Tempur Sealy Reports Record 4th Quarter and Full Year 2020

– Fourth Quarter Net Sales Increased 21%, Net Income Increased 213%, and Adjusted EBITDA Increased 57%
– Initiated Quarterly Dividend and Increased Share Repurchase Authorization
– Establishes 2021 EPS Guidance Range of $2.30 to $2.50

LEXINGTON, Ky., Feb. 11, 2021 /PRNewswire/ — Tempur Sealy International, Inc. (NYSE: TPX) announced financial results for the fourth quarter and year ended December 31, 2020. The Company also issued financial guidance for the full year 2021. 

FOURTH QUARTER 2020 KEY HIGHLIGHTS 

  • Total net sales increased 21.3% to $1,057.0 million as compared to $871.3 million in the fourth quarter of 2019, with an increase of 20.6% in the North America business segment and an increase of 25.6% in the International business segment. 
  • Gross margin was 45.9% as compared to 44.3% in the fourth quarter of 2019. 
  • Operating income increased 128.4% to $193.2 million as compared to $84.6 million in the fourth quarter of 2019. Adjusted operating income(1) increased 61.0% to $199.7 million as compared to $124.0 millionin the fourth quarter of 2019. 
  • Net income increased 213.2% to $144.7 million as compared to $46.2 million in the fourth quarter of 2019. Adjusted net income(1) increased 89.9% to $143.2 million as compared to $75.4 million in the fourth quarter of 2019. 
  • Earnings before interest, tax, depreciation and amortization (“EBITDA”)(1) increased 111.9% to $238.2 million as compared to $112.4 million in the fourth quarter of 2019. Adjusted EBITDA per credit facility(1)increased 57.2% to $239.5 million as compared to $152.4 million in the fourth quarter of 2019. 
  • Earnings per diluted share (“EPS”) increased to $0.67 as compared to $0.21 in the fourth quarter of 2019. Adjusted EPS(1) increased 97.1% to $0.67 as compared to $0.34 in the fourth quarter of 2019. The Company effected a four-for-one stock split, via a stock dividend, to shareholders of record as of November 10, 2020. All share and per share information has been retroactively adjusted. 
  • Net cash provided by operating activities increased to a record $156.8 million as compared to $113.1 million in the fourth quarter of 2019.

Company Chairman and CEO Scott Thompson commented, “We are extremely proud of the global organization’s accomplishments during a year of challenges and uncertainties. The team initiated industry-leading employee and customer safety programs, progressed on ESG initiatives, and delivered record full year sales. The fourth quarter sales growth was broad-based across all geographies and channels. Retail partners continue to drive sales with our products, and our online sales stood out once again as our US web sales doubled compared to the prior year. This strong sales performance combined with favorable company-wide margins resulting in 2020 being a record year of financial performance. Our innovative products, powerful omni-channel marketing approach and robust global manufacturing capabilities position the Company well for 2021 and beyond.”

Business Segment Highlights: Fourth Quarter 2020

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. In the fourth quarter of 2020, the Company realigned its business segment reporting to include Mexico within the North America segment, which was previously included in the International segment. This segment reporting change was retrospectively applied to all prior periods presented.

North America net sales increased 20.6% to $893.6 million as compared to $741.2 million in the fourth quarter of 2019. On a constant currency basis(1), North America net sales increased 20.7% as compared to the fourth quarter of 2019. Gross margin was 43.4% as compared to 41.9% in the fourth quarter of 2019. Operating margin was 20.9% as compared to 11.2% in the fourth quarter of 2019. Adjusted operating margin(1) was 16.4% in the fourth quarter of  2019. There were no adjustments to operating margin in the fourth quarter of 2020. 

North America net sales through the wholesale channel increased $129.2 million, or 19.5%, to $792.1 million as compared to the fourth quarter of 2019, primarily driven by broad-based demand across our retail partners. North America net sales through the direct channel increased $23.2 million, or 29.6%, to $101.5 million, as compared to the fourth quarter of 2019, primarily driven by growth in our e-commerce business.

