LEXINGTON, Ky., April 30,
2020 /PRNewswire/ -- Tempur Sealy International, Inc. (NYSE:
TPX) announced financial results for the first quarter
ended March 31, 2020. As previously announced, the
Company has withdrawn its previously-issued full-year financial
guidance for 2020 and will not provide updated full-year financial
guidance until the operating environment becomes clear.
FIRST QUARTER 2020 FINANCIAL
SUMMARY
- Total net sales increased 19.0% to $822.4 million as compared to $690.9 million in the first quarter of 2019. On a
constant currency basis(1), total net sales increased
19.8%, with an increase of 24.5% in the North America business segment and an increase
of 2.0% in the International business segment.
- Gross margin was 43.4% as compared to 40.8% in the first
quarter of 2019.
- Operating income increased 74.0% to $105.3 million as compared to $60.5 million in the first quarter of 2019.
Operating income in the first quarter of 2020 included $11.7 million of charges associated with a
wholesale customer bankruptcy. Adjusted operating
income(1) increased 89.3% to $120.8 million as compared to $63.8 million in the first quarter of 2019.
- Net income increased 110.2% to $59.7
million as compared to $28.4
million in the first quarter of 2019. Adjusted net
income(1) increased 143.3% to $72.5 million as compared to $29.8 million in the first quarter of 2019.
- Earnings before interest, tax, depreciation and amortization
("EBITDA")(1) increased 39.7% to $134.5 million as compared to $96.3 million for the first quarter of 2019.
Adjusted EBITDA(1) increased 62.9% to $151.2 million as compared to $92.8 million in the first quarter of 2019.
- Earnings per diluted share ("EPS") increased 117.6% to
$1.11 as compared to $0.51 in the first quarter of 2019. Adjusted
EPS(1) increased 148.1% to $1.34 as compared to $0.54 in the first quarter of 2019.
- For the trailing twelve months ended March 31, 2020, leverage based on the ratio of
consolidated indebtedness less netted cash(1) to
adjusted EBITDA(1) was 3.03 times as compared to 3.84
times in the corresponding prior year period.
KEY HIGHLIGHTS
(in millions,
except percentages and per
common share amounts)
|
Three Months
Ended
|
|
% Reported
Change
|
|
% Constant
Currency Change(1)
|
March 31,
2020
|
|
March 31,
2019
|
Net sales
|
$
|
822.4
|
|
|
$
|
690.9
|
|
|
19.0
|
%
|
|
19.8
|
%
|
Net income
|
$
|
59.7
|
|
|
$
|
28.4
|
|
|
110.2
|
%
|
|
111.3
|
%
|
EBITDA
(1)
|
$
|
134.5
|
|
|
$
|
96.3
|
|
|
39.7
|
%
|
|
40.2
|
%
|
Adjusted EBITDA
(1)
|
$
|
151.2
|
|
|
$
|
92.8
|
|
|
62.9
|
%
|
|
63.5
|
%
|
EPS
|
$
|
1.11
|
|
|
$
|
0.51
|
|
|
117.6
|
%
|
|
119.6
|
%
|
Adjusted EPS
(1)
|
$
|
1.34
|
|
|
$
|
0.54
|
|
|
148.1
|
%
|
|
150.0
|
%
|
Company Chairman and CEO Scott
Thompson commented, "This is the fourth consecutive quarter
of double-digit adjusted EBITDA growth. We are especially pleased
with these results in light of COVID-19 having a material impact on
our Asian business throughout the quarter, and a material impact on
our North American and European markets during the second half of
March. While there are significant challenges that lie ahead, our
strong operating momentum heading into this crisis gives us
confidence that we will emerge even stronger on the other
side."
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 a robust 24.5% to $677.2
million as compared to $544.0 million in
the first quarter of 2019. On a constant currency
basis(1), North America
net sales increased 24.5% as compared to
the first quarter of 2019. Gross margin was 40.9% as
compared to 37.6% in the first quarter of 2019. Operating margin
was 15.0% as compared to 11.8% in the first quarter of 2019.
Adjusted operating margin(1) was 16.9% in the first
quarter of 2020.
North America net sales through
the wholesale channel increased $107.8
million, or 21.5%, to $609.6
million as compared to the first quarter of 2019, primarily
driven by the expansion of our retail distribution network.
North America net sales through
the direct channel increased $25.4
million, or 60.2%, to $67.6
million, as compared to the first quarter of 2019,
primarily driven by growth from company-owned stores, which
includes the acquisition of Sleep Outfitters. North America net sales through the direct
channel, excluding Sleep Outfitters, increased approximately 20% as
compared to the first quarter of 2019.
Company Chairman and CEO Scott
Thompson commented, "We are very pleased with the way our
online business has performed in response to market changes post
COVID-19 with growth exceeding 100% in April in the U.S.
market. This again points out the strength of our
go-to-market strategy of being wherever the customer wants to
shop."
