Jennifer Convertibles Reports Third Quarter Results

WOODBURY, N.Y., July 10 /PRNewswire-FirstCall/ -- Jennifer Convertibles, Inc. (AMEX: JEN) announced today its unaudited financial results for the third fiscal quarter ended May 26, 2007.

For the third quarter, revenue from continuing operations decreased by 6.3% to $33.3 million from the $35.5 million reported for the same period last year. For the nine-month period, revenue from continuing operations decreased 4.5% to $99.4 million from the $104.1 reported in the same period last year.

For the third quarter, the Company generated net income of $1,609,000 or $0.20 and $0.18 per basic and diluted share, respectively, compared to net income of $2,245,000 or $0.31 and $0.26 per basic and diluted share, respectively, for the same period last year. For the nine-month period, the net income was $2,230,000 or $0.28 and $0.25 per basic and diluted share, respectively, compared to a net income of $3,646,000 or $0.50 and $0.46 per basic and diluted share, respectively, for the same period last year.

Operating margins from continuing operations decreased during the current three and nine month periods to 32.0% and 30.5%, respectively, compared to operating margins from continuing operations of 32.5% and 31.4%, respectively, during the three and nine month periods last year.

For the third quarter, selling, general and administrative expenses from continuing operations increased to 26.9% as a percentage of revenue from continuing operations compared to 25.8% for the same period last year. For the nine-month period, selling, general and administrative expenses from continuing operations increased to 28.1% compared to 27.6% for the same period last year.

During the third quarter, the Company did not close any stores. During fiscal 2006, the Company closed three stores, of which the operating results were reported as discontinued operations. Revenues from the closed stores reported as discontinued operations amounted to $70,000 and $345,000 in the thirteen and thirty-nine week periods ended May 27, 2006, respectively. Income (loss) from discontinued operations amounted to ($11,000) and $91,000 in the thirteen-week and thirty-nine week periods ended May 27, 2006, respectively. Income related to store closings approximated $182,000 in the thirty-nine week period ended May 27, 2006.

During the quarter, the Company opened one store and had no store closings. In addition, the Company opened a big box, full line home furniture retail store that sells products and accessories of Ashley Homestores, Ltd.

Commenting on the results Harley J. Greenfield, Chief Executive Officer of Jennifer said, "I am pleased to report that the changes to our merchandising and advertising strategies and adjustment to margins which returned us to profitability during our second fiscal quarter continued to be successful. We achieved a 42% increase in income from operations during the quarter to $1,470,000 from the $1,032,000 reported in the second fiscal quarter despite the furniture industry being significantly depressed. Our balance sheet remains strong with over $15 million in cash and short term investments."

Mr. Greenfield added, "We recently opened our first Ashley Furniture HomeStore on Glen Cove Road in Carle Place, New York. Our grand opening of this 40,000 square foot store took place in mid-June and we expect this location to produce substantial revenues and additional profitability to fuel Jennifer's growth. We are currently in the process of negotiating the lease for our second Ashley Furniture HomeStore location."

Jennifer Convertibles is the owner and licensor of the largest group of sofabed specialty retail stores in the United States, with 171 Jennifer Convertibles(R) stores and is the largest specialty retailer of leather furniture with 16 Jennifer Leather stores. As of May 26, 2007, the Company owned 163 stores and licensed 24 (including 23 owned and operated by a private company on a royalty free basis.) and operates one licensed Ashley Furniture HomeStore.

Statements in this press release other than the statements of historical fact are "forward-looking statements." Such statements are subject to certain risks and uncertainties, including changes in retail demand, vendor performance and other risk factors identified from time to time in the Company's filings with the Securities and Exchange Commission that could cause actual results to differ materially from any forward-looking statements. These forward-looking statements represent the Company's judgment as of the date of the release. The Company disclaims, however, any interest or obligations to update these forward-looking statements.

