- Announces Agreement to Acquire Mattress Firm
- Reports EPS of $0.48 and
Adjusted EPS(1) of $0.53
- Declares First Quarter Dividend of $0.11 per share
- Reaffirms 2023 Adjusted EPS(1) Guidance Range of
$2.60 - $2.80
LEXINGTON, Ky., May 9, 2023
/PRNewswire/ -- Tempur Sealy International, Inc. (NYSE: TPX)
and Mattress Firm Group Inc. ("Mattress Firm") today announced that
Tempur Sealy has signed a definitive agreement to acquire Mattress
Firm, the nation's largest mattress specialty retailer, in a cash
and stock transaction valued at approximately $4.0 billion. The Company expects the
transaction to close in the second half of 2024, subject to the
satisfaction of customary closing conditions, including applicable
regulatory approvals. A separate press release related to the
announcement of this transaction can be found on the Company's
investor relations website at investor.tempursealy.com.
The Company today also announced financial results for the
first quarter ended March 31, 2023 and reaffirmed
financial guidance for the full year 2023.
FIRST QUARTER 2023 FINANCIAL
SUMMARY
- Total net sales decreased 2.5% to $1,208.1 million as compared to $1,239.5 million in the first quarter of 2022. On
a constant currency basis(1), total net sales decreased
0.5%, with a decrease of 1.2% in the North America business segment and an increase
of 1.7% in the International business segment.
- Gross margin was 41.4% as compared to 42.2% in the first
quarter of 2022. Adjusted gross margin(1) was 41.8% in
the first quarter of 2023. There were no adjustments to gross
margin in the first quarter of 2022.
- Operating income decreased 24.0% to $143.3 million as compared to $188.6 million in the first quarter of 2022.
Adjusted operating income(1) was $153.4 million in the first quarter of 2023.
There were no adjustments to operating income in the
first quarter of 2022.
- Net income decreased 34.7% to $85.3
million as compared to $130.7
million in the first quarter of 2022. Adjusted net
income(1) was $92.9
million in the first quarter of 2023. There were no
adjustments to net income in the first quarter of 2022.
- Earnings per diluted share ("EPS") decreased 30.4% to
$0.48 as compared to $0.69 in the first quarter of 2022. Adjusted
EPS(1) was $0.53 in the
first quarter of 2023. There were no adjustments to EPS in the
first quarter of 2022.
KEY
HIGHLIGHTS
|
|
(in millions, except
percentages and per common share amounts)
|
Three Months
Ended
|
|
% Reported
Change
|
March 31,
2023
|
|
March 31,
2022
|
Net sales
|
$
1,208.1
|
|
$
1,239.5
|
|
(2.5) %
|
Net income
|
$
85.3
|
|
$
130.7
|
|
(34.7) %
|
Adjusted net income
(1)
|
$
92.9
|
|
$
130.7
|
|
(28.9) %
|
EPS
|
$
0.48
|
|
$
0.69
|
|
(30.4) %
|
Adjusted EPS
(1)
|
$
0.53
|
|
$
0.69
|
|
(23.2) %
|
Company Chairman and CEO Scott
Thompson commented, "Our first quarter performance reflects
the strength of our industry-leading business model, as we
continued to outperform the broader industry against a challenging
operating backdrop. Though the U.S. industry conditions were
slightly less favorable than anticipated as a result of heightened
macroeconomic pressures, we performed largely in-line with our
first quarter expectations. In the second quarter, our expectation
is that our consolidated sales will return to growth year over
year, supported by the strong reception to our newly launched
products, encouraging order trends quarter to date, and fully
lapping the challenging prior year comps in the first quarter.
Thompson continued, "Today we also announced that we have signed
a definitive agreement to acquire Mattress Firm, the nation's
largest mattress specialty retailer. This acquisition aligns with
our strategy of acquiring companies that extend our competitive
advantages, enable us to move closer to consumers, and facilitate
continued innovation. This combination will complement Tempur
Sealy's extensive product development and manufacturing
capabilities with vertically integrated retail. The two companies
have grown over the last 35 years with a mutual focus on providing
customers the best sleep products in the world. We are thrilled to
formally bring these teams together."
Business Segment Highlights
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.