North America gross margin
improved 330 basis points as compared to the first quarter of
2019. The improvement was primarily driven by favorable fixed cost
leverage on higher unit volume, lower commodity costs and decreased
floor model expenses. North
America adjusted operating margin(1) improved 510
basis points as compared to the first quarter of 2019. The
improvement in adjusted operating margin(1) was
primarily driven by the improvement in gross margin and operating
expense leverage.
International net
sales decreased 1.2% to $145.2 million as compared to $146.9
million in the first quarter of 2019. On a constant
currency basis(1), International net sales increased
2.0% as compared to the first quarter of 2019. Gross margin was
55.0% as compared to 52.7% in the first quarter of 2019. Operating
margin was 18.3% as compared to 17.2% in the first quarter of 2019.
Adjusted operating margin(1) was 19.9% as compared
to 17.4% in the first quarter of 2019.
International net sales through the wholesale channel decreased
$1.3 million, or 1.1%, to
$112.8 million as compared to the
first quarter of 2019. International net sales through the direct
channel decreased $0.4 million, or
1.2%, to $32.4 million as compared to
the first quarter of 2019.
International gross margin improved 230 basis points as compared
to the first quarter of 2019. The improvement was primarily driven
by operational improvements, favorable country mix and lower
commodity costs. International adjusted operating
margin(1) improved 250 basis points as compared to the
first quarter of 2019. The improvement was primarily driven by the
improvement in gross margin and favorable operating expense
leverage, partially offset by the performance of the Asia joint venture as a result of the
reduction in contributions from its operations in China.
Corporate operating expense decreased to
$22.7 million as compared to
$29.0 million in the first quarter of
2019. Corporate adjusted operating expense(1) was
$26.0 million in the first quarter of
2019.
The Company ended the first quarter of 2020 with total debt of
$1.9 billion and consolidated
indebtedness less netted cash(1) of $1.7
billion. Leverage based on the ratio of consolidated indebtedness
less netted cash(1) to adjusted
EBITDA(1) was 3.03 times for the trailing
twelve months ended March 31, 2020. During
the first quarter of 2020, the Company repurchased 2.6
million shares of its common stock for a total cost of $187.5
million, under its share repurchase program. On March 27, 2020, the Company announced that it had
ceased all share repurchase activity. As of March 31,
2020, the Company had approximately $131.3 million available
under its existing share repurchase authorization.
Consolidated net income increased 110.2% to $59.7 million as compared to $28.4 million in the first quarter
of 2019. Adjusted net income(1) increased
143.3% to $72.5 million as compared
to $29.8 million in the first quarter
of 2019. EPS increased 117.6% to $1.11 as compared to $0.51 in the first quarter
of 2019. Adjusted EPS(1) increased 148.1% to
$1.34 as compared to $0.54 in the first quarter of 2019.
COVID-19 Business Update
The Company is studying, responding, and optimizing its
operations related to the challenges from the novel coronavirus
("COVID-19") crisis. The Company has taken and continues to take
precautionary measures to mitigate health risks during the evolving
situation resulting from COVID-19. In addition, the Company is
working with various government and healthcare organizations to
provide products and services in this time of crisis.
The Company has experienced a major reduction in total net sales
since COVID-19 began materially impacting our business in
mid-March. Order trends were down 80% for a few days in early April
with second quarter to date 2020 orders down approximately 55% as
compared to the same period in 2019. The business has a highly
variable cost structure that naturally adjusts with changes in
sales. However, given the sudden and significant change in volume,
actions were quickly implemented to further mitigate the financial
impact. These actions included reducing expenses by approximately
$300 million on an annualized basis.
Additionally, the Company ceased share repurchases, began
supporting medical relief efforts and increased support for
charitable organizations.
The Company has no significant debt maturities until 2023 and
has approximately $300 million of
liquidity, including $197 million of
cash on hand as of March 31, 2020 and
approximately $100 million available
under its revolving credit facility. The Company does not see
material issues with any debt agreements based on current known
facts and circumstances. However, given the uncertainty of this
crisis, the Company has initiated discussions with commercial banks
to secure additional short-term liquidity.
Company Chairman and CEO Scott
Thompson commented, "These are truly unprecedented times as
we move from a record first quarter to a very challenging second
quarter. The negative impact from COVID-19 is expected to result in
an operating loss and negative EBITDA in the second quarter.
Despite this challenging environment, we believe that our
consumer-preferred products and brands, our compelling marketing,
and our powerful omni-channel distribution platform make Tempur
Sealy uniquely well-positioned to withstand these headwinds. We
feel confident that our strong position in the industry and our
resilient workforce will ensure that we emerge from the current
challenge in an even stronger competitive position within the
global market."
Financial Guidance
As previously announced, the Company has withdrawn its
previously-issued full-year financial guidance for 2020 and will
not provide updated full-year financial guidance until the
operating environment becomes clear.
Conference Call Information
Tempur Sealy International, Inc. will host a live conference
call to discuss financial results today, April 30, 2020, at
8:00 a.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.tempursealy.com. After the
conference call, a webcast replay will remain available on the
investor relations section of the Company's website for 30
days.
