TEMPUR SEALY INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q) | MarketScreener

2022-05-06 18:25:41 By : Mr. JACKIE YOUNG

In this discussion and analysis, we discuss and explain the consolidated financial condition and results of operations for the three months ended March 31, 2022, including the following topics:

We are committed to improving the sleep of more people, every night, all around the world. As a leading designer, manufacturer, distributor and retailer of bedding products worldwide, we know how crucial a good night of sleep is to overall health and wellness. Utilizing over a century of knowledge and industry-leading innovation, we deliver award-winning products that provide breakthrough sleep solutions to consumers in over 100 countries.

General Business and Economic Conditions

Our global 2022 marketing plan is to aggressively support our innovative bedding products through investing significant marketing dollars to promote our worldwide brands and product launches.

A summary of our results for the three months ended March 31, 2022 include:

For a discussion and reconciliation of non-GAAP financial measures as discussed above to the corresponding GAAP financial results, refer to the non-GAAP financial information set forth below under the heading "Non-GAAP Financial Information."

The following table sets forth the various components of our Condensed Consolidated Statements of Income and expresses each component as a percentage of net sales:

Net sales increased 18.7%, and on a constant currency basis increased 19.8%. The change in net sales was driven by the following:

Our gross margin is primarily impacted by the relative amount of net sales contributed by our premium or value products. Our value products have a significantly lower gross margin than our premium products. If sales of our value priced products increase relative to sales of our premium priced products, our gross margins will be negatively impacted in both our North America and International segments.

Gross margin declined 180 basis points. The primary drivers of changes in gross margin by segment are discussed below:

General, administrative and other expenses include salaries and related expenses, information technology, professional fees, depreciation and amortization of long-lived assets not used in the manufacturing process, expenses for administrative functions and research and development costs.

•International operating expenses increased $55.0 million, or 99.1%, and increased 130 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by advertising and other selling and marketing investments, as well as the acquisition of Dreams.

•Corporate operating expenses increased $2.4 million, or 7.7%, primarily driven by ERP implementation costs.

Research and development expenses for the three months ended March 31, 2022 were $7.8 million compared to $6.5 million for the three months ended March 31, 2021, an increase of $1.3 million, or 20.0%.

Interest expense, net, increased $8.6 million, or 69.9%. The increase in interest expense, net, was primarily driven by increased average levels of outstanding debt.

Cash Provided by (Used in) Continuing Operations

Cash Used in Discontinued Operations

Net cash used in operating, investing and financing activities from discontinued operations for the periods ended March 31, 2022 and 2021 was not material.

The Board of Directors declared a dividend of $0.10 per share for the second quarter of 2022. The dividend is payable on May 26, 2022 to shareholders of record as of May 12, 2022.

Adjusted Net Income and Adjusted EPS

(1) Certain subsidiaries in the International business segment are accounted for as

discontinued operations and have been designated as unrestricted subsidiaries in the

2019 Credit Agreement. Therefore, these subsidiaries are excluded from our adjusted

financial measures for covenant compliance purposes.

(2) In the first quarter of 2021, we recognized $5.0 million of loss on extinguishment of

debt associated with the redemption of the remaining amount outstanding of the 2023

(3) Adjusted income tax provision represents the tax effects associated with the

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