North America net
sales decreased 1.3% to $919.6 million as
compared to $931.4 million in the first quarter
of 2022. This decline was primarily driven by continued
macroeconomic pressures impacting U.S. consumer behavior. On a
constant currency basis(1), North America net sales decreased 1.2% as
compared to the first quarter of 2022. Gross margin was
37.4% as compared to 37.8% in the first quarter of 2022. Adjusted
gross margin(1) was 37.9% in the first quarter of 2023.
There were no adjustments to gross margin in the first quarter of
2022. Operating margin was 14.8% as compared to 16.7% in the first
quarter of 2022. Adjusted operating margin(1) was 15.3%
in the first quarter of 2023. There were no adjustments to
operating margin in the first quarter of 2022.
North America net sales through
the wholesale channel decreased $7.0
million, or 0.9%, to $804.3
million, as compared to the first quarter of 2022.
North America net sales through
the direct channel decreased $4.8
million, or 4.0%, to $115.3
million, as compared to the first quarter of
2022.
North America adjusted gross
margin(1) improved 10 basis points as compared to gross
margin in the first quarter of 2022. The improvement
was primarily driven by pricing actions, partially offset by
operational headwinds and product launch costs. North America adjusted operating
margin(1) declined 140 basis points as compared to
operating margin in the first quarter of 2022. The decline was
primarily driven by operating expense deleverage partially offset
by the improvement in gross margin.
International net
sales decreased 6.4% to $288.5 million as compared to $308.1
million in the first quarter of 2022. This decline
was primarily driven by unfavorable foreign exchange. On a constant
currency basis(1), International net sales increased
1.7% as compared to the first quarter of 2022. Gross margin was
54.0% as compared to 55.3% in the first quarter of 2022. Operating
margin was 15.3% as compared to 21.7% in the first quarter of
2022.
International net sales through the wholesale channel decreased
$4.5 million, or 4.0%, to
$108.3 million as compared to the
first quarter of 2022. International net sales through the direct
channel decreased $15.1 million, or
7.7%, to $180.2 million as compared
to the first quarter of 2022.
International gross margin declined 130 basis points as compared
to the first quarter of 2022. The decline was primarily driven by
product launch costs, offset by pricing actions. International
operating margin declined 640 basis points as compared to the first
quarter of 2022. The decline was primarily driven by operating
expense deleverage associated with product launch costs, the
decline in gross margin and Asia
joint venture performance.
Corporate operating expense increased to
$36.9 million as compared to
$33.6 million in the first quarter of
2022. Corporate adjusted operating expense(1) was
$31.7 million in the first quarter of
2023. There were no adjustments to operating expense in the first
quarter of 2022.
Consolidated net income decreased 34.7% to $85.3 million as compared to $130.7 million in the first quarter
of 2022. Adjusted net income(1) was $92.9 million in the first quarter of 2023. There
were no adjustments to net income in the first quarter of 2022.
EPS decreased 30.4% to $0.48 as compared to $0.69 in the first quarter
of 2022. Adjusted EPS(1) was $0.53 in the first quarter of 2023. There were no
adjustments to EPS in the first quarter of 2022.
The Company ended the first quarter of 2023 with total debt of
$2.9 billion and consolidated
indebtedness less netted cash(1) of $2.8 billion.
Leverage based on the ratio of consolidated indebtedness less
netted cash(1) to adjusted
EBITDA(1) was 3.24 times for the trailing
twelve months ended March 31, 2023.
During the first quarter of 2023, the Company repurchased 1.0
million shares of its common stock for a total cost of
$35.7 million. Over the last twelve
months, the Company has repurchased 7.4 million shares of its
common stock for a total cost of $208.3
million. As of March 31, 2023, the Company had
approximately $774.5 million
available under its existing share repurchase authorization.
Additionally, today the Company announced that its Board of
Directors declared a quarterly cash dividend of $0.11 per share, payable on June 6, 2023, to
shareholders of record at the close of business on May 23,
2023.
Financial Guidance
For the full year 2023, the Company reaffirmed its expectations
for an adjusted EPS(1) range of $2.60 to $2.80.
This contemplates the Company's current sales outlook for mid
single digit year-over-year growth.
