- 20.1% Growth in Net Sales Driven by Double-Digit Domestic Unit Volume
Increase
- 19.3% Increase in Adjusted EBITDA
- Seventh Consecutive Quarter of Sales Growth Exceeding the Industry
ATLANTA, Nov. 13 /PRNewswire/ -- Simmons Company ("Company" or
"Simmons"), a leading manufacturer of premium-branded bedding products,
today released operating results for the quarter and nine months ended
September 29, 2007.
Results for the Quarter Ended September 29, 2007
For the third quarter of 2007, net sales increased 20.1% to $312.0
million compared to $259.8 million for the same period last year. Domestic
segment net sales increased $31.4 million, or 12.7%, to $279.7 million
compared to the same period of 2006. The domestic segment sales growth was
primarily attributable to a 13.5% increase in conventional bedding units
sold. Gross profit for the third quarter of 2007 was $125.3 million, or
40.2% of net sales, compared to $117.2 million, or 45.1% of net sales, for
the same period of 2006.
For the third quarter of 2007, operating income was $38.8 million, or
12.4% of net sales, compared to $33.9 million, or 13.1% of net sales, for
the same period last year exclusive of the $43.8 million gain on the sale
of Sleep Country USA ("SCUSA") in August 2006. Net income was $12.3 million
for the third quarter of 2007 compared to $10.4 million for the same period
in 2006, exclusive of the gain on the sale of SCUSA net of related taxes
(see the Supplemental Information to this press release). For the third
quarter of 2007, Adjusted EBITDA (see the Supplemental Information to this
press release) was $51.8 million, or 16.6% of net sales, compared to $43.5
million, or 16.7% of net sales, in the third quarter of 2006.
Results for the Nine Months Ended September 29, 2007
For the first nine months of 2007, net sales rose 16.3% to $857.3
million compared to $736.8 million for the same period last year. Domestic
segment net sales increased $75.3 million, or 10.9%, to $763.2 million for
the first nine months of 2007 compared to the same period of the prior
year. Domestic segment sales growth for the first nine months of 2007 was
primarily attributable to an 11.9% increase in conventional bedding units
sold. Gross profit for the first nine months of 2007 was $339.6 million, or
39.6% of net sales, compared to $325.8 million, or 44.2% of net sales, for
the same period of 2006.
For the first nine months of 2007, operating income was $84.6 million,
or 9.9% of net sales, compared to $91.4 million, or 12.4% of net sales, for
the same period last year exclusive of the gain on the sale of SCUSA. Net
income was $17.7 million for the first nine months of 2007 compared to
$18.9 million for the same period of the prior year, exclusive of the gain
on the sale of SCUSA net of related taxes. For the first nine months of
2007, Adjusted EBITDA was $121.1 million, or 14.1% of net sales, compared
to $119.7 million, or 16.2% of net sales, during the same period last year.
Simmons' Chairman and Chief Executive Officer Charlie Eitel said, "The
strong sales momentum we have experienced over the last six quarters
continued into the third quarter of 2007, with the third quarter being the
seventh successive quarter our sales growth in the U.S. exceeded that
reported by ISPA for the industry. In the third quarter and first nine
months of this year, our business operated at record sales levels despite a
very competitive sales environment." He added, "Our year-to-date sales
growth of 16.3% has been driven principally by effective marketing and our
decision to be competitive at a broad range of retail price points. Our
marketing and sales efforts have resulted in strong demand for our U.S.
products and we believe a sizable gain in market share this year. Our top
line growth of 20.1% was driven by the Beautyrest(R) 2007 product line,
which was launched earlier this year and has proven to be our most
successful Beautyrest product line in our history. Our top line performance
helped offset gross margin pressures. Our net sales and Adjusted EBITDA in
the third quarter were quarterly records for Simmons."
Mr. Eitel continued, "In the third quarter we made further progress in
the integration of our recent Simmons Canada and ComforPedic acquisitions.
In Canada, we have been able to significantly expand our Adjusted EBITDA
margins through a change in product mix and achievement of cost synergies.
We also began manufacturing our new ComforPedic by Simmons(TM) product in
several of our U.S. facilities and started the roll out of this new product
line to several new major accounts during this last quarter. We expect that
these two acquisitions will be very beneficial to Simmons."
