Simmons Bedding Company Announces Second Quarter Results

Furniture World Magazine

Simmons Bedding Company, a leading manufacturer of premium branded bedding products, announced its operating results for the second quarter ended June 26, 2004, posting increased net income on increased second quarter sales. For the second quarter of 2004, net sales increased 1.3% to $201.8 million, as compared to $199.3 million in the same period one year ago. Wholesale bedding net sales increased 2.0% to $187.7 million in the second quarter. In comparison to the prior year, Simmons' wholesale bedding average unit selling price in the second quarter increased 4.8% while wholesale bedding unit shipments decreased 1.3%. The Company's retail store net sales in the second quarter of 2004 decreased $4.2 million, or 17.9%, to $19.2 million from $23.4 million in the second quarter of 2003, due to the sale of the Company's Mattress Gallery retail operations on May 1, 2004. The Company had net income of $6.0 million in the second quarter of 2004 compared to $3.5 million in the same period one year ago. The increase in net income was due principally to a 60% increase in operating income, offset in part by increased interest expense that resulted from the December 19, 2003 acquisition of Simmons by affiliates of Thomas H. Lee Partners ("THL"). Adjusted EBITDA for the second quarter of 2004 decreased by $1.3 million, or 4.2%, to $28.9 million from $30.2 million in the second quarter of 2003. Simmons' Chairman and Chief Executive Officer, Charlie Eitel, said, "We are very pleased with our second quarter results when considering the timing of this year's fiscal quarter end in relation to the fourth of July holiday and in comparison to the prior year second quarter, during which we had a significantly higher growth rate as compared to the industry. During the quarter we achieved record sales, opened a new manufacturing facility in Hazleton, Pennsylvania, continued construction on another new facility in Waycross, Georgia which began production earlier this week, finalized the sale of our Mattress Gallery retail operations, and increased our operating cash flows." For the first six months of 2004, net sales increased 10.2% to $425.1 million, as compared to $385.9 million in the same period one year ago. Wholesale bedding net sales increased 10.9% to $394.8 million for the first six months of 2004. Simmons' wholesale bedding unit shipments and wholesale bedding average unit selling price increased 3.5% and 7.1%, respectively, in the first six months of 2004 versus the prior year. The Company's retail store net sales in the first six months of 2004 decreased $1.3 million, or 2.9%, to $44.3 million from $45.7 million in the first six months of 2003. The Company had net income of $9.9 million in the first six months of 2004 compared to $11.0 million in the same period one year ago. The decrease in net income was due principally to increased interest expense, intangible amortization expense, and non-recurring expenses, all of which are related to the December 19, 2003 acquisition of Simmons by THL. Adjusted EBITDA for the first six months of 2004 increased by $6.9 million, or 11.7 %, to $66.2 million from $59.3 million in the first six months of 2003. Mr. Eitel added, "While our operating earnings and net income in the second quarter of 2004 improved compared to a year ago, our results were negatively impacted by increases in the cost of raw materials, primarily steel, wood and foam; increased fuel costs; non-recurring costs associated with the closing of one manufacturing facility; and start-up costs for our two new manufacturing facilities. We expect these new facilities to generate cost savings for us by the end of 2004." Net debt (total debt less cash) totaled $728.2 million as of June 26, 2004, a decline of $28.9 million during the second quarter. For the first six months of 2004, net debt decreased by $38.4 million as a result of increased cash flow from operations. Mr. Eitel also stated, "We are pleased to announce that B. Joseph Messner has joined the Board of Directors of Simmons as the Company's fourth independent director. Joe is a seasoned chief executive who is currently CEO of Bushnell Performance Optics, developer and marketer of Bushnell, Tasco, Bolle and Serengeti brands of sports optics. Prior to being named CEO of Bushnell Performance Optics, Mr. Messner was President and CEO of First Alert, Inc., a leading manufacturer and marketer of residential safety products. The Simmons management team welcomes the counsel Joe brings to our Board." The Board of Directors also includes independent directors David A. Jones, Chairman and Chief Executive Officer of Rayovac Corporation, and Albert L. Prillaman, Chairman of Stanley Furniture Company, Inc., both of whom were elected to the Board in connection with THL's purchase of Simmons in December 2003, and William P. Carmichael, Chairman of the Nations Funds (Bank of America advised mutual funds), who was elected in May of this year. The Company also announced that to enhance the balance of independent directors on the Simmons Board, Robert W. Hellyer and William S. Creekmuir, President and Executive Vice President and Chief Financial Officer of the Company, respectively, had relinquished their Board positions. Mr. Eitel concluded, "We are very pleased with our financial performance for the first six months of 2004, and are excited about our new product lines which will be introduced in October at the International Home Furnishings Market, and the acquisition of the crib mattress business of Simmons Juvenile Products Company, Inc. which we anticipate will be finalized during the third quarter. And while we are encouraged by industry sales in recent months, as reported by the International Sleep Products Association, and our own sales to date for our third quarter, there is some concern about the impact of rising raw material costs and fuel prices. We remain cautiously optimistic about the balance of 2004." The Company will webcast its second quarter and first six months of 2004 financial results via a conference call on Monday, August 16, 2004 beginning at 11:00 a.m. Eastern Daylight Time. It will be available at the Company's website http://www.simmons.com/. The webcast will also be available for replay through August 30, 2004. Atlanta-based Simmons Bedding Company is one of the world's largest mattress manufacturers, manufacturing and marketing a broad range of products including Beautyrest(R), BackCare(R), BackCare Kids(R), Olympic(R) Queen, Deep Sleep(R) and sang(TM). The Company operates 18 plants across the United States and Puerto Rico. Simmons is committed to helping consumers attain a higher quality of sleep and supports its mission through a Better Sleep Through Science(R) philosophy, which includes developing superior mattresses and promoting a sound, smart sleep routine. For more information, consumers and customers can visit the Company's website at http://www.simmons.com/.