TRINITY, N.C., March 27, 2012 /PRNewswire/ -- Sealy Corporation
(NYSE: ZZ), a leading global bedding manufacturer, today announced
results for its first quarter of fiscal 2012.
Fiscal 2012 1st Quarter Recap for Continuing Operations
- Net sales increased by $6.8
million to $312.3 million, a
2.2% increase compared to the first quarter of fiscal 2011.
- Gross profit increased by $3.9
million to $122.4 million
compared to the first quarter of fiscal 2011. Gross Margin
increased 40 basis points to 39.2%
- Income from operations increased by $6.2
million to $25.9 million
compared to the first quarter of fiscal 2011. Prior year
results included $3.7 million of
higher product launch and advertising costs, which were associated
with the launch of the 2011 Next Generation Posturepedic line.
- Net income from continuing operations was $1.6 million or $0.01 per diluted share, compared to net income
from continuing operations of $0.1
million or $0.00 per diluted
share in the prior year quarter. The corresponding share
counts for 2012 and 2011 first quarter earnings per share were
109.3 million and 107.8 million, respectively. For further
information on the calculation of diluted shares, please see the
attached Reconciliation of Fully Diluted Sharecount schedule.
- Adjusted EBITDA increased by 21.2% or $6.4 million to $36.4
million compared to the prior year quarter.
"We delivered positive financial and operational performance in
the first quarter of 2012," stated Larry
Rogers, Sealy's President and Chief Executive Officer.
"Our positive sales, gross margin and Adjusted EBITDA
performance for the quarter were driven by the success of our Next
Generation Stearns & Foster line, which began shipping in Q4,
2011."
Fiscal 2012 First Quarter Results
Total U.S. net sales increased 0.7% to $240.3 million from the first quarter of fiscal
2011. Excluding third party sales from the component plants,
wholesale average unit selling price increased by 4.3%, while
wholesale unit volume decreased 4.0%. The increase in average unit
selling price was driven by the performance of the newly introduced
Next Generation Stearns & Foster product line. The decrease in
unit volume is attributable to lower sales volumes in the middle
and lower price points, partially offset by growth from the Next
Generation Stearns & Foster product line.
International net sales increased $5.2
million, or 7.7%, from the first quarter of fiscal 2011 to
$71.9 million. This increase was
primarily due to increased sales in Canada coupled with stronger sales performance
in the Mexico and Argentina markets. In Canada, local currency sales increases of
10.2% translated into increases of 8.2% in U.S. dollars due to a
weaker Canadian dollar. Local currency sales performance in
Canada was driven by a 15.5%
increase in unit volume, offset by a 4.6% decrease in average unit
selling price. The increase in unit volume and decrease in average
unit selling price was attributable to strategic promotional events
to drive increases in unit volumes and market share.
Gross profit for the first fiscal quarter increased by
$3.9 million to $122.4 million from the prior year quarter.
Gross margin increased 0.4 percentage points to 39.2%.
The increase in percentage of net sales was primarily due to an
increase in gross profit margin in U.S. operations which was
partially offset by decreases in gross profit margins in
Canada and other international
operations. U.S. gross profit margin increased 0.8 percentage
points to 38.7%. The increase in gross profit margin was due
primarily to relatively better pricing and a shift in the mix of
product sales to higher priced Next Generation Stearns & Foster
products which resulted in an improvement in gross profit margin of
approximately 1.6 percentage points. Also contributing to the
improvement in gross profit margin were advances made in
manufacturing processes including value engineering efforts which
resulted in a 1.0 percentage point increase in U.S. gross profit
margin. These gains were partially offset by higher material costs
related to increased commodity prices, which resulted in a 1.5
percentage point decrease in U.S. gross profit margin.
Selling, general, and administrative expenses were $100.1 million for the first quarter of fiscal
2012, a decrease of $3.6 million
versus the comparable period a year earlier. As a percentage of net
sales, this expense was 32.1% and 34.0% for the quarters ended
February 26, 2012 and February 27, 2011, respectively. The
decrease as a percentage of net sales was principally due to
reductions in product launch and national advertising expenses
relative to those experienced in the prior year period for the
introduction of the Next Generation Posturepedic line.
