TRINITY, N.C., March 30 /PRNewswire-FirstCall/ -- Sealy
Corporation (NYSE: ZZ), the bedding industry's largest global
manufacturer, today announced results for its first quarter of
fiscal year 2010.
Net sales for the first fiscal quarter were $339.6 million, an increase of 9.6% compared to
the same prior year period.
Gross margin increased 331 basis points to 41.3% from the prior
year quarter, driven by a 202 basis point gain in the Company's
U.S. market.
Income from operations for the first fiscal quarter increased
49.0%, or $11.5 million, to
$34.8 million compared to the same
period in the prior year.
Net Income in the first quarter of 2010 was $5.7 million, compared to $4.3 million in the comparable prior year
quarter, an increase of 31.5%. Earnings per share (EPS) in
the first quarter of 2010 were $0.03
per diluted share, compared to $0.05
per diluted share in the comparable prior year quarter. The
corresponding diluted share counts for 2010 first quarter EPS and
2009 first quarter EPS were 283.6 million and 93.6 million,
respectively.
Adjusted EBITDA for the first fiscal quarter increased 38.8% to
$49.3 million from $35.5 million, while Adjusted EBITDA margin
increased to 14.5%, an increase of 306 basis points compared to the
same prior year period.
"We are very pleased with our first quarter 2010 results, as we
delivered top line growth, driven by both unit growth and Average
Unit Selling Price ("AUSP") growth. These results represent
our second consecutive quarter of year-over-year sales growth.
We continue to reap benefits from the successful rollout last
year of our innovative Stearns & Foster line. We had a strong
showing at the Las Vegas Market in February, where we continued our
focus on new products, introducing a new Sealy promotional line,
the Embody specialty line and select Posturepedic mattresses to
commemorate Posturepedic's 60th anniversary. We are also
seeing the benefits of our relentless focus on permanently reducing
our cost structure throughout the economic downturn, as we
delivered gross margin expansion and increased Adjusted EBITDA in
terms of both dollars and margin. As our operational and
financial metrics improve, we expect to continue to generate strong
free cash flow to further delever our balance sheet," stated
Larry Rogers, Sealy's President and
Chief Executive Officer.
Fiscal 2010 First Quarter Results
Total U.S. net sales increased 4.9% to $246.4 million from the first quarter of fiscal
2009. Wholesale domestic net sales, which exclude third party
sales from Sealy's component plants, grew 4.6% to $241.6 million compared to the first quarter of
fiscal 2009. The successful launch of the new Stearns &
Foster line and a more stable retail environment drove the positive
performance. Unit volume increased 2.4%, while wholesale Average
Unit Selling Price increased 2.2% on a year-over-year basis.
International net sales increased $18.0
million, or 24.0%, from the first quarter of 2009 to
$93.3 million. Excluding the effects
of currency fluctuation, International net sales increased 11.9%
from the first quarter of 2009. This increase was primarily due to
increased sales stemming from the success of our new Stearns &
Foster line, better execution of promotions and an improvement in
retail demand in the Canadian market. Canadian unit volume for the
quarter increased 32.5% from the comparable prior year quarter.
Gross profit was $140.1 million
compared to $117.6 million in the
first quarter of fiscal 2009. Gross profit margin was 41.3%,
an increase of 331 basis points compared to the prior year first
quarter. U.S. gross profit margin increased 202 basis points
to 42.3%. This increase in U.S. gross profit margin was
driven primarily by lower material costs and improved manufacturing
efficiencies.
Selling, general, and administrative (SG&A) expenses were
$109.0 million for the first quarter
of fiscal 2010, an increase of $12.3
million versus the comparable period a year earlier. As a
percent of net sales, SG&A increased 89 basis points to 32.1%
from 31.2% in the same prior year period. The increase as a
percentage of net sales was primarily driven by an increase in
non-cash compensation costs. The increase in absolute dollars is
primarily due to a $6.3 million
increase in volume driven variable expenses. Non-cash
compensation expense increased by $3.1
million compared to the first quarter of fiscal 2009 due
primarily to the recognition of expense related to the restricted
share units that were granted in the third quarter of fiscal
2009.
Income from operations for the first fiscal quarter increased
$11.5 million to $34.8 million
compared to the same period in the prior year. As a percent
of net sales, income from operations increased to 10.3% from 7.6%
in the same prior year period. This increase was based on better
gross profit margin performance.
Total Adjusted EBITDA increased 38.8% to $49.3 million for the first quarter of fiscal
2010, or 14.5% of net sales, which represents an increase of 306
basis points on a year-over-year basis.
