Mattress major Tempur Sealy, with headquarters in Lexington, Kentucky, had first-quarter net sales of $701.9 million, an increase of 80% as compared with the first quarter of 2013, which did not include a full quarter of Sealy net sales. The company completed the acquisition of Sealy in the first quarter of 2013. Net sales for that quarter were $46.7 million and included Sealy net sales from March 18 to March 31.
Tempur Sealy reported net income of $27.4 million (using generally accepted accounting principles) and adjusted net income of $32.6 million in the first quarter of 2014.
Gross profit margin was 38.4% as compared with 48.3% in the first quarter of 2013. The decrease is a result of the inclusion of a full quarter of the lower-margin Sealy business, changes in product mix and channels, and higher new product launch costs, partially offset by geographic mix and lower sourcing costs, Tempur Sealy said.
Operating income was $62.4 million as compared with $44.5 million in the prior-year quarter, and included $7.4 million in integration costs related to the Sealy acquisition. Operating income in the first quarter of 2013 included $16 million of transaction and integration costs.
GAAP earnings per diluted share were $0.44, compared with $0.20 in the first quarter of 2013. Adjusted earnings per share were $0.53, as compared to $0.62 in the prior-year quarter.
Adjusted earnings before interest, taxes, depreciation and amortization in the first quarter of 2014 were $91.4 million, as compared with $76.8 million in the prior-year quarter.
Net sales for the Tempur North America business segment decreased 5.7% to $213 million in the first quarter of 2014, from $225.9 million in the first quarter of 2013. Bedding decreased 2.5% to $199.5 million, and other products decreased 36.6% to $13.5 million, from $21.3 million in the first quarter of 2013.
Tempur International net sales increased 7% to $125.7 million, from $117.5 million in the first quarter of 2013. Bedding net sales increased 6.6% to $95.2 million, and other products increased 8.2% to $30.5 million.
Sealy net sales were $363.2 million in the first quarter of 2014.
“Overall our first quarter was in line with our expectations,” said Mark Sarvary, Tempur Sealy chief executive officer. “The majority of our 2014 initiatives have just begun, and we remain confident that they will drive growth in 2014. We are also excited about our recently announced acquisitions of Sealy brand rights in Japan and in continental Europe. Both of these transactions represent significant future growth opportunities.”
The company ended the first quarter with consolidated funded debt, less qualified cash, of $1.8 billion. Its debt to adjusted EBITDA ratio is in accordance with the company’s senior secured credit facility, Tempur Sealy said.
The company confirmed its 2014 guidance for net sales (from $2.8 billion to $2.9 billion), adjusted EBITDA (from $415 million to $435 million) and adjusted EPS, which is projected to range from $2.60 to $2.85 per diluted share—including depreciation and amortization of approximately $0.19 per share, associated with the Sealy purchase price allocation.
