BRIEFLY | |
Third-quarter results | |
Net sales | $347.9 million |
Net income | $42.3 million |
Mattress sales | Down 11% |
Pillow sales | Up 11% |
Gross profit margin | 49.2% |
Mattress and pillow manufacturer Tempur-Pedic recorded net sales of $347.9 million in the third quarter of fiscal 2012, a decrease of 9% from $383.1 million in the third quarter of 2011.
The Lexington, Ky.-based company’s net income for the third quarter declined 31.7% to $42.3 million, as compared with net income of $61.9 million in the prior-year period. Third-quarter earnings per diluted share were $0.03 and reflect the tax provision recorded in connection with the anticipated repatriation of foreign earnings, together with transaction costs related to Tempur-Pedic’s proposed acquisition of rival Sealy. Adjusted earnings per share were $0.70 in the third quarter of 2012, as compared with $0.90 per diluted share in the third quarter of 2011.
On a constant-currency basis, net sales decreased 7%. Net sales in the North American segment decreased 14%; international segment net sales increased 3%. On a constant-currency basis, international segment net sales increased 11%.
During the third quarter, mattress sales decreased 11% globally—dropping 15% in North America and increasing 1% internationally. On a constant-currency basis, international mattress sales rose 10%. Pillow sales increased 11% globally—up 5% in North America and 16% internationally. On a constant-currency basis, international pillow sales increased 23%.
Gross profit margin was 49.2%, as compared with 52.4% in the third quarter of 2011. Tempur-Pedic attributed the decrease to product mix and increased promotions and discounts, partially offset by geographic mix.
Operating income for the fiscal third quarter decreased 34% to $63.4 million, or 18.2% of sales, as compared with $96.6 million, or 25.2% of sales, in the third quarter of 2011. The decrease reflected deleverage throughout the income statement driven by lower sales, the company said. Operating income in the third quarter of 2012 included $3.6 million of transaction costs related to the proposed Sealy acquisition, as well as a benefit of $8 million related to an adjustment to long-term incentive stock compensation following a re-evaluation of the probability of meeting certain related required financial metrics.
Tempur-Pedic lowered its outlook for full-year 2012 net sales to approximately $1.40 billion. In addition, the company lowered its full year 2012 earnings guidance to approximately $2.55 per share.
“Changes in the competitive environment that we experienced during the second quarter in North America continued to have an adverse impact on our third-quarter performance,” said Mark Sarvary, Tempur-Pedic chief executive officer. “We recently launched a broad series of new initiatives in response to the new competitive landscape in North America, and while it remains early, we are seeing some stabilization as a result. The initiatives are more expensive than we initially estimated, however, we are committed to returning to growth.”
He continued: “We remain very confident in our company’s growth potential and our strong brand and are very excited about our proposed combination with Sealy. Together, Tempur and Sealy will have a portfolio of highly complementary brands, products, technologies and geographic footprints that provides a platform for growth.”