As of February 28, 2010, the
Company's debt net of cash was $722.9
million. This represents a decrease of $38.0 million compared to $760.9 million as of May
31, 2009, at the conclusion of our 2009 refinancing. The Net
Debt to Adjusted EBITDA ratio excluding the 8.0% Payment In Kind
Convertible Notes was 3.01x as of February
28, 2010, as compared to 4.03x as of May 31, 2009.
"We are encouraged by the stabilization we have seen in retail
demand across our business segments and with the signs of stability
in both the macro-economic and consumer credit market environments.
We continue to believe our product innovation and operational
improvements have put the Company in a strong strategic position to
accelerate gains in profitable market share and drive increasing
value for our shareholders," added Mr. Rogers.
Adjusted EBITDA
Within the information above, Sealy provides information
regarding Adjusted EBITDA and Adjusted EBITDA Margin which are not
recognized terms under GAAP (Generally Accepted Accounting
Principles) and do not purport to be alternatives to operating
income or net income as a measure of operating performance or to
cash flows from operating activities as a measure of liquidity. We
present Adjusted EBITDA and its derivative, Adjusted EBITDA Margin,
because the covenants contained in our senior debt agreements are
based upon these measures and Adjusted EBITDA is a material
component of those covenants. Additionally, these measures are not
intended to be measures of available cash flow for management's
discretionary use, as these measures do not consider certain cash
requirements such as interest payments, tax payments and debt
service requirements. Because not all companies use identical
calculations, this presentation may not be comparable to other
similarly titled measures of other companies. A
reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin to the
Company's income from operations is provided in the attached
schedule.
Conference Call
The Company will hold a conference call today to discuss its
fiscal first quarter 2010 results at 5:00
p.m. (Eastern Daylight Time). The conference call can
be accessed live over the phone by dialing 1-877-941-2321, or for
international callers, 1-480-629-9714. A replay will be available
one hour after the call and can be accessed by dialing
1-800-406-7325, or for international callers, 1-303-590-3030. The
passcode for the live call and the replay is 4263821. The replay
will be available until April 6,
2010.
Interested investors and other parties may also listen to a
simultaneous webcast of the conference call by logging onto the
Investors section of the Company's website at www.sealy.com. The
on-line replay will be available for a limited time beginning
immediately following the call in the Investors section of the
Company's website at www.sealy.com.
An updated investor presentation will be posted on Wednesday, March 31st, in the Investors section
of the Company's website at www.sealy.com.
About Sealy
Sealy is the bedding industry's largest global manufacturer with
sales of $1.3 billion in fiscal 2009.
The Company manufactures and markets a broad range of mattresses
and foundations under the Sealy(R), Sealy Posturepedic(R),
including SpringFree(TM) and TrueForm(R); Stearns & Foster(R),
and Bassett(R) brands. Sealy operates 25 plants in North America, and has the largest market
share and highest consumer awareness of any bedding brand on the
continent. In the United States,
Sealy sells its products to approximately 3,000 customers with more
than 7,000 retail outlets. Sealy is also a leading supplier to the
hospitality industry. For more information, please visit
www.sealy.com.
This document contains forward-looking statements within the
meaning of the safe harbor provisions of the Securities Litigation
Reform Act of 1995. Terms such as "expect," "believe," "continue,"
and "grow," as well as similar comments, are forward-looking in
nature. Although the Company believes its growth plans are based
upon reasonable assumptions, it can give no assurances that such
expectations can be attained. Factors that could cause actual
results to differ materially from the Company's expectations
include: general business and economic conditions, competitive
factors, raw materials purchasing, and fluctuations in demand.
Please refer to the Company's Securities and Exchange Commission
filings for further information.
