Tempur-Pedic will continue to enhance product range this year
Tempur-Pedic International Inc, the leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, announced financial results for the fourth quarter and year ended December 31, 2010. The Company also announced a $200 million share repurchase program and issued financial guidance for 2011.
Chief Executive Officer Mark Sarvary commented, "In 2010 we delivered strong financial results and at the same time executed well on our strategic growth initiatives; we strengthened the product range and greatly improved how well consumers understand and appreciate the unique benefits of Tempur-Pedic. In 2011 we will implement the next phases of our plan to become the world's favorite mattress and pillow brand. We will continue to enhance our product range both in the U.S. and internationally, increase our investment in consumer communication and broaden distribution in all geographies."
Chief Financial Officer Dale Williams stated, "The new share repurchase program reflects our confidence in long term growth opportunities and our commitment to increase shareholder value. With high returns on capital, we project operating cash flow will be far in excess of our modest capital needs over the next several years."
Fourth quarter financial summary
• Earnings per share (EPS) were $0.66 per diluted share in the fourth quarter of 2010 as compared to EPS of $0.38 per diluted share in the fourth quarter of 2009. The Company reported net income of $46.3 million for the fourth quarter of 2010 as compared to net income of $29.1 million in the fourth quarter of 2009.
• Net sales increased 20% to $292.7 million in the fourth quarter of 2010 from $244.8 million in the fourth quarter of 2009. On a constant currency basis, net sales increased 21%. Net sales in the North American segment increased 31%, while international segment net sales increased 1%. On a constant currency basis, international segment net sales increased 6%.
• Mattress sales increased 20% globally. Mattress sales increased 32% in the North American segment and decreased 1% in the international segment. On a constant currency basis, international mattress sales increased 4%. Pillow sales increased 18% globally. Pillow sales increased 31% in North America and 8% internationally. On a constant currency basis, international pillow sales increased 11%.
• Gross profit margin was 51.9% as compared to 48.5% in the fourth quarter of 2009. The gross profit margin increased as a result of improved efficiencies in manufacturing, fixed cost leverage related to higher production volumes and favorable product mix, partially offset by higher commodity costs and geographic mix.
• Operating profit margin was 24.5% as compared to 19.3% in the fourth quarter of 2009.
• The Company generated $44.5 million of operating cash flow as compared to $14.6 million in the fourth quarter of 2009.
• During thequarter, the Company reduced Total debt by $29.0 million to $407.0 million and increased cash by $15.6 million to $53.6 million. As of December 31, 2010, the Company's ratio of funded debt to EBITDA was 1.45 times, well within the covenant in its credit facility, which requires that this ratio not exceed 3.00 times. For additional information about EBITDA and Funded debt (which are non-GAAP measures) please refer to the reconciliation and other information included in the attached schedule.