- Consolidated Sales Decreased 3%, Direct
Channel Sales Increased 1%
- Consolidated Gross Margins
Expanded 2.2% to 44.9%
- Strong EPS Growth of 15% and
Adjusted EPS(1) Growth of 9%
LEXINGTON, Ky., Aug. 6, 2024
/PRNewswire/ -- Tempur Sealy International, Inc. (NYSE: TPX)
announced financial results for the second quarter
ended June 30, 2024 and revised financial guidance for
the full year 2024.
SECOND QUARTER 2024 FINANCIAL
SUMMARY
- Total net sales decreased 2.8% to $1,233.6 million as compared to $1,269.7 million in the second quarter of 2023,
with a decrease of 3.8% in the North
America business segment and consistent sales in the
International business segment. On a constant currency
basis(1), total net sales decreased 2.6%, with a
decrease of 3.8% in the North
America business segment and an increase of 1.9% in the
International business segment.
- Gross margin was 44.9% as compared to 42.7% in the second
quarter of 2023.
- Operating income increased 9.1% to $173.3 million as compared to $158.8 million in the second quarter of 2023.
Adjusted operating income(1) increased 5.1% to
$180.6 million as compared to
$171.8 million in the second quarter
of 2023.
- Net income increased 14.8% to $106.1
million as compared to $92.4
million in the second quarter of 2023. Adjusted net
income(1) increased 9.5% to $111.7 million as compared to $102.0 million in the second quarter of
2023.
- Earnings per diluted share ("EPS") increased 15.4% to
$0.60 as compared to $0.52 in the second quarter of 2023. Adjusted
EPS(1) increased 8.6% to $0.63 as compared to $0.58 in the second quarter of 2023.
- Leverage based on the ratio of consolidated indebtedness less
netted cash(1) to adjusted EBITDA(1) was 2.70
times for the trailing twelve months ended June 30, 2024 compared to 3.10 times in the
trailing twelve months ended June 30,
2023.
KEY
HIGHLIGHTS
|
|
(in millions, except
percentages and per common share amounts)
|
Three Months
Ended
|
|
% Reported
Change
|
June 30,
2024
|
|
June 30,
2023
|
Net sales
|
$
1,233.6
|
|
$
1,269.7
|
|
(2.8) %
|
Net income
|
$
106.1
|
|
$
92.4
|
|
14.8 %
|
Adjusted net income
(1)
|
$
111.7
|
|
$
102.0
|
|
9.5 %
|
EPS
|
$
0.60
|
|
$
0.52
|
|
15.4 %
|
Adjusted EPS
(1)
|
$
0.63
|
|
$
0.58
|
|
8.6 %
|
Company Chairman and CEO Scott
Thompson commented, "We are pleased to see our global
market outperformance mitigate the impact of softer than
anticipated industry volumes. Despite an estimated mid-single digit
industry decline over the quarter, more than our anticipated
low-single digit decline for the period, our sales were only
slightly below internal expectations. Our strong gross margin
performance and solid cost controls resulted in healthy earnings
growth in the second quarter.
Thompson continued, "I am pleased to share that we recently
executed a new post-closing supply agreement with one of Mattress
Firm's medium size mattress suppliers. This is one of several
post-closing supply agreements we have executed in preparation for
our planned acquisition of Mattress Firm, and is consistent with
our plan for Mattress Firm to continue as a multi-branded retailer.
Regarding the FTC's challenge of the Mattress Firm acquisition, we
are confident in the pro-competitive rationale for this transaction
and look forward to presenting the facts of our case. We believe
that a successful litigation process can be completed in the coming
months, which would allow us to close the transaction in late 2024
or early 2025."
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 3.8% to $978.4 million as
compared to $1,016.8 million in
the second quarter of 2023. Net sales through the
wholesale channel decreased $41.2
million, or 4.6%, to $854.8
million as compared to the second quarter of 2023, primarily
driven by continued macroeconomic pressures impacting U.S. consumer
behavior. Net sales through the direct channel increased
$2.8 million, or 2.3%, to
$123.6 million as compared to the
second quarter of 2023.
