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Tempur Sealy Results

Tempur Sealy Reports Record Third Quarter Results

Thu October 29, 2020 6:37 AM|PR Newswire|About: TPX

-EPS Increased 75% to $2.29, Adjusted EPS Increased 126% to $2.94

-Net Income of $121 Million

-Trailing Twelve Month Adjusted EBITDA of $694 Million

-Announced New Long-Term Capital Allocation Strategy

PR Newswire

LEXINGTON, Ky., Oct. 29, 2020 /PRNewswire/ — Tempur Sealy International, Inc. (TPX) announced financial results for the third quarter ended September 30, 2020.

THIRD QUARTER 2020 FINANCIAL SUMMARY

  • Total net sales increased 37.9% to $1,132.3 million as compared to $821.0 million in the third quarter of 2019. On a constant currency basis(1), total net sales increased 37.7%, with an increase of 43.3% in the North America business segment and an increase of 10.1% in the International business segment.
  • Gross margin was 46.8% as compared to 43.9% in the third quarter of 2019. Adjusted gross margin(1) was 46.9% in the third quarter of 2020. There were no adjustments to gross margin in the third quarter of 2019.
  • Operating income increased 49.4% to $180.2 million as compared to $120.6 million in the third quarter of 2019. Operating income in the third quarter of 2020 included $45.2 million of amortization for aspirational plan stock-based compensation. Adjusted operating income(1) was $227.2 million in the third quarter of 2020. There were no adjustments to operating income in the third quarter of 2019.
  • Net income increased 65.6% to $121.4 million as compared to $73.3 million in the third quarter of 2019. Adjusted net income(1) increased 114.3% to $155.4 million as compared to $72.5 million in the third quarter of 2019.
  • Earnings before interest, tax, depreciation and amortization (“EBITDA”)(1) increased 85.7% to $279.9 million as compared to $150.7 million in the third quarter of 2019. Adjusted EBITDA per credit facility(1) increased 86.3% to $279.3 million as compared to $149.9 million in the third quarter of 2019.
  • Earnings per diluted share (“EPS”) increased 74.8% to $2.29 as compared to $1.31 in the third quarter of 2019. Adjusted EPS(1) increased 126.2% to $2.94 as compared to $1.30 in the third quarter of 2019.
  • For the trailing twelve months ended September 30, 2020, leverage based on the ratio of consolidated indebtedness less netted cash(1) to adjusted EBITDA per credit facility(1) was 1.92 times as compared to 3.22 times in the corresponding prior year period.
  • Net cash provided by operating activities increased to a record $327.5 million as compared to $155.8 million in the third quarter of 2019.

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 43.2% to $976.5 million as compared to $682.0 million in the third quarter of 2019. On a constant currency basis(1), North America net sales increased 43.3% as compared to the third quarter of 2019. Gross margin was 44.9% as compared to 42.1% in the third quarter of 2019. Adjusted gross margin(1) was 45.0% as compared to 42.1% in the third quarter of 2019. Operating margin was 23.7% as compared to 17.6% in the third quarter of 2019. Adjusted operating margin(1) was 23.9% as compared to 17.6% in the third quarter of 2019.

North America net sales through the wholesale channel increased $266.9 million, or 44.3%, to $869.1 million,  as compared to the third quarter of 2019, driven by broad-based demand across both existing and new distribution networks. North America net sales through the direct channel increased $27.6 million, or 34.6%, to $107.4 million, primarily driven by an increase of more than 100% in web sales as compared to the third quarter of 2019.

North America adjusted gross margin(1) improved 290 basis points as compared to the third quarter of 2019. The improvement was primarily driven by fixed cost leverage and productivity on higher unit volumes, brand mix and lower commodity costs. North America adjusted operating margin(1) improved 630 basis points as compared to the third quarter of 2019. The improvement was primarily driven by operating expense leverage and the improvement in gross margin.

In the U.S., Sealy’s third quarter sales growth was unfavorably impacted by supply chain constraints, primarily related to encased innerspring components. As a result, the Company could not fulfill the domestic demand for Sealy mattresses and  exited the quarter with a record amount of orders to fulfill. The Company expects these supply chain constraints to continue in the short-term.

International net sales increased 12.1% to $155.8 million as compared to $139.0 million in the third quarter of 2019. On a constant currency basis(1), International net sales increased 10.1% as compared to the third quarter of 2019. Gross margin was 58.8% as compared to 53.1% in the third quarter of 2019. Operating margin was 28.8% as compared to 19.6% in the third quarter of 2019. Adjusted operating margin(1) was 29.0% as compared to 19.6% in the third quarter of 2019.

International net sales through the wholesale channel increased $10.2 million, or 9.5%, to $118.1 million as compared to the third quarter of 2019. International net sales through the direct channel increased $6.6 million, or 21.2%, to $37.7 million as compared to the third quarter of 2019.

International gross margin improved 570 basis points as compared to the third quarter of 2019. The improvement was primarily driven by favorable mix, fixed cost leverage and productivity on higher unit volumes and lower commodity costs. International adjusted operating margin(1) improved 940 basis points as compared to the third quarter of 2019. The improvement was primarily driven by the improvement in gross margin and operating expense leverage.

https://seekingalpha.com/pr/18063402-tempur-sealy-reports-record-third-quarter-results