Contacts: Alan H. Oshiki
Broadgate Consultants, Inc.
(212) 232-2222
William S. Creekmuir
Simmons Company
(770) 673-2625
FOR IMMEDIATE RELEASE
Simmons Company
Reports Record Full Year 2006 Results
- • Double-Digit Growth in Volume Drives Record Sales
- • Operational Improvements Deliver Increased Operating Margins and Record EBITDA
_________________________________________________________________
ATLANTA, March 22, 2007 – 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 ended
December 30, 2006.
“The Company’s 2006 financial results significantly exceeded our expectations for the year,” said Charlie Eitel, Simmons Chairman and Chief Executive Officer. “Simmons set new highs in net sales and Adjusted EBITDA while gaining market share with increasing momentum throughout 2006. We also took steps to build our core business by exiting the retail segment with the sale of Sleep Country USA in August, and acquiring Simmons Canada in November. We believe these strategic transactions, coupled with moves we made to strengthen our product lines and our U.S. and Canadian management teams, position us well for 2007.”
Mr. Eitel continued, “We are optimistic about our prospects for 2007. We entered the year with arguably the hottest product line in our industry including our luxury line, Beautyrest Black™, which was introduced in August 2006. This January we introduced our new Beautyrest® 2007 product line. Dealer reaction to the product line at the Las Vegas Market was enthusiastic and the initial performance of the line at retail has been outstanding.”
Results for the Quarter Ended December 30, 2006
For the fourth quarter of 2006, net sales were $224.8 million compared to $214.8 million for the same period last year, a 4.6% increase. The fourth quarter of 2006 was a 13 week period whereas the fourth quarter of 2005 was a 14 week period. The additional week added approximately $12.4 million of sales in 2005. Additionally, our net sales in 2005 included the sales of our former retail operations. Exclusive of these sales, our net sales increased $29.2 million or 14.9%. Our sales growth was primarily attributable to an increase in our domestic conventional bedding units sold of 5.3% compared to the same period last year, and Simmons Canada sales of $12.7 million in 2006. Gross profit for the fourth quarter increased to $91.7 million, or 40.8% of net sales, from $91.0 million, or 42.4% of net sales, for the same period of 2005.
For the fourth quarter of 2006, operating income was $16.7 million, or 7.4% of net sales, compared to $19.6 million, or 9.1% of net sales, for the same period last year. We had a net loss of ($2.8) million for the fourth quarter of 2006 compared to net income $0.5 million for the same period of the prior year. For the fourth quarter of 2006, Adjusted EBITDA (see the Supplemental Information to this press release) increased 6.0% to $32.8 million compared to $30.9 million during the same period of 2005.
Results for the Year Ended December 30, 2006
For fiscal year 2006, net sales rose 12.4% to $961.6 million compared to $855.3 million in 2005. Exclusive of the net sales associated with our former retail operations, our net sales increased $124.6 million, or 15.8%, to $912.7 million in fiscal year 2006 compared to $788.1 million in fiscal year 2005. In addition, fiscal year 2006 was a 52 week year compared to 53 weeks in fiscal year 2005. For fiscal year 2006, our net sales increased principally due to increases in domestic conventional bedding unit volume and average unit selling price of 10.8% and 2.6%, respectively, compared to fiscal year 2005. Gross profit for the fiscal year 2006 was $417.5 million or 43.4% of net sales, compared to $367.1 million, or 42.9% of net sales, a year ago.
For fiscal year 2006, operating income was $152.0 million, or 15.8% of net sales, compared to $76.3 million, or 8.9% of net sales, in 2005. Exclusive of the $43.3 million pre-tax gain on the sale of Sleep Country USA, operating income was $108.7 million, or 11.3% of net sales, for fiscal year 2006. Net income was $47.6 million for fiscal year 2006 compared to $3.3 million in 2005. Adjusted EBITDA for fiscal year 2006 increased 42.9% to a record $163.3 million compared to $114.3 million, or 13.4% of net sales, for 2005.
As of December 30, 2006, Simmons’ working capital (see Supplemental Information to this press release) as a percentage of net sales for fiscal year 2006 was 0.7% compared to 2.0% at the beginning of the year. In 2006, Simmons Bedding’s leverage ratio decreased from 6.2 to 4.1, as a result of the Company’s improved financial performance and debt reduction.
The Company will webcast its 2006 financial results via a conference call on Friday, March 23, 2007, beginning at 11:00 a.m. Eastern Time. The webcast will be available at the Company’s website www.simmons.com and will also be available for replay through April 6, 2007.
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 TM, BackCare®, Natural Care TM Latex, BackCare Kids® 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.
“Safe Harbor” Statement under Private Securities Litigation Reform Act of 1995:
This press release includes forward-looking statements that reflect our 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 call. 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 our expectations. These factors include, but are not limited to: (i) competitive pricing pressures in the bedding industry; (ii) legal and regulatory requirements; (iii) the success of our new products; (iv) our relationships with and viability of our major suppliers; (v) fluctuations in our 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 our return rates and warranty claims; (ix) our labor relations; (x) departure of our key personnel; (xi) encroachments on our intellectual property; (xii) our product liability claims; (xiii) our level of indebtedness; (xiv) interest rate risks; (xv) compliance with covenants in our debt agreements; (xvi) our future acquisitions; (xvii) our ability to successfully integrate Simmons Canada into our operations; (xviii) the loss of key personnel at Simmons Canada as a result of our acquisition; (xix) our ability to achieve the expected benefits from any personnel realignments; and (xx) other risks and factors identified from time to time in our reports filed with the Securities and Exchange Commission. We undertake no obligation to update or revise any forward-looking statements, either to reflect new developments or for any other reason.
-table follows-