North America gross margin was
41.9% as compared to 39.7% in the second quarter of 2023. Gross
margin improved 200 basis points as compared to adjusted gross
margin(1) in the second quarter of 2023. There were no
adjustments to gross margin in the second quarter of 2024. The
improvement was primarily driven by favorable commodity costs,
operational efficiencies and favorable product launch costs. These
improvements were partially offset by the mix impact of the new
distribution win for our OEM business.
North America operating margin
was 18.4% as compared to 17.1% in the second quarter of 2023.
Operating margin improved 100 basis points as compared to adjusted
operating margin(1) in the second quarter of 2023. There
were no adjustments to operating margin in the second quarter of
2024. The improvement was primarily driven by the improvement in
gross margin, partially offset by investments in growth
initiatives.
International net
sales increased 0.9% to $255.2 million as compared to $252.9
million in the second quarter of 2023. On a constant
currency basis(1), International net sales increased
1.9% as compared to the second quarter of 2023. Net sales through
the wholesale channel increased $2.5
million, or 2.7%, to $95.7
million as compared to the second quarter of 2023. Net sales
through the direct channel decreased $0.2
million, or 0.1%, to $159.5
million as compared to the second quarter of 2023.
International gross margin improved 170 basis points to 56.6% as
compared to 54.9% in the second quarter of 2023. The improvement
was primarily driven by operational efficiencies and favorable
product launch costs.
International operating margin declined 90 basis points to 12.5%
as compared to 13.4% in the second quarter of 2023. The decline was
primarily driven by investments in growth initiatives and
Asia joint venture performance,
partially offset by the improvement in gross margin.
Corporate operating expense decreased to
$38.9 million as compared to
$49.2 million in the second quarter
of 2023. Adjusted operating expense(1) was $31.6 million as compared to $38.6 million in the second quarter of 2023,
primarily driven by reduced variable compensation expense.
Consolidated net income increased 14.8% to $106.1 million as compared to $92.4 million in the second quarter
of 2023. Adjusted net income(1) increased 9.5% to
$111.7 million as compared to
$102.0 million in the second quarter
of 2023. EPS increased 15.4% to $0.60 as compared to $0.52 in the second quarter
of 2023. Adjusted EPS(1) increased 8.6% to
$0.63 as compared to $0.58 in the second quarter of 2023.
The Company ended the second quarter of 2024 with total debt of
$2.5 billion and consolidated
indebtedness less netted cash(1) of $2.4 billion.
Leverage based on the ratio of consolidated indebtedness less
netted cash(1) to adjusted EBITDA(1)
was 2.70 times for the trailing twelve months
ended June 30, 2024.
Financial Guidance
For the full year 2024, the Company revised its expectations for
an adjusted EPS(1) range of $2.45 to $2.65.
This contemplates the Company's current outlook that 2024 sales
will be consistent versus prior year. At the midpoint, this revised
guidance represents a 6% increase in adjusted EPS(1)
from the prior year.
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 2024.
Dividend Declared
The Company's Board of Directors declared a quarterly cash
dividend of $0.13 per share, payable
on August 29, 2024, to shareholders
of record at the close of business on August
15, 2024.
Conference Call Information
Tempur Sealy International, Inc. will host a live conference
call to discuss financial results today, August 6, 2024, 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 EPS, adjusted net income, 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 Company's expectations
regarding the outcome of the pending litigation with the FTC,
the expected Mattress Firm acquisition including expectations
regarding post-closing supply agreements, future performance,
integration of acquired companies with our business and the ability
of the Company to close the acquisition on the timeline indicated
or at all, the Company's expected quarterly results, full year
guidance and outperformance relative to the broader industry, the
Company's quarterly cash dividend, the Company's expectations
regarding geopolitical events (including the war in Ukraine and the conflict in the Middle East), 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 2024 and subsequent periods and
the Company's expectations for 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 risks associated with satisfaction of
closing conditions prior to consummation of the acquisition,
including the outcome of the pending litigation with the FTC, or
the ability to obtain the required financing for the acquisition;
Mattress Firm's ongoing operations; the ability to successfully
integrate Mattress Firm into Tempur Sealy's operations and realize
synergies from the transaction; the possibility that the expected
benefits of the acquisition are not realized when expected or at
all; general economic, financial and industry conditions,
particularly conditions relating to the financial performance and
related credit issues present in the retail sector, as well as
consumer confidence and the availability of consumer financing; the
impact of the macroeconomic environment in both the U.S. and
internationally on Mattress Firm and the Company; uncertainties
arising from national and global events; industry competition; the
effects of consolidation of retailers on revenues and costs; and
consumer acceptance and changes in demand for Mattress Firm's and
the Company's products and services and the factors discussed in
the Company's Annual Report on Form 10-K for the year ended
December 31, 2023. 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 750 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.
