Simmons Second Quarter Sales Up 3.1%, Steve Fendrich Executive Vice President Sales

Furniture World News

Simmons Bedding Company, a leading manufacturer of premium-branded bedding products, released operating results for the second quarter of 2005. Results for the Quarter Ended June 25, 2005 For the second quarter of 2005, net sales were $208.0 million compared to $201.8 million for the same period a year ago, a 3.1% increase. Wholesale bedding segment net sales increased 2.6% to $192.7 million for the second quarter of 2005 compared to $187.7 million for the same period a year ago. The increase in wholesale bedding segment net sales was largely due to the addition of $6.2 million in net sales of juvenile products as a result of the August 2004 acquisition of the crib mattress and related soft goods of Simmons Juvenile Products Company, Inc. (“Juvenile Acquisition”). Conventional bedding net sales declined $0.9 million, or 0.5%, during the second quarter compared to the same period a year ago due primarily to a 7.4% decrease in unit volume, partially offset by a 6.0% increase in conventional bedding average unit selling price (“AUSP”). Simmons’ retail bedding segment net sales decreased 2.3% to $18.8 million for the second quarter of 2005 compared to $19.2 million for the same period a year ago. Retail bedding segment net sales decreased due to the sale of the Company’s Mattress Gallery retail operation in Southern California in May 2004. On a comparable store basis, Simmons’ retail store sales increased 14.6% in the second quarter of 2005 versus the same period of 2004. Gross margin for the second quarter of 2005 was 43.6%, a 1.8 percentage point decrease from the second quarter of 2004. Simmons’ wholesale bedding segment gross margin for the second quarter of 2005 was 41.9%, compared to 43.4% for the second quarter of 2004. The second quarter 2005 gross margin was negatively impacted by increases in the costs of raw materials and sales of juvenile bedding products, which sell at lower margins, as a result of the Juvenile Acquisition. For the second quarter of 2005, Simmons’ operating income was $18.9 million, compared to $20.2 million for the second quarter of 2004. The Company’s net income was $3.7 million for the second quarter of 2005 compared to $6.0 million for the second quarter of 2004. For the second quarter of 2005, adjusted EBITDA was $27.5 million compared to $28.9 million for the second quarter of 2004, a 5.0% decrease. For a full discussion of adjusted EBITDA see the Supplemental Information included later in this press release. Results for the Six Months Ended June 25, 2005 For the first six months of 2005, net sales were $413.6 million compared to $425.1 million for the same period a year ago, a 2.7% decrease. Wholesale bedding segment net sales decreased 3.2% to $382.3 million for the first six months of 2005 compared to $394.8 million for the same period a year ago. The wholesale bedding segment sales decline in the first six months of 2005 was primarily due to an 11.4% decline in conventional bedding unit volume, partially offset by an increase in conventional bedding AUSP of 6.3%. Additionally, wholesale bedding net sales increased $11.9 million for the six months ended June 25, 2005 due to sales of juvenile products following the Juvenile Acquisition. Simmons’ retail bedding segment net sales decreased 14.5% to $37.9 million for the first six months of 2005 compared to $44.3 million for the same period of 2004. The 2005 sales decline was due to the May 2004 sale of the Company’s Mattress Gallery retail operation. On a comparable store basis, Simmons’ retail store sales increased 18.4% for the six months ended June 25, 2005 compared to the same period of 2004. Simmons’ gross margin for the first six months of 2005 was 44.1%, a 1.8 percentage point decrease from the first six months of 2004. The Company’s wholesale bedding segment gross margin for the first six months of 2005 was 42.3%, compared to 44.8% for the first six months of 2004. The 2005 year-to-date margin decline, in comparison to the prior year, was due primarily to an increase in conventional bedding material and overhead costs, and the selling of juvenile products, which sell at lower margins. Simmons’ operating income was $31.9 million for the first six months of 2005, compared to $37.5 million for the first six months of 2004. The Company’s net income was $4.2 million for the first six months of 2005 compared to $9.9 million for the first six months of 2004. For the first six months of 2005, adjusted EBITDA was $47.5 million compared to $66.2 million for the first six months of 2004, a 28.3% decrease. Simmons’ Chairman and Chief Executive Officer, Charlie Eitel, said “Although our second quarter adjusted EBITDA declined slightly compared to a year ago, we are still pleased with our second quarter financial performance. As a result of pricing and product modifications we have made, we regained some of the sales momentum in our wholesale bedding segment which we lost during our first quarter. Additionally, through our people realignment plan and other aspects of our cost reduction initiative, we made considerable progress during the second quarter towards lowering our overall cost structure.” Balance Sheet Items Net debt (total debt of $747.3 million less cash of $31.4 million) totaled $715.9 million as of June 25, 2005, a decrease of $12.4 million since December 25, 2004. During the second quarter, the Company repaid $1.0 million of its tranche C term loan. For the second quarter of 2005, Simmons’ working capital (see the Supplemental Information to this press release) as a percentage of net sales for the trailing twelve months was 1.9% compared to 2.1% at the end of 2004. Steve Fendrich Named Executive Vice President – Sales The Company also announced that Stephen G. Fendrich had been named Executive Vice President – Sales. Mr. Fendrich, who has 22 years of bedding industry experience, was previously Chief Executive Officer and President of the Company’s Sleep Country USA retail operations. Before joining Sleep Country, Mr. Fendrich was one of the founders of The Mattress Firm, one of the nation’s largest mattress retailers. Mr. Eitel commented, “Steve’s experience as a mattress retailer will be invaluable to us. His insights should help us gain a deeper understanding of our retailers’ needs. I believe Steve’s successful track record of improving sales and profitability at Sleep Country, while at the same time creating a culture of creativity and growth, clearly demonstrates his leadership capabilities.” Mr. Fendrich will retain his Sleep Country USA responsibilities until a successor is named. Separately, the Company announced that Kevin Damewood, former Senior Vice President – Sales, had assumed the responsibilities of Divisional Vice President of Sales – Northeast Region. The above mentioned personnel changes are the latest step in Simmons’ corporate restructuring strategy to more effectively align resources and streamline operations. Conclusion The Company will webcast its 2005 second quarter financial results via a conference call on Wednesday, August 10, 2005, beginning at 11:00 a.m. Eastern Time. The webcast will be available at the Company’s website www.simmons.com and will also be available for replay through August 23, 2005. Atlanta-based Simmons Bedding Company is one of the world's largest mattress manufacturers, manufacturing and marketing a broad range of products including Beautyrest®, BackCare®, BackCare Kids®, Olympic® Queen, Deep Sleep® and HealthSmartTM. The Company operates 17 conventional bedding manufacturing facilities and three juvenile bedding manufacturing facilities across the United States and Puerto Rico. 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.