The Company noted that its expectations are based on information
available at the time of this release, and are subject to changing
conditions and risks, many of which are outside the Company's
control. The Company is unable to reconcile forward–looking
adjusted EPS, a non–GAAP financial measure, to EPS, its most
directly comparable forward–looking GAAP financial measure, without
unreasonable efforts, because the Company is currently unable to
predict with a reasonable degree of certainty the type and extent
of certain items that would be expected to impact EPS in 2023.
Conference Call Information
Tempur Sealy International, Inc. will host a live conference
call to discuss the announced Mattress Firm acquisition and the
Company's financial results today, May 9, 2023, at
8:00 a.m. Eastern Time. The call will
be webcast and can be accessed on the Company's investor relations
website at investor.tempursealy.com. After the conference call, a
webcast replay will remain available on the investor relations
section of the Company's website for 30 days.
Non-GAAP Financial Measures and Constant Currency
Information
For additional information regarding EBITDA, adjusted EBITDA,
adjusted net income, adjusted EPS, adjusted gross profit, adjusted
gross margin, adjusted operating income (expense), adjusted
operating margin, consolidated indebtedness and consolidated
indebtedness less netted cash (all of which are non-GAAP financial
measures), please refer to the reconciliations and other
information included in the attached schedules. For information on
the methodology used to present information on a constant currency
basis, please refer to "Constant Currency Information" included in
the attached schedules.
Forward-Looking Statements
This press release contains statements that may be characterized
as "forward-looking," within the meaning of the federal securities
laws. Such statements might include information concerning one or
more of the Company's plans, guidance, objectives, goals,
strategies, and other information that is not historical
information. When used in this release, the words "assumes,"
"estimates," "expects," "guidance," "anticipates," "might,"
"projects," "plans," "proposed," "targets," "intends," "believes,"
"will", "contemplates" and variations of such words or similar
expressions are intended to identify forward-looking statements.
These forward-looking statements include, without limitation,
statements relating to the announced Mattress Firm acquisition, the
Company's expected quarterly results and full year guidance, the
Company's quarterly cash dividend, the Company's share repurchase
targets, the Company's expectations regarding geopolitical events
including the war in Ukraine, the
macroeconomic environment including its impact on consumer
behavior, foreign exchange rates and fluctuations in such rates,
the bedding industry, financial infrastructure, adjusted EPS for
2023 and subsequent periods and the Company's expectations for
increasing sales and adjusted EPS growth, product launches,
expected hiring and advertising, capital project timelines, channel
growth, acquisitions and commodities outlook. Any forward-looking
statements contained herein are based upon current expectations and
beliefs and various assumptions. There can be no assurance that the
Company will realize these expectations, meet its guidance, or that
these beliefs will prove correct.
Numerous factors, many of which are beyond the Company's
control, could cause actual results to differ materially from any
that may be expressed herein as forward-looking statements. These
potential risks include the factors discussed in the Company's
Annual Report on Form 10-K for the year ended December 31,
2022. There may be other factors that may cause the Company's
actual results to differ materially from the forward-looking
statements. The Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which such statement is made.
About Tempur Sealy International, Inc.
Tempur Sealy is committed to improving the sleep of more people,
every night, all around the world. As a leading designer,
manufacturer, distributor and retailer of bedding products
worldwide, we know how crucial a good night of sleep is to overall
health and wellness. Utilizing over a century of knowledge and
industry-leading innovation, we deliver award-winning products that
provide breakthrough sleep solutions to consumers in over 100
countries.
Our highly recognized brands include Tempur-Pedic®, Sealy® and
Stearns & Foster® and our popular non-branded offerings consist
of value-focused private label and OEM products. At Tempur Sealy we
understand the importance of meeting our customers wherever and
however they want to shop and have developed a powerful
omni-channel retail strategy. Our products allow for complementary
merchandising strategies and are sold through third-party
retailers, our over 700 Company-owned stores worldwide and our
e-commerce channels. With the range of our offerings and variety of
purchasing options, we are dedicated to continuing to turn our
mission to improve the sleep of more people, every night, all
around the world into a reality.
Importantly, we are committed to carrying out our global
responsibility to protect the environment and the communities in
which we operate. As part of that commitment, we have established
the goal of achieving carbon neutrality for our global wholly owned
operations by 2040.
