Net Sales Increase 2% Gross Margin Expands 331 Basis Points
Operating Income Grows $43.6 million Adjusted EBITDA Increases 75%
TRINITY, N.C., Jan. 13 /PRNewswire-FirstCall/ -- Sealy Corporation
(NYSE: ZZ), the bedding industry's largest global manufacturer,
today announced results for its fourth quarter and full fiscal year
2009. Net sales for the fourth fiscal quarter were $332.1 million
an increase of 1.9% compared to the same prior year period, based
principally upon U.S. wholesale bedding sales growth of 7.3%. Gross
margin increased 331 basis points to 39.5% from the prior year
quarter, driven by a 371 basis point gain in the Company's U.S.
market. Income from operations for the fourth fiscal quarter
increased $43.6 million to $19.6 million compared to the same
period in the prior year. Earnings per share (EPS) in the fourth
quarter 2009 were $0.02 per diluted share, compared to a loss of
$0.45 per diluted share in the prior year quarter. The
corresponding share counts for 2009 fourth quarter EPS and 2008
fourth quarter EPS were 278.4 million and 91.8 million,
respectively. Adjusted EBITDA for the fourth fiscal quarter
increased to $37.0 million from $21.1 million, while Adjusted
EBITDA margin increased 465 basis points to 11.1% compared to the
same prior year period. "We are pleased with the results produced
by our intense focus on the aspects of our business that we can
control, which are clearly represented by the year-over-year
improvements in the results that we are reporting today. Our Q4
2009 sales results represent our first year-over-year increase
since Q4 2007. Our successful roll-out of the new Stearns &
Foster line reinforced our commitment to developing innovative
products and was an important driver in our profitable market share
gains and in strengthening our partnerships with our retailers and
suppliers. Our relentless focus on permanently reducing our cost
structure has aligned our operations with current market conditions
and our increased cash flow has provided greater financial
flexibility in making further investments in the growth and
efficiency of our business," stated Larry Rogers, Sealy's President
and Chief Executive Officer. Fiscal 2009 Fourth Quarter Results
Total U.S. net sales increased 6.1% to $233.0 million from the
fourth quarter of fiscal 2008. Wholesale domestic net sales, which
exclude third party sales from Sealy's component plants, grew 7.3%
to $227.7 million, compared to $212.2 million in the fourth quarter
of 2008. New product introductions such as the Company's new
Stearns & Foster line offset a weak retail environment. Unit
volume increased 7.9%, while wholesale Average Unit Selling Price
(AUSP) decreased 0.6% on a year-over-year basis. International net
sales decreased $7.0 million, or 6.6%, from the fourth quarter of
2008 to $99.1 million. Excluding the effects of currency
fluctuation, International net sales declined 8.8% from the fourth
quarter of 2008. This decline was primarily due to soft sales in
the Company's Canadian business unit, which experienced a
challenging retail environment and reduced promotional activity.
Gross profit was $131.1 million compared to $117.9 million in the
fourth quarter of fiscal 2008. Gross profit margin was 39.5%, an
increase of 331 basis points compared to the prior year fourth
quarter. U.S. gross profit margin increased 371 basis points to
41.5%. This increase in U.S. gross profit margin was driven
primarily by lower material costs and continued improvements in
manufacturing efficiencies, which were partially offset by
unfavorable pricing trends. Selling, general, and administrative
(SG&A) expenses were $113.9 million for the fourth quarter of
fiscal 2009, an improvement of $3.1 million versus the comparable
period a year earlier. As a percent of sales, SG&A declined to
34.3% from 35.9% in the same prior year period. The reduction in
SG&A expenses is primarily due to actions taken by management
to reduce the Company's cost structure. Volume driven variable
expenses declined $4.1 million. Fixed operating costs, exclusive of
compensation expense, decreased $10.5 million including a $4.8
million improvement in foreign exchange driven costs and reductions
in discretionary and severance related costs. Compensation expense
increased by $11.5 million primarily due to increases for
incentive-based payments, defined contribution plan payments, and