Non-GAAP Financial Measures and Constant Currency
Information
For additional information regarding EBITDA, adjusted EBITDA,
adjusted EPS, adjusted net income, adjusted operating income
(expense), adjusted operating margin, consolidated indebtedness and
consolidated indebtedness less netted cash (all of which are
non-GAAP financial measures), please refer to the reconciliations
and other information included in the attached schedules. For
information on the methodology used to present information on a
constant currency basis, please refer to "Constant Currency
Information" included in the attached schedules.
Forward-Looking Statements
This press release contains statements that may be characterized
as "forward-looking," within the meaning of the federal securities
laws. Such statements might include information concerning one or
more of the Company's plans, guidance, objectives, goals,
strategies, and other information that is not historical
information. When used in this release, the words "assumes,"
"estimates," "expects," "guidance," "anticipates," "might,"
"projects," "plans," "proposed," "targets," "intends," "believes,"
"will" 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 expectations regarding EBITDA and
performance generally for 2020 and subsequent periods and the
Company's expectations for emerging from the market downturn. Any
forward-looking statements contained herein 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 any
that may be expressed herein as forward-looking statements. These
risk factors include the impact of the macroeconomic environment in
both the U.S. and internationally on the Company's business
segments and expectations regarding growth of the mattress
industry; uncertainties arising from global events, natural
disasters or pandemics; risks associated with the duration, scope
and severity of COVID-19 and its effects on the Company's business
and operations, including the disruption or delay of production and
delivery of materials and products in the Company's supply chain;
the impact of travel bans, work-from-home policies, or
shelter-in-place orders; a temporary or prolonged shutdown of
manufacturing facilities or retail stores and decreased retail
traffic; the effects of strategic investments on the Company's
operations, including efforts to expand its global market share;
the ability to develop and successfully launch new products; the
efficiency and effectiveness of the Company's advertising campaigns
and other marketing programs; the ability to increase sales
productivity within existing retail accounts and to further
penetrate the retail channel, including the timing of opening or
expanding within large retail accounts and the timing and success
of product launches and the related expenses and life cycles of
such products; the ability to continuously improve and expand the
Company's product line; the effects of consolidation of retailers
on revenues and costs; competition in the Company's industry;
consumer acceptance of the Company's products; general economic,
financial and industry conditions, particularly conditions relating
to liquidity, financial performance and related credit issues
present in the retail sector; financial distress among the
Company's business partners, customers and competitors, and
financial solvency and related problems experienced by other market
participants, any of which may be amplified by the effects of
COVID-19; risks associated with the Company's acquisition of 80%
ownership of Sherwood Acquisition Holdings, LLC, including the
possibility that the expected benefits of the acquisition are not
realized when expected or at all; the Company's reliance on
information technology and associated risks involving potential
security lapses and/or cyber-based attacks; the outcome of pending
tax audits or other tax, regulatory or investigation proceedings
and pending litigation; changes in foreign tax rates and changes in
tax laws generally, including the ability to utilize tax loss
carryforwards; market disruptions related to COVID-19 which may
frustrate the Company's ability to access financing on acceptable
terms or at all; the Company's capital structure and debt level,
including its ability to meet financial obligations and continue to
comply with the terms and financial ratio covenants of its credit
facilities; changes in interest rates; effects of changes in
foreign exchange rates on the Company's reported earnings; changing
commodity costs; expectations regarding the Company's target
leverage and share repurchase program; sales fluctuations due to
seasonality; the effect of future legislative or regulatory
changes, including changes in international trade duties, tariffs
and other aspects of international trade policy; the Company's
ability to protect its intellectual property; and disruptions to
the implementation of the Company's strategic priorities and
business plan caused by changes in its executive management
team.
Other potential risk factors include the risk factors discussed
under the heading "Risk Factors" in Part I, ITEM 1A of the
Company's Annual Report on Form 10-K for the year ended
December 31, 2019. There may be other factors that may cause
the Company's actual results to differ materially from the
forward-looking statements. The Company undertakes no obligation to
update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made.
About Tempur Sealy International, Inc.
Tempur Sealy International, Inc. (NYSE: TPX) develops,
manufactures and markets mattresses, foundations, pillows and other
products. The Company's brand portfolio includes many highly
recognized brands in the industry, including Tempur®,
Tempur-Pedic®, Sealy® featuring Posturepedic® Technology and
Stearns & Foster®. World headquarters for Tempur Sealy
International is in Lexington, KY.
For more information, visit http://www.tempursealy.com or call
800-805-3635.
Investor Relations Contact:
Aubrey Moore
Investor Relations
Tempur Sealy International, Inc.