Investor Relations Contact:
Aubrey Moore
Investor Relations
Tempur Sealy International, Inc.
800-805-3635
Investor.relations@tempursealy.com
(1) This is a non-GAAP financial measure. Please refer to
"Non-GAAP Financial Measures and Constant Currency Information"
below.
TEMPUR SEALY INTERNATIONAL, INC. AND
SUBSIDIARIES
|
Condensed
Consolidated Statements of Income
|
(in millions, except
percentages and per common share amounts)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
|
|
March
31,
|
|
Chg %
|
|
2023
|
|
2022
|
|
|
Net sales
|
$
1,208.1
|
|
$
1,239.5
|
|
(2.5) %
|
Cost of
sales
|
708.2
|
|
716.7
|
|
|
Gross profit
|
499.9
|
|
522.8
|
|
(4.4) %
|
Selling and marketing
expenses
|
256.7
|
|
243.5
|
|
|
General, administrative
and other expenses
|
104.5
|
|
97.6
|
|
|
Equity income in
earnings of unconsolidated affiliates
|
(4.6)
|
|
(6.9)
|
|
|
Operating
income
|
143.3
|
|
188.6
|
|
(24.0) %
|
|
|
|
|
|
|
Other expense,
net:
|
|
|
|
|
|
Interest expense,
net
|
32.8
|
|
20.9
|
|
|
Other expense
(income), net
|
0.1
|
|
(1.3)
|
|
|
Total other expense,
net
|
32.9
|
|
19.6
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
110.4
|
|
169.0
|
|
(34.7) %
|
Income tax
provision
|
(24.5)
|
|
(38.1)
|
|
|
Net income before
non-controlling interest
|
85.9
|
|
130.9
|
|
(34.4) %
|
Less: Net income
attributable to non-controlling interest
|
0.6
|
|
0.2
|
|
|
Net income attributable
to Tempur Sealy International, Inc.
|
$
85.3
|
|
$
130.7
|
|
(34.7) %
|
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
|
|
Basic
|
$
0.50
|
|
$
0.72
|
|
(30.6) %
|
Diluted
|
$
0.48
|
|
$
0.69
|
|
(30.4) %
|
|
|
|
|
|
|
Weighted average common
shares outstanding:
|
|
|
|
|
|
Basic
|
172.0
|
|
182.6
|
|
|
Diluted
|
176.8
|
|
188.5
|
|
|
TEMPUR SEALY INTERNATIONAL, INC. AND
SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(in
millions)
|
|
|
March 31,
2023
|
|
December 31,
2022
|
ASSETS
|
(unaudited)
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
91.0
|
|
$
69.4
|
Accounts receivable,
net
|
461.5
|
|
422.6
|
Inventories
|
566.7
|
|
555.0
|
Prepaid expenses and
other current assets
|
151.4
|
|
148.2
|
Total Current
Assets
|
1,270.6
|
|
1,195.2
|
Property, plant and
equipment, net
|
823.2
|
|
791.1
|
Goodwill
|
1,069.8
|
|
1,062.3
|
Other intangible
assets, net
|
714.6
|
|
715.8
|
Operating lease
right-of-use assets
|
563.1
|
|
506.8
|
Deferred income
taxes
|
12.7
|
|
11.3
|
Other non-current
assets
|
83.1
|
|
77.3
|
Total Assets
|
$
4,537.1
|
|
$
4,359.8
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$
368.1
|
|
$
359.8
|
Accrued expenses and
other current liabilities
|
441.8
|
|
432.7
|
Short-term operating
lease obligations
|
113.5
|
|
105.5
|
Current portion of
long-term debt
|
74.0
|
|
70.4
|
Income taxes
payable
|
25.4
|
|
12.8
|
Total Current
Liabilities
|
1,022.8
|
|
981.2
|
Long-term debt,
net
|
2,769.0
|
|
2,739.9
|
Long-term operating
lease obligations
|
501.3
|
|
453.5
|
Deferred income
taxes
|
116.5
|
|
114.0
|
Other non-current
liabilities
|
83.9
|
|
83.5
|
Total
Liabilities
|
4,493.5
|
|
4,372.1
|
|
|
|
|
Redeemable
non-controlling interest
|
8.9
|
|
9.8
|
|
|
|
|
Total Stockholders'
Equity (Deficit)
|
34.7
|
|
(22.1)
|
Total Liabilities,
Redeemable Non-Controlling Interest and Stockholders' Equity
(Deficit)
|
$
4,537.1
|
|
$
4,359.8
|
TEMPUR SEALY INTERNATIONAL, INC. AND
SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(in
millions)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2023
|
|
2022
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
Net income before
non-controlling interest
|
$
85.9
|
|
$
130.9
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
33.8
|
|
30.4
|
