On March 18, 2013, the Company completed its previously announced merger with Sealy. The Company's 2013 first quarter financials include Sealy's operations for the period March 18, 2013 through March 31, 2013.
FIRST QUARTER FINANCIAL SUMMARY
Earnings per diluted share (EPS) under U.S. generally accepted accounting principles (GAAP) in the first quarter of 2013 were $0.20, and reflect transaction and integration costs related to the recently completed Sealy acquisition as well as certain discrete tax items. Adjusted EPS were $0.62 in the first quarter of 2013 as compared to GAAP EPS of $0.86 in the first quarter of 2012.
GAAP net income in the first quarter of 2013 was $12.5 million. The Company reported adjusted net income of $38.2 million for the first quarter of 2013 as compared to GAAP net income of $56.2 million in the first quarter of 2012.
Total net sales increased 1.5% to $390.1 million in the first quarter of 2013 from $384.4 million in the first quarter of 2012. The net sales increase was due to the inclusion of $46.7 million of Sealy sales for the stub period. Excluding Sealy, Tempur-Pedic net sales decreased 10.7% to $343.4 million.
Gross profit margin was 48.3%. Excluding Sealy, Tempur-Pedic gross profit margin decreased to 51.7% as compared to 53.6% in the first quarter of 2012. The Tempur-Pedic gross profit margin decreased primarily as a result of product mix, deleverages, and increased promotions and discounts, offset partially by lower commodity costs and geographic mix.
Operating income was $44.3 million, or 11.4% of net sales. Operating income included $16.0 million of transaction and integration costs related to the Sealy acquisition. Excluding Sealy, Tempur-Pedic operating income was $47.2 million as compared to $86.1 million in the first quarter of 2012. The lower Tempur-Pedic operating income reflects the reduced gross margin and deleverage of certain operating expenses related to lower sales.
Adjusted EBITDA for the first quarter of 2013 was $76.8 million as compared to $98.7 million in the first quarter of 2012.
The Company ended the quarter with consolidated funded debt of $2.0 billion. The ratio of consolidated funded debt less qualified cash to adjusted EBITDA was 4.4 times, calculated on a combined basis for Tempur-Pedic and Sealy in accordance with the Company's new senior secured credit facility. For additional information regarding adjusted EBITDA and consolidated funded debt less qualified cash (which are non-GAAP measures) please refer to the reconciliations and other information included in the attached schedules.
Tempur-Pedic International CEO Mark Sarvary commented, "We are pleased to have completed the acquisition of Sealy in March. The integration is progressing smoothly and as planned. We remain confident in realizing cost synergies in excess of $40 million by the third full year and continue to be very excited about the significant opportunity for revenue synergies. Our performance during the first quarter was in line with our projections and we expect positive net sales growth for the balance of the year."
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