North America gross margin improved 150 basis points as compared to the fourth quarter of 2019. The improvement was primarily driven by favorable floor model costs and fixed cost leverage on higher unit volume. These improvements were partially offset by brand mix from new Sherwood OEM sales, which generally is a lower-margin business. North America operating margin improved 450 basis points as compared to adjusted operating margin(1) in the fourth quarter of 2019. The improvement was primarily driven by operating expense leverage as well as the improvement in gross margin, partially offset by incremental advertising investments. 

“Our North American growth was broad-based by brand and channel, with some sales constrained by the shortage of key components, primarily innersprings,” commented Company Chairman and CEO Scott Thompson. “Looking ahead we are finding a record level of unaided awareness and purchase intent for our brands, which is being further confirmed in early sales activity in the first quarter of 2021.”

International net sales increased a robust 25.6% to $163.4 million as compared to $130.1 million in the fourth quarter of 2019. On a constant currency basis(1), International net sales increased 18.4% as compared to the fourth quarter of 2019. Gross margin was 59.9% as compared to 58.4% in the fourth quarter of 2019. Operating margin was 29.8% as compared to 25.6% in the fourth quarter of 2019.

International net sales through the wholesale channel increased $24.4 million, or 25.4%, to $120.4 million as compared to the fourth quarter of 2019. International net sales through the direct channel increased $8.9 million, or 26.1%, to $43.0 million as compared to the fourth quarter of 2019. The increase in net sales was primarily driven by broad-based demand across geographies and channels.

International gross margin improved 150 basis points as compared to the fourth quarter of 2019. The improvement was primarily driven by fixed cost leverage as well as operational efficiency gains, partially offset by increased commodity costs. International operating margin improved 420 basis points as compared to the fourth quarter of 2019. The improvement was primarily driven by operating expense leverage, including cost reductions, which improved gross margin. 

Company Chairman and CEO Scott Thompson continued, “The international group had a very strong fourth quarter, led by broad-based growth across all regions. Post year-end, the Asian Pacific market’s growth has accelerated while our European markets are dealing with significant restrictions on retail activity related to COVID-19. As such, international sales are expected to deaccelerate in the first quarter of 2021.”

Corporate operating expense increased to $42.5 million as compared to $31.5 million in the fourth quarter of 2019. Corporate adjusted operating expense(1) increased to $36.0 million as compared to $30.8 million in the fourth quarter of 2019. The increase in operating expenses was primarily driven by amortization for the Company’s performance-based stock compensation plans.

Consolidated net income increased 213.2% to $144.7 million as compared to $46.2 million in the fourth quarter of 2019. Adjusted net income(1) increased 89.9% to $143.2 million as compared to $75.4 million in the fourth quarter of 2019. EPS increased 219.0% to $0.67 as compared to $0.21 in the fourth quarter of 2019. Adjusted EPS(1) increased 97.1% to $0.67 as compared to $0.34 in the fourth quarter of 2019.

The Company ended the fourth quarter of 2020 with total debt of $1.4 billion and consolidated indebtedness less netted cash(1) of $1.3 billion. Leverage based on the ratio of consolidated indebtedness less netted cash(1) to adjusted EBITDA per credit facility(1) was 1.68 times for the year ended December 31, 2020, the lowest leverage in the Company’s history. 

During the fourth quarter of 2020, the Company repurchased 5.1 million shares of its common stock for a total cost of $132.2 million. As of December 31, 2020, the Company had approximately $201.6 million available under its existing share repurchase authorization. In a separate press release issued today, the Company announced that its Board of Directors increased the authorization under its share repurchase program to $400.0 million. In the last twelve months, the Company has invested over $100 million in capital to support the business and over $300 million in share repurchases. 

Additionally, today the Company announced that its Board of Directors declared a quarterly cash dividend of 7 cents per share. The dividend is payable on March 12, 2021, to shareholders of record on the close of business on February 25, 2021.

Financial Guidance

For the full year 2021, the Company currently expects net sales growth between 15% and 20% resulting in EPS between $2.30 to $2.50. This projection implies 2021 EBITDA of between $875 and $925 million.  

The Company noted that 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.

Read the full news release at the Tempur Sealy investor relations website.

BedTimes has published this company news release unedited and is not responsible for its content.

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