Amortization of
stock-based compensation
|
10.8
|
|
13.8
|
Amortization of
deferred financing costs
|
1.0
|
|
1.0
|
Bad debt
expense
|
1.7
|
|
1.6
|
Deferred income
taxes
|
0.7
|
|
(1.0)
|
Dividends received
from unconsolidated affiliates
|
1.5
|
|
1.1
|
Equity income in
earnings of unconsolidated affiliates
|
(4.6)
|
|
(6.9)
|
Foreign currency
adjustments and other
|
(0.8)
|
|
(0.1)
|
Changes in operating
assets and liabilities, net of effect of business
acquisitions
|
(30.2)
|
|
(85.2)
|
Net cash provided by
operating activities
|
99.8
|
|
85.6
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
Purchases of property,
plant and equipment
|
(52.1)
|
|
(60.3)
|
Other
|
0.1
|
|
1.0
|
Net cash used in
investing activities
|
(52.0)
|
|
(59.3)
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
Proceeds from
borrowings under long-term debt obligations
|
509.8
|
|
528.1
|
Repayments of
borrowings under long-term debt obligations
|
(477.4)
|
|
(216.0)
|
Proceeds from exercise
of stock options
|
0.8
|
|
0.1
|
Treasury stock
repurchased
|
(35.7)
|
|
(494.8)
|
Dividends
paid
|
(20.8)
|
|
(18.7)
|
Repayments of finance
lease obligations and other
|
(5.1)
|
|
(3.5)
|
Net cash used in
financing activities
|
(28.4)
|
|
(204.8)
|
|
|
|
|
NET EFFECT OF EXCHANGE
RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
2.2
|
|
(5.9)
|
Increase (decrease) in
cash and cash equivalents
|
21.6
|
|
(184.4)
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
69.4
|
|
300.7
|
CASH AND CASH
EQUIVALENTS, end of period
|
$
91.0
|
|
$
116.3
|
Summary of Channel Sales
The following table highlights net sales information, by channel
and by business segment, for the three months
ended March 31, 2023 and 2022:
|
Three Months Ended
March 31,
|
(in
millions)
|
Consolidated
|
|
North
America
|
|
International
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Wholesale
(a)
|
$
912.6
|
|
$
924.1
|
|
$
804.3
|
|
$
811.3
|
|
$
108.3
|
|
$
112.8
|
Direct
(b)
|
295.5
|
|
315.4
|
|
115.3
|
|
120.1
|
|
180.2
|
|
195.3
|
|
$
1,208.1
|
|
$
1,239.5
|
|
$
919.6
|
|
$
931.4
|
|
$
288.5
|
|
$
308.1
|
|
|
(a)
|
The Wholesale channel
includes all third party retailers, including third party
distribution, hospitality and healthcare.
|
(b)
|
The Direct channel
includes company-owned stores, online and call centers.
|
TEMPUR SEALY INTERNATIONAL, INC. AND
SUBSIDIARIES
Reconciliation of Non-GAAP Financial
Measures
(in millions, except percentages, ratios and per
common share amounts)
The Company provides information regarding adjusted net income,
EBITDA, adjusted EBITDA, adjusted EPS, adjusted gross profit,
adjusted gross margin, adjusted operating income (expense),
adjusted operating margin, consolidated indebtedness and
consolidated indebtedness less netted cash, which are not
recognized terms under GAAP and do not purport to be alternatives
to net income, earnings per share, gross profit, gross margin,
operating income (expense) and operating margin as a measure of
operating performance, or an alternative to total debt as a measure
of liquidity. The Company believes these non-GAAP financial
measures provide investors with performance measures that better
reflect the Company's underlying operations and trends, providing a
perspective not immediately apparent from net income, gross profit,
gross margin, operating income (expense) and operating margin. The
adjustments management makes to derive the non-GAAP financial
measures include adjustments to exclude items that may cause
short-term fluctuations in the nearest GAAP financial measure, but
which management does not consider to be the fundamental attributes
or primary drivers of the Company's business.