non-cash compensation expense related to new equity grants. Income
from operations for the fourth fiscal quarter increased $43.6
million to $19.6 million compared to the same period in the prior
year. As a percent of sales, income from operations increased to
5.9% from a loss in the same prior year period. This improvement
was based on better gross profit margin performance and continued
cost improvements. Prior year results included a non-cash charge of
$27.5 million related to the impairment of goodwill at the
Company's European and Puerto Rican reporting units. Total Adjusted
EBITDA was $37.0 million for the fourth quarter of fiscal 2009, or
11.1% of net sales, which represents an increase of 465 basis
points on a year-over-year basis. Fiscal 2009 Full Year Results Net
Sales for the fiscal year ended November 29, 2009 decreased 13.9%
to $1,290.1 million from $1,498.0 million for fiscal 2008. Gross
profit was $516.8 million, or 40.1% of net sales, versus $582.0
million, or 38.9% of net sales, for fiscal 2008. Income from
operations was $111.1 million or 8.6% of net sales compared to
$82.5 million or 5.5% of net sales for fiscal 2008. Net income was
$13.5 million, or $0.10 per diluted share, based on a diluted share
count of 185.6 million shares. For fiscal 2008, the Company
reported a net loss of $3.8 million, or $0.04 per diluted share,
based on a diluted share count of 91.2 million shares. Total
Adjusted EBITDA was $167.7 million, or 13.0% of net sales, compared
to $166.9 million, or 11.1% of net sales, for the fiscal year ended
November 30, 2008. During the year, the Company reduced its debt
net of cash by $40.8 million. As of November 29, 2009, the
Company's debt net of cash was $716.0 million, compared to $756.8
million as of November 30, 2008. This also represents a decrease of
$33.6 million compared to the Company's debt net of cash as of
August 30, 2009, and a decrease of $44.9 million compared to $760.9
million as of May 31, 2009. The Net Debt to Adjusted EBITDA ratio
excluding the 8.0% Payment In Kind Convertible Notes was 3.20x as
of November 29, 2009, as compared to 3.76x as of August 30, 2009,
and 4.03x as of May 31, 2009. "With macro-economic, credit market
and retail industry conditions showing signs of recovery, our
industry is generating more examples of stabilization in demand and
profitability. In this environment, we 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 fourth quarter 2009
results at 5:00 p.m. (Eastern Standard Time). The conference call
can be accessed live over the phone by dialing 1-877-941-2069, or
for international callers, 1-480-629-9713. 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 4195263. The replay
will be available until January 20, 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 http://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
http://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), PurEmbrace(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 http://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) November 29, November 30,
2009 2008 ------------ ------------ ASSETS Current assets: Cash and
equivalents $131,427 $26,596 Accounts receivable, net of allowances
for bad debts, cash discounts and returns 156,850 156,583
Inventories 56,810 64,634 Prepaid expenses and other current assets
21,080 30,969 Deferred income tax assets 20,222 16,775 ------
------ Total current assets 386,389 295,557 ------- -------
Property, plant and equipment -at cost 446,989 449,308 Less
accumulated depreciation (239,508) (225,958) -------- --------
207,481 223,350 ------- ------- Other assets: Goodwill 360,583
357,149 Intangible assets, net of accumulated amortization 1,937
4,945 Deferred income tax assets 6,874 3,392 Debt issuance costs,
net, and other assets 52,206 29,083 ------ ------ 421,600 394,569
------- ------- Total assets $1,015,470 $913,476 ==========
======== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities:
Current portion - long-term obligations $13,693 $21,243 Accounts
payable 88,971 97,084 Accrued incentives and advertising 31,804
34,542 Accrued compensation 43,105 24,797 Accrued interest 15,230
16,432 Other accrued liabilities 36,436 44,363 ------ ------ Total
current liabilities 229,239 238,461 Long-term obligations, net of
current portion 833,766 762,162 Other liabilities 59,625 71,257
Deferred income tax liabilities 832 584 - - Common stock and