Income from operations for the first quarter increased 31.7% or
$6.2 million to $25.9 million. Prior year results included
$3.7 million of higher product launch
and advertising costs, which were associated with the launch of the
2011 Next Generation Posturepedic line.
Net income from continuing operations for the first quarter of
fiscal 2012 was $0.01 per diluted
share.
As of February 26, 2012, the
Company's debt net of cash was $682.7
million and Net Debt to Adjusted EBITDA ratio (excluding the
Convertible Payment In Kind Notes) was 3.76x, compared to 3.95x at
November 27, 2011. During the
quarter, we redeemed $10 million of
our Senior Secured Notes.
"As we look forward in 2012, we are focused on driving continued
performance of the new Stearns & Foster line at retail, and
initiating the rollouts of the new, value priced Sealy Promotional
Line, and the premium priced Optimum by Sealy Posturepedic line.
These two lines were introduced at the January 2012 Las Vegas Furniture Market and will
begin shipping in the second quarter of 2012," stated Mr. Rogers.
"Finally, we remain focused on driving organizational and
operational improvements throughout the company in 2012," concluded
Mr. Rogers.
Results from Discontinued Operations
During the fourth quarter of 2010, the company divested the
assets of its manufacturing operations in France and Italy, which represented all of the assets in
its Europe segment. In
addition, the company discontinued manufacturing operations in
Brazil. The company has
transitioned to a license arrangement with third parties in both of
these markets. These businesses are accounted for as
discontinued operations, and accordingly, the company has
reclassified its financial data for all periods presented to
reflect these actions. Unless otherwise noted, the reported
financial data pertains to Sealy's continuing operations.
Non-GAAP Measures
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. The Company presents Adjusted EBITDA,
because the covenants contained in the Company's senior debt
agreements are based upon these measures and Adjusted EBITDA is a
material component of those covenants. Additionally, management
uses Adjusted EBITDA to evaluate the Company's operating
performance. The Company also presents Adjusted EBITDA
margin, which is Adjusted EBTIDA reflected as a percentage of net
sales because it believes that this measure provides useful
incremental information to investors regarding the Company's
operating performance. 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 net income is provided in the attached schedule.
Additionally, the Company provides certain information on a
constant currency basis which reflects a comparison of current
period results translated at the prior period currency rates.
This information is provided because the Company believes
that it provides useful incremental information to investors
regarding the Company's operating performance.
Conference Call
The Company will hold a conference call today to discuss its
fiscal first quarter 2012 results at 5:00
p.m. (Eastern Standard Time). The conference call can
be accessed live over the phone by dialing 1-877-941-4774, or for
international callers, 1-480-629-9760. A replay will be available
one hour after the call and can be accessed by dialing
1-877-870-5176, or for international callers, 1-858-384-5517. The
passcode for the live call and the replay is 4524490. The replay
will be available until April 3,
2012.
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.
About Sealy
Sealy owns one of the largest bedding brands in the world, with
sales of $1.2 billion in fiscal 2011.
The Company manufactures and markets a broad range of mattresses
and foundations under the Sealy®, Sealy Posturepedic®, Sealy
Embody™, Optimum™ by Sealy Posturepedic®, Stearns & Foster®,
and Bassett® 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.
The condensed consolidated statements of operations and related
information presented below have been adjusted for discontinued
operations presentation for all periods presented. However,
the condensed consolidated balance sheets and statements of cash
flows have not been adjusted for such presentation.
