Simmons Company Reports First Quarter 2008 Results

ATLANTA, May 6 /PRNewswire/ -- Simmons Company ("Company" or "Simmons"), the holding company for Simmons Bedding Company ("Simmons Bedding"), a leading manufacturer of premium-branded bedding products, today released operating results for the first quarter of 2008.

For the first quarter of 2008, net sales increased 3.5% to $276.9 million compared to $267.4 million for the same period last year. Domestic segment net sales increased $6.8 million, or 2.9%, to $245.1 million compared to the same period of 2007. The domestic segment sales growth was primarily attributable to an increase in conventional bedding average unit sales price of 7.9% which was partially offset by a decrease in conventional bedding units sold of 3.6%. Gross profit for the first quarter of 2008 was $109.7 million, or 39.6% of net sales, compared to $108.2 million, or 40.5% of net sales, for the same period of 2007. For the first quarter of 2008, operating income was $22.1 million, or 8.0% of net sales, compared to $25.2 million, or 9.4% of net sales, for the same period last year. Net income was $2.5 million for the first quarter of 2008 compared to $4.4 million for the same period in 2007. For the first quarter of 2008, Adjusted EBITDA (see the Supplemental Information to this press release) was $33.0 million, or 11.9% of net sales, compared to $36.1 million, or 13.5% of net sales for the first quarter of 2007.

"Despite a very difficult retail and economic environment, we continued to gain market share in the U.S. during the first quarter," said Charlie Eitel, Simmons Chairman and Chief Executive Officer. "Our sales growth rate has exceeded that of the industry for nine consecutive quarters due to our strong product offerings across all retail price points, outstanding service and our solid relationships with our customers."

Mr. Eitel continued, "Our operating results for the quarter were negatively impacted by rising raw material and fuel prices. While we have taken significant measures to lower our overall cost structure and implemented price increases on certain products in November 2007 and March 2008, the majority of the benefits associated with these initiatives will not begin to be realized until the second and third quarters of 2008. We believe our efforts will put us in a position to continue to be successful in this challenging retail and manufacturing environment."

As of March 29, 2008, Simmons' working capital (see Supplemental Information to this press release) was 2.4% of net sales for the trailing twelve months compared to 2.3% a year ago.

The Company will discuss its first quarter 2008 financial results on a webcast Tuesday, May 6, 2008 beginning at 5:00 p.m. Eastern time. The webcast will be available for replay or download through podcast at the Company's website www.simmons.com until May 20, 2008.

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(R), Beautyrest Black(R), ComforPedic by Simmons(TM), Natural Care(R), Beautyrest Beginnings(TM) and Deep Sleep(R). 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 report. 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) general economic and industry conditions; (ii) competitive pricing pressures in the bedding industry; (iii) legal and regulatory requirements; (iv) the success of our new products and the future costs to roll out such products; (v) our relationships with and viability of our major suppliers; (vi) fluctuations in our costs of raw materials and energy prices; (vii) our relationship with and viability of significant customers and licensees; (viii) our ability to increase prices on our products and the effect of these price increases on our unit sales; (ix) an increase in our return rates and warranty claims; (x) our labor relations; (xi) departure of our key personnel; (xii) encroachments on our intellectual property; (xiii) our product liability claims; (xiv) our level of indebtedness; (xv) interest rate risks; (xvi) foreign currency exchange rate risks; (xvii) compliance with covenants in our debt agreements; (xviii) our future acquisitions; (xix) our ability to achieve the expected benefits from any personnel realignments; (xx) our ability to successfully implement our new enterprise resource planning system; and (xxi) 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-


                       Simmons Company and Subsidiaries
     Unaudited Condensed Historical Consolidated Statements of Operations
                                (in thousands)

                                                        Quarters Ended

                                                  March 29,         March 31,
                                                    2008              2007
    Net sales                                     $276,881          $267,406
    Cost of products sold                          167,207           159,215
    Gross profit                                   109,674           108,191

    Operating expenses:
      Selling, general and administrative
       expenses                                     88,551            84,708
      Amortization of intangibles                    1,589             1,479
      Licensing revenues                            (2,568)           (3,193)
                                                    87,572            82,994
    Operating income                                22,102            25,197
      Interest expense, net                         17,815            18,389
    Income before income taxes                       4,287             6,808
      Income tax expense                             1,772             2,395
    Net income                                      $2,515            $4,413

    Adjusted EBITDA (a)                            $32,981           $36,101

    See Notes to Condensed Historical Financial Data.