800-805-3635
Investor.relations@tempursealy.com
TEMPUR SEALY
INTERNATIONAL, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Income
|
(in millions,
except percentages and per common share amounts)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
|
|
March
31,
|
|
Chg
%
|
|
2020
|
|
2019
|
|
|
Net sales
|
$
|
822.4
|
|
|
$
|
690.9
|
|
|
19.0%
|
Cost of
sales
|
465.3
|
|
|
409.1
|
|
|
|
Gross
profit
|
357.1
|
|
|
281.8
|
|
|
26.7%
|
Selling and marketing
expenses
|
171.0
|
|
|
153.5
|
|
|
|
General,
administrative and other expenses
|
80.6
|
|
|
70.7
|
|
|
|
Equity loss (income)
in earnings of unconsolidated affiliates
|
0.2
|
|
|
(2.9)
|
|
|
|
Operating
income
|
105.3
|
|
|
60.5
|
|
|
74.0%
|
|
|
|
|
|
|
Other expense,
net:
|
|
|
|
|
|
Interest expense,
net
|
20.3
|
|
|
22.4
|
|
|
|
Other expense
(income), net
|
0.5
|
|
|
(7.8)
|
|
|
|
Total other expense,
net
|
20.8
|
|
|
14.6
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations before income taxes
|
84.5
|
|
|
45.9
|
|
|
84.1%
|
Income tax
provision
|
(23.5)
|
|
|
(16.9)
|
|
|
|
Income from continuing
operations
|
61.0
|
|
|
29.0
|
|
|
110.3%
|
Loss from
discontinued operations, net of tax
|
(1.2)
|
|
|
(0.4)
|
|
|
|
Net income before
non-controlling interests
|
59.8
|
|
|
28.6
|
|
|
109.1%
|
Less: Net income
attributable to non-controlling interests
|
0.1
|
|
|
0.2
|
|
|
|
Net income
attributable to Tempur Sealy International, Inc.
|
$
|
59.7
|
|
|
$
|
28.4
|
|
|
110.2%
|
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
Earnings per share for
continuing operations
|
$
|
1.14
|
|
|
$
|
0.53
|
|
|
|
Loss per share for
discontinued operations
|
(0.02)
|
|
|
(0.01)
|
|
|
|
Earnings per
share
|
$
|
1.12
|
|
|
$
|
0.52
|
|
|
115.4%
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
Earnings per share for
continuing operations
|
$
|
1.13
|
|
|
$
|
0.52
|
|
|
|
Loss per share for
discontinued operations
|
(0.02)
|
|
|
(0.01)
|
|
|
|
Earnings per
share
|
$
|
1.11
|
|
|
$
|
0.51
|
|
|
117.6%
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
Basic
|
53.4
|
|
|
54.7
|
|
|
|
Diluted
|
54.0
|
|
|
55.7
|
|
|
|
TEMPUR SEALY
INTERNATIONAL, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(in
millions)
|
|
|
March 31,
2020
|
|
December 31,
2019
|
ASSETS
|
(unaudited)
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash and
cash equivalents
|
$
|
197.0
|
|
|
$
|
64.9
|
|
Accounts
receivable, net
|
372.8
|
|
|
372.0
|
|
Inventories
|
273.4
|
|
|
260.5
|
|
Prepaid
expenses and other current assets
|
203.2
|
|
|
202.8
|
|
Total Current
Assets
|
1,046.4
|
|
|
900.2
|
|
Property,
plant and equipment, net
|
460.3
|
|
|
435.8
|
|
Goodwill
|
753.6
|
|
|
732.3
|
|
Other
intangible assets, net
|
635.2
|
|
|
641.4
|
|
Operating lease
right-of-use assets
|
283.2
|
|
|
245.4
|
|
Deferred
income taxes
|
13.0
|
|
|
14.1
|
|
Other
non-current assets
|
114.5
|
|
|
92.6
|
|
Total
Assets
|
$
|
3,306.2
|
|
|
$
|
3,061.8
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$
|
265.3
|
|
|
$
|
251.7
|
|
Accrued
expenses and other current liabilities
|
413.0
|
|
|
473.2
|
|
Current
portion of long-term debt
|
47.5
|
|
|
37.4
|
|
Income
taxes payable
|
24.6
|
|
|
11.0
|
|
Total Current
Liabilities
|
750.4
|
|
|
773.3
|
|
Long-term
debt, net
|
1,885.5
|
|
|
1,502.6
|
|
Long-term operating
lease obligations
|
241.7
|
|
|
205.4
|
|
Deferred
income taxes
|
101.4
|
|
|
102.1
|
|
Other
non-current liabilities
|
118.8
|
|
|
118.0
|
|
Total
Liabilities
|
3,097.8
|
|
|
2,701.4
|
|
|
|
|
|
Total Stockholders'
Equity
|
208.4
|
|
|
360.4
|
|
Total Liabilities and
Stockholders' Equity
|
$
|
3,306.2
|
|
|
$
|
3,061.8
|
|
TEMPUR SEALY
INTERNATIONAL, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(in
millions)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2020
|
|
2019
