 |  |  |  |  |  |  |  |  |
|
Sealy Corporation Reports Fourth Quarter and Full Year Fiscal 2007 Results
TRINITY, N.C., Jan. 31 /PRNewswire-FirstCall/ -- Sealy Corporation (NYSE: ZZ) , the largest bedding manufacturer in the world, today announced results for its fourth quarter and full fiscal year 2007. The fiscal year ended December 2, 2007 was a 53-week year compared to a 52-week fiscal year 2006. "In 2007 we executed well on key strategies which we believe are going to be critical to our ongoing success, including driving unit volume and protecting valuable real estate on our retailers' floors," said David J. McIlquham, Sealy's Chairman and Chief Executive Officer. "However, it was a challenging year for Sealy as our fiscal 2007 financial results did not meet our expectations. The difficult consumer spending environment combined with rising commodity cost pressures is expected to continue for the next few quarters. While we cannot control these external forces, we will begin to roll out our exciting new Sealy Posturepedic platform, implement significant changes within the Sealy organization to improve costs, and intensify our marketing strategy to support the new Posturepedic positioning of 'No Tossing and Turning Caused by Pressure Points.'" Fiscal 2007 Fourth Quarter Results Net sales for the fourth quarter ended December 2, 2007 increased 11.6% to $441.3 million from $395.3 million for the comparable period a year earlier on unit volume growth of 20.1%, partially offset by a 7.0% decrease in average unit selling price (AUSP). The extra week in fiscal 2007 compared to fiscal 2006 contributed net sales of $32.3 million. Domestic net sales increased $26.8 million, or 9.4%, to $311.4 million on a 12.5% increase in unit volume, partially offset by a 2.8% decrease in AUSP. The extra week in fiscal 2007 contributed approximately $26.2 million of net sales. The Company experienced strong performance in its Sealy Posturepedic Reserve beds along with its visco and latex specialty bedding products. The decrease in AUSP is primarily due to an increase in the share of sales coming from the Sealy Posturepedic Reserve beds and pricing actions taken in the first quarter of the year on Sealy Posturepedic TrueForm beds. The Company implemented a pricing increase after its fiscal year end which is expected to begin to positively impact AUSP in the first quarter of fiscal 2008 and mitigate the impact of raw material cost pressures. International net sales increased $19.2 million, or 17.3%, to $129.9 million. Excluding the effects of foreign currency fluctuation, net sales grew 7.2% in the quarter. The increase internationally represents a 33.8% increase in unit volume, partially offset by a decrease in AUSP. The changes in volume and AUSP were a result of increased sales of lower priced OEM products in Europe as well as select pricing actions in Canada. Mexico, Canada and Argentina continued to experience strong net sales growth and to increase market share. Fourth quarter gross profit was $179.9 million, compared to $177.5 million in the prior year fourth quarter. The extra week in fiscal 2007 compared to fiscal 2006 contributed gross profit of $13.1 million. As a percentage of net sales, gross profit was 40.8% compared to 44.9% in the fourth quarter of fiscal 2006. The decline in gross profit as a percentage of net sales was driven primarily by the addition of over $7.3 million of flame retardant materials to the Company's products in the U.S. compared to the prior year, as well as by the above mentioned product mix and price changes. The U.S. results for fourth quarter 2006 also included a $5.7 million benefit from a reduction in workers' compensation reserves, while 2007 fourth quarter results include only a $0.9 million benefit. On a per unit basis, material costs for the fourth quarter of fiscal 2007 increased a net 6.1% in the U.S. compared to the fourth quarter of fiscal 2006. Partially offsetting the above factors were continued improvements in manufacturing efficiencies, including improved labor productivity and yields on raw materials. Net income for the fourth quarter of 2007 was $17.1 million or $0.18 per fully diluted share, compared to $21.5 million or $0.22 per fully diluted share, for the comparable period a year ago. Fourth quarter 2007 diluted earnings per share includes a $0.03 income tax benefit from the release of $2.5 million of valuation allowances for Mexican deferred tax assets, offset by a $0.03 write-down charge of $4.2 million related to customer bankruptcies. Fiscal 2007 Full Year Results Net sales for the fiscal year ended December 2, 2007 increased 7.5% to $1,702.1 million from $1,582.8 million for the comparable period a year earlier. Gross profit for 2007 was $709.6 million, or 41.7% of net sales, versus $707.9 million, or 44.7% of net sales, for the comparable period a year earlier. Net income for 2007 was $79.4 million versus net income of $74.0 million for the comparable period a year ago. Fiscal year 2007 results include $26.4 million of incremental material costs to achieve compliance with the federal flammability standards that took effect on July 1, 2007, $6.4 million of additional national advertising costs, $6.2 million in charges related to customer bankruptcies and $3.9 million of expense associated with an organizational realignment in the United States. Fiscal year 2006 results include $34.2 million of charges related to the Company's