SEALY
CORPORATION
|
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
|
(In
thousands)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
February
26,
|
|
November
27,
|
|
February
27,
|
|
|
2012
|
|
2011
|
|
2011
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and equivalents
|
$
97,924
|
|
$
107,975
|
|
$
102,390
|
|
|
Accounts receivable, net of
allowances for bad debts, cash discounts and returns
|
154,128
|
|
126,494
|
|
154,950
|
|
|
Inventories
|
59,166
|
|
57,002
|
|
57,216
|
|
|
Other current assets
|
27,122
|
|
29,275
|
|
22,890
|
|
|
Deferred income tax
assets
|
21,646
|
|
21,349
|
|
20,169
|
|
Total current assets
|
359,986
|
|
342,095
|
|
357,615
|
|
Property, plant and equipment -
at cost
|
407,322
|
|
406,115
|
|
392,479
|
|
Less accumulated
depreciation
|
(243,064)
|
|
(239,370)
|
|
(223,865)
|
|
|
164,258
|
|
166,745
|
|
168,614
|
|
Other assets:
|
|
|
|
|
|
|
|
Goodwill
|
362,681
|
|
361,026
|
|
363,455
|
|
|
Intangible assets,
net
|
1,042
|
|
1,116
|
|
1,314
|
|
|
Deferred income tax
assets
|
2,747
|
|
1,772
|
|
5,205
|
|
|
Other assets, including debt
issuance costs, net
|
45,545
|
|
46,440
|
|
52,896
|
|
|
412,015
|
|
410,354
|
|
422,870
|
|
Total assets
|
$
936,259
|
|
$
919,194
|
|
$
949,099
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Current portion - long-term
obligations
|
$
1,697
|
|
$
1,584
|
|
$
2,156
|
|
|
Accounts payable
|
76,384
|
|
68,774
|
|
79,879
|
|
|
Accrued incentives and
advertising
|
22,896
|
|
26,038
|
|
26,418
|
|
|
Accrued compensation
|
21,550
|
|
17,601
|
|
20,655
|
|
|
Accrued interest
|
16,441
|
|
14,074
|
|
17,346
|
|
|
Other accrued
liabilities
|
28,721
|
|
28,426
|
|
33,237
|
|
Total current
liabilities
|
167,689
|
|
156,497
|
|
179,691
|
|
Long-term obligations, net of
current portion
|
778,890
|
|
790,297
|
|
789,999
|
|
Other liabilities
|
52,366
|
|
52,415
|
|
52,680
|
|
Deferred income tax
liabilities
|
554
|
|
549
|
|
843
|
|
|
|
|
|
|
|
|
Stockholders'
deficit:
|
|
|
|
|
|
|
|
Common stock
|
1,010
|
|
1,010
|
|
981
|
|
|
Additional paid-in
capital
|
945,105
|
|
935,512
|
|
921,763
|
|
|
Accumulated deficit
|
(1,015,341)
|
|
(1,016,577)
|
|
(1,007,591)
|
|
|
Accumulated other comprehensive
income
|
5,986
|
|
(509)
|
|
10,733
|
|
Total shareholders'
deficit
|
(63,240)
|
|
(80,564)
|
|
(74,114)
|
|
Total liabilities and
shareholders' deficit
|
$
936,259
|
|
$
919,194
|
|
$
949,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEALY
CORPORATION
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(In
thousands, except per share data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
February
26,
|
|
February
27,
|
|
|
2012
|
|
2011
|
|
|
|
|
|
|
Net sales
|
$
312,290
|
|
$
305,529
|
|
Cost of goods sold
|
189,915
|
|
187,025
|
|
|
|
|
|
|
|
Gross profit
|
122,375
|
|
118,504
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
100,124
|
|
103,734
|
|
Amortization expense
|
72
|
|
72
|
|
Royalty income, net of royalty
expense
|
(3,730)
|
|
(4,971)
|
|
|
|
|
|
|
|
|
Income from
operations
|
25,909
|
|
19,669
|
|
|
|
|
|
|
Interest expense
|
22,160
|
|
21,708
|
|
Refinancing and extinguishment
of debt