|
CASH FLOWS FROM
OPERATING ACTIVITIES FROM CONTINUING
OPERATIONS:
|
|
|
|
Net income before
non-controlling interests
|
$
|
59.8
|
|
|
$
|
28.6
|
|
Loss from discontinued
operations, net of tax
|
1.2
|
|
|
0.4
|
|
Adjustments to
reconcile net income from continuing operations to net cash
provided by
operating activities:
|
|
|
|
Depreciation and
amortization
|
23.2
|
|
|
21.5
|
|
Amortization of
stock-based compensation
|
7.3
|
|
|
6.6
|
|
Amortization of
deferred financing costs
|
0.7
|
|
|
0.6
|
|
Bad debt
expense
|
15.7
|
|
|
1.6
|
|
Deferred income
taxes
|
3.0
|
|
|
(1.8)
|
|
Dividends received
from unconsolidated affiliates
|
—
|
|
|
1.3
|
|
Equity loss (income)
in earnings of unconsolidated affiliates
|
0.2
|
|
|
(2.9)
|
|
Foreign currency
adjustments and other
|
0.6
|
|
|
(6.5)
|
|
Changes in operating
assets and liabilities, net of effect of business
acquisitions
|
(96.7)
|
|
|
(44.8)
|
|
Net cash provided by
operating activities from continuing operations
|
15.0
|
|
|
4.6
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES FROM CONTINUING
OPERATIONS:
|
|
|
|
Purchases of property,
plant and equipment
|
(26.2)
|
|
|
(19.1)
|
|
Acquisitions, net of
cash acquired
|
(37.9)
|
|
|
—
|
|
Debtor-in-possession
financing arrangement
|
—
|
|
|
(9.5)
|
|
Other
|
0.1
|
|
|
8.3
|
|
Net cash used in
investing activities from continuing operations
|
(64.0)
|
|
|
(20.3)
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES FROM CONTINUING
OPERATIONS:
|
|
|
|
Proceeds from
borrowings under long-term debt obligations
|
611.1
|
|
|
212.6
|
|
Repayments of
borrowings under long-term debt obligations
|
(231.0)
|
|
|
(198.7)
|
|
Proceeds from exercise
of stock options
|
1.3
|
|
|
2.4
|
|
Treasury stock
repurchased
|
(199.3)
|
|
|
(3.7)
|
|
Repayments of finance
lease obligations and other
|
6.0
|
|
|
(1.6)
|
|
Net cash provided by
financing activities from continuing operations
|
188.1
|
|
|
11.0
|
|
|
|
|
|
Net cash provided by
(used in) continuing operations
|
139.1
|
|
|
(4.7)
|
|
|
|
|
|
CASH USED IN
DISCONTINUED OPERATIONS:
|
|
|
|
Operating cash
flows
|
(1.1)
|
|
|
(0.7)
|
|
Investing cash
flows
|
—
|
|
|
—
|
|
Financing cash
flows
|
—
|
|
|
—
|
|
Net cash used in
discontinued operations
|
(1.1)
|
|
|
(0.7)
|
|
|
|
|
|
NET EFFECT OF
EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
|
(5.9)
|
|
|
(0.8)
|
|
Increase (decrease)
in cash and cash equivalents
|
132.1
|
|
|
(6.2)
|
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
64.9
|
|
|
45.8
|
|
CASH AND CASH
EQUIVALENTS, end of period
|
197.0
|
|
|
39.6
|
|
LESS: CASH AND CASH
EQUIVALENTS OF DISCONTINUED OPERATIONS
|
—
|
|
|
—
|
|
CASH AND CASH
EQUIVALENTS OF CONTINUING OPERATIONS
|
$
|
197.0
|
|
|
$
|
39.6
|
|
Summary of Channel Sales
The following table highlights net sales information, by channel
and by business segment, for the three months
ended March 31, 2020 and 2019:
|
Three Months Ended
March 31,
|
(in
millions)
|
Consolidated
|
|
North America
(c)
|
|
International
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Wholesale
(a)
|
$
|
722.4
|
|
|
$
|
615.9
|
|
|
$
|
609.6
|
|
|
$
|
501.8
|
|
|
$
|
112.8
|
|
|
$
|
114.1
|
|
Direct
(b)
|
100.0
|
|
|
75.0
|
|
|
67.6
|
|
|
42.2
|
|
|
32.4
|
|
|
32.8
|
|
|
$
|
822.4
|
|
|
$
|
690.9
|
|
|
$
|
677.2
|
|
|
$
|
544.0
|
|
|
$
|
145.2
|
|
|
$
|
146.9
|
|
|
(a)
|
The Wholesale channel
includes all third party retailers, including third party
distribution, hospitality and healthcare.
|
(b)
|
The Direct channel
includes company-owned stores, e-commerce and call
centers.
|
(c)
|
Sleep Outfitters'
sales have been reclassified into the Direct channel for 2019 due
to the acquisition on April 1, 2019. Sleep Outfitters, previously a
third party retailer, had historically been part of the Wholesale
channel.
