Simmons '03 sales up 13.8%
By Larry Thomas -- Furniture Today, March 28, 2004
ATLANTA — ATLANTA — Aided by additional retail floor placements and improved sales of higher-priced products, bedding major Simmons said sales jumped 13.8% in 2003.
The company, which was acquired in December by affiliates of Thomas H. Lee Partners for $1.1 billion, reported brisk sales of both its Beautyrest and BackCare lines. In addition, its more than 100 bedding retail stores in California, Oregon and Washington had a same-store sales gain of 14.9% and an overall sales jump of 36.4%.
"I am extremely pleased with our strong 2003 financial performance, particularly given that the year began with a difficult economic environment and concluded with the distractions … related to the sale of the company," said Charlie Eitel, chairman and CEO.
For the year ended Dec. 27, sales totaled $806.3 million. Wholesale bedding sales rose 12.5% to $741 million, including a 5.6% gain in unit shipments and an identical 5.6% increase in the average unit selling price, said Eitel. Retail sales for the year amounted to $97.9 million
"Clearly, Simmons gained market share in 2003," Eitel said during a conference call with securities analysts and bondholders. "And I'm very confident that Simmons will continue to outpace the industry's growth rate in 2004."
Simmons' net loss for the year, including foreign currency adjustments, amounted to $41 million, substantially more than the 2002 net loss of $630,000. However, the company's adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, rose 20.8% to $124.3 million.
The jump in the net loss was largely due to costs associated with the Lee transaction, as well as higher interest expenses. There were also a number of one-time charges, including costs associated with two plant openings and stock compensation expense for several senior employees who exercised options when the Lee transaction was completed.
For the fourth quarter, sales jumped 21.6% to $202.5 million, with wholesale bedding sales up 20.9% to $185.3 million.
Fourth-quarter retail sales also were up. The company didn't give a total, but said comparable-store sales rose 13.3%.
During the conference call, Eitel said the company's biggest challenge this year is soaring costs for raw materials, particularly steel and wood. He said the company is studying a possible price increase, but doesn't have a timetable for a decision.
"There's no question that margins are going to be under pressure," he said. "These are probably the biggest increases (in raw materials prices) that anybody has seen in 20 years."
At least some of the margin pressure could be relieved if Simmons is able to grab a big share of the new business that Eitel said is "up for grabs" at several retailers that he didn't identify.
In response to a question, he said some retailers are re-evaluating their bedding business in the wake of last week's Chapter 11 bankruptcy filing by Spring Air's largest licensee, Spring Air Partners-North America.
"They've been on our tail with low prices for four years, and they found out that it doesn't work," he said of the Spring Air affiliate. "There are a lot of dissatisfied (retailers) out there."
| Simmons | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are loses or declines. | |||
| Year ended 12/27 | 2003 | 2002 | Change |
| Sales | $806,333,000 | $708,595,000 | 13.8% |
| Operating income | 93,519,000 | 81,836,000 | 14.3% |
| Net income | (a) (41,062,000) | (b) (630,000) | — |
| (a) Includes $68.4 million in pretax variable stock compensation expense, a $22.4 million pretax transaction expense, a $9.7 million income tax benefit and a $224,000 after-tax foreign currency translation gain. (b) Includes $15.6 million in pretax variable stock compensation expense and a $19,000 after-tax foreign currency translation loss. | |||
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