- Domestic Sales Increase Produces 19.9% Fourth Quarter Sales Gain
- Eight Consecutive Quarters of Sales Growth Exceeding the Industry
- 10.6% Growth in Domestic Volume Drives Record Annual Sales
ATLANTA, March 10 /PRNewswire/ -- Simmons Company ("Company" or
"Simmons"), the holding company for Simmons Bedding Company ("Simmons
Bedding"), a leading manufacturer of premium-branded bedding products,
today released operating results for the fourth quarter and full year ended
December 29, 2007.
Results for the Quarter Ended December 29, 2007
For the fourth quarter of 2007, net sales increased 19.9% to a record
$269.6 million compared to $224.8 million for the same period last year.
Domestic segment net sales increased $27.1 million, or 12.8%, to $239.2
million compared to the same period of 2006. The domestic segment sales
growth was primarily attributable to increases in conventional bedding
average unit sales price and units sold of 6.6% and 6.4%, respectively.
Gross profit for the fourth quarter of 2007 was $111.0 million, or 41.2% of
net sales, compared to $91.7 million, or 40.8% of net sales, for the same
period of 2006. For the fourth quarter of 2007, operating income was $23.7
million, or 8.8% of net sales, compared to $16.7 million, or 7.4% of net
sales, for the same period last year. Net income was $6.2 million for the
fourth quarter of 2007 compared to a net loss of ($2.8) million for the
same period in 2006. For the fourth quarter of 2007, Adjusted EBITDA (see
the Supplemental Information to this press release) increased 21.4% to a
fourth quarter record $35.9 million, or 13.3% of net sales, from $29.6
million, or 13.1% of net sales, in the fourth quarter of 2006.
Results for the Year Ended December 29, 2007
For 2007, net sales rose 17.2% to a record $1,126.8 million compared to
$961.6 million for 2006. Domestic segment net sales increased $102.4
million, or 11.4%, to $1,002.4 million for 2007 compared to 2006. Domestic
segment sales growth for 2007 was primarily attributable to a 10.6%
increase in conventional bedding units sold. Gross profit for 2007 was
$450.6 million, or 40.0% of net sales, compared to $417.5 million, or 43.4%
of net sales, for 2006. The decline in 2007 gross margin was largely
attributable to the August 2006 sale of Sleep Country USA ("SCUSA"), the
Company's former retail operations, which sold products at higher gross
margins than those of our wholesale operations, as well as the acquisition
of Simmons Canada in November 2006, which sells products at lower gross
margins than those of the Domestic segment.
For 2007, operating income was $108.3 million, or 9.6% of net sales,
compared to $108.7 million, or 11.3% of net sales, for 2006 exclusive of
the $43.3 million gain on the sale of SCUSA. Net income was $23.9 million
for 2007 compared to $16.6 million for the prior year, exclusive of the
gain on the sale of SCUSA net of related taxes (see Supplemental
Information to this press release). For 2007, Adjusted EBITDA was $157.0
million, or 13.9% of net sales, compared to $149.3 million, or 15.5% of net
sales, during 2006.
"Our 2007 net sales and Adjusted EBITDA results were new annual records
for the Company," said Charlie Eitel, Simmons Chairman and Chief Executive
Officer. "During the year we gained considerable market share and the
fourth quarter was the eighth consecutive quarter that our sales growth
exceeded the growth rate for the industry. Looking forward, our mid-year
2007 acquisition of ComforPedic should position us well for further growth
in the specialty bedding area."
Mr. Eitel continued, "We are starting 2008 in a very challenging retail
and manufacturing environment but we believe our sales momentum, strong
product offerings and keen focus on cost management put us in position to
be successful -- despite a soft economy and higher raw material costs."
As of December 29, 2007, Simmons' working capital (see Supplemental
Information to this press release) as a percentage of net sales for 2007
was 1.0% compared to 0.7% at the beginning of the year. During the fourth
quarter, Simmons' total debt, less cash on hand, decreased by $35.9
million. For the fourth quarter of 2007, Simmons Bedding's leverage ratio
decreased to 4.2 from 4.5, as a result of the Company's improved financial
performance and debt reduction.