                JENNIFER CONVERTIBLES, INC. & SUBSIDIARIES
                     SUMMARY CONSOLIDATED BALANCE SHEETS
                                (IN THOUSANDS)

                                                                  08/26/06
                                                  05/26/07       (Restated)

  CASH AND CASH EQUIVALENTS                        $ 7,047         $ 7,641
  SHORT TERM INVESTMENTS                             8,150           5,000
  RESTRICTED CASH                                       74             864
  ACCOUNTS RECEIVABLE                                1,196             906
  MERCHANDISE INVENTORIES, Net                      13,412          13,597
  DUE FROM AFFILIATED COMPANY                        4,896           4,869
  PREPAID EXPENSES AND OTHER CURRENT ASSETS          1,427           1,160
                                                    36,202          34,037

  FIXTURES, EQUIPMENT & LEASEHOLD IMPROVEMENTS, Net  3,301           2,682
  ANNUITY CONTRACT                                       -             935
  GOODWILL                                           1,650           1,650
  OTHER ASSETS                                         685             703

                                                  $ 41,838        $ 40,007


  ACCOUNTS PAYABLE                                $ 16,813        $ 18,838
  CUSTOMER DEPOSITS                                  8,557           7,036
  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES     3,891           4,383
  DUE TO AFFILIATED COMPANY                            550             500
  DEFERRED RENT AND ALLOWANCES - Current Portion       673             587
    TOTAL CURRENT LIABILITIES                       30,484          31,344

  DEFERRED RENT AND ALLOWANCES - Net of Current
   Portion                                           2,948           2,959
  OBLIGATIONS UNDER CAPITAL LEASES - Net of
   Current Portion                                     126             145
    TOTAL LIABILITIES                               33,558          34,448

  STOCKHOLDERS' EQUITY                               8,280           5,559

                                                  $ 41,838        $ 40,007



                  JENNIFER CONVERTIBLES, INC. & SUBSIDIARIES
                SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT SHARE DATA)

                                   THREE MONTHS ENDED     NINE MONTHS ENDED
                                  05/26/07    05/27/06   05/26/07   05/27/06
  REVENUE:
    NET SALES                      $31,012     $33,071    $92,897    $97,105
    REVENUE FROM SERVICE
     CONTRACTS                       2,258       2,425      6,543      7,065
                                    33,270      35,496     99,440    104,170

  COST OF SALES AND OTHER CHARGES   22,613      23,944     69,101     71,412

  SELLING, GENERAL &
   ADMINISTRATIVE EXPENSES           8,950       9,146     27,905     28,723

  DEPRECIATION AND AMORTIZATION        237         223        690        617
                                    31,800      33,313     97,696    100,752

  INCOME FROM OPERATIONS             1,470    2,183      1,744      3,418

  INTEREST INCOME                      188         109        541        264

  INTEREST EXPENSE                     (4)        (22)       (11)       (22)

  INCOME FROM CONTINUING OPERATIONS
   BEFORE INCOME TAXES               1,654       2,270      2,274      3,660

  INCOME TAXES                          45          14         44        105

  INCOME FROM CONTINUING OPERATIONS  1,609       2,256      2,230      3,555

  (LOSS) INCOME FROM DISCONTINUED
    OPERATIONS (including income on
    store closings of $182 for the
    thirty-nine weeks ended in 2006)     -        (11)          -         91

  NET INCOME                        $1,609      $2,245     $2,230     $3,646

  BASIC INCOME (LOSS) PER COMMON
   SHARE:

  INCOME FROM CONTINUING OPERATIONS  $0.20       $0.31      $0.28      $0.49
  (LOSS) INCOME FROM DISCONTINUED
    OPERATIONS                           -           -          -       0.01
  NET INCOME                         $0.20       $0.31      $0.28      $0.50

  DILUTED INCOME (LOSS) PER COMMON
   SHARE:

    INCOME FROM CONTINUING
      OPERATIONS                     $0.18       $0.26      $0.25      $0.45
    (LOSS) INCOME FROM
      DISCONTINUED OPERATIONS            -           -          -        .01
    NET INCOME                       $0.18       $0.26      $0.25      $0.46

  WEIGHTED AVERAGE COMMON SHARES
   OUTSTANDING                   6,925,320   5,933,705  6,856,009  5,851,919

  COMMON SHARES ISSUABLE ON
   CONVERSION OF OUTSTANDING
   SERIES A PARTICIPATING
   PREFERRED STOCK                 924,500   1,396,722    924,500  1,415,309

  TOTAL WEIGHTED AVERAGE COMMON
   SHARES BASIC                  7,849,820   7,330,427  7,780,509  7,267,228

  EFFECT OF POTENTIAL COMMON
   SHARE ISSUANCE:
    STOCK OPTIONS                  604,768   1,115,264    837,917    615,877
    WARRANTS                       73,3848      82,543     83,352     63,693
    SERIES B CONVERTIBLE
     PREFERRED STOCK                     -      62,216          -     56,379

  WEIGHTED AVERAGE COMMON SHARES
   DILUTED                       8,527,972   8,590,450  8,701,778  8,003,177