IPO, associated debt extinguishments and noncash compensation, partially offset by a reduction in charges of $5.7 million due to changes in estimates underlying the reserves for workers' compensation claims. The Company generated $94.4 million of cash flow from operations in fiscal 2007. For the full fiscal year 2007, Sealy reduced its net debt by $7.8 million, purchased 1.1 million shares of its common stock for an aggregate cost of $16.3 million, and paid $27.4 million in cash dividends to stockholders. Mr. McIlquham continued, "We have begun implementation of some key strategic initiatives that we believe are necessary to drive profitable growth in the current environment. These include driving AUSP growth through new product mix and selective price increases, controlling our product launch costs, creating new advertising strategies for retail and our Sealy Posturepedic brand, expanding our latex production and product lines, achieving meaningful cost reductions in fixed operating expenses and infrastructure, and building on our strength in our international markets. Our long-term outlook remains favorable with solid growth drivers, and we know that we must continue to invest and innovate to protect and strengthen Sealy's leadership position in the industry for improved and sustainable results." Fourth quarter and full fiscal year 2007 results are preliminary and remain subject to completion of the audit being conducted by the Company's independent public accountants. Conference Call The Company will host a conference call and audio webcast with investors, analysts and other interested parties today at 5:00 P.M. eastern time. The call can be accessed live over the phone by dialing (800) 762-8973, or for international callers, (480) 248-5081. Participants should register at least 15 minutes prior to the commencement of the call. Additionally, a live audio webcast will be available to interested parties at www.sealy.com under the Investor Relations section. Participants should allow at least 15 minutes prior to the commencement of the call to register, download and install necessary audio software. A replay will be available one hour after the call and can be accessed by dialing (800) 406-7325, or for international callers, (303) 590-3030. The passcode for the replay is 3833273. The replay will be available until February 7, 2008. About Sealy Sealy is the largest bedding manufacturer in the world with sales of approximately $1.7 billion in 2007. The company manufactures and markets a broad range of mattresses and foundations under the Sealy(R), Sealy Posturepedic(R), Stearns & Foster(R), and Bassett(R) brands. Sealy operates 26 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 2,900 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 Sheets
(in thousands)
(Unaudited - Preliminary results)
December 2, November 26,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $14,607 $45,620
Accounts receivable, net of
allowances for bad debts, cash
discounts and returns 208,821 193,838
Inventories 73,682 66,126
Assets held for sale - 2,338
Prepaid expenses and other current
assets 26,497 24,710
Deferred income taxes 20,087 12,627
343,694 345,259
Property, plant and equipment - at
cost 442,306 397,167
Less accumulated depreciation (198,434) (178,957)
243,872 218,210
Other assets:
Goodwill 395,460 388,204
Other intangibles, net of
accumulated amortization 8,866 13,026
Debt issuance costs, net, and other
assets 33,187 38,033
437,513 439,263
$1,025,079 $1,002,732
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion - long-term
obligations $36,433 $18,282
Accounts payable 135,352 118,885
Accrued incentives and advertising 47,754 40,578
Accrued compensation 32,422 35,484
Accrued interest 16,526 17,286
Other accrued expenses 53,398 57,669
321,885 288,184
Long-term obligations, net of current
portion 757,322 814,236
Other noncurrent liabilities 50,814 42,688
Deferred income taxes 8,295 10,199
Common stock and options subject to
redemption 16,156 20,263
Stockholders' deficit:
Common stock 902 904
Additional paid-in capital 654,626 664,609
Accumulated deficit (794,160) (846,144)
Accumulated other comprehensive
income 9,239 7,793
(129,393) (172,838)
$1,025,079 $1,002,732
SEALY CORPORATION
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited - Preliminary results)
Three Months Ended
December 2, November 26,
2007 2006
Net sales $441,290 $395,272
Cost of goods sold 261,360 217,812
Gross profit 179,930 177,460
Selling, general and administrative
expenses 143,066 125,692
Amortization of intangibles 872 5,308
Royalty income, net of royalty
expense (5,088) (7,630)
Income from operations 41,080 54,090
Interest expense 16,906 19,351
Debt extinguishment and refinancing
expenses 973 37
Other income, net (137) (109)
Income before income tax expense 23,338 34,811
Income tax expense 6,203 13,310
Net income $17,135 $21,501
Earnings per common share---Basic $0.19 $0.24
Earning per common share---Diluted $0.18 $0.22
Weighted average number of common
shares outstanding:
Basic 90,940 90,983
Diluted 95,652 96,715
SEALY CORPORATION
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited - Preliminary results)
Year Ended
December 2, November 26,
2007 2006
Net sales $1,702,065 $1,582,843
Cost of goods sold 992,455 874,927
Gross profit 709,610 707,916
Selling, general and administrative
expenses 545,608 499,614
Expenses associated with initial
public offering of common stock - 28,510
