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Sealy's 1Q sales slip 1.2%, net income up

David Perry -- Furniture Today, April 20, 2003

Trinity, N.C. — Bedding maker Sealy reported net sales of $288.3 million in the fiscal first quarter ended March 2, a decrease of 1.2% from sales in the same quarter a year earlier. Net income was up 4.5% to $4 million.

Earnings before interest, taxes, depreciation and amortization came to $38.2 million, compared with $39 million a year earlier.

Sales to Sealy's affiliates fell to $10.9 million from $38.6 million a year ago, mainly because of changes at two of the company's biggest customers, Mattress Discounters and Mattress Firm. Mattress Discounters has downsized, and Mattress Firm was no longer a Sealy affiliate in the latest quarter. Sales to non-affiliates, now including Mattress Firm, jumped by 9.6%, to $277.4 million in the latest quarter.

Domestic sales declined by 3%, to $233.8 million.

"In spite of the challenging economic environment and the restructuring of Mattress Discounters, we are pleased with our operating results in the first quarter," said Dave McIlquham, Sealy's president and chief executive officer. "In addition to a solid first three months, since the end of the first quarter, Mattress Discounters emerged from bankruptcy and the company subsequently sold its interests in Mattress Discounters to an affiliate of Bain Capital for approximately $13.6 million, which represented a slight gain."

Bain Capital is Sealy's principal owner.

In its quarterly report to the Securities and Exchange Commission, the company also forecast that sales in the second quarter could be down 8% to 10% from last year "primarily due to the softening of the economy and lower sales expected from Mattress Discounters and Mattress Firm as they restructure."

Reported net sales reflect Sealy's adoption of new accounting standards on volume rebates and promotional monies. Historically, Sealy classified those costs as marketing and selling expenses, but now classifies them as a reduction of revenue. That had the effect of reducing net sales and selling, general and administrative expenses each by $11.6 million for the first quarter of this year, and $9.1 million for the year-earlier quarter.

Sealy
Earnings per share are fully diluted, and all figures in parentheses are losses or declines.
Quarter ended 3/2	2003	2002	Change
(a) After liquidation preference charges for common L & M shares of $5.1 million in the 2003 quarter and $4.6 million in the 2002 quarter; includes pretax charges for stock-based compensation of $540,000 in the 2003 quarter and $574,000 in the 2002 quarter and royalty income of $2.7 million in the 2003 quarter and $2.5 million in the 2002 quarter.
Sales	$288,311,000	$291,773,000	(1.2%)
Operating income	30,299,000	33,077,000	(8.4%)
Net income (a)	3,979,000	3,806,000	4.5%
Earnings per share	0.13	0.12	8.3%

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