Simmons Company Reports Fourth Quarter and Full Year 2005 Results15 March 2006
Simmons Company ("Company" or "Simmons"), the ultimate parent of Simmons Bedding Company ("Simmons Bedding"), a leading manufacturer of premium-branded bedding products, today released operating results for the fourth quarter and full year 2005.
For the fourth quarter of 2005, net sales were $214.8 million compared to $206.6 million for the same period last year, a 4.0% increase. The fourth quarter of 2005 was a 14 week period whereas the fourth quarter of 2004 was a 13 week period. The additional week added approximately $14 million of net sales in 2005. For the fourth quarter of 2005, Simmons' wholesale and retail bedding segment net sales increased 2.2% and 28.6%, respectively, compared to the same period last year. On a comparable store basis, retail store sales for our Sleep Country USA stores increased 19.0% in the fourth quarter of 2005, compared to the prior year period, adjusted for the additional week in 2005. Gross profit for Simmons was $92.4 million, or 43.0% of net sales, for the fourth quarter of 2005 compared to $91.5 million, or 44.3% of net sales, for the same period last year. For the fourth quarter of 2005, operating income was $19.6 million, or 9.1% of net sales, compared to $16.5 million, or 8.0% of net sales, for the same period last year. Net income was $0.5 million for the fourth quarter of 2005 compared to $4.4 million for the same period of the prior year. For the fourth quarter of 2005, adjusted EBITDA (see the Supplemental Information to this press release) was $30.7 million, or 14.3% of net sales, for the fourth quarter of 2005 compared to $29.3 million, or 14.2% of net sales, for the same period last year. Simmons' fourth quarter net sales and adjusted EBITDA were both historical highs for the Company.
For fiscal year 2005, net sales declined 1.7% to $855.3 million from $869.9 million for 2004. Fiscal year 2005 was a 53 week year whereas fiscal year 2004 was a 52 week year. For 2005, Simmons' wholesale bedding segment net sales decreased 2.5% and retail bedding segment sales increased 1.6% compared to the prior year. On a comparable store basis, retail store sales for our Sleep Country USA stores increased 18.6% in 2005 compared to the prior year, adjusted for the additional week in 2005. Gross profit for Simmons was $372.6 million, or 43.6% of net sales, for 2005 compared to $397.6 million, or 45.7% of net sales, for the prior year. For 2005, operating income was $76.3 million, or 8.9% of net sales, compared to $79.5 million, or 9.1% of net sales, for the prior year. Net income was $3.3 million for 2005 compared to $23.8 million for 2004. For 2005, adjusted EBITDA was $113.6 million, or 13.3% of net sales, compared to $130.1 million, or 15.0% of net sales, for the prior year. Simmons repaid $27.1 million of debt in fiscal year 2005. Simmons' working capital (see the Supplemental Information to this press release) as a percentage of net sales was 2.0% as of December 31, 2005 compared to 2.1% as of December 25, 2004.
Simmons' Chairman and Chief Executive Officer, Charlie Eitel, said, "Despite the fourth quarter challenges of a temporary foam shortage and unprecedented increases in the cost of foam, we continued to see improvement in our overall sales and profitability during the quarter driven by our reinvigorated product lines and our focus on taking costs out of our business processes. In addition, we also improved our sales strategy in the fourth quarter by realigning our sales organization to better match our customers' needs. As we start 2006, we are excited about our new sales strategy and lower cost structure."
The Company will webcast its 2005 financial results via a conference call on Tuesday, March 14, 2006, beginning at 11:00 a.m. Eastern Time. The webcast will be available at the Company's website http://www.simmons.com and will also be available for replay through March 28, 2006.
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(R), BackCare(R), BackCare Kids(R) and Deep Sleep(R). 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 http://www.simmons.com.
"Safe Harbor" Statement under Private Securities Litigation Reform Act of 1995:
This press release includes forward-looking statements that reflect Simmons' current views about future events and financial performance. Words such as "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts" and variations of such words or similar expressions that predict or indicate future events, results or trends, or that do not relate to historical matters, identify forward-looking statements. The forward-looking statements in this press release speak only as of the date of this release. These forward-looking statements are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that the events, results or trends identified in these forward- looking statements will occur or be achieved. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from Simmons' expectations. These factors include, but are not limited to: (i) competitive and pricing pressures in the bedding industry; (ii) legal and regulatory requirements; (iii) the success of new products; (iv) our relationships with our major suppliers; (v) fluctuations in costs of raw materials; (vi) our relationship with significant customers and licensees; (vii) our ability to increase prices on our products and the effect of these price increases on our unit sales; (viii) an increase in return rates and warranty claims; (ix) our labor relations; (x) departure of key personnel; (xi) encroachments on our intellectual property; (xii) product liability claims; (xiii) our level of indebtedness; (xiv) interest rate risks; (xv) compliance with covenants in our debt agreements; (xvi) future acquisitions; (xvii) our ability to achieve the expected benefits from any personnel realignments; and (xviii) other risks and factors identified from time to time in the Company's and Simmons Beddings' reports filed with the Securities and Exchange Commission ("SEC"). We undertake no obligation to update or revise any forward-looking statements, either to reflect new developments or for any other reason.