Amortization of intangibles 3,356 5,707
Royalty income, net of royalty
expense (18,562) (18,855)
Income from operations 179,208 192,940
Interest expense 63,976 71,961
Debt extinguishment and refinancing
expenses 1,222 9,899
Other income, net (421) (750)
Income before income tax expense 114,431 111,830
Income tax expense 35,058 37,576
Income before cumulative effect of
change in accounting principle 79,373 74,254
Cumulative effect of the adoption of
FASB Interpretation No. 47,
net of related tax benefit of $191 - 287
Net income $ $79,373 $ $73,967
Earnings per common share---Basic
Income before cumulative effect of
change in accounting principle $0.87 $0.89
Cumulative effect of a change in
accounting principle - -
Earnings per common share---Basic $0.87 $0.89
Earnings per common share---Diluted
Income before cumulative effect of
change in accounting principle $0.82 $0.83
Cumulative effect of a change in
accounting principle - -
Earning per common share---Diluted $0.82 $0.83
Weighted average number of common
shares outstanding:
Basic 91,299 83,622
Diluted 96,337 89,558
SEALY CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited - Preliminary results)
Year Ended
December 2, November 26,
2007 2006
Cash flows from operating
activities:
Net income $79,373 $73,967
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 30,493 30,185
Deferred income taxes (5,207) 2,037
Non-cash interest expense:
Senior Subordinated PIK Notes - 3,348
Amortization of debt issuance
costs and other (469) 1,511
Stock-based compensation 2,891 2,658
Excess tax benefits from share-
based payment arrangements (6,585) -
(Gain) loss on sale of assets (1,695) 478
Write-off of debt issuance costs
related to debt extinguishments 1,770 6,302
Cumulative effect of accounting
change - 478
Other, net 5,980 (13,914)
Changes in operating assets and
liabilities:
Accounts receivable (5,285) (15,133)
Inventories (5,456) (3,297)
Prepaid expenses and other current
assets (2,251) (5,557)
Accounts payable 13,243 (6,088)
Accrued expenses (8,597) (6,570)
Other liabilities (3,823) (12,180)
Net cash provided by (used in)
operating activities 94,382 58,225
Cash flows from investing
activities:
Purchase of property, plant and
equipment (42,434) (30,872)
Proceeds from sale of property,
plant and equipment 5,065 535
Net cash used in investing
activities (37,369) (30,337)
Cash flows from financing
activities:
Proceeds from initial public
offering of common stock, net of
underwriting discount and other
direct costs of $24,489 - 295,348
Cash dividends (27,389) (138,648)
Repayments of long-term
obligations, including discounts
taken of $460 in 2007 and premiums
paid of $2,703 in 2006 (79,202) (611,614)
Borrowings under new credit
facility - 440,000
Borrowings under revolving credit
facilities 233,990 172,181
Repayments under revolving credit
facilities (206,643) (177,155)
Repurchase of common stock (16,253) -
Exercise of employee stock options,
including related excess tax
benefits 7,166 2,559
Other 2,113 (1,609)
Net cash (used in) provided by
financing activities (86,218) (18,938)
Effect of exchange rate changes on
cash (1,808) 116
Change in cash and cash equivalents (31,013) 9,066
Cash and cash equivalents:
Beginning of period 45,620 36,554
End of period $14,607 $45,620
EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA are not recognized terms under GAAP (Generally Accepted Accounting Principles) and do not purport to be alternatives to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, they are not intended to be measures of free cash flow for management's discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. The following table sets forth a reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA: (Unaudited - Preliminary Results)
Three Months Ended: Twelve Months Ended:
Dec. 2, Nov. 26, Dec. 2, Nov. 26,
2007 2006 2007 2006
(in thousands) (in thousands)
Income before
cumulative effect
of change
accounting
principle $17,135 $21,501 $79,373 $74,254
Interest expense 16,906 19,351 63,976 71,961
Income taxes 6,203 13,310 35,058 37,576
Depreciation and
amortization 7,429 13,560 30,493 30,185
EBITDA 47,673 67,722 208,900 213,976
Management fees
to KKR - 721
Unusual and
nonrecurring
losses:
IPO expenses - - - 28,510
Workers compensation
change in estimate - (4,489) - (4,489)
Debt extinguishment
or refinancing
charges - 37 - 9,899
North American
realignment 624 - 3,898 -
Other (various) (a) 2,247 (2,801) 4,048 1,648
Adjusted EBITDA $50,544 $60,469 $216,846 $250,265
(a) Consists of various immaterial adjustments
The following table reconciles EBITDA to cash flow from operations: (Unaudited - Preliminary Results)
Year Ended: Year Ended:
Dec. 2, 2007 Nov. 26, 2006
(in thousands)
EBITDA $208,900 $213,976
Adjustments to EBITDA to arrive at
cash flow
from operations:
Cumulative effect of a change in
accounting principle - 287
Interest expense (63,976) (71,961)
Income taxes (35,058) (37,576)
Non-cash charges against (credits to)
net income:
Deferred income taxes (5,207) 2,037
Non-cash interest expense (469) 4,859
Other, net 2,361 (4,572)
Changes in operating assets &
liabilities (12,169) (48,825)
Cash flow from operations $94,382 $58,225
Website: http://www.sealy.com/ |
Issuers of news releases and not PR Newswire are solely responsible for the accuracy of the content.
Terms and conditions, including restrictions on
redistribution, apply.
Copyright © 1996-2007 PR Newswire Association LLC.
All Rights Reserved.
A United Business Media company.
