Tempur Sealy reports strong third-quarter results

Tempur Sealy International, the recently merged bedding major with headquarters in Lexington, Ky., announced that net sales in the third quarter of 2013 were $735.5 million, an increase of 111.4% as compared with the third quarter of 2012. The increase was due to the inclusion of $389.9 million of Sealy net sales.

Tempur Sealy’s third quarter
Net sales $735.5 million
Adjusted net income $44.9 million
Gross profit margin 40.6%

The company completed its acquisition of Sealy in March 2013, and results for 2012 do not include Sealy.

The company reported net income of $40.2 million (using generally accepted accounting principles) and adjusted net income of $44.9 million, as compared with GAAP net loss of $2 million in the prior-quarter 2012.

Gross profit margin was 40.6%, as compared with 49.2%, in the third quarter of 2012. The company attributed the decline to the inclusion of Sealy, which has lower margins than the Tempur North America and Tempur International segments, as well as changes in product mix, which were partly offset by lower sourcing costs.

Operating income in third-quarter 2013 was $81.2 million, as compared with $63.4 million in the prior-year quarter. It included $8.5 million in transaction and integration costs related to the Sealy acquisition and also reflects the inclusion of Sealy operating income, the company said.

GAAP earnings per diluted share were $0.65 compared with $0.03 in third-quarter 2012. These results reflect transaction and integration costs, as well as interest related to the refinancing of the company’s Term A facility under its senior secured credit facility, Tempur Sealy said.

Adjusted earnings per share were $0.73, as compared with $0.70 in the prior-year quarter.

Adjusted EBITDA for the third quarter of 2013 was $115.5 million, up from $69.3 million in the third quarter of 2012.

Tempur North America net sales increased 0.6% to $242.4 million, up from $240.9 million in the third quarter of 2012. Bedding net sales increased 0.2% to $220.6 million; other sleep products net sales increased 4.8% to $21.8 million, as compared with third-quarter 2013.

Tempur International net sales decreased 3.6% to $103.2 million in the third quarter of 2013, down from $107 million in the prior-year quarter. Bedding decreased 4.7% to $76.5 million, as compared with $80.3 million in the third quarter of 2013. Sleep accessories net sales for the quarter were unchanged at $26.7 million.

Sealy net sales for third-quarter 2013 were $389.9 million. Bedding net sales were $365.2 million and other product sales were $24.7 million. [Sealy third-quarter 2012 results as reported in BedTimes]

Commenting on the company’s third quarter, Mark Sarvary, Tempur Sealy chief executive officer, said: “Overall our third quarter was in line with our expectations. The steps we have taken to improve Tempur North America’s performance showed progress and led to a slight sales increase during the quarter. Our Sealy business also showed growth during the quarter. However, Tempur International results were slightly below our plan due to continued weakness in Europe. The integration with Sealy continues to progress well, cost synergies continue to track to our plan and we remain very excited about our ability to capture significant revenue synergies.”

Tempur Sealy confirmed its guidance for full-year 2013. It expects net sales to range from $2.425 billion to $2.450 billion, adjusted EBITDA from $370 million to $385 million, and adjusted earnings per share from $2.25 to $2.40 per diluted share—including depreciation and amortization of approximately $0.14 per share associated with the Sealy purchase price allocation.

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