Second Quarter Financial Summary
Earnings per diluted share (EPS) were $0.45 in the second quarter of 2012 as compared to EPS of $0.76 per diluted share in the second quarter of 2011. The Company reported net income of $29.1 million for the second quarter of 2012 as compared to net income of $53.1 million in the second quarter of 2011.
Net sales decreased 4% to $329.5 million in the second quarter of 2012 from $342.2 million in the second quarter of 2011. On a constant currency basis, net sales decreased 1%. Net sales in the North American segment decreased 8% and international segment net sales increased 8%. On a constant currency basis, international segment net sales increased 17%.
Mattress sales decreased 4% globally. Mattress sales decreased 8% in the North American segment and increased 11% in the international segment. On a constant currency basis, international mattress sales increased 20%. Pillow sales decreased 2% globally. Pillow sales decreased 10% in North America and increased 5% internationally. On a constant currency basis, international pillow sales increased 12%.
Gross profit margin was 50.7% as compared to 52.9% in the second quarter of 2011. The gross profit margin decreased primarily as a result of increased promotions and discounts, deleverage and product mix, offset partially by geographic mix.
Operating profit margin was 14.4% as compared to 24.2% in the second quarter of 2011 reflecting deleverage throughout the income statement.
The Company generated $42.0 million of operating cash flow as compared to $48.2 million in the second quarter of 2011.
During the second quarter of 2012, the Company purchased 4.9 million shares of its common stock for a total cost of $138 million. As of June 30, 2012, the Company had $100 million available under its existing share repurchase authorization.
Chief Executive Officer Mark Sarvary commented, "As we stated on June 6, 2012, changes in the competitive environment in North America during the second quarter had an adverse impact on our performance. We are taking actions across our operations to realign our expense structure appropriately.
“At the same time we are focused on a series of new initiatives designed to strengthen our competitive position. At next week's industry tradeshow in Las Vegas we will unveil several of these new initiatives to our customers. We are very confident in our Company's growth potential and our strong brand, and as a result remain committed to our long-term strategic plan."
On June 6, 2012, the Company revised its full year 2012 guidance. The Company maintained its outlook for full year 2012 net sales to be approximately $1.43 billion. In addition, the Company updated its full year 2012 earnings guidance and currently expects diluted earnings per share to be approximately $2.80, principally reflecting a lower weighted average shares outstanding for 2012.
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