The Company believes that exclusion of these items assists in
providing a more complete understanding of the Company's underlying
results from operations and trends, and management uses these
measures along with the corresponding GAAP financial measures to
manage the Company's business, to evaluate its consolidated and
business segment performance compared to prior periods and the
marketplace, to establish operational goals and to provide
continuity to investors for comparability purposes. Limitations
associated with the use of these non-GAAP financial measures
include that these measures do not present all of the amounts
associated with the Company's results as determined in accordance
with GAAP. These non-GAAP financial measures should be considered
supplemental in nature and should not be construed as more
significant than comparable financial measures defined by GAAP.
Because not all companies use identical calculations, these
presentations may not be comparable to other similarly titled
measures of other companies. For more information about these
non-GAAP financial measures and a reconciliation to the nearest
GAAP financial measure, please refer to the reconciliations on the
following pages.
Constant Currency Information
In this press release the Company refers to, and in other press
releases and other communications with investors the Company may
refer to, net sales, earnings or other historical financial
information on a "constant currency basis," which is a non-GAAP
financial measure. These references to constant currency do not
include operational impacts that could result from fluctuations in
foreign currency rates. To provide information on a constant
currency basis, the applicable financial results are adjusted based
on a simple mathematical model that translates current period
results in local currency using the comparable prior corresponding
period's currency conversion rate. This approach is used for
countries where the functional currency is the local country
currency. This information is provided so that certain financial
results can be viewed without the impact of fluctuations in foreign
currency rates, thereby facilitating period-to-period comparisons
of business performance.
Adjusted Net Income and Adjusted EPS
A reconciliation of reported net income to adjusted net income
and the calculation of adjusted EPS is provided below. Management
believes that the use of these non-GAAP financial measures provides
investors with additional useful information with respect to the
impact of various adjustments as described in the footnotes at the
end of this release.
The following table sets forth the reconciliation of the
Company's reported net income to adjusted net income and the
calculation of adjusted EPS for the three months
ended March 31, 2023 and 2022:
|
Three Months
Ended
|
(in millions, except
per share amounts)
|
March 31,
2023
|
|
March 31,
2022
|
Net income
|
$
85.3
|
|
$
130.7
|
Restructuring costs
and other (1)
|
5.2
|
|
—
|
ERP system transition
(2)
|
3.2
|
|
—
|
Operational start-up
costs (3)
|
1.7
|
|
—
|
Adjusted income tax
provision (4)
|
(2.5)
|
|
—
|
Adjusted net
income
|
$
92.9
|
|
$
130.7
|
|
|
|
|
Adjusted earnings per
common share, diluted
|
$
0.53
|
|
$
0.69
|
|
|
|
|
Diluted shares
outstanding
|
176.8
|
|
188.5
|
|
Please refer to
Footnotes at the end of this release.
|
Adjusted Gross Profit, Adjusted Gross Margin,
Adjusted Operating Income (Expense) and Adjusted Operating
Margin
A reconciliation of gross profit and gross margin to adjusted
gross profit and adjusted gross margin, respectively, and operating
income (expense) and operating margin to adjusted operating income
(expense) and adjusted operating margin, respectively, are provided
below. Management believes that the use of these non-GAAP financial
measures provides investors with additional useful information with
respect to the impact of various adjustments as described in the
footnotes at the end of this release.