SEALY
CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEET
(In
thousands)
(Unaudited)
|
|
|
|
|
|
February
28,
|
|
November
29,
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and equivalents
|
$
117,055
|
|
$
131,427
|
|
|
Accounts receivable, net of allowances
for bad debts, cash discounts and returns
|
177,700
|
|
156,850
|
|
|
Inventories
|
59,536
|
|
56,810
|
|
|
Prepaid expenses and other current
assets
|
16,091
|
|
21,080
|
|
|
Deferred income tax assets
|
15,688
|
|
20,222
|
|
Total current assets
|
386,070
|
|
386,389
|
|
Property, plant and equipment - at
cost
|
436,097
|
|
446,989
|
|
Less accumulated
depreciation
|
(236,297)
|
|
(239,508)
|
|
|
|
199,800
|
|
207,481
|
|
Other assets:
|
|
|
|
|
|
Goodwill
|
360,875
|
|
360,583
|
|
|
Intangible assets, net of accumulated
amortization
|
1,594
|
|
1,937
|
|
|
Deferred income tax assets
|
10,670
|
|
6,874
|
|
|
Debt issuance costs, net, and other
assets
|
52,920
|
|
52,206
|
|
|
|
426,059
|
|
421,600
|
|
Total assets
|
$
1,011,929
|
|
$
1,015,470
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Current portion - long-term
obligations
|
$
10,972
|
|
$
13,693
|
|
|
Accounts payable
|
95,461
|
|
88,971
|
|
|
Accrued incentives and
advertising
|
25,689
|
|
31,804
|
|
|
Accrued compensation
|
28,229
|
|
43,105
|
|
|
Accrued interest
|
19,161
|
|
15,230
|
|
|
Other accrued liabilities
|
33,468
|
|
36,436
|
|
Total current liabilities
|
212,980
|
|
229,239
|
|
Long-term obligations, net of current
portion
|
829,005
|
|
833,766
|
|
Other liabilities
|
60,225
|
|
59,625
|
|
Deferred income tax
liabilities
|
1,997
|
|
832
|
|
|
|
|
|
|
|
Common stock and options subject to
redemption
|
-
|
|
-
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
Common stock
|
947
|
|
947
|
|
|
Additional paid-in capital
|
896,130
|
|
885,064
|
|
|
Accumulated deficit
|
(987,236)
|
|
(992,950)
|
|
|
Accumulated other comprehensive
income
|
(2,119)
|
|
(1,053)
|
|
Total shareholders' deficit
|
(92,278)
|
|
(107,992)
|
|
Total liabilities and shareholders'
deficit
|
$
1,011,929
|
|
$
1,015,470
|
|
|
|
|
|
|
SEALY
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands,
except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
February
28,
|
|
March 1,
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
Net sales
|
$ 339,627
|
|
$ 309,976
|
|
Cost of goods sold
|
199,507
|
|
192,336
|
|
|
|
|
|
|
|
|
|
Gross profit
|
140,120
|
|
117,640
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expenses
|
108,956
|
|
96,696
|
|
Amortization expense
|
339
|
|
815
|
|
Restructuring expenses and asset
impairment
|
-
|
|
113
|
|
Royalty income, net of royalty expense
|
(4,023)
|
|
(3,370)
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
34,848
|
|
23,386
|
|
|
|
|
|
|
|
|
Interest expense
|
22,341
|
|
17,548
|
|
Gain on sale of subsidiary stock
|
-
|
|
(1,292)
|
|
Other income, net
|
(54)
|
|
(33)
|
|
|
|
|
|
|
|
|
Income before income tax provision
|
12,561
|
|
7,163
|
|
Income tax provision
|
7,790
|
|
2,819
|
|
Equity in earnings of unconsolidated
affiliates
|
943
|
|
-
|
|
|
|
Net income
|
$
5,714
|
|
$
4,344
|
|
|
|
|
|
|
|
|
Earnings per common
share---Basic
|
$
0.06
|
|
$0.05
|
|
|
|
|
|
|
|
|
Earnings per common
share---Diluted
|
$
0.03
|
|
$0.05
|
|
Weighted average number of common
shares outstanding:
|
|
|
|
|
|
Basic
|
94,524
|
|
91,807
|
|
|
Diluted
|
283,576
|
|
93,555
|
|
|
|
|
|
|
|
SEALY
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
thousands)
(Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
February 28,
|
|
March 1,
|
|
|
|
|
|
|
2010
|
|
2009
|
|
Operating activities:
|
|
|
|
|
|
Net income
|
$
5,714
|
|
$
4,344
|
|
|
Adjustments to reconcile net income
to
|
|
|
|
|
|
net cash provided by (used in)
operating activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
7,549
|
|
8,229
|
|
|
|
Deferred income taxes
|
2,656
|
|
(3,571)
|
|
|
|
Amortization of deferred gain on
sale-leaseback
|
(163)
|
|
(162)
|
|
|
|
Paid in kind interest on convertible
notes
|
3,365
|
|
-
|
|
|
|
Amortization of discount on new senior
secured notes
|
389
|
|
-
|
|
|
|
Amortization of debt issuance costs