|
TEMPUR SEALY INTERNATIONAL, INC. AND
SUBSIDIARIES
Reconciliation of Non-GAAP Financial
Measures
(in millions, except percentages, ratios and per
common share amounts)
The Company provides information regarding adjusted net income,
adjusted EPS, adjusted operating income (expense), adjusted
operating margin, EBITDA, adjusted EBITDA, consolidated
indebtedness and consolidated indebtedness less netted cash, which
are not recognized terms under GAAP and do not purport to be
alternatives to net income, earnings per share, operating income
(expense), operating margin and net cash provided by operating
activities as a measure of operating performance or an alternative
to total debt as a measure of liquidity. The Company believes these
non-GAAP financial measures provide investors with performance
measures that better reflect the Company's underlying operations
and trends, providing a perspective not immediately apparent from
net income, operating income (expense) and operating margin. The
adjustments management makes to derive the non-GAAP financial
measures include adjustments to exclude items that may cause
short-term fluctuations in the nearest GAAP financial measure, but
which management does not consider to be the fundamental attributes
or primary drivers of the Company's business.
The Company believes that exclusion of these items assists in
providing a more complete understanding of the Company's underlying
results from continuing operations and trends, and management uses
these measures along with the corresponding GAAP financial measures
to manage the Company's business, to evaluate its consolidated and
business segment performance compared to prior periods and the
marketplace, to establish operational goals and to provide
continuity to investors for comparability purposes. Limitations
associated with the use of these non-GAAP financial measures
include that these measures do not present all of the amounts
associated with the Company's results as determined in accordance
with GAAP. These non-GAAP financial measures should be considered
supplemental in nature and should not be construed as more
significant than comparable financial measures defined by GAAP.
Because not all companies use identical calculations, these
presentations may not be comparable to other similarly titled
measures of other companies. For more information about these
non-GAAP financial measures and a reconciliation to the nearest
GAAP financial measure, please refer to the reconciliations on the
following pages.
Constant Currency Information
In this press release the Company refers to, and in other press
releases and other communications with investors the Company may
refer to, net sales, earnings or other historical financial
information on a "constant currency basis," which is a non-GAAP
financial measure. These references to constant currency do not
include operational impacts that could result from fluctuations in
foreign currency rates. To provide information on a constant
currency basis, the applicable financial results are adjusted based
on a simple mathematical model that translates current period
results in local currency using the comparable prior corresponding
period's currency conversion rate. This approach is used for
countries where the functional currency is the local country
currency. This information is provided so that certain financial
results can be viewed without the impact of fluctuations in foreign
currency rates, thereby facilitating period-to-period comparisons
of business performance.
Adjusted Net Income and Adjusted EPS
A reconciliation of reported net income to adjusted net income
and the calculation of adjusted EPS is 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 various adjustments as described in the footnotes at the
end of this release.
The following table sets forth the reconciliation of the
Company's reported net income to adjusted net income and the
calculation of adjusted EPS for the three months
ended March 31, 2020 and 2019:
|
Three Months
Ended
|
(in millions,
except per share amounts)
|
March 31,
2020
|
|
March 31,
2019
|
Net income
|
$
|
59.7
|
|
|
$
|
28.4
|
|
Loss from discontinued
operations, net of tax (1)
|
1.2
|
|
|
0.4
|
|
Customer-related
charges (2)
|
11.7
|
|
|
—
|
|
Operational
disruptions (3)
|
2.3
|
|
|
—
|
|
Accounting standard
adoption (4)
|
1.5
|
|
|
—
|
|
Acquisition-related
costs and other (5)
|
—
|
|
|
(3.9)
|
|
Tax adjustments
(6)
|
(3.9)
|
|
|
4.9
|
|
Adjusted net
income
|
$
|
72.5
|
|
|
$
|
29.8
|
|
|
|
|
|
Adjusted earnings per
common share, diluted
|
$
|
1.34
|
|
|
$
|
0.54
|
|
|
|
|
|
Diluted shares
outstanding
|
54.0
|
|
|
55.7
|
|
Adjusted Operating Income (Expense) and Adjusted Operating
Margin
A reconciliation of operating income (expense) and operating
margin to adjusted operating income (expense) and adjusted
operating margin, respectively, 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 various adjustments as described in the footnotes at the
end of this release.
The following table sets forth the Company's reported gross
profit and the reconciliation of the Company's operating income
(expense) and operating margin to the calculation of adjusted
operating income (expense) and adjusted operating margin for the
three months ended March 31, 2020.
The Company had no adjustments to gross profit for the three months
ended March 31, 2020.
