Tempur-Pedic profits decline
By Janice Chamberlain -- Furniture Today, October 21, 2005
Lexington, Ky. — Confronted with a softening U.S. retail environment, Tempur-Pedic International posted a 22.5% decline in net income in its third quarter ended Sept. 30, although sales increased 13.4%.
In the nine months, sales jumped 27.7% and net profits surged 34.9% for the maker and marketer of visco-elastic mattresses and pillows.
Sales in the latest quarter came to $206.1 million, measured against $181.7 million in the comparable period last year, with net income slumping to $17.4 million from $22.4 million last year.
On a pro forma basis, excluding a one-time charge of $6.5 million or 6 cents per share for the repatriation of foreign earnings under the American Jobs Creation Act of 2004, net income in the 2005 quarter was $24.4 million, or 24 cents per share.
In the nine months, sales were $621.1 million, compared with $486.5 million in the year-earlier period. Net profits in the most recent nine months were $69 million, up from $51.1 million last year.
In a conference call with analysts, President Thomas Bryant said, "U.S. sales (in the third quarter) developed at a slower rate, but still were above last year's.... Sales were soft in July and rebounded in August, but September did not bring the seasonal uptick we normally experience."
Bryant added that Tempur-Pedic sales appeared to be in line with figures from the International Sleep Products Assn., which indicated bedding sales were choppy in the first two months of the quarter.
Domestic sales were up 11% in the quarter, with international sales gaining 19%, he said. Direct sales slipped 4%.
Tempur-Pedic CEO Robert Trussel said, "The retail environment softened during the third quarter related to macro-economic factors that adversely affected net sales growth in our U.S. business. However, our international business showed considerable strength as a result of our new marketing and product launches."
Bryant said the company continues to expand its furniture retail channel, adding about 270 net furniture stores in the United States and 190 net stores internationally in the latest quarter. He said the company expects a 20% to 25% account growth rate in 2005.
Gross profit in the 2005 quarter slipped to 49.7% of sales from 52.9% in the comparable 2004 period. Chief Financial Officer Dale Williams attributed the dip to three factors: the sales and product mix during the quarter; the introduction of two products, the first time the company has introduced more than one product at a time; and increases in market prices for key chemicals and fuel.
Looking to the future, Tempur-Pedic reaffirmed its September sales guidance, expecting 2005 total sales in a range of $845 million to $855 million, with earnings per share from 94 cents to 96 cents, measured against 2004 sales and earnings of $684.9 million and 73 cents, respectively.
The earnings per share guidance takes into account a charge of about 10 cents for the repatriation of foreign earnings and the writeoff of deferred financing costs related to the company's prior credit facility. During the latest quarter, Tempur-Pedic closed on a new senior credit facility of $340 million, with the Bank of America as lead agent.
The company's board of directors has authorized the repurchase of up to $80 million of the company's common stock. Under the program, stock repurchases may be made through open-market transactions, negotiated purchases or otherwise. Tempur-Pedic said it will not purchase shares from insiders.
| Tempur-Pedic | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 9/30 | 2005 | 2004 | Change |
| (a) Includes pretax losses on the early extinguishment of debt of $717,000 in the 2005 nine months and $5.4 million in the 2004 nine months. | |||
| Sales | $206,095,000 | $181,737,000 | 13.4% |
| Operating income | 43,445,000 | 43,486,000 | (0.1%) |
| Net income | 17,368,000 | 22,411,000 | (22.5%) |
| Earnings per share | 0.17 | 0.22 | (22.7%) |
| 9 months ended 9/30 | 2005 | 2004 | Change |
| Sales | $621,089,000 | $486,460,000 | 27.7% |
| Operating income | 138,739,000 | 107,739,000 | 28.8% |
| Net income (a) | 68,968,000 | 51,127,000 | 34.9% |
| Earnings per share | 0.67 | 0.50 | 34.0% |
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Tempur-Pedic profits decline
Oct 24, 2005
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