and other
|
2,067
|
|
583
|
|
|
|
Share-based compensation
|
4,117
|
|
1,016
|
|
|
|
Loss on sale of assets
|
171
|
|
395
|
|
|
|
Gain on sale of subsidiary
stock
|
-
|
|
(1,292)
|
|
|
|
Other, net
|
(523)
|
|
(172)
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
(22,905)
|
|
(8,369)
|
|
|
|
Inventories
|
(3,991)
|
|
6,947
|
|
|
|
Prepaid expenses and other current
assets
|
2,011
|
|
10,723
|
|
|
|
Other assets
|
71
|
|
-
|
|
|
|
Accounts payable
|
8,577
|
|
14,056
|
|
|
|
Accrued expenses
|
(19,419)
|
|
(12,619)
|
|
|
|
Other liabilities
|
1,565
|
|
(186)
|
|
|
|
|
|
Net cash (used in) provided by
operating activities
|
(8,749)
|
|
19,922
|
|
Investing activities:
|
|
|
|
|
|
Purchase of property, plant and
equipment
|
(2,449)
|
|
(2,346)
|
|
|
Proceeds from sale of property, plant
and equipment
|
57
|
|
8,449
|
|
|
Net proceeds from sale of subsidiary
stock
|
-
|
|
1,237
|
|
|
Investments in and loans to
unconsolidated affiliate
|
-
|
|
(2,322)
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
(2,392)
|
|
5,018
|
|
Financing activities:
|
|
|
|
|
|
Proceeds from issuance of long-term
obligations
|
516
|
|
1,990
|
|
|
Repayments of long-term
obligations
|
(3,361)
|
|
(4,043)
|
|
|
Borrowings under revolving credit
facilities
|
-
|
|
59,565
|
|
|
Repayments under revolving credit
facilities
|
-
|
|
(93,965)
|
|
|
Exercise of employee stock options,
including related excess tax benefits
|
-
|
|
3
|
|
|
Debt issuance costs
|
-
|
|
(8)
|
|
|
Other
|
(16)
|
|
-
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
(2,861)
|
|
(36,458)
|
|
Effect of exchange rate changes on
cash
|
(370)
|
|
(4)
|
|
Change in cash and
equivalents
|
(14,372)
|
|
(11,522)
|
|
Cash and equivalents:
|
|
|
|
|
|
Beginning of period
|
131,427
|
|
26,596
|
|
|
|
|
|
|
|
|
|
|
|
End of period
|
$
117,055
|
|
$
15,074
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF
ADJUSTED EBITDA TO OPERATING INCOME AND ADJUSTED EBITDA MARGIN TO
OPERATING MARGIN
|
|
NON GAAP
MEASURES
|
|
|
|
|
|
Three Months
Ended:
|
|
|
|
|
February
28,
|
|
March
1,
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
(in
thousands)
|
(percentage of net
sales)
|
|
(in
thousands)
|
(percentage of net sales)
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
$
34,848
|
10.3%
|
|
$
23,386
|
7.5%
|
|
Depreciation and
amortization
|
|
7,549
|
2.2%
|
|
8,229
|
2.7%
|
|
|
|
|
|
|
|
|
|
|
Adjustments for debt
covenants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash compensation
|
|
4,107
|
1.2%
|
|
1,011
|
0.3%
|
|
|
KKR consulting fees
|
|
496
|
0.1%
|
|
720
|
0.2%
|
|
|
Severance charges
|
|
1,115
|
0.3%
|
|
1,278
|
0.4%
|
|
|
Equity in earnings of unconsolidated
affiliates
|
|
943
|
0.3%
|
|
-
|
0.0%
|
|
|
Other (a)
|
|
230
|
0.1%
|
|
877
|
0.3%
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
49,288
|
14.5%
|
|
$
35,501
|
11.5%
|
|
|
|
|
|
|
|
|
|
|
(a) Consists of various
immaterial adjustments
|
|
|
|
|
|
|
|
|
|
Share Count Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
February 28,
2010
|
|
March 1,
2009
|
|
|
|
(in
thousands)
|
|
Numerator:
|
|
|
|
|
|
Net income, as reported
|
|
$
5,714
|
|
$
4,344
|
|
Net income attributable to
participating securities
|
|
(18)
|
|
(13)
|
|
Interest on convertible
notes
|
|
3,365
|
|
-
|
|
Net income available to common
shareholders
|
|
$
9,061
|
|
$
4,331
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Denominator for basic earnings per
share—weighted average shares
|
|
94,524
|
|
91,807
|
|
Effect of dilutive
securities:
|
|
|
|
|
|
Convertible debt
|
|
178,204
|
|
-
|
|
Stock options
|
|
1,316
|
|
1,595
|
|
Restricted share units
|
|
9,206
|
|
-
|
|
Other
|
|
326
|
|
153
|
|
Denominator for diluted earnings per
share—adjusted weighted average shares and assumed
conversions
|
|
283,576
|
|
93,555
|
|
|
|
|
|
|
Interest Expense Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
February 28,
2010
|
|
March 1,
2009
|
|
|
(in
thousands)
|
|
Cash interest expense
|
$
17,060
|
|
$
16,965
|
|
Non-cash interest expense
|
5,282
|
|
583
|
|
Total interest
expense
|
$
22,341
|
|
$
17,548
|
|
|
|
|
|
SOURCE Sealy Corporation