Tempur Sealy Sees Sales and Margin Growth in Third Quarter

Tempur Sealy’s third quarter
Net sales $880 million
Gross margin 40.9%
Net income $40.2 million
Earnings per share $0.64

Mattress major Tempur Sealy International Inc., with headquarters in Lexington, Kentucky, reported total net sales in the fiscal third quarter increased 6.4% to $880 million, compared with third-quarter 2014. On a constant currency basis, total net sales increased 10.6%.

North America net sales increased 8.2% to $741.2 million. On a constant currency basis, North America net sales increased 9.8%. International net sales decreased 2.3% to $138.8 million in the third quarter. On a constant currency basis, International net sales increased 14.1%.

Gross margin (under U.S. generally accepted accounting principles) was 40.9%, compared with 38.5% in the third quarter of 2014. Adjusted gross margin was 41.3%, compared with 38.8% in the prior-year quarter.

Net income in the third quarter rose 8.4% to $40.2 million, compared with the same period in 2014.

Earnings before interest, tax, depreciation and amortization rose 14.3% to $121.4 million. Adjusted EBITDA increased 19.1% to $142.3 million compared with the same quarter in 2014.

GAAP operating income was $110.9 million compared with $87.1 million in the third quarter of 2014. Operating income included $5.5 million of integration costs, $5.2 million of additional costs related to executive management transition and related retention compensation and $2.4 million of restructuring costs. Adjusted operating income was $124 million, or 14.1% of net sales, as compared with 11.8% of net sales in the third quarter of 2014.

GAAP earnings per diluted share increased 7% to $0.64. Adjusted EPS increased 26.1% to $1.11. On a constant currency basis, adjusted EPS increased 36.4%.

Tempur Sealy ended the quarter with consolidated funded debt less qualified cash of $1.4 billion. The ratio of consolidated funded debt less qualified cash to EBITDA, calculated in accordance with the company’s senior secured credit facility, was 3.53 times.

“The company’s iconic brands and products continue to perform well throughout the world resulting in solid revenue growth and EBITDA margin expansion,” said Scott Thompson, Tempur Sealy chairman and chief executive officer. “The North American operation was a highlight in the quarter driven by Tempur Flex, Tempur Breeze and Sealy Posturepedic. The international operations dealt with unfavorable foreign exchange headwinds but still managed to deliver stable operating results. The company continues to demonstrate the free cash flow attributes of the business, resulting in consistent deleveraging of the balance sheet and enhancing the company’s future capital structuring alternatives.”

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