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
|
|
|
|
Six Months
Ended
|
|
|
|
June
30,
|
|
Chg %
|
|
June
30,
|
|
Chg %
|
|
2024
|
|
2023
|
|
|
|
2024
|
|
2023
|
|
|
Net sales
|
$
1,233.6
|
|
$
1,269.7
|
|
(2.8) %
|
|
$
2,423.0
|
|
$
2,477.8
|
|
(2.2) %
|
Cost of
sales
|
679.4
|
|
727.4
|
|
|
|
1,356.2
|
|
1,435.6
|
|
|
Gross profit
|
554.2
|
|
542.3
|
|
2.2 %
|
|
1,066.8
|
|
1,042.2
|
|
2.4 %
|
Selling and marketing
expenses
|
276.2
|
|
270.2
|
|
|
|
541.2
|
|
526.9
|
|
|
General, administrative
and other expenses
|
107.8
|
|
117.5
|
|
|
|
228.8
|
|
222.0
|
|
|
Equity income in
earnings of unconsolidated affiliates
|
(3.1)
|
|
(4.2)
|
|
|
|
(8.0)
|
|
(8.8)
|
|
|
Operating
income
|
173.3
|
|
158.8
|
|
9.1 %
|
|
304.8
|
|
302.1
|
|
0.9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense,
net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
33.4
|
|
33.6
|
|
|
|
67.7
|
|
66.4
|
|
|
Other income,
net
|
(0.6)
|
|
(0.2)
|
|
|
|
(0.9)
|
|
(0.1)
|
|
|
Total other expense,
net
|
32.8
|
|
33.4
|
|
|
|
66.8
|
|
66.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
140.5
|
|
125.4
|
|
12.0 %
|
|
238.0
|
|
235.8
|
|
0.9 %
|
Income tax
provision
|
(34.0)
|
|
(32.2)
|
|
|
|
(54.7)
|
|
(56.7)
|
|
|
Net income before
non-controlling interest
|
106.5
|
|
93.2
|
|
14.3 %
|
|
183.3
|
|
179.1
|
|
2.3 %
|
Less: Net income
attributable to non-controlling interest
|
0.4
|
|
0.8
|
|
|
|
0.9
|
|
1.4
|
|
|
Net income attributable
to Tempur Sealy International, Inc.
