Quarterly Net Income Improved and Quarterly Adjusted EBITDA Unchanged Despite Difficult Economic Environment ATLANTA, August 4
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 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 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 profit101,210 106,084 210,884 214,275
Operating expenses:
Selling, general and
administrative expenses82,55986,109 171,110 170,817
Amortization of intangibles 1,587 1,493 3,176 2,972
Licensing revenues (2,460) (2,121) (5,028) (5,314)
81,68685,481 169,258 168,475
Operating income 19,52420,60341,62645,800
Interest expense, net 17,48719,25835,30237,647
Income before income taxes2,037 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 39,38935,207
Other current assets 23,96525,281
Total current assets 216,913 207,992
Property, plant and equipment, net 94,12687,449
Goodwill, net 538,783 540,126
Intangible assets, net 598,970 604,547
Other assets36,71437,539
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 69,23072,484
Accrued expenses 86,87996,366
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 30,79628,842
Total liabilities1,314,702 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 EndedSix Months Ended
June 28,June 30, June 28,June 30,
20082007 20082007
Net income $1,181 $984 $3,696 $5,397
Depreciation and
amortization 10,448 7,343 18,664 14,691
Income tax expense 856361 2,628 2,756
Interest expense17,590 19,355 35,536 38,111
EBITDA 30,075 28,043 60,524 60,955
Reorganization
expense including
management severance1,476 1,338 1,751 1,958
Management fees377488 865 953
Relocation of U.S.
manufacturing and
Canada corporate
facilities445 -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)
191,617180,472
Current liabilities 156,696169,622
Less:
Current maturities of long-term debt (587) (772)
156,109168,850
Working capital $35,508$11,622
SOURCE Simmons Company