|
913
|
|
-
|
|
Other income, net
|
(122)
|
|
(105)
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes
|
2,958
|
|
(1,934)
|
|
Income tax provision
(benefit)
|
2,527
|
|
(1,209)
|
|
Equity in earnings of
unconsolidated affiliates
|
1,175
|
|
855
|
|
|
|
Income from continuing
operations
|
1,606
|
|
130
|
|
Loss from discontinued
operations
|
(370)
|
|
(1,032)
|
|
|
|
Net income (loss)
|
$
1,236
|
|
$
(902)
|
|
|
|
|
|
|
Earnings (loss) per common
share—Basic
|
|
|
|
|
|
|
Income (loss) from continuing
operations per common share
|
$
0.02
|
|
$
-
|
|
|
|
Loss from discontinued
operations per common share
|
-
|
|
(0.01)
|
|
(Loss) earnings per common
share—Basic
|
$
0.02
|
|
$
(0.01)
|
|
|
|
|
|
|
Earnings (loss) per common
share—Diluted
|
|
|
|
|
|
|
Income (loss) from continuing
operations per common share
|
$
0.01
|
|
$
-
|
|
|
|
Loss from discontinued
operations per common share
|
-
|
|
(0.01)
|
|
Earnings (loss) per common
share—Diluted
|
$
0.01
|
|
$
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding:
|
|
|
|
|
|
Basic
|
100,918
|
|
97,816
|
|
|
Diluted
|
109,254
|
|
107,828
|
|
|
|
|
|
|
|
|
|
SEALY
CORPORATION
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(in
thousands)
|
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
|
February
26,
|
|
February
27,
|
|
|
2012
|
|
2011
|
|
Operating activities:
|
|
|
|
|
|
Net income (loss)
|
$
1,236
|
|
$
(902)
|
|
|
Adjustments to reconcile net
income to
|
|
|
|
|
|
net cash provided by (used in)
operating activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
6,058
|
|
6,054
|
|
|
|
Deferred income taxes
|
(636)
|
|
322
|
|
|
|
Amortization of deferred gain on
sale-leaseback
|
(174)
|
|
(167)
|
|
|
|
Paid in kind interest on
convertible notes
|
5,526
|
|
4,586
|
|
|
|
Amortization of discount on new
senior secured notes
|
424
|
|
382
|
|
|
|
Amortization of debt issuance
costs and other
|
1,162
|
|
1,175
|
|
|
|
Share-based
compensation
|
2,496
|
|
2,879
|
|
|
|
Loss (gain) on sale of
assets
|
243
|
|
(231)
|
|
|
|
Write-off of debt issuance costs
related to debt extinguishments
|
553
|
|
-
|
|
|
|
Loss on repurchase of senior
notes
|
300
|
|
-
|
|
|
|
Dividends received from
unconsolidated affiliates
|
1,000
|
|
1,011
|
|
|
|
Equity in earnings of
unconsolidated affiliates
|
(1,175)
|
|
(855)
|
|
|
|
Loss on disposition of
subsidiary
|
-
|
|
206
|
|
|
|
Other, net
|
1,210
|
|
638
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
(24,463)
|
|
(12,459)
|
|
|
|
Inventories
|
(2,571)
|
|
161
|
|
|
|
Prepaid expenses and other
current assets
|
2,081
|
|
(2,796)
|
|
|
|
Other assets
|
95
|
|
(839)
|
|
|
|
Accounts payable
|
6,142
|
|
12,547
|
|
|
|
Accrued expenses
|
1,877
|
|
(13,294)
|
|
|
|
Other liabilities
|
(12)
|
|
(615)
|
|
Net cash provided by (used in)
operating activities
|
1,372
|
|
(2,197)
|
|
Investing activities:
|
|
|
|
|
|
Purchase of property, plant and
equipment
|
(3,822)
|
|
(5,927)
|
|
|
Proceeds from sale of property,
plant and equipment
|
1,981
|
|
224
|
|
|
|
|
|
Net cash used in investing
activities
|
(1,841)
|
|
(5,703)
|
|
Financing activities:
|
|
|
|
|
|
Proceeds from issuance of