|
$
106.1
|
|
$
92.4
|
|
14.8 %
|
|
$
182.4
|
|
$
177.7
|
|
2.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
0.61
|
|
$
0.54
|
|
13.0 %
|
|
$
1.05
|
|
$
1.03
|
|
1.9 %
|
Diluted
|
$
0.60
|
|
$
0.52
|
|
15.4 %
|
|
$
1.02
|
|
$
1.01
|
|
1.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
173.7
|
|
172.1
|
|
|
|
173.6
|
|
172.1
|
|
|
Diluted
|
178.0
|
|
176.8
|
|
|
|
178.0
|
|
176.8
|
|
|
TEMPUR SEALY
INTERNATIONAL, INC. AND SUBSIDIARIES Condensed
Consolidated Balance Sheets (in millions)
|
|
|
June 30,
2024
|
|
December 31,
2023
|
ASSETS
|
(unaudited)
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
95.8
|
|
$
74.9
|
Accounts receivable,
net
|
474.0
|
|
431.4
|
Inventories
|
507.4
|
|
483.1
|
Prepaid expenses and
other current assets
|
84.5
|
|
113.8
|
Total Current
Assets
|
1,161.7
|
|
1,103.2
|
Property, plant and
equipment, net
|
867.6
|
|
878.3
|
Goodwill
|
1,076.0
|
|
1,083.3
|
Other intangible
assets, net
|
708.2
|
|
714.8
|
Operating lease
right-of-use assets
|
618.5
|
|
636.5
|
Deferred income
taxes
|
14.5
|
|
15.6
|
Other non-current
assets
|
131.5
|
|
122.2
|
Total Assets
|
$
4,578.0
|
|
$
4,553.9
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$
353.3
|
|
$
311.3
|
Accrued expenses and
other current liabilities
|
415.2
|
|
427.1
|
Short-term operating
lease obligations
|
125.8
|
|
119.6
|
Current portion of
long-term debt
|
48.4
|
|
44.9
|
Income taxes
payable
|
15.1
|
|
5.3
|
Total Current
Liabilities
|
957.8
|
|
908.2
|
Long-term debt,
net
|
2,438.1
|
|
2,527.0
|
Long-term operating
lease obligations
|
552.9
|
|
574.8
|
Deferred income
taxes
|
127.1
|
|
127.9
|
Other non-current
liabilities
|
81.4
|
|
82.6
|
Total
Liabilities
|
4,157.3
|
|
4,220.5
|
|
|
|
|
Redeemable
non-controlling interest
|
8.9
|
|
10.0
|
|
|
|
|
Total Stockholders'
Equity
|
411.8
|
|
323.4
|
Total Liabilities,
Redeemable Non-Controlling Interest and Stockholders'
Equity
|
$
4,578.0
|
|
$
4,553.9
|
TEMPUR SEALY
INTERNATIONAL, INC. AND SUBSIDIARIES Condensed
Consolidated Statements of Cash Flows (in
millions) (unaudited)
|
|
|
Six Months
Ended
|
|
June
30,
|
|
2024
|
|
2023
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
Net income before
non-controlling interest
|
$
183.3
|
|
$
179.1
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
79.7
|
|
66.4
|
Amortization of
stock-based compensation
|
18.7
|
|
24.2
|
Amortization of
deferred financing costs
|
1.9
|
|
1.9
|
Bad debt
expense
|
4.0
|
|
4.2
|
Deferred income
taxes
|
0.2
|
|
0.8
|
Dividends received
from unconsolidated affiliates
|
6.0
|
|
3.4
|
Equity income in
earnings of unconsolidated affiliates
|
(8.0)
|
|
(8.8)
|
Foreign currency
adjustments and other
|
0.5
|
|
(1.1)
|
Changes in operating
assets and liabilities
|
(5.5)
|
|
(19.6)
|
Net cash provided by
operating activities
|
280.8
|
|
250.5
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
Purchases of property,
plant and equipment
|
(60.0)
|
|
(112.7)
|
Other
|
0.3
|
|
0.4
|
Net cash used in
investing activities
|
(59.7)
|
|
(112.3)
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
Proceeds from
borrowings under long-term debt obligations
|
869.0
|
|
1,005.7
|
Repayments of
borrowings under long-term debt obligations
|
(962.7)
|
|
(1,033.3)
|
Proceeds from exercise
of stock options
|
0.3
|
|
0.8
|
Treasury stock
repurchased
|
(43.8)
|
|
(35.9)
|
Dividends
paid
|
(47.5)
|
|
(39.8)
|
Repayments of finance
lease obligations and other
|
(10.3)
|
|
(8.9)
|
Net cash used in
financing activities
|
(195.0)
|
|
(111.4)
|
|
|
|
|
NET EFFECT OF EXCHANGE
RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
(5.2)
|
|
5.6
|
Increase in cash and
cash equivalents
|
20.9
|
|
32.4
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
74.9
|
|
