Tempur Sealy Reports Record Fourth Quarter and Full-Year 2016 Results

News release written by Tempur Sealy International; excerpts published, unedited, by BedTimes. Link to complete release at Tempur Sealy

­ Issues Financial Guidance for 2017

LEXINGTON, Ky., Feb. 16, 2017 /PRNewswire/ ­­ Tempur Sealy International, Inc. (NYSE: TPX) today announced financial results for the fourth quarter and year ended December 31, 2016. The Company also issued financial guidance for the full year 2017.

KEY HIGHLIGHTS

 

  • Total net sales increased 0.3% to $769.5 million from $767.3 million in the fourth quarter of 2015. On a constant currency basis(1), total net sales increased 1.7%, with an increase
  • of 1.9% in the North America business segment and an increase of 0.9% in the International business segment.
  • Gross margin under U.S. generally accepted accounting principles (“GAAP”) was 41.5% as compared to 40.8% in the fourth quarter of 2015.
  • GAAP net income was $63.4 million as compared to a net loss of $(11.3) million for the fourth quarter of 2015. In the fourth quarter of 2015, the Company recorded a $60.7 million tax charge related to its Danish tax matter. Adjusted net income(1) increased 6.1% to $66.5 million as compared to adjusted net income of $62.7 million in the fourth quarter of 2015.
  • Earnings before interest, tax, depreciation and amortization (“EBITDA”)(1) increased 13.0% to $130.1 million as compared to $115.1 million for the fourth quarter of 2015. Adjusted EBITDA(1) increased 3.9% to a record $137.9 million as compared to adjusted EBITDA(1) of $132.7 million in the fourth quarter of 2015.

GAAP operating income increased 17.1% to $107.5 million, or 14.0% of net sales, as compared to $91.8 million, or 12.0% of net sales, in the fourth quarter of 2015. Operating income in the fourth quarter of 2016 included $8.3 million of restructuring costs and $3.8 million of benefit related to performance­based stock compensation. Operating income in the fourth quarter of 2015 included $19.4 million of restructuring costs, executive management transition, integration and other costs. Adjusted operating income(1) was $112.0 million, or 14.6% of net sales, as compared to adjusted operating income of $111.2 million, or 14.5% of net sales, in the fourth quarter of 2015.

GAAP earnings per diluted share (“EPS”) was $1.12 as compared to a loss of $(0.18) in the fourth quarter of 2015. Adjusted EPS(1) increased 19.2% to $1.18, as compared to adjusted EPS of $0.99 in the fourth quarter of 2015.

During the fourth quarter of 2016, the Company repurchased 3.5 million shares of its common stock for a total cost of $215.3 million. As of December 31, 2016, the Company had approximately $67 million available under its existing share repurchase authorization.

The Company ended the fourth quarter of 2016 with consolidated funded debt less qualified cash(1) of $1.9 billion. In addition, leverage based on the ratio of consolidate funded debt less qualified cash to adjusted EBITDA(1) was 3.60 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 are solid and the Team remains focused on our long­term initiatives. Our fourth quarter adjusted EPS growth of 19% is evidence of the strength of Company’s Brands, and business model, even against a relatively muted bedding industry.”

FULL YEAR 2016 FINANCIAL SUMMARY

Total net sales decreased 0.8% to $3,127.3 million from $3,151.2 million in 2015. On a constant currency basis(1), total net sales increased 0.7%, with growth in both the North America and International business segments.

GAAP gross margin was 41.9% as compared to 39.6% in 2015. Adjusted gross margin(1) was 41.9% as compared to 40.1% in 2015.

GAAP net income was $202.1 million as compared to $73.5 million in 2015. Adjusted net income(1) was $242.4 million as compared to $199.9 million in 2015.

EBITDA(1) increased 31.3% to $510.8 million as compared to $388.9 million in 2015. Adjusted EBITDA(1) increased 14.4% to a record $521.6 million as compared to $455.8 million in 2015.

GAAP operating income increased 34.4% to $415.5 million, as compared to $309.1 million in 2015. Adjusted operating income(1) was $425.0 million, or 13.6% of net sales, as compared to $373.8 million, or 11.9% of net sales, in 2015.