The following table sets forth the reconciliation of the
Company's reported gross profit and operating income (expense) to
the calculation of adjusted gross profit and adjusted operating
income (expense) for the three months ended March 31,
2023.
|
1Q
2023
|
(in millions, except
percentages)
|
Consolidated
|
|
Margin
|
|
North
America
|
|
Margin
|
|
International
|
|
Margin
|
|
Corporate
|
Net sales
|
$
1,208.1
|
|
|
|
$
919.6
|
|
|
|
$
288.5
|
|
|
|
$
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
$
499.9
|
|
41.4 %
|
|
$
344.0
|
|
37.4 %
|
|
$
155.9
|
|
54.0 %
|
|
$
—
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ERP system transition
(2)
|
3.2
|
|
|
|
3.2
|
|
|
|
—
|
|
|
|
—
|
Operational start-up
costs (3)
|
1.7
|
|
|
|
1.7
|
|
|
|
—
|
|
|
|
—
|
Total
adjustments
|
4.9
|
|
|
|
4.9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross
profit
|
$
504.8
|
|
41.8 %
|
|
$
348.9
|
|
37.9 %
|
|
$
155.9
|
|
54.0 %
|
|
$
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(expense)
|
$
143.3
|
|
11.9 %
|
|
$
136.0
|
|
14.8 %
|
|
$
44.2
|
|
15.3 %
|
|
$
(36.9)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring costs and
other (1)
|
5.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.2
|
ERP system transition
(2)
|
3.2
|
|
|
|
3.2
|
|
|
|
—
|
|
|
|
—
|
Operational start-up
costs (3)
|
1.7
|
|
|
|
1.7
|
|
|
|
—
|
|
|
|
—
|
Total
adjustments
|
10.1
|
|
|
|
4.9
|
|
|
|
—
|
|
|
|
5.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (expense)
|
$
153.4
|
|
12.7 %
|
|
$
140.9
|
|
15.3 %
|
|
$
44.2
|
|
15.3 %
|
|
$
(31.7)
|
The following table sets forth the Company's reported gross
profit and operating income (expense) for the three months ended
March 31, 2022. The Company had no adjustments to gross profit
or operating income (expense) for the three months ended
March 31, 2022.
|
1Q
2022
|
(in millions, except
percentages)
|
Consolidated
|
|
Margin
|
|
North
America
|
|
Margin
|
|
International
|
|
Margin
|
|
Corporate
|
Net sales
|
$
1,239.5
|
|
|
|
$
931.4
|
|
|
|
$
308.1
|
|
|
|
$
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
$
522.8
|
|
42.2 %
|
|
$
352.4
|
|
37.8 %
|
|
$
170.4
|
|
55.3 %
|
|
$
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(expense)
|
$
188.6
|
|
15.2 %
|
|
$
155.4
|
|
16.7 %
|
|
$
66.8
|
|
21.7 %
|
|
$
(33.6)
|
|
Please refer to
Footnotes at the end of this release.
|
EBITDA, Adjusted EBITDA and Consolidated Indebtedness less
Netted Cash
The following reconciliations are provided below:
- Net income to EBITDA and adjusted EBITDA
- Ratio of consolidated indebtedness less netted cash to adjusted
EBITDA
- Total debt, net to consolidated indebtedness less netted
cash
Management believes that presenting these non-GAAP measures
provides investors with useful information with respect to the
Company's operating performance, cash flow generation and
comparisons from period to period, as well as general information
about the Company's leverage.
The Company's credit agreement (the "2019 Credit Agreement")
provides the definition of adjusted EBITDA. Accordingly, the
Company presents adjusted EBITDA to provide information regarding
the Company's compliance with requirements under the 2019 Credit
Agreement.
The following table sets forth the reconciliation of the
Company's reported net income to the calculations of EBITDA and
adjusted EBITDA for the three months ended March 31,
2023 and 2022:
|
Three Months
Ended
|
(in
millions)
|
March 31,
2023
|
|
March 31,
2022
|
Net income
|
$
85.3
|
|
$
130.7
|
Interest expense,
net
|
32.8
|
|
20.9
|
Income
taxes
|
24.5
|
|
38.1
|
Depreciation and
amortization
|
45.0
|
|
44.8
|
EBITDA
|
$
187.6
|
|
$
234.5
|
Adjustments:
|
|
|
|
Restructuring costs
and other(1)
|
5.2
|
|
—
|
ERP system transition
(2)
|
3.2
|
|
—
|
Operational start-up
costs (3)
|
1.7
|
|
—
|
Adjusted
EBITDA
|
$
197.7
|
|
$
234.5
|
|
Please refer to
Footnotes at the end of this release.