69.4
|
CASH AND CASH
EQUIVALENTS, end of period
|
$
95.8
|
|
$
101.8
|
Summary of Channel Sales
The following table highlights net sales information, by channel
and by business segment, for the three months
ended June 30, 2024 and 2023:
|
Three Months Ended
June 30,
|
(in
millions)
|
Consolidated
|
|
North
America
|
|
International
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Wholesale
(a)
|
$
950.5
|
|
$
989.2
|
|
$
854.8
|
|
$
896.0
|
|
$
95.7
|
|
$
93.2
|
Direct
(b)
|
283.1
|
|
280.5
|
|
123.6
|
|
120.8
|
|
159.5
|
|
159.7
|
|
$
1,233.6
|
|
$
1,269.7
|
|
$
978.4
|
|
$
1,016.8
|
|
$
255.2
|
|
$
252.9
|
|
|
(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 basis 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 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 net income to adjusted net income and the
calculation of adjusted EPS for the three months ended June 30, 2024 and 2023:
|
Three Months
Ended
|
(in millions, except
per share amounts)
|
June 30,
2024
|
|
June 30,
2023
|
Net income
|
$
106.1
|
|
$
92.4
|
Transaction costs
(1)
|
7.3
|
|
10.6
|
Operational start-up
costs (2)
|
—
|
|
2.4
|
Adjusted income tax
provision (3)
|
(1.7)
|
|
(3.4)
|
Adjusted net
income
|
$
111.7
|
|
$
102.0
|
|
|
|
|
Adjusted earnings per
common share, diluted
|
$
0.63
|
|
$
0.58
|
|
|
|
|
Diluted shares
outstanding
|
178.0
|
|
176.8
|
|
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 operating income (expense) for the
three months ended June 30, 2024. The Company had no
adjustments to gross profit for the three months ended
June 30, 2024.
|
2Q
2024
|
(in millions, except
percentages)
|
Consolidated
|
|
Margin
|
|
North
America
|
|
Margin
|
|
International
|
|
Margin
|
|
Corporate
|
Net sales
|
$
1,233.6
|
|
|
|
$
978.4
|
|
|
|
$
255.2
|
|
|
|
$
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
$
554.2
|
|
44.9 %
|
|
$
409.8
|
|
41.9 %
|
|
$
144.4
|
|
56.6 %
|
|
$
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(expense)
|
$
173.3
|
|
14.0 %
|
|
$
180.4
|
|
18.4 %
|
|
$
31.8
|
|
12.5 %
|
|
$
(38.9)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction costs
(1)
|
7.3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7.3
|
Adjusted operating
income (expense)
|
$
180.6
|
|
14.6 %
|
|
$
180.4
|
|
18.4 %
|
|
$
31.8
|
|
12.5 %
|
|
$
(31.6)
|
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 June 30, 2023:
|
2Q
2023
|
(in millions, except
percentages)
|
Consolidated
|
|
Margin
|
|
North
America
|
|
Margin
|
|
International
|
|
Margin
|
|
Corporate
|
Net sales
|
$
1,269.7
|
|
|
|
$
1,016.8
|
|
|
|
$
252.9
|
|
|
|
$
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
$
542.3
|
|
42.7 %
|
|
$
403.4
|
|
39.7 %
|
|
$
138.9
|
|
54.9 %
|
|
$
—
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational start-up
costs (2)
|
2.4
|
|
|
|
2.4
|
|
|
|
—
|
|
|
|
—
|
Adjusted gross
profit
|
$
544.7
|
|
42.9 %
|
|
$
405.8
|
|
39.9 %
|
|
$
138.9
|
|
54.9 %
|
|
$
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(expense)
|
$
158.8
|
|
12.5 %
|
|
$
174.1
|
|
17.1 %
|
|
$
33.9
|
|
13.4 %
|
|
$
(49.2)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction costs
(1)
|
10.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10.6
|
Operational start-up
costs (2)
|
2.4
|
|
|
|
2.4
|
|
|
|
—
|
|
|
|
—
|
Total
adjustments
|
13.0
|
|
|
|
2.4
|
|
|
|
—
|
|
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (expense)
|
$
171.8
|
|
13.5 %
|
|
$
176.5
|
|
17.4 %
|
|
$
33.9
|
|
13.4 %
|
|
$
(38.6)
|
|
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 "2023 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 2023 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 June 30, 2024 and 2023:
|
Three Months
Ended
|
(in
millions)
|
June 30,
2024
|
|
June 30,