GAAP EPS was $3.38 as compared to $1.17 in 2015. Adjusted EPS(1) increased 27.0% to a record $4.05 as compared to adjusted EPS of $3.19 in 2015. On a constant currency basis, adjusted EPS increased 30.7%.

Operating cash flow for the full year 2016 was $165.5 million compared to $234.2 million in 2015.

Fourth Quarter 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 1.9% to $623.4 million from $611.6 million in the fourth quarter of 2015.

On a constant currency basis(1), North America net sales increased 1.9%. GAAP gross margin was 39.4% as compared to 38.7% in the fourth quarter of 2015. GAAP operating margin was 16.5% as compared to 15.5% in the fourth quarter of 2015, driven primarily by gross margin improvement.

North America adjusted gross margin(1) improved 60 basis points to 39.5% as compared to 38.9% in the fourth quarter of 2015. Gross margin improvements were primarily driven by operational improvements, pricing actions, and favorable mix, partially offset by product launch costs. North America adjusted operating margin(1) declined to 16.7% as compared to 16.8% in the fourth quarter of 2015 primarily driven by increased product launch expense.

International net sales decreased 6.2% to $146.1 million from $155.7 million in the fourth quarter of 2015.

On a constant currency basis(1), International net sales increased 0.9%. GAAP gross margin was 50.6% as compared to 49.3% in the fourth quarter of 2015. GAAP operating margin was 18.2% as compared to 17.3% in the fourth quarter 2015, driven primarily by the increase in gross margin.

International adjusted gross margin(1) increased 150 basis points to 51.3% as compared to 49.8% in the fourth quarter of 2015. The increase in gross margin was primarily driven by operational improvements and channel mix. International adjusted operating margin(1) increased to 22.2% as compared to 20.0% in the fourth quarter of 2015, primarily driven by improved gross margin and lower operating expenses.

Corporate GAAP operating expense decreased 26.2% to $22.0 million from $29.8 million in the fourth quarter of 2015. In the fourth quarter of 2016, the Company recorded $1.6 million of restructuring costs and $3.8 million of benefit related to performance­based stock compensation. In the fourth quarter of 2015, the Company recorded $6.9 million of additional costs related to executive management transition, integration, and other costs. Corporate adjusted operating expense(1) increased 5.7% to $24.2 million as compared to $22.9 million in the fourth quarter of 2015.

Balance Sheet

As of December 31, 2016, the Company reported $65.7 million in cash and cash equivalents and $1.9 billion in total debt, as compared to $153.9 million in cash and cash equivalents and $1.5 billion in total debt as of December 31, 2015.

Financial Guidance

For the full year 2017, the Company currently expects adjusted EBITDA(1) to range from $400 million to $450 million, which includes approximately $15 million of unfavorable commodity inflation and $12 million of unfavorable foreign currency impact.

The Company noted its expectations are based on information available at the time of this release, and are subject to changing conditions, many of which are outside the Company’s control.

The Company also noted that its 2017 outlook for adjusted EBITDA is a non­GAAP financial measure that excludes or has otherwise been adjusted for items impacting comparability. The Company further noted that it is unable to reconcile this forward­looking non­GAAP financial measure to GAAP net income, its most directly comparable forward­looking GAAP financial measure, without unreasonable efforts, because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact GAAP net income in 2017 but would not impact adjusted EBITDA. These items that impact comparability may include restructuring activities, the impact of the recent termination of contracts with Mattress Firm, foreign currency exchange rates, income taxes, and other items. The unavailable information could have a significant impact on the Company’s full year 2017 GAAP financial results.

 

 

About Tempur Sealy International, Inc.

Tempur Sealy International, Inc. (NYSE: TPX) is the world’s largest bedding provider. Tempur Sealy International, Inc. develops, manufactures and markets mattresses, foundations, pillows and other products. The Company’s brand portfolio includes many highly recognized brands, including TEMPUR®, Tempur­Pedic®,

Sealy®, Sealy Posturepedic® and Stearns & Foster®. World headquarters for Tempur Sealy International, Inc. is in Lexington, KY. For more information, visit http://www.tempursealy.com or call 800­805­3635.

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