Simmons Reports Fourth Quarter Sales Up 19.9%

Furniture World News

Simmons Company, the holding company for Simmons Bedding Company, a leading manufacturer of premium-branded bedding products, released operating results for the fourth quarter and full year ended December 29, 2007. Results for the Quarter Ended December 29, 2007 For the fourth quarter of 2007, net sales increased 19.9% to a record $269.6 million compared to $224.8 million for the same period last year. Domestic segment net sales increased $27.1 million, or 12.8%, to $239.2 million compared to the same period of 2006. The domestic segment sales growth was primarily attributable to increases in conventional bedding average unit sales price and units sold of 6.6% and 6.4%, respectively. Gross profit for the fourth quarter of 2007 was $111.0 million, or 41.2% of net sales, compared to $91.7 million, or 40.8% of net sales, for the same period of 2006. For the fourth quarter of 2007, operating income was $23.7 million, or 8.8% of net sales, compared to $16.7 million, or 7.4% of net sales, for the same period last year. Net income was $6.2 million for the fourth quarter of 2007 compared to a net loss of ($2.8) million for the same period in 2006. For the fourth quarter of 2007, Adjusted EBITDA (see the Supplemental Information to this press release) increased 21.4% to a fourth quarter record $35.9 million, or 13.3% of net sales, from $29.6 million, or 13.1% of net sales, in the fourth quarter of 2006. Results for the Year Ended December 29, 2007 For 2007, net sales rose 17.2% to a record $1,126.8 million compared to $961.6 million for 2006. Domestic segment net sales increased $102.4 million, or 11.4%, to $1,002.4 million for 2007 compared to 2006. Domestic segment sales growth for 2007 was primarily attributable to a 10.6% increase in conventional bedding units sold. Gross profit for 2007 was $450.6 million, or 40.0% of net sales, compared to $417.5 million, or 43.4% of net sales, for 2006. The decline in 2007 gross margin was largely attributable to the August 2006 sale of Sleep Country USA ("SCUSA"), the Company's former retail operations, which sold products at higher gross margins than those of our wholesale operations, as well as the acquisition of Simmons Canada in November 2006, which sells products at lower gross margins than those of the Domestic segment. For 2007, operating income was $108.3 million, or 9.6% of net sales, compared to $108.7 million, or 11.3% of net sales, for 2006 exclusive of the $43.3 million gain on the sale of SCUSA. Net income was $23.9 million for 2007 compared to $16.6 million for the prior year, exclusive of the gain on the sale of SCUSA net of related taxes (see Supplemental Information to this press release). For 2007, Adjusted EBITDA was $157.0 million, or 13.9% of net sales, compared to $149.3 million, or 15.5% of net sales, during 2006. "Our 2007 net sales and Adjusted EBITDA results were new annual records for the Company," said Charlie Eitel, Simmons Chairman and Chief Executive Officer. "During the year we gained considerable market share and the fourth quarter was the eighth consecutive quarter that our sales growth exceeded the growth rate for the industry. Looking forward, our mid-year 2007 acquisition of ComforPedic should position us well for further growth in the specialty bedding area." Mr. Eitel continued, "We are starting 2008 in a very challenging retail and manufacturing environment but we believe our sales momentum, strong product offerings and keen focus on cost management put us in position to be successful -- despite a soft economy and higher raw material costs." As of December 29, 2007, Simmons' working capital (see Supplemental Information to this press release) as a percentage of net sales for 2007 was 1.0% compared to 0.7% at the beginning of the year. During the fourth quarter, Simmons' total debt, less cash on hand, decreased by $35.9 million. For the fourth quarter of 2007, Simmons Bedding's leverage ratio decreased to 4.2 from 4.5, as a result of the Company's improved financial performance and debt reduction. The Company will webcast its 2007 financial results via a conference call on Tuesday, March 11, 2008, beginning at 3:00 p.m. Eastern Time. The webcast will be available at the Company's website www.simmons.com and will also be available for replay through March 25, 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(TM), ComforPedic by Simmons(TM), Natural Care(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 bedding 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.