- 15.2% Increase in Net Sales
- Record Second Quarter Sales
- Unit Volume Increases Drive U.S. Market Share Gain
ATLANTA, Aug. 14 /PRNewswire/ -- Simmons Company ("Company" or
"Simmons"), a leading manufacturer of premium-branded bedding products,
today released operating results for the quarter and six months ended June
30, 2007.
"The strong sales momentum we have experienced over the last several
quarters continued into the second quarter of 2007. In the second quarter
and first half of this year our business operated at record sales levels
despite a relatively soft home furnishings sales environment. Our
year-to-date sales growth of 14.3% has been driven principally by effective
marketing and our decision to be competitive at a broad range of retail
price points. This has resulted in strong demand for our U.S. products,
especially our Beautyrest(R) brand, and we believe a sizable gain in market
share," said Simmons' Chairman and Chief Executive Officer Charlie Eitel.
"Although we are very pleased with our first half sales performance, our
operating margins in the first half of 2007 were negatively impacted by
roll out costs as we completed the transition to our new Beautyrest(R) 2007
product line and brought our products into compliance with the U.S.
Consumer Product Safety Commission's new regulations relating to open flame
resistance standards which became effective July 1, 2007," he added.
Mr. Eitel continued, "Our new Beautyrest(R) line is now fully rolled
out and is selling very well at retail. With the roll out of the
Beautyrest(R) 2007 product line behind us, we expect our operating margins
to return to pre- launch levels. Additionally, we are excited to have added
the ComforPedic by Simmons(TM) brand to our specialty bedding product
assortment. The reception by our dealers to this product at the recently
concluded Las Vegas home furnishings market far exceeded our expectations.
Further, we believe the addition in the last 12 months of Beautyrest
Black(TM), Natural Care(TM) and now ComforPedic by Simmons(TM) to our
already strong product offering makes Simmons an even more compelling
bedding resource to our retail customers and consumers alike."
Results for the Quarter Ended June 30, 2007
For the second quarter of 2007, net sales increased 15.2% to $277.9
million compared to $241.2 million for the same period last year. Net sales
in the 2006 second quarter included $18.5 million in sales from Simmons'
former retail operations, Sleep Country USA, which was sold in August 2006.
Excluding the 2006 second quarter sales impact of the Company's former
retail business, Simmons' net sales increased $55.2 million, or 24.8%,
driven by domestic sales growth of 10.2% and the addition of $32.8 million
of sales from the Company's Canadian operations, which were acquired in
November 2006. Simmons' domestic sales growth compared to the same period
last year was primarily attributable to an increase in conventional bedding
units sold of 10.8%, or $23.1 million, and an increase in conventional
bedding average unit selling price ("AUSP") of 0.2%, or approximately $0.5
million. Gross profit for the second quarter of 2007 decreased to $106.1
million, or 38.2% of net sales, from $109.2 million, or 45.3% of net sales,
for the same period of 2006.
For the second quarter of 2007, operating income was $20.6 million, or
7.4% of net sales, compared to $28.1 million, or 11.7% of net sales, for
the same period last year. The financial results for the quarter included
$14.0 million in incremental costs related to the roll out of the Company's
2007 Beautyrest(R) product line. Net income was $0.9 million for the second
quarter of 2007 compared to $2.1 million for the same period of the prior
year. For the second quarter of 2007, Adjusted EBITDA (see the Supplemental
Information to this press release) was $33.2 million, or 11.9% of net
sales, compared to $37.3 million, or 15.5% of net sales, during the same
period last year.
Results for the Six Months Ended June 30, 2007
For the first six months of 2007, net sales rose 14.3% to $545.3
million compared to $477.1 million for the same period last year. Net sales
for the first six months of 2006 included $37.5 million of sales from our
former retail operations. Excluding the 2006 first half sales impact of the
Company's former retail business, Simmons' net sales increased $105.7
million, or 24.0%, driven by domestic sales growth of 10.0% and $62.2
million of sales from the Company's Canadian operations. Simmons' domestic
sales growth for the first six months of 2007 compared to the same period
last year was primarily attributable to an increase in conventional bedding
units sold of 11.0%, or $46.1 million, partially offset by a decrease in
conventional bedding AUSP of 0.1%, or $0.3 million. Gross profit for the
first six months of 2007 increased to $214.3 million, or 39.3% of net
sales, from $208.6 million, or 43.7% of net sales, for the same period of
2006.
For the first six months of 2007, operating income was $45.8 million,
or 8.4% of net sales, compared to $57.5 million, or 12.1% of net sales, for
the same period last year. The financial results for the period included
approximately $23.6 million in incremental costs related to the roll out of
the Company's 2007 Beautyrest(R) product line. Net income was $5.4 million
for the first six months of 2007 compared to $8.5 million for the same
period of the prior year. For the first six months of 2007, Adjusted EBITDA
(see the Supplemental Information to this press release) was $69.3 million,
or 12.7% of net sales, compared to $76.3 million, or 16.0% of net sales,
during the same period last year.
