Double-Digit Growth in Volume Drives Record Sales For Simmons Bedding

Furniture World News

Simmons Company, the ultimate parent of Simmons Bedding Company (“Simmons Bedding”), a leading manufacturer of premium-branded bedding products, released operating results for the quarter and nine months ended September 30, 2006. “We are very pleased with our third quarter results, which represented new quarterly highs in terms of net sales and Adjusted EBITDA. Our 14.5% increase in our top line and 21.5% increase in Adjusted EBITDA for the quarter versus a year ago were driven by improved sales execution and marketing. Additionally, our lean manufacturing principles are taking hold and helping us manage costs and improve service,” said Charlie Eitel Simmons’ Chairman and Chief Executive Officer. “During the quarter we completed the sale of Sleep Country USA and announced the acquisition of Simmons Canada. As a result of these strategic transactions, Simmons is well positioned for the future growth of our brands in North America.” Mr. Eitel continued, “Despite some softening in retail home furnishing sales, we remain optimistic about our prospects for the balance of 2006 based upon the momentum with which we entered the fourth quarter. We remain encouraged by the response of our dealers to our new product lines which we introduced in July, especially our Beautyrest Black™ luxury bedding line, the sales of which have exceeded all expectations. Furthermore, we are excited about the prospects of finalizing our acquisition of Simmons Canada, which we anticipate will close in the near future.” Results for the Quarter Ended September 30, 2006 For the third quarter of 2006, net sales rose 14.5% to $259.8 million compared to $226.8 million for the same period last year. For the third quarter of 2006, Simmons’ wholesale bedding segment net sales increased 18.1%, compared to the same period last year. Conventional bedding unit volume grew 9.9% for the third quarter of 2006 compared to the same period last year. Gross profit for the third quarter of 2006 increased $19.3 million to $117.2 million, or 45.1% of net sales, from $97.9 million, or 43.2% of net sales, for the same period last year. For the third quarter of 2006, operating income was $77.8 million, or 29.9% of net sales, compared to $25.0 million, or 11.0% of net sales, for the same period last year. Exclusive of the $43.8 million pre-tax gain on the sale of Sleep Country USA, operating income was $33.9 million, or 13.1% of net sales, for the third quarter of 2006. Net income was $41.9 million for the third quarter of 2006 compared to $4.0 million for the same period of the prior year. For the third quarter of 2006, Adjusted EBITDA (see the Supplemental Information to this press release) increased 21.5% to a quarterly record $43.5 million, or 16.7% of net sales, compared to $35.8 million, or 15.8% of net sales, during the same period of 2005. Results for the Nine Months Ended September 30, 2006 For the first nine months of 2006, net sales rose 15.0% to $736.8 million compared to $640.5 million for the same period last year. For the first nine months of 2006, Simmons’ wholesale bedding segment net sales increased 16.1% compared to the same period last year. Conventional bedding unit volume grew 12.6%. Gross profit for the first nine months of 2006 was $325.8 million, or 44.2% of net sales, compared to $280.1 million, or 43.7% of net sales, for the same period last year. For the first nine months of 2006, operating income was $135.3 million, or 18.4% of net sales, compared to $56.7 million, or 8.9% of net sales, for the same period last year. Exclusive of the pre-tax gain on the sale of Sleep Country USA, operating income was $91.4 million, or 12.4% of net sales, for the first nine months of 2006. Net income was $50.4 million for the first nine months of 2006 compared to $2.9 million for the same period of the prior year. Adjusted EBITDA for the first nine months of 2006 increased 43.6% to $119.7 million, or 16.2% of net sales, compared to $83.4 million, or 13.0% of net sales, for the same period of 2005. As of September 30, 2006, Simmons’ working capital (see the Supplemental Information to this press release) as a percentage of net sales for the trailing twelve months was 2.1%, compared to 2.0% at the beginning of the year. During the third quarter Simmons’ debt, net of $101.7 million of cash on hand at quarter end, declined $68.0 million. Simmons intends to use this cash for the acquisition of Simmons Canada. The Company will webcast its third quarter and first nine months of 2006 financial results via a conference call on Monday, November 13, 2006, 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 November 27, 2006. Simmons Appoints New President Separately, Simmons today also announced the appointment of Gary S. Matthews as President of both Simmons Company and its operating subsidiary, Simmons Bedding Company, effective December 1, 2006. Mr. Matthews will report to Simmons’ Chairman and Chief Executive Officer Charlie Eitel. “We are excited to have Gary join the Simmons team,” said Mr. Eitel. “He has a track record of outstanding success in building and marketing brands and product lines in various industries. Gary will play a very important role in executing Simmons’ long-term growth plan.” Mr. Matthews has served in various corporate and leadership capacities during his 25-year career. He joins Simmons from privately-held Sleep Innovations, Inc., a fabricator and marketer of foam bedding, specialty sleep products and accessories, where he served as President and Chief Executive Officer. Prior to joining Sleep Innovations, he served as President, Worldwide Consumer Medicines and Specialty Pharmaceuticals division at Bristol-Myers Squibb Company. Previously, he served as President and Chief Executive Officer of Derby Cycle Corporation; Managing Director, Guinness UK; and President and Chief Executive Officer of the Guinness Import Company, Inc. Mr. Matthews said, “I am looking forward to joining a company with such a strong leadership position in the bedding industry and adding to the existing strengths of a world-class team. I believe I can use my experience to enhance the value of Simmons to its customers. My priorities will include a strategic plan to build upon and leverage the strengths of Simmons to create new opportunities for the Company, including future offerings in the specialty sleep arena.” Mr. Matthews received his Master’s of Business Administration from the Harvard Business School and his undergraduate degree from Princeton University. About Simmons Company Atlanta-based Simmons Company, through its indirect subsidiary Simmons Bedding, is one of the world's largest mattress manufacturers, manufacturing and marketing a broad range of products including Beautyrest®, Beautyrest BlackTM, BackCare®, Natural CareTM Latex, BackCare Kids®, and Deep Sleep®. Simmons Bedding operates 17 conventional bedding manufacturing facilities and two 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.