The Company will webcast its 2007 financial results via a conference
call on Tuesday, March 11, 2008, beginning at 3:00 p.m. Eastern Time. The
webcast will be available at the Company's website http://www.simmons.com and will
also be available for replay through March 25, 2008.
About Simmons Company
Atlanta-based Simmons Company, through its indirect subsidiary Simmons
Bedding Company, is one of the world's largest mattress manufacturers,
manufacturing and marketing a broad range of products including
Beautyrest(R), Beautyrest Black(TM), ComforPedic by Simmons(TM), Natural
Care(TM), BackCare(R), Beautyrest Beginnings(TM) and Deep Sleep(R). Simmons
Bedding Company operates 21 conventional bedding manufacturing facilities
and two juvenile bedding manufacturing facilities across the United States,
Canada and Puerto Rico. Simmons also serves as a key supplier of bedding to
many of the world's leading hotel groups and resort properties. Simmons is
committed to developing superior mattresses and promoting a higher quality
sleep for consumers around the world. For more information, visit the
Company's website at http://www.simmons.com.
"Safe Harbor" Statement under Private Securities Litigation Reform Act
of 1995:
This press release includes forward-looking statements that reflect our
current views about future events and financial performance. Words such as
"estimates," "expects," "anticipates," "projects," "plans," "intends,"
"believes," "forecasts" and variations of such words or similar expressions
that predict or indicate future events, results or trends, or that do not
relate to historical matters, identify forward-looking statements. The
forward-looking statements in this press release speak only as of the date
of this report. These forward-looking statements are expressed in good
faith and we believe there is a reasonable basis for them. However, there
can be no assurance that the events, results or trends identified in these
forward- looking statements will occur or be achieved. Investors should not
rely on forward-looking statements because they are subject to a variety of
risks, uncertainties, and other factors that could cause actual results to
differ materially from our expectations. These factors include, but are not
limited to: (i) general economic and industry conditions; (ii) competitive
pricing pressures in the bedding industry; (iii) legal and regulatory
requirements; (iv) the success of our new products and the future costs to
roll out such products; (v) our relationships with and viability of our
major suppliers; (vi) fluctuations in our costs of raw materials; (vii) our
relationship with and viability of significant customers and licensees;
(viii) our ability to increase prices on our products and the effect of
these price increases on our unit sales; (ix) an increase in our return
rates and warranty claims; (x) our labor relations; (xi) departure of our
key personnel; (xii) encroachments on our intellectual property; (xiii) our
product liability claims; (xiv) our level of indebtedness; (xv) interest
rate risks; (xvi) foreign currency exchange rate risks; (xvii) compliance
with covenants in our debt agreements; (xviii) our future acquisitions;
(xix) our ability to successfully integrate ComforPedic into our
operations; (xx) our ability to achieve the expected benefits from any
personnel realignments; (xxi) our ability to successfully implement our new
enterprise resource planning system; and (xxii) other risks and factors
identified from time to time in our reports filed with the Securities and
Exchange Commission. We undertake no obligation to update or revise any
forward-looking statements, either to reflect new developments or for any
other reason.
Simmons Company and Subsidiaries
Condensed Historical Consolidated Statements of Operations
(in thousands)
Quarter Ended Year Ended
December December December December
29, 2007 30, 2006 29, 2007 30, 2006
Net sales $269,572 $224,790 $1,126,841 $961,625
Cost of products sold 158,541 133,113 676,255 544,164
Gross profit 111,031 91,677 450,586 417,461
Operating expenses:
Selling, general and
administrative expenses 87,993 75,734 346,252 311,839
Gain on sale of Sleep
Country USA - - - (43,311)
Amortization of intangibles 1,595 1,435 6,146 5,655
Licensing revenues (2,264) (2,193) (10,085) (8,691)
87,324 74,976 342,313 265,492
Operating income 23,707 16,701 108,273 151,969
Interest expense, net 17,975 17,996 75,661 79,928
Income (loss) before
income taxes 5,732 (1,295) 32,612 72,041
Income tax expense (benefit) (482) 1,507 8,663 24,427
Net income (loss) $6,214 $(2,802) $23,949 $47,614
Adjusted EBITDA (a) $35,869 $29,555 $156,967 $149,284
See Notes to Condensed Historical Financial Data.