|
1Q
2020
|
(in millions,
except percentages)
|
Consolidated
|
|
Margin
|
|
North
America
|
|
Margin
|
|
International
|
|
Margin
|
|
Corporate
|
Net sales
|
$
|
822.4
|
|
|
|
|
$
|
677.2
|
|
|
|
|
$
|
145.2
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
357.1
|
|
|
43.4
|
%
|
|
$
|
277.2
|
|
|
40.9
|
%
|
|
$
|
79.9
|
|
|
55.0
|
%
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(expense)
|
$
|
105.3
|
|
|
12.8
|
%
|
|
$
|
101.4
|
|
|
15.0
|
%
|
|
$
|
26.6
|
|
|
18.3
|
%
|
|
$
|
(22.7)
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer-related
charges (2)
|
11.7
|
|
|
|
|
11.7
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Operational disruptions
(3)
|
2.3
|
|
|
|
|
—
|
|
|
|
|
2.3
|
|
|
|
|
—
|
|
Accounting standard
adoption (4)
|
1.5
|
|
|
|
|
1.5
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Total
adjustments
|
15.5
|
|
|
|
|
13.2
|
|
|
|
|
2.3
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (expense)
|
$
|
120.8
|
|
|
14.7
|
%
|
|
$
|
114.6
|
|
|
16.9
|
%
|
|
$
|
28.9
|
|
|
19.9
|
%
|
|
$
|
(22.7)
|
|
The following table sets forth the Company's reported gross
profit and the reconciliation of the Company's operating income
(expense) and operating margin to the calculation of adjusted
operating income (expense) and adjusted operating margin for the
three months ended March 31, 2019. The Company had no
adjustments to gross profit for the three months ended
March 31, 2019.
|
1Q
2019
|
(in millions,
except percentages)
|
Consolidated
|
|
Margin
|
|
North
America
|
|
Margin
|
|
International
|
|
Margin
|
|
Corporate
|
Net sales
|
$
|
690.9
|
|
|
|
|
$
|
544.0
|
|
|
|
|
$
|
146.9
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
281.8
|
|
|
40.8
|
%
|
|
$
|
204.4
|
|
|
37.6
|
%
|
|
$
|
77.4
|
|
|
52.7
|
%
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(expense)
|
$
|
60.5
|
|
|
8.8
|
%
|
|
$
|
64.3
|
|
|
11.8
|
%
|
|
$
|
25.2
|
|
|
17.2
|
%
|
|
$
|
(29.0)
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related
costs and other (5)
|
3.3
|
|
|
|
|
—
|
|
|
|
|
0.3
|
|
|
|
|
3.0
|
|
Total
adjustments
|
3.3
|
|
|
|
|
—
|
|
|
|
|
0.3
|
|
|
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (expense)
|
$
|
63.8
|
|
|
9.2
|
%
|
|
$
|
64.3
|
|
|
11.8
|
%
|
|
$
|
25.5
|
|
|
17.4
|
%
|
|
$
|
(26.0)
|
|
EBITDA, Adjusted EBITDA and Consolidated Indebtedness Less
Netted Cash
The following reconciliations are provided below:
- Net income to EBITDA and adjusted EBITDA
- Ratio of consolidated indebtedness less netted cash to adjusted
EBITDA
- Total debt, net to consolidated indebtedness less netted
cash
Management believes that presenting these non-GAAP measures
provides investors with useful information with respect to the
Company's operating performance, cash flow generation and
comparisons from period to period, as well as general information
about the Company's progress in reducing its leverage.
The following table sets forth the reconciliation of the
Company's reported net income to the calculations of EBITDA and
adjusted EBITDA for the three months ended March 31,
2020 and 2019:
|
Three Months
Ended
|
(in
millions)
|
March 31,
2020
|
|
March 31,
2019
|
Net income
|
$
|
59.7
|
|
|
$
|
28.4
|
|
Interest expense,
net
|
20.3
|
|
|
22.4
|
|
Income
taxes
|
23.5
|
|
|
16.9
|
|
Depreciation and
amortization
|
31.0
|
|
|
28.6
|
|
EBITDA
|
$
|
134.5
|
|
|
$
|
96.3
|
|
Adjustments:
|
|
|
|
Loss from discontinued
operations, net of tax (1)
|
1.2
|
|
|
0.4
|
|
Customer-related
charges (2)
|
11.7
|
|
|
—
|
|
Operational
disruptions (3)
|
2.3
|
|
|
—
|
|
Accounting standard
adoption (4)
|
1.5
|
|
|
—
|
|
Acquisition-related
costs and other (5)
|
—
|
|
|
(3.9)
|
|
Adjusted
EBITDA
|
$
|
151.2
|
|
|
$
|
92.8
|
|
The following table sets forth the reconciliation of the
Company's net income to the calculations of EBITDA and adjusted
EBITDA for the trailing twelve months ended March 31,
2020:
|
Trailing Twelve
Months Ended
|
(in
millions)
|
March 31,
2020
|
Net income
|
$
|
220.8
|
|
Interest expense,
net
|
83.6
|
|
Income tax
provision
|
81.3
|
|
Depreciation and
amortization
|
120.9
|
|
EBITDA
|
$
|
506.6
|
|
Adjustments:
|
|
Loss from discontinued
operations, net of tax (1)
|
2.2
|
|
Customer-related
charges (2)
|
41.5
|
|
Earnings from Sherwood
prior to acquisition (7)
|
9.8
|
|
Charitable stock
donation (8)
|
8.9
|
|
Acquisition-related
costs and other (9)
|
3.5
|
|
Operational
disruptions (3)
|
2.3
|
|
Accounting standard
adoption (4)
|
1.5
|
|
Adjusted
EBITDA
|
$
|
576.3
|
|
|
|
Consolidated
indebtedness less netted cash
|
$
|
1,746.0
|
|
|
|
Ratio of consolidated
indebtedness less netted cash to adjusted EBITDA
|
3.03 times
|
|
On October 16, 2019, the Company
entered into a credit agreement (the "2019 Credit Agreement") with
a syndicate of banks. Under the 2019 Credit Agreement, the
definition of adjusted EBITDA contains certain restrictions that
limit adjustments to net income when calculating adjusted EBITDA.