Simmons Company and Subsidiaries
Condensed Historical Consolidated Statements of Operations
(in thousands)
Quarter Ended Year Ended
December December December December
31, 25, 31, 25,
2005 2004 2005 2004
(14 weeks) (13 weeks) (53 weeks) (52 weeks)
Wholesale net sales $195,551 $191,405 $788,123 $808,373
Retail net sales 22,766 17,701 82,274 80,985
Eliminations (3,508) (2,549) (15,121) (19,465)
Net sales 214,809 206,557 855,276 869,893
Cost of products sold 122,362 115,092 482,710 472,252
Gross profit 92,447 91,465 372,566 397,641
Operating expenses:
Selling, general and
administrative expenses 72,780 71,587 299,057 317,755
Amortization of intangibles 1,417 1,424 5,693 4,933
Plant closure charges - 2,304 72 3,068
Transaction expenses 379 1,688 556 1,993
Licensing fees (1,709) (2,125) (9,128) (9,622)
72,867 74,878 296,250 318,127
Operating income 19,580 16,587 76,316 79,514
Interest expense, net 18,574 11,498 70,355 44,216
Income before income taxes 1,006 5,089 5,961 35,298
Income tax expense 548 649 2,636 11,524
Net income $458 $4,440 $3,325 $23,774
Adjusted EBITDA (a) $30,716 $29,291 $113,573 $130,100
See Notes to Condensed Historical Financial Data.
Simmons Company and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 25,
2005 2004
Assets
Current assets:
Cash and cash equivalents $24,622 $24,206
Accounts receivable, net 76,032 87,467
Inventories 33,050 33,300
Other current assets 17,950 22,649
Total current assets 151,654 167,622
Property, plant and equipment, net 58,360 62,842
Goodwill, net 488,230 488,686
Intangible assets, net 537,290 542,983
Other assets 45,243 45,157
$1,280,777 $1,307,290
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $1,602 $4,124
Accounts payable and accrued liabilities 110,170 125,457
Total current liabilities 111,772 129,581
Long-term debt 906,148 913,611
Deferred income taxes 144,418 147,924
Other non-current liabilities 14,092 13,346
Total liabilities 1,176,430 1,204,462
Stockholders' equity 104,347 102,828
$1,280,777 $1,307,290
See Notes to Condensed Historical Financial Data.
Simmons Company and Subsidiaries
(Notes to Condensed Historical Financial Data - continued)
a) Adjusted EBITDA (as defined in Simmons Bedding's senior credit
facility) differs from the term "EBITDA" as it is commonly used. In
addition to adjusting net income to exclude interest expense, income
taxes and depreciation and amortization, adjusted EBITDA also adjusts
net income by excluding items or expenses not typically excluded in the
calculation of "EBITDA" such as management fees, non-cash stock
compensation expenses, reorganization costs, and other unusual or non-
recurring charges or credits. Adjusted EBITDA is presented because it
is a material component of the covenants contained within Simmons
Bedding's credit agreements and a measure used by management to
determine operating performance. EBITDA does not represent net income
or cash flow from operations as those terms are defined by accounting
principles generally accepted in the United States and does not
necessarily indicate whether cash flows will be sufficient to fund cash
needs. Below is a reconciliation of net income to adjusted EBITDA:
Quarter Ended Year Ended
December December December December
31, 25, 31, 25,
2005 2004 2005 2004
Net income $458 $4,440 $3,325 $23,774
Depreciation and amortization 7,518 6,431 27,722 23,084
Income tax expense 548 648 2,636 11,524
Interest expense 18,727 11,522 70,621 44,357
EBITDA 27,251 23,041 104,304 102,739
Non-cash stock compensation
expense 7 39 9 3,347
Reorganization expense 2,508 - 6,534 -
Transaction related
expenditures, including
cost of products sold 379 1,346 556 8,797
Plant opening/closing charges - 4,072 321 13,549
Other 571 793 1,849 1,668
Adjusted EBITDA $30,716 $29,291 $113,573 $130,100
b) Working capital computation (current assets less current liabilities as
defined in our senior credit facility):
December 31, December 25,
2005 2004
Current assets $151,654 $167,622
Less:
Cash and equivalents (24,622) (24,206)
127,032 143,416
Current liabilities 111,772 129,581
Less:
Current maturities of long-term debt (1,602) (4,124)
110,170 125,457
Working capital $16,862 $17,959
Source: prnewswire
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