Simmons Company and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
December 29, December 30,
2007 2006
Assets
Current assets:
Cash and cash equivalents $27,520 $20,784
Accounts receivable, net 119,984 92,035
Inventories 35,207 26,718
Other current assets 25,281 22,559
Total current assets 207,992 162,096
Property, plant and equipment, net 87,449 73,185
Goodwill, net 540,126 512,818
Intangible assets, net 604,547 592,802
Other assets 37,539 32,753
Total assets $1,477,653 $1,373,654
Liabilities and Stockholder's Equity
Current liabilities:
Current maturities of long-term debt $772 $778
Accounts payable 72,484 60,318
Accrued expenses 96,366 74,594
Total current liabilities 169,622 135,690
Long-term debt 900,716 896,001
Deferred income taxes 190,321 177,692
Other non-current liabilities 28,842 14,410
Total liabilities 1,289,501 1,223,793
Stockholder's equity 188,152 149,861
Total liabilities and
stockholder's equity $1,477,653 $1,373,654
See Notes to Condensed Historical Financial Data.
Simmons Company and Subsidiaries
(Notes to Condensed Historical Financial Data - continued)
(a) Adjusted EBITDA (as defined in Simmons Bedding's senior credit
facility) differs from the term "EBITDA" as it is commonly used. In
addition to adjusting net income to exclude interest expense, income
taxes and depreciation and amortization, Adjusted EBITDA as we
interpret the definition also adjusts net income by excluding items or
expenses not typically excluded in the calculation of "EBITDA" such as
management fees, non-cash stock compensation expenses, reorganization
costs, and other unusual or non-recurring charges or credits. In
addition, Adjusted EBITDA, as defined, includes the pro forma effect
of business acquisitions and dispositions including synergies.
Adjusted EBITDA is presented because it is a material component of the
covenants contained within Simmons Bedding's credit agreements and a
measure used by management to determine operating performance. EBITDA
does not represent net income or cash flow from operations as those
terms are defined by accounting principles generally accepted in the
United States and does not necessarily indicate whether cash flows
will be sufficient to fund cash needs. Below is a reconciliation of
net income to Adjusted EBITDA:
Quarter Ended Year Ended
December December December December
29, 2007 30, 2006 29, 2007 30, 2006
Net income (loss) $6,214 $(2,802) $23,949 $47,614
Depreciation and amortization 8,408 6,803 30,625 28,688
Income tax expense (benefit) (482) 1,507 8,663 24,427
Interest expense 18,175 18,581 76,182 81,265
EBITDA 32,315 24,089 139,419 181,994
Gain on sale of SCUSA - - - (43,311)
Reorganization expense including
management severance 434 2,340 2,430 4,727
Management fees 235 420 1,675 1,659
Non-recurring professional
service fees 695 - 3,062 -
Transaction related expenditures
including integration costs 1,212 1,665 4,602 1,700
Conversion costs associated with
meeting new flammability
standard 277 673 2,260 673
ERP system implementation costs 690 - 1,575 -
Other 11 368 1,944 1,842
Adjusted EBITDA before pro forma
adjustments $35,869 $29,555 $156,967 $149,284
Pro forma effect of acquisitions
and dispositions - 3,238 277 14,047
Adjusted EBITDA $35,869 $32,793 $157,244 $163,331
(b) Working capital computation (current assets less current liabilities,
excluding cash, current maturities of long-term debt, and assets and
liabilities held for sale):
December December
29, 2007 30, 2006
Current assets $207,992 $162,096
Less:
Cash and cash equivalents (27,520) (20,784)
180,472 141,312
Current liabilities 169,622 135,690
Less:
Current maturities of long-term debt (772) (778)
168,850 134,912
Working capital $11,622 $6,400
(c) Reconciliation of net income to net income, exclusive of the gain on
the sale of Sleep Country USA net of related taxes:
2006
Net income $47,614
Gain on the sale of Sleep Country USA (43,311)
Tax effect of the gain 12,297
Net income, exclusive of gain net
of related taxes $16,600
SOURCE Simmons Company
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Related links:
http://www.simmons.com
CONTACT:
Alan H. Oshik of Broadgate Consultants, Inc.
for Simmons Company, +1-212-232-2222; of William S. Creekmuir of
Simmons Company, +1-770-673-2625
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