long-term obligations
|
702
|
|
787
|
|
|
Repayments of long-term
obligations
|
(929)
|
|
(1,118)
|
|
|
Repayment of senior secured
notes, including premium of $300
|
(10,300)
|
|
-
|
|
|
Repurchase of common stock
associated with vesting of employee share-based
awards
|
(10)
|
|
-
|
|
|
Exercise of employee stock
options, including related excess tax benefits
|
-
|
|
581
|
|
|
Debt issuance costs
|
-
|
|
(147)
|
|
|
Other
|
-
|
|
(34)
|
|
|
|
|
|
Net cash (used in) provided by
financing activities
|
(10,537)
|
|
69
|
|
Effect of exchange rate changes
on cash
|
955
|
|
966
|
|
Change in cash and
equivalents
|
(10,051)
|
|
(6,865)
|
|
Cash and equivalents:
|
|
|
|
|
|
Beginning of period
|
107,975
|
|
109,255
|
|
|
|
|
|
|
|
End of period
|
$
97,924
|
|
$
102,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF EBITDA TO NET
INCOME
|
|
NON GAAP
MEASURES
|
|
|
|
|
Three Months
Ended:
|
|
|
February
26,
|
|
February
27,
|
|
|
2012
|
|
2011
|
|
|
(in
thousands)
|
(percentage
of
net sales)
|
|
(in
thousands)
|
(percentage
of
net sales)
|
|
|
|
|
|
|
|
|
Net (loss) income
|
$
1,236
|
0.4%
|
|
$
(902)
|
-0.3%
|
|
Interest
expense
|
22,160
|
7.1%
|
|
21,708
|
7.1%
|
|
Income
taxes
|
2,527
|
0.8%
|
|
(1,209)
|
-0.4%
|
|
Depreciation
and amortization (a)
|
6,058
|
1.9%
|
|
6,054
|
2.0%
|
|
|
|
|
|
|
|
|
|
31,981
|
10.2%
|
|
25,651
|
8.4%
|
|
Adjustments for debt
covenants:
|
|
|
|
|
|
|
|
Refinancing charges
|
913
|
0.3%
|
|
-
|
0.0%
|
|
|
Non-cash compensation
|
2,496
|
0.8%
|
|
2,880
|
0.9%
|
|
|
KKR consulting fees
|
154
|
0.0%
|
|
366
|
0.1%
|
|
|
Discontinued
operations
|
370
|
0.1%
|
|
1,032
|
0.3%
|
|
|
Other (various) (b)
|
458
|
0.1%
|
|
75
|
0.0%
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
$
36,372
|
11.6%
|
|
$
30,004
|
9.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Excludes depreciation
from discontinued operations
|
|
(b) Consists of various
immaterial adjustments
|
|
|
Sealy Corporation
|
|
Share Count
Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
February 26,
2012
|
|
February 27,
2011
|
|
|
|
(in
thousands)
|
|
Numerator:
|
|
|
|
|
|
Net income from continuing
operations, as reported
|
|
$
1,606
|
|
$
130
|
|
Net income attributable to
participating securities
|
|
(3)
|
|
-
|
|
Net income from continuing
operations available to common shareholders
|
|
$
1,603
|
|
$
130
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Denominator for basic
earnings per share—weighted average shares
|
|
100,918
|
|
97,816
|
|
Effect of dilutive
securities:
|
|
|
|
|
|
Stock options
|
|
683
|
|
886
|
|
Restricted share
units
|
|
7,114
|
|
8,720
|
|
Other
|
|
539
|
|
406
|
|
Denominator for diluted
earnings per share—adjusted weighted average shares and
assumed conversions
|
|
109,254
|
|
107,828
|
|
|
|
|
|
|
|
|
|
|
|
|
Sealy Corporation
|
|
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
February 26,
2012
|
|
February 27,
2011
|
|
|
(in
thousands)
|
|
Cash interest expense
|
$
15,048
|
|
$
15,565
|
|
Non-cash interest
expense
|
7,112
|
|
6,143
|
|
Total interest
expense
|
$
22,160
|
|
$
21,708
|
|
|
|
|
|
|
|
|
|
|
SOURCE Sealy Corporation