For the trailing twelve months ended March
31, 2020, the Company's adjustments to net income when
calculating adjusted EBITDA did not exceed the allowable amount
under the 2019 Credit Agreement.
The ratio of adjusted EBITDA under the 2019 Credit Agreement to
consolidated indebtedness less netted cash is 3.03 times for the
trailing twelve months ended March 31,
2020. The 2019 Credit Agreement requires the Company to
maintain a ratio of consolidated indebtedness less netted cash to
adjusted EBITDA of less than 5.00:1.00 times.
The following table sets forth the reconciliation of the
Company's reported total debt to the calculation of consolidated
indebtedness less netted cash as of March
31, 2020. "Consolidated Indebtedness" and "Netted Cash" are
terms used in the 2019 Credit Agreement for purposes of certain
financial covenants.
(in
millions)
|
March 31,
2020
|
Total debt,
net
|
$
|
1,933.0
|
|
Plus: Deferred
financing costs (10)
|
8.9
|
|
Consolidated
indebtedness
|
1,941.9
|
|
Less: Netted cash
(11)
|
195.9
|
|
Consolidated
indebtedness less netted cash
|
$
|
1,746.0
|
|
Footnotes:
(1)
|
Certain subsidiaries
in the International business segment are accounted for as
discontinued operations and have been designated as unrestricted
subsidiaries in the 2019 Credit Agreement. Therefore, these
subsidiaries are excluded from the Company's adjusted financial
measures for covenant compliance purposes.
|
(2)
|
In the first quarter
of 2020, the Company recorded $11.7 million of customer-related
charges in connection with the bankruptcy of Art Van Furniture, LLC
and affiliates to fully reserve trade receivables and other assets
associated with this account. In the fourth quarter of 2019, the
Company recorded $29.8 million of customer-related charges in
connection with the bankruptcy of Mattress PAL Holding, LLC
("Mattress PAL") and resulting significant liquidity issues of
Mattress PAL's affiliates to fully reserve trade receivables and
other assets associated with this account.
|
(3)
|
In the first quarter
of 2020, in applying contractual definitions under the 2019 Credit
Agreement, the Company recorded $2.3 million of certain direct
charges related to operational disruptions caused by the government
shutdowns as a result of COVID-19.
|
(4)
|
In the first quarter
of 2020, the Company recorded $1.5 million of charges related to
the adoption of ASU No. 2016-13, "Financial Instruments - Credit
Losses (Topic 326)". As permitted by the 2019 Credit Agreement, the
Company elected to eliminate the effect of this accounting change
within its covenant compliance calculation.
|
(5)
|
In the first quarter
of 2019, the Company recorded $3.3 million of acquisition-related
and other costs in operating expenses, primarily related to
professional fees for the acquisition of Sleep Outfitters. These
costs were offset by $7.2 million of other income related to the
sale of its interest in a subsidiary of the Asia-Pacific joint
venture.
|
(6)
|
Adjusted income tax
provision represents the tax effects associated with the
aforementioned items and other discrete income tax
events.
|
(7)
|
The Company completed
the acquisition of Sherwood Bedding on January 31, 2020 and
designated this subsidiary as restricted under the 2019 Credit
Agreement. For covenant compliance purposes, the Company included
$9.8 million of EBITDA from this subsidiary for the ten months
prior to acquisition in the Company's calculation of adjusted
EBITDA for the trailing twelve months ended March 31,
2020.
|
(8)
|
In 2019, the Company
recorded an $8.9 million charge related to the donation of common
stock at fair market value to certain public charities.
|
(9)
|
In 2019, the Company
recorded $3.5 million of acquisition-related and other costs. These
costs included $2.8 million of post-acquisition restructuring
charges and professional fees incurred in the acquisition of Sleep
Outfitters and $0.7 million of professional fees in connection with
the amendment of the senior secured credit facility.
|
(10)
|
The Company presents
deferred financing costs as a direct reduction from the carrying
amount of the related debt in the Condensed Consolidated Balance
Sheets. For purposes of determining total debt for financial
covenant purposes, the Company has added these costs back to total
debt, net as calculated per the Condensed Consolidated Balance
Sheets.
|
(11)
|
Netted cash includes
cash and cash equivalents for domestic and foreign subsidiaries
designated as restricted subsidiaries in the 2019 Credit
Agreement.
|
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content:http://www.prnewswire.com/news-releases/tempur-sealy-reports-record-first-quarter-2020-results-301049749.html
SOURCE Tempur Sealy International, Inc.