Simmons Company Reports Second Quarter Sales Decline

Furniture World Magazine

Simmons Company, the holding company for Simmons Bedding Company, a leading manufacturer of premium-branded bedding products, 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® product offering at introductory price points. We believe this line will help capture a younger generation of Beautyrest® 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. 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®, Beautyrest Black®, Beautyrest Studio(TM), ComforPedic by Simmons(TM), Natural Care®, Beautyrest Beginnings(TM) and Deep Sleep®. 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.