options subject to redemption - 8,856 Stockholders' deficit: Common
stock 947 917 Additional paid-in capital 885,064 668,547
Accumulated deficit (992,950) (817,597) Accumulated other
comprehensive income (1,053) (19,711) ------ ------- Total
shareholders' deficit (107,992) (167,844) -------- -------- Total
liabilities and shareholders' deficit $1,015,470 $913,476
========== ======== SEALY CORPORATION CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except per share data)
(Unaudited) Three Months Ended ------------------ November 29,
November 30, 2009 2008 ------------ ------------ Net sales $332,060
$325,756 Cost of goods sold 200,926 207,902 ------- ------- Gross
profit 131,134 117,854 Selling, general and administrative expenses
113,887 117,030 Goodwill impairment loss 1,188 27,475 Amortization
expense 873 842 Restructuring expenses and asset impairment (192)
219 Royalty income, net of royalty expense (4,256) (3,769) ------
------ Income (loss) from operations 19,634 (23,943) Interest
expense 22,541 15,340 Loss on rights for convertible notes - -
Refinancing and extinguishment of debt and interest rate
derivatives (38) 5,378 Other income, net (17) (100) --- ---- Loss
before income tax benefit (2,852) (44,561) Income tax benefit
(5,426) (3,141) ------ ------ Net income (loss) $2,574 $(41,420)
====== ======== Earnings per common share---Basic $0.03 $(0.45)
===== ====== Earnings per common share--- Diluted $0.02 $(0.45)
===== ====== Weighted average number of common shares outstanding:
Basic 93,535 91,793 Diluted 278,404 91,793 SEALY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands,
except per share data) (Unaudited) Year Ended ---------- November
29, November 30, 2009 2008 ------------ ------------ Net sales
$1,290,064 $1,498,023 Cost of goods sold 773,279 915,977 -------
------- Gross profit 516,785 582,046 Selling, general and
administrative expenses 416,420 482,566 Goodwill impairment loss
1,188 27,475 Amortization expense 3,308 3,692 Restructuring
expenses and asset impairment 1,256 3,126 Royalty income, net of
royalty expense (16,442) (17,327) ------- ------- Income from
operations 111,055 82,514 Interest expense 79,092 60,464 Loss on
rights for convertible notes 4,549 - Refinancing and extinguishment
of debt and interest rate derivatives 17,423 5,378 Gain on sale of
subsidiary stock (1,292) - Other income, net (77) (397) --- ----
Income before income tax expense 11,360 17,069 Income tax provision
(benefit) (2,125) 20,872 ------ ------ Net income $13,485 $(3,803)
======= ======= Earnings per common share-- -Basic $0.15 $(0.04)
===== ====== Earnings per common share-- -Diluted $0.10 $(0.04)
===== ====== Weighted average number of common shares outstanding:
Basic 92,258 91,231 Diluted 185,639 91,231 RECONCILIATION OF
ADJUSTED EBITDA TO OPERATING INCOME AND ADJUSTED EBITDA MARGIN TO
OPERATING MARGIN NON GAAP MEASURES Three Months Ended:
------------------- November 29, November 30, 2009 2008 -----------
----------- (percentage (percentage of net of net (in thousands)
sales) (in thousands) sales) Income from operations $19,634 5.9%
$(23,943) -7.3% Depreciation and amortization 8,746 2.6% 8,691 2.7%
Adjustments for debt covenants: Non-cash compensation 5,251 1.6%
845 0.3% KKR consulting fees 587 0.2% 2,195 0.7% Severance charges
278 0.1% 2,282 0.7% Goodwill impairment 1,188 0.4% 27,475 8.4%
Restructuring and impairment related charge 974 0.3% 220 0.1% Other
(a) 297 0.1% 3,331 1.0% --- ----- Adjusted EBITDA $36,955 11.1%
$21,096 6.5% ======= ======= Year Ended: ----------- November 29,
November 30, 2009 2008 ----------- ----------- (percentage
(percentage of net of net (in thousands) sales) (in thousands)
sales) Income from operations $111,055 8.6% $82,514 5.5%
Depreciation and amortization 33,401 2.6% 35,949 2.4% Adjustments
for debt covenants: Non-cash compensation 12,638 1.0% 3,375 0.2%
KKR consulting fees 2,862 0.2% 2,195 0.1% Severance charges 2,502
0.2% 6,019 0.4% Goodwill impairment 1,188 0.1% 27,475 1.8%
Restructuring and impairment related charge 3,623 0.3% 3,402 0.2%
Other (a) 467 0.0% 5,997 0.4% --- ----- Adjusted EBITDA $167,736
13.0% $166,926 11.1% ======== ======== (a) Consists of various
immaterial adjustments DATASOURCE: Sealy Corporation CONTACT: Mark
D. Boehmer, VP & Treasurer, Sealy Corporation, +1-336-862-8705
Web Site: http://www.sealy.com/
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