TPX: Tempur-Pedic Not Resting on its Laurels

Mattress maker Tempur-Pedic (TPX) has had a busy few days. In addition to being included in our Small Cap and Mid Cap Watch Lists, introduced a new product here and another two there, and opened a new manufacturing plant in New Mexico. This state-of-the-art facility, just over 800,000 sq. ft., is the world’s largest mattress factory.

But what we found particularly impressive was their earnings announcement. In it, they reported:

FOURTH QUARTER 2006 FINANCIAL SUMMARY

  • Pro forma earnings per share (EPS) were $0.40 per diluted share in the fourth quarter of 2006 as compared to $0.31 per diluted share in the fourth quarter of 2005. GAAP EPS increased to $0.36 per diluted share from $0.30 per diluted share in the fourth quarter of 2005.
  • Net sales rose 19% to $256.6 million in the fourth quarter of 2006 from $215.6 million in the fourth quarter of 2005. Retail sales increased 23% worldwide. Domestic retail sales increased 29% and international retail sales increased 12%. Sales in the U.S. furniture and bedding retail channel were especially strong, with an increase of 39%.
  • Cash flow provided by operations increased 41% to $32.7 million in the fourth quarter of 2006 from $23.2 million in the fourth quarter of 2005.
  • Worldwide, mattress unit growth increased 16%. Domestic mattress unit growth was particularly robust, increasing 23%. International mattress unit growth was up 8%.
  • Worldwide, pillow unit growth increased 13%. Domestic pillow unit volume increased 25%. Domestic pillow units and revenue represented new all-time quarterly records.

But unlike other companies we know, their pro-forma adjustments are truly things we would consider one-time in nature.

Pro forma results exclude the impact related to the previously disclosed early redemption of the Company’s senior subordinated debt as well as the favorable impact of an income tax ruling. GAAP and pro forma 2006 results include $3.8 million of stock-based compensation expense, an increase of 31% compared to prior year, resulting from the Company’s adoption of FAS 123 R.

Did you get that? They aren’t stripping out options charges. What they are segregating is the fees they had to pay to pay off debt early and the benefit they received from a tax refund. Heck – with that kind of one-time charges we almost wish they were recurring.

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To top it all off, they announced a dividend and share buyback program. It is no surprise the stock has been up on the news, which actually will hurt our Watch List performance since (as we announced) we will be pricing the Watch Lists as of the closing price on Wednesday, January 31. Although the 15% share gains in the last week won’t count in our favor, we thought they were sure worth mentioning.

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3 Comments on “TPX: Tempur-Pedic Not Resting on its Laurels”

  1. [...] Yes, we know it has only been two days since the Watch Lists were priced, but they were a nice two days. In fact, despite our complaints that some stocks were going up dramatically between the time we announced the watch list and the time we priced it, several names had nice earnings reports Wednesday night and got an immediate boost to their at-the-close official pricing. [...]

  2. [...] Small Cap Watch List (Track at Marketocracy) and Mid Cap Watch List (Track at Marketocracy) member Tempur-Pedic (TPX) raised its dividend: Tempur-Pedic International Inc. (NYSE: TPX), the leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, today0 announced its board of directors approved an increase in the quarterly dividend on its common stock, from 6 cents per share to 8 cents per share. We have frequently noted the company’s recent string of successes and the announcement is more evidence of the same. Furthermore, it will be more administratively efficient to send investors larger checks – the processing costs for the payment will change little, so more of the total money spent will reach the people who should be getting it. [...]

  3. [...] one of my earnings previews this week (I said estimates have been rising but they will probably still beat them.) Having blown through the prior $100 million share repurchase since January, the board [...]

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