Urethane Blog
Tempur Sealy Results
July 27, 2017
Tempur Sealy Reports Second Quarter 2017 Results
– Direct Sales in North America Increased 137%, Driven by Web Sales Increase of 190%
PR NewswireLEXINGTON, Ky., July 27, 2017 /PRNewswire/ — Tempur Sealy International, Inc. (TPX) (NYSE: TPX) today announced financial results for the second quarter ended June 30, 2017. The Company also updated its financial guidance for the full year 2017.
SECOND QUARTER 2017 FINANCIAL SUMMARY
- Total net sales decreased 18.0% to $659.3 million from $804.4 million in the second quarter of 2016. On a constant currency basis(1), total net sales decreased 17.2%, with a decrease of 21.0% in the North America business segment and an increase of 1.6% in the International business segment.
- Gross margin was 40.7% as compared to 41.9% in the second quarter of 2016.
- Operating income decreased 43.5% to $56.6 million as compared to $100.2 million in the second quarter of 2016.
- Net income under U.S. generally accepted accounting principles (“GAAP”) increased 15.0% to $24.5 million as compared to $21.3 million in the second quarter of 2016. GAAP net income decreased 56.0% to $24.5 million as compared to adjusted net income(1) of $55.7 million in the second quarter of 2016. The Company had no adjustments to GAAP net income in the second quarter of 2017. The Company incurred a $47.2 million loss on extinguishment of debt in the second quarter of 2016 in connection with financing activities in 2016.
- Earnings before interest, tax, depreciation and amortization (“EBITDA”)(1) decreased 30.6% to $85.8 million as compared to $123.7 million for the second quarter of 2016. EBITDA(1) decreased 31.2% as compared to adjusted EBITDA(1) of $124.7 million in the second quarter of 2016. The Company had no adjustments to EBITDA in the second quarter of 2017.
- GAAP earnings per diluted share (“EPS”) increased 28.6% to $0.45 as compared to $0.35 in the second quarter of 2016. GAAP EPS decreased 51.1% to $0.45 as compared to adjusted EPS(1) of $0.92 in the second quarter of 2016.
- The Company ended the second quarter of 2017 with total debt and consolidated funded debt less qualified cash(1) of $1.9 billion. Leverage based on the ratio of consolidated funded debt less qualified cash to adjusted EBITDA(1) was 3.74 times for the trailing twelve months ended June 30, 2017.
KEY HIGHLIGHTS
(in millions, except percentages and per common share amounts) |
Three Months Ended | % Change | % Change Constant Currency (1) |
||||||||||
June 30, 2017 | June 30, 2016 | ||||||||||||
Net sales | $ | 659.3 | $ | 804.4 | (18.0) | % | (17.2) | % | |||||
Net income | 24.5 | 21.3 | 15.0 | % | 20.2 | % | |||||||
EPS | 0.45 | 0.35 | 28.6 | % | 34.3 | % | |||||||
Adjusted EPS (1) | 0.45 | 0.92 | (51.1) | % | (48.9) | % | |||||||
EBITDA (1) | 85.8 | 123.7 | (30.6) | % | (29.2) | % |
Tempur Sealy International, Inc. Chairman and CEO Scott Thompson commented, “We are pleased with our sales and EBITDA performance, despite the loss of our largest customer, and, we are encouraged that our business trends accelerated throughout the quarter. While worldwide industry trends continue to be a bit sluggish, we have outperformed our expectations and are raising the midpoint of our 2017 financial guidance.”
(1) 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 decreased 21.4% to $525.4 million from $668.2 million in the second quarter of 2016. On a constant currency basis(1), North America net sales decreased 21.0% compared to the second quarter of 2016. Gross margin was 37.9% as compared to 40.0% in the second quarter of 2016. Operating margin was 10.6% as compared to 15.5% in the second quarter of 2016.
In the second quarter of 2017, net sales to Mattress Firm were $1.2 million prior to the termination of our contract at the beginning of the quarter. In the second quarter of 2016, net sales to Mattress Firm were $191.4 million. Excluding Mattress Firm, North America net sales increased 10% driven by growth across all of our brands.
North America gross margin declined 210 basis points as compared to the second quarter of 2016. This was driven primarily by fixed cost deleverage on lower unit volume and unfavorable brand mix. This was slightly offset by improved productivity across our operations, channel mix, and lower floor model discounts. North America operating margin declined 490 basis points as compared to the second quarter of 2016. The decline in operating margin was driven by the gross margin decline as well as unfavorable operating expense leverage, and increased investments in our brand advertising campaign.
International net sales decreased 1.7% to $133.9 million from $136.2 million in the second quarter of 2016. On a constant currency basis(1), International net sales increased 1.6% compared to the second quarter of 2016. Gross margin was 52.1% as compared to 51.1% in the second quarter of 2016. Operating margin was 19.6% as compared to 17.0% in the second quarter 2016.
International gross margin increased 100 basis points as compared to the second quarter of 2016. The increase was primarily driven by favorable mix, which was partially offset by new product introductions. International operating margin increased 260 basis points as compared to the second quarter of 2016. The increase in operating margin was primarily driven by the improvement in gross margin, as well as, expense management, and improved performance in our Asia joint venture operations, which was offset by increased investments in our advertising.
Corporate operating expense decreased to $25.5 million from $26.3 million in the second quarter of 2016.
https://seekingalpha.com/pr/16898164-tempur-sealy-reports-second-quarter-2017-results
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