Quarterly Net Income Improved and Quarterly Adjusted EBITDA Unchanged
Despite Difficult Economic Environment
ATLANTA, August 4 /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 quarter and six months ended June
28, 2008.
Results for the Quarter Ended June 28, 2008
For the second quarter of 2008, net sales decreased 3.7% to $267.7
million compared to $277.9 million for the same period last year. Domestic
segment net sales decreased $16.0 million, or 6.5%, to $229.3 million
compared to the same period of 2007. The domestic segment sales decline was
primarily attributable to a decrease in conventional bedding unit volume of
12.2% which was partially offset by an increase in conventional bedding
average unit selling price ("AUSP") of 7.0%. Gross profit for the second
quarter of 2008 was $101.2 million, or 37.8% of net sales, compared to
$106.1 million, or 38.2% of net sales, for the same period of 2007. For the
second quarter of 2008, operating income was $19.5 million, or 7.3% of net
sales, compared to $20.6 million, or 7.4% of net sales, for the same period
last year. Net income was $1.2 million for the second quarter of 2008
compared to $1.0 million for the same period in 2007. For the second
quarter of 2008, Adjusted EBITDA (see the Supplemental Information to this
press release) was $33.3 million, or 12.5% of net sales, compared to $33.2
million, or 11.9% of net sales for the same period of 2007.
Results for the Six Months Ended June 28, 2008
For the first six months of 2008, net sales decreased 0.1% to $544.6
million compared to $545.3 million for the same period last year. Domestic
segment net sales decreased $9.2 million, or 1.9%, to $474.3 million
compared to the same period of 2007. The domestic segment sales decline was
primarily attributable to a decrease in conventional bedding unit volume of
8.0% which was partially offset by an increase in conventional bedding AUSP
of 7.6%. Gross profit for the first six months of 2008 was $210.9 million,
or 38.7% of net sales, compared to $214.3 million, or 39.3% of net sales,
for the same period of 2007. For the first six months of 2008, operating
income was $41.6 million, or 7.6% of net sales, compared to $45.8 million,
or 8.4% of net sales, for the same period last year. Net income was $3.7
million for the first six months of 2008 compared to $5.4 million for the
same period in 2007. For the first six months of 2008, Adjusted EBITDA was
$66.3 million, or 12.2% of net sales, compared to $69.3 million, or 12.7%
of net sales, for the same period of 2007.
"The economic environment we operated in during the second quarter was
very difficult because of reduced demand and increased costs, but we were
able to maintain Adjusted EBITDA at a level comparable to last year's
second quarter," said Charlie Eitel, Simmons Chairman and Chief Executive
Officer. "Despite the difficult sales environment, our products continue to
be among the best performing at retail. Our year over year sales
performance exceeded that reported by the International Sleep Products
Association for the tenth consecutive quarter, although our domestic
segment sales declined for the quarter."
Mr. Eitel continued, "Our operating results continue to be negatively
impacted by rising raw material and fuel prices. To mitigate raw material
cost inflation, during the quarter we successfully executed on significant
cost reduction efforts and we implemented a price increase on our products.
At last week's Las Vegas Market, we successfully introduced our new
Beautyrest Studio(TM) line to provide our customers with an improved
Beautyrest(R) product offering at introductory price points. We believe
this line will help capture a younger generation of Beautyrest(R)
customers, as well as those price conscious consumers trading down as a
result of the current economy."
During the second quarter, the Company's net debt increased $4.7
million to $911.1 million and Simmons Bedding's net debt decreased $1.0
million to $677.7 million. As of June 28, 2008, Simmons' working capital
(see Supplemental Information to this press release) was 3.2% of net sales
for the trailing twelve months compared to 2.2% a year ago.