|
The following table sets forth the reconciliation of the
Company's net income to the calculations of EBITDA and adjusted
EBITDA for the trailing twelve months ended March 31,
2023:
|
Trailing Twelve
Months Ended
|
(in
millions)
|
March 31,
2023
|
Net income
|
$
410.3
|
Interest expense,
net
|
114.9
|
Income tax
provision
|
105.4
|
Depreciation and
amortization
|
182.2
|
EBITDA
|
$
812.8
|
Adjustments:
|
|
Loss from discontinued
operations, net of tax (5)
|
0.4
|
ERP system transition
(2)
|
18.7
|
Restructuring costs
and other (1)
|
15.2
|
Operational start-up
costs (3)
|
8.2
|
Adjusted
EBITDA
|
$
855.3
|
|
|
Consolidated
indebtedness less netted cash
|
$
2,772.7
|
|
|
Ratio of consolidated
indebtedness less netted cash to adjusted EBITDA
|
3.24 times
|
Under the 2019 Credit Agreement, the definition of adjusted
EBITDA contains certain restrictions that limit adjustments to net
income when calculating adjusted EBITDA. For the trailing twelve
months ended March 31, 2023, the Company's adjustments to net
income when calculating adjusted EBITDA did not exceed the
allowable amount under the 2019 Credit Agreement.
The ratio of consolidated indebtedness less netted cash to
adjusted EBITDA is 3.24 times for the trailing twelve months ended
March 31, 2023. The 2019 Credit Agreement requires the Company
to maintain a ratio of consolidated indebtedness less netted cash
to adjusted EBITDA of less than 5.00 times.
The following table sets forth the reconciliation of the
Company's reported total debt to the calculation of consolidated
indebtedness less netted cash as of March 31, 2023.
"Consolidated Indebtedness" and "Netted Cash" are terms used in the
2019 Credit Agreement for purposes of certain financial
covenants.
(in
millions)
|
March 31,
2023
|
Total debt,
net
|
$
2,843.0
|
Plus: Deferred
financing costs (6)
|
19.6
|
Consolidated
indebtedness
|
2,862.6
|
Less: Netted cash
(7)
|
89.9
|
Consolidated
indebtedness less netted cash
|
$
2,772.7
|
|
Please refer to
Footnotes at the end of this release.
|
Footnotes:
(1)
|
In the first quarter of
2023, the Company recorded $5.2 million of restructuring costs
primarily associated with the acquisition of Mattress Firm. In the
trailing twelve months ended March 31, 2023, the Company recognized
$15.2 million of restructuring costs primarily associated with the
acquisition of Mattress Firm and headcount reductions related to
organizational changes.
|
(2)
|
In the first quarter of
2023, the Company recorded $3.2 million of charges related to the
transition of its ERP system, including labor, logistics, training
and travel. In the trailing twelve months ended March 31, 2023, the
Company recognized $18.7 million of charges related to the
transition of its ERP system.
|
(3)
|
In the first quarter of
2023, the Company recorded $1.7 million of operational start-up
costs related to the capacity expansion of its manufacturing and
distribution facilities in the U.S., including personnel and
facility related costs. In the trailing twelve months ended March
31, 2023, the Company recognized $8.2 million of operational
start-up costs.
|
(4)
|
Adjusted income tax
provision represents the tax effects associated with the
aforementioned items.
|
(5)
|
Certain subsidiaries in
the International business segment are accounted for as
discontinued operations and have been designated as unrestricted
subsidiaries in the 2019 Credit Agreement. Therefore, these
subsidiaries are excluded from the Company's adjusted financial
measures for covenant compliance purposes.
|
(6)
|
The Company presents
deferred financing costs as a direct reduction from the carrying
amount of the related debt in the Condensed Consolidated Balance
Sheets. For purposes of determining total debt for financial
covenant purposes, the Company has added these costs back to total
debt, net as calculated per the Condensed Consolidated Balance
Sheets.
|
(7)
|
Netted cash includes
cash and cash equivalents for domestic and foreign subsidiaries
designated as restricted subsidiaries in the 2019 Credit
Agreement.
|
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SOURCE Tempur Sealy International, Inc.