2023
|
Net income
|
$
106.1
|
|
$
92.4
|
Interest expense,
net
|
33.4
|
|
33.6
|
Income
taxes
|
34.0
|
|
32.2
|
Depreciation and
amortization
|
50.6
|
|
46.3
|
EBITDA
|
$
224.1
|
|
$
204.5
|
Adjustments:
|
|
|
|
Transaction costs
(1)
|
7.3
|
|
10.6
|
Operational start-up
costs (2)
|
—
|
|
2.4
|
Adjusted
EBITDA
|
$
231.4
|
|
$
217.5
|
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 June 30, 2024:
|
Trailing Twelve
Months Ended
|
(in
millions)
|
June 30,
2024
|
Net income
|
$
372.8
|
Interest expense,
net
|
131.2
|
Loss on extinguishment
of debt (4)
|
3.2
|
Income tax
provision
|
101.4
|
Depreciation and
amortization
|
193.1
|
EBITDA
|
$
801.7
|
Adjustments:
|
|
Transaction costs
(1)
|
55.3
|
Cybersecurity event
(5)
|
14.3
|
Fair value
remeasurement (6)
|
11.0
|
Operational start-up
costs (2)
|
9.4
|
Adjusted
EBITDA
|
$
891.7
|
|
|
Consolidated
indebtedness less netted cash
|
$
2,410.0
|
|
|
Ratio of consolidated
indebtedness less netted cash to adjusted EBITDA
|
2.70 times
|
|
Please refer to
Footnotes at the end of this release.
|
Under the 2023 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 June 30, 2024, the
Company's adjustments to net income when calculating adjusted
EBITDA did not exceed the allowable amount under the 2023 Credit
Agreement.
The ratio of consolidated indebtedness less netted cash to
adjusted EBITDA is 2.70 times for the trailing twelve months ended
June 30, 2024. The 2023 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 June 30,
2024. "Consolidated Indebtedness" and "Netted Cash" are
terms used in the 2023 Credit Agreement for purposes of certain
financial covenants.
(in
millions)
|
June 30,
2024
|
Total debt,
net
|
$
2,486.5
|
Plus: Deferred
financing costs (7)
|
19.3
|
Consolidated
indebtedness
|
2,505.8
|
Less: Netted cash
(8)
|
95.8
|
Consolidated
indebtedness less netted cash
|
$
2,410.0
|
|
Please refer to
Footnotes at the end of this release.
|
Footnotes:
(1)
|
In the second quarter
of 2024, the Company recorded $7.3 million of transaction costs,
primarily related to legal and professional fees associated with
the pending acquisition of Mattress Firm. In the second quarter of
2023, the Company recorded $10.6 million of transaction costs
primarily associated with the pending acquisition of Mattress Firm.
In the trailing twelve months ended June 30, 2024, the Company
recognized $55.3 million of transaction costs associated with the
pending acquisition of Mattress Firm.
|
(2)
|
In the second quarter
of 2023, the Company recorded $2.4 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 June
30, 2024, the Company recognized $9.4 million of operational
start-up costs.
|
(3)
|
Adjusted income tax
provision represents the tax effects associated with the
aforementioned items.
|
(4)
|
In the trailing twelve
months ended June 30, 2024, the Company recognized $3.2 million of
loss on extinguishment of debt associated with the refinancing of
its senior secured credit facilities.
|
(5)
|
In the trailing twelve
months ended June 30, 2024, the Company recorded $14.3 million of
costs associated with the cybersecurity event identified on July
23, 2023.
|
(6)
|
In the trailing twelve
months ended June 30, 2024, the Company recorded a fair value
remeasurement of $11.0 million related to a strategic investment in
a product innovation initiative.
|
(7)
|
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.
|
(8)
|
Netted cash includes
cash and cash equivalents for domestic and foreign subsidiaries
designated as restricted subsidiaries in the 2023 Credit
Agreement.
|
View original
content:https://www.prnewswire.com/news-releases/tempur-sealy-reports-second-quarter-results-302214880.html
SOURCE Tempur Sealy International, Inc.