales through the wholesale channel increased $47.8 million, or 10.5%, to $501.8 million as compared to the first quarter of 2018. North America net sales through the direct channel increased $11.2 million, or 36.1%, to $42.2 million, as compared to the first quarter of 2018, driven primarily by growth from expanded retail stores.

North America gross margin declined 30 basis points as compared to the first quarter of 2018. The decline was primarily driven by commodity cost inflation, increased floor model expenses and unfavorable merchandising mix. These were partially offset by brand mix and favorable pricing. North America operating margin improved 70 basis points as compared to the first quarter of 2018. The improvement in operating margin was driven by operating expense leverage, which was partially offset by the decline in gross margin.

International net sales decreased 3.6% to $146.9 million as compared to $152.4 million in the first quarter of 2018. On a constant currency basis(2), International net sales increased 3.0% as compared to the first quarter of 2018. GAAP gross margin was 52.7% as compared to 53.0% in the first quarter of 2018. GAAP operating margin was 17.2% as compared to 18.8% in the first quarter of 2018.

International net sales through the wholesale channel decreased $15.0 million, or 11.6%, to $114.1 million as compared to the first quarter of 2018. International net sales through the direct channel increased $9.5 million, or 40.8%, to $32.8 million as compared to the first quarter of 2018.

International gross margin declined 30 basis points as compared to gross margin for the first quarter of 2018. The decline in gross margin was primarily driven by unfavorable foreign exchange. The decline was partially offset by operational improvements. International adjusted operating margin(2) declined 140 basis points as compared to operating margin in the first quarter of 2018. The decline was driven by operating expense deleverage, unfavorable performance in the Asia-Pacific joint venture and the decline in gross margin.

Corporate operating expense increased to $29.0 million as compared to $27.0 million in the first quarter of 2018. Corporate adjusted operating expense (2) decreased to $26.0 million as compared to corporate operating expense of $27.0 million in the first quarter of 2018.

https://seekingalpha.com/pr/17496707-tempur-sealy-reports-first-quarter-2019-results