                       Simmons Company and Subsidiaries
                    Condensed Consolidated Balance Sheets
                                (in thousands)


                                                 March 29,        December 29,
                                                    2008              2007*
                                                (Unaudited)
    Assets
    Current assets:
      Cash and cash equivalents                    $17,972           $27,520
      Accounts receivable, net                     124,066           119,984
      Inventories                                   39,148            35,207
      Other current assets                          24,176            25,281
        Total current assets                       205,362           207,992

    Property, plant and equipment, net              90,909            87,449
    Goodwill, net                                  538,568           540,126
    Intangible assets, net                         600,165           604,547
    Other assets                                    40,934            37,539
        Total assets                            $1,475,938        $1,477,653

    Liabilities and Stockholder's Equity
    Current liabilities:
      Current maturities of long-term
       debt                                           $675              $772
      Accounts payable                              79,267            72,484
      Accrued expenses                              81,405            96,366
        Total current liabilities                  161,347           169,622

    Long-term debt                                 923,731           900,716
    Deferred income taxes                          190,687           190,321
    Other non-current liabilities                   31,365            28,842
        Total liabilities                        1,307,130         1,289,501

    Stockholder's equity                           168,808           188,152
        Total liabilities and
         stockholder's equity                   $1,475,938        $1,477,653

    * Derived from the Company's 2007 audited consolidated financial
      statements

    See Notes to Condensed Historical Financial Data.



                       Simmons Company and Subsidiaries
            Notes to Unaudited Condensed Historical Financial Data

     a) Adjusted EBITDA (as defined in Simmons Bedding's senior credit
        facility) differs from the term "EBITDA" as it is commonly used.  In
        addition to adjusting net income to exclude interest expense, income
        taxes and depreciation and amortization, Adjusted EBITDA as we
        interpret the definition also adjusts net income by excluding items or
        expenses not typically excluded in the calculation of "EBITDA" such as
        management fees, reorganization costs, ERP system implementation costs
        and other unusual or non-recurring charges or credits.  In addition,
        Adjusted EBITDA, as defined, includes the pro forma effect of business
        acquisitions and dispositions including synergies.  Adjusted EBITDA is
        presented because it is a material component of the covenants
        contained within Simmons Bedding's credit agreements and a measure
        used by management to determine operating performance.  EBITDA does
        not represent net income or cash flow from operations as those terms
        are defined by accounting principles generally accepted in the United
        States and does not necessarily indicate whether cash flows will be
        sufficient to fund cash needs.  Below is a reconciliation of net
        income to Adjusted EBITDA:


                                                         Quarter Ended

                                                   March 29,        March 31,
                                                      2008             2007

      Net income                                     $2,515           $4,413
      Depreciation and amortization                   8,216            7,348
      Income tax expense                              1,772            2,395
      Interest expense                               17,946           18,756

      EBITDA                                         30,449           32,912

      Reorganization expense including
       management severance                             275              620
      Management fees                                   488              465
      Relocation of manufacturing and
       Canada corporate facilities                      558                -
      Non-recurring professional service
       fees                                             408                -
      Transaction related expenditures
       including integration costs                      107              585
      Conversion costs associated with
       meeting new flammability standard                  -              913
      ERP system implementation costs                   482                -
      Other                                             214              606

      Adjusted EBITDA                               $32,981          $36,101


     b) Working capital computation (current assets less current liabilities,
        excluding cash and current maturities of long-term debt):


                                                  March 29,       December 29,
                                                     2008             2007

      Current assets                               $205,362         $207,992

      Less:
        Cash and cash equivalents                   (17,972)         (27,520)
                                                    187,390          180,472

      Current liabilities                           161,347          169,622

      Less:
        Current maturities of long-term
         debt                                          (675)            (772)
                                                    160,672          168,850

      Working capital                               $26,718          $11,622