As of June 30, 2007, Simmons' working capital (see the Supplemental
Information to this press release) as a percentage of net sales for the
trailing twelve months was 2.2% compared to 1.9% a year ago. During the
second quarter of 2007, the Company's net debt increased $12.3 million as a
result of the June 29, 2007 acquisition of certain net assets of Comfor
Products, Inc.
The Company will webcast its second quarter and first six months 2007
financial results via a conference call on Wednesday, August 15, 2007,
beginning at 11:00 a.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 August 29, 2007.
About Simmons
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 under brands
including Beautyrest(R), Beautyrest Black(TM), Natural Care(TM),
ComforPedic by Simmons(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 beds to many of the world's leading hotel groups, casinos
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 call. 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) competitive pricing pressures in the bedding industry; (ii)
legal and regulatory requirements; (iii) the success of our new products
and the future costs to roll out such products; (iv) our relationships with
and viability of our major suppliers; (v) fluctuations in our costs of raw
materials; (vi) our relationship with significant customers and licensees;
(vii) our ability to increase prices on our products and the effect of
these price increases on our unit sales; (viii) an increase in our return
rates and warranty claims; (ix) our labor relations; (x) departure of our
key personnel; (xi) encroachments on our intellectual property; (xii) our
product liability claims; (xiii) our level of indebtedness; (xiv) interest
rate risks; (xv) compliance with covenants in our debt agreements; (xvi)
our future acquisitions; (xvii) our ability to successfully integrate
Simmons Canada and ComforPedic into our operations; (xviii) our ability to
achieve the expected benefits from any personnel realignments; and (xix)
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)
Quarters Ended Six Months Ended
June 30, July 1, June 30, July 1,
2007 2006 2007 2006
Net sales $277,871 $241,202 $545,277 $477,069
Cost of products sold 171,787 132,051 331,002 268,490
Gross profit 106,084 109,151 214,275 208,579
Operating expenses:
Selling, general and
administrative expenses 86,109 81,633 170,817 152,539
Amortization of intangibles 1,493 1,417 2,972 2,834
Licensing fees (2,121) (2,012) (5,314) (4,300)
Total operating expenses 85,481 81,038 168,475 151,073
Operating income 20,603 28,113 45,800 57,506
Interest expense, net 19,258 24,715 37,647 43,891
Income before income taxes 1,345 3,398 8,153 13,615
Income tax expense 361 1,337 2,756 5,121
Net income $984 $2,061 $5,397 $8,494
Adjusted EBITDA (a) $33,154 $37,324 $69,255 $76,272
See Notes to Condensed Historical Financial Data.
Simmons Company and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
June 30, December 30,
2007 2006
Assets
Current assets:
Cash and cash equivalents $17,251 $20,784
Accounts receivable, net 124,108 92,035
Inventories 33,405 26,718
Other current assets 24,150 22,559
Total current assets 198,914 162,096
Property, plant and equipment, net 79,174 73,185
Goodwill, net 536,001 512,818
Intangible assets, net 601,963 592,802
Other assets 39,116 32,753
Total assets $1,455,168 $1,373,654
Liabilities and Stockholder's Equity
Current liabilities:
Current maturities of long-term
debt $778 $778
Accounts payable and accrued
liabilities 158,815 134,912
Total current liabilities 159,593 135,690
Long-term debt 919,486 896,001
Deferred income taxes 186,515 177,692
Other non-current liabilities 25,649 14,410
Total liabilities 1,291,243 1,223,793
Stockholder's equity 163,925 149,861
Total liabilities and
stockholder's equity $1,455,168 $1,373,654
See Notes to Condensed Historical Financial Data.
Simmons Company and Subsidiaries
(Notes to 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, non-cash stock compensation expenses, reorganization
costs, and other unusual or non-recurring charges or credits. 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 30, July 1, June 30, July 1,
2007 2006 2007 2006
Adjusted EBITDA:
Net income $984 $2,061 $5,397 $8,494
Depreciation and amortization 7,343 6,777 14,691 14,057
Income tax expense 361 1,337 2,756 5,121
Interest expense 19,355 24,866 38,111 44,126
EBITDA 28,043 35,041 60,955 71,798
Reorganization expense including
management severance 1,338 829 1,958 2,381
Conversion costs associated with
meeting new flammability
standard 1,069 - 1,982 -
Transaction expenses 1,054 133 1,639 133
Management fees 488 441 953 846
Other, net 1,162 880 1,768 1,114
Adjusted EBITDA $33,154 $37,324 $69,255 $76,272
b) Working capital computation (current assets less current liabilities as
defined in our senior credit facility):
June 30, July 1,
2007 2006
Current assets $198,914 $164,916
Less:
Cash and cash equivalents (17,251) (28,882)
181,663 136,034
Current liabilities 159,593 119,133
Less:
Current maturities of long-term
debt (778) (413)
158,815 118,720
Working capital $22,848 $17,314
SOURCE Simmons Company
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Related links:
http://www.simmons.com
CONTACT:
Alan H. Oshiki, Broadgate Consultants, Inc.,
+1-212-232-2222; William S. Creekmuir, Simmons Company,
+1-770-673-2625
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