The Company will discuss its second quarter 2008 financial results on a
webcast Monday, August 4, 2008 beginning at 5:00 p.m. Eastern Time. The
webcast will be available for replay or download through podcast at the
Company's website http://www.simmons.com until August 18, 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(R), Beautyrest Studio(TM), ComforPedic by
Simmons(TM), Natural Care(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 beds 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 and energy
prices; (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 achieve the expected
benefits from any personnel realignments; and (xx) 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
Unaudited Condensed Historical Consolidated Statements of Operations
(in thousands)
Quarters Ended Six Months Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Net sales $267,683 $277,871 $544,564 $545,277
Cost of products sold 166,473 171,787 333,680 331,002
Gross profit 101,210 106,084 210,884 214,275
Operating expenses:
Selling, general and
administrative expenses 82,559 86,109 171,110 170,817
Amortization of intangibles 1,587 1,493 3,176 2,972
Licensing revenues (2,460) (2,121) (5,028) (5,314)
81,686 85,481 169,258 168,475
Operating income 19,524 20,603 41,626 45,800
Interest expense, net 17,487 19,258 35,302 37,647
Income before income taxes 2,037 1,345 6,324 8,153
Income tax expense 856 361 2,628 2,756
Net income $1,181 $984 $3,696 $5,397
Adjusted EBITDA (a) $33,335 $33,154 $66,316 $69,255
See Notes to Condensed Historical Financial Data.
Simmons Company and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
June 28, December 29,
2008 2007*
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $25,296 $27,520
Accounts receivable, net 128,263 119,984
Inventories 39,389 35,207
Other current assets 23,965 25,281
Total current assets 216,913 207,992
Property, plant and equipment, net 94,126 87,449
Goodwill, net 538,783 540,126
Intangible assets, net 598,970 604,547
Other assets 36,714 37,539
Total assets $1,485,506 $1,477,653
Liabilities and Stockholder's Equity
Current liabilities:
Current maturities of long-term debt $587 $772
Accounts payable 69,230 72,484
Accrued expenses 86,879 96,366
Total current liabilities 156,696 169,622
Long-term debt 935,795 900,716
Deferred income taxes 191,415 190,321
Other non-current liabilities 30,796 28,842
Total liabilities 1,314,702 1,289,501
Stockholder's equity 170,804 188,152
Total liabilities and
stockholder's equity $1,485,506 $1,477,653
* Derived from the Company's 2007 audited consolidated financial
statements
See Notes to Condensed Historical Financial Data.
Simmons Company and Subsidiaries
Notes to Unaudited Condensed Historical Financial Data
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,
reorganization costs, ERP system implementation 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:
Quarters Ended Six Months Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Net income $1,181 $984 $3,696 $5,397
Depreciation and
amortization 10,448 7,343 18,664 14,691
Income tax expense 856 361 2,628 2,756
Interest expense 17,590 19,355 35,536 38,111
EBITDA 30,075 28,043 60,524 60,955
Reorganization
expense including
management severance 1,476 1,338 1,751 1,958
Management fees 377 488 865 953
Relocation of U.S.
manufacturing and
Canada corporate
facilities 445 - 1,003 -
Non-recurring
professional service
fees 31 - 439 -
Transaction related
expenditures including
integration costs 84 1,054 191 1,639
Conversion costs
associated with meeting
new flammability
standard - 1,069 - 1,982
ERP system implementation
costs 603 - 1,085 -
Other 244 1,162 458 1,768
Adjusted EBITDA $33,335 $33,154 $66,316 $69,255
b) Working capital computation (current assets less current
liabilities, excluding cash and current maturities of long-term debt):
June 28, December 29,
2008 2007
Current assets $216,913 $207,992
Less:
Cash and cash equivalents (25,296) (27,520)
191,617 180,472
Current liabilities 156,696 169,622
Less:
Current maturities of long-term debt (587) (772)
156,109 168,850
Working capital $35,508 $11,622
SOURCE Simmons Company
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Related links:
http://www.simmons.com
CONTACT:
Alan H. Oshiki of Broadgate Consultants, LLC,
+1-212-232-2222, for Simmons; or William S. Creekmuir of Simmons
Company, +1-770-673-2625
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