The Company will webcast its third quarter and first nine months 2007
financial results via a conference call on Wednesday, November 14, 2007,
beginning at 10:30 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 November 28, 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) foreign currency exchange rate risks; (xvi) compliance
with covenants in our debt agreements; (xvii) our future acquisitions;
(xviii) our ability to successfully integrate Simmons Canada and
ComforPedic into our operations; (xix) our ability to achieve the expected
benefits from any personnel realignments; (xx) our ability to successfully
implement our new enterprise resource planning system; and (xxi) 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 Nine Months Ended
September September September September
29, 2007 30, 2006 29, 2007 30, 2006
Net sales $311,992 $259,766 $857,269 $736,835
Cost of products sold 186,712 142,562 517,714 411,051
Gross profit 125,280 117,204 339,555 325,784
Operating expenses:
Selling, general and
administrative expenses 87,442 84,089 258,259 236,628
Gain on sale of Sleep
Country USA - (43,834) - (43,834)
Amortization of intangibles 1,579 1,386 4,551 4,220
Licensing fees (2,507) (2,199) (7,821) (6,498)
Total operating expenses 86,514 39,442 254,989 190,516
Operating income 38,766 77,762 84,566 135,268
Interest expense, net 20,039 18,041 57,686 61,932
Income before income taxes 18,727 59,721 26,880 73,336
Income tax expense 6,389 17,799 9,145 22,920
Net income $12,338 $41,922 $17,735 $50,416
Adjusted EBITDA (a) $51,843 $43,460 $121,098 $119,730
See Notes to Condensed Historical Financial Data.
Simmons Company and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
September 29, December 30,
2007 2006
Assets
Current assets:
Cash and cash equivalents $17,290 $20,784
Accounts receivable, net 140,482 92,035
Inventories 33,581 26,718
Other current assets 24,595 22,559
Total current assets 215,948 162,096
Property, plant and equipment, net 84,225 73,185
Goodwill, net 538,955 512,818
Intangible assets, net 604,852 592,802
Other assets 38,732 32,753
Total assets $1,482,712 $1,373,654
Liabilities and Stockholder's Equity
Current liabilities:
Current maturities of long-term debt $1,178 $778
Accounts payable and accrued
liabilities 154,262 134,912
Total current liabilities 155,440 135,690
Long-term debt 925,970 896,001
Deferred income taxes 193,358 177,692
Other non-current liabilities 27,594 14,410
Total liabilities 1,302,362 1,223,793
Stockholder's equity 180,350 149,861
Total liabilities and
stockholder's equity $1,482,712 $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 Nine Months Ended
September September September September
29, 2007 30, 2006 29, 2007 30, 2006
Adjusted EBITDA:
Net income $12,338 $41,922 $17,735 $50,416
Depreciation and
amortization 7,526 7,829 22,217 21,885
Income tax expense 6,389 17,799 9,145 22,920
Interest expense 19,896 18,558 58,007 62,684
EBITDA 46,149 86,108 107,104 157,905
Reorganization
expense including
management
severance 38 5 1,996 2,386
Conversion costs
associated with
meeting new
flammability standard 1 - 1,983 -
Transaction expenses
including integration
costs 1,751 428 3,390 560
Non-recurring
professional
service fees 1,595 - 2,367 -
Management information
system implementation
costs 805 - 885 -
Management fees 487 423 1,440 1,263
Gain on sale of SCUSA - (43,834) - (43,834)
Other, net 1,017 330 1,933 1,450
Adjusted EBITDA $51,843 $43,460 $121,098 $119,730
b) Reconciliation of net income to net income, exclusive of the gain on
the sale of Sleep Country USA net of related taxes:
Periods Ended
September 30, 2006
Quarter Nine Months
Net Income $41,922 $50,416
Gain on the sale of Sleep Country USA (43,834) (43,834)
Tax effect of the gain 12,297 12,297
Net Income, exclusive of the gain $10,385 $18,879
SOURCE Simmons Company
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Related links:
http://www.simmons.com
CONTACT:
Alan H. Oshiki of Broadgate Consultants,
Inc., +1-212-232-2222, for Simmons Company; or William S.
Creekmuir of Simmons Company, +1-770-673-2625
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