Simmons 3Q sales up 9%
By Furniture Today Staff -- Furniture Today, November 10, 2004
ATLANTA -- Simmons Bedding Co. said net sales in the third quarter increased 9.3%, to $238.2 million, as compared to $217.9 million in the same period one year ago.
Wholesale bedding net sales increased 11.3% to $222.1 million in the third quarter. In comparison to the prior year, Simmons' wholesale bedding unit shipments and average unit selling price in the third quarter increased 6.2% and 0.5%, respectively.
The company's non-juvenile wholesale bedding unit volume and wholesale bedding average unit selling price in the third quarter increased 4.5% and 1.7%, respectively. As a result of the sale of the company's Mattress Gallery retail operations on May 1, 2004, the company's retail segment net sales in the third quarter of 2004 decreased $8.3 million, or 30.3%, to $19.0 million from $27.3 million in the third quarter of 2003.
Simmons' Chairman and CEO, Charlie Eitel said: "We are pleased with our third quarter results and accomplishments. During the quarter we achieved sales growth in our wholesale bedding segment; 23.1% same store sales growth for our Pacific Northwest retail operations; opened a new manufacturing facility in Waycross, Georgia; increased the production levels at our new manufacturing facility in Hazleton, Pennsylvania; acquired the crib mattress and related softgoods operations of Simmons Juvenile Products; and reduced our working capital as a percentage of net sales."
Operating income increased 4.6% to $25.5 million. Simmons had net income of $9.4 million in the third quarter of 2004 compared to $15.6 million in the same period one year ago. The decrease in net income was due principally to increased interest expense as a result of the Company's new capital structure following the December 19, 2003 acquisition of Simmons by Thomas H. Lee Equity Fund V, L.P. and related affiliates. Adjusted EBITDA for the third quarter of 2004 decreased by $2.5 million, or 6.7%, to $34.6 million from $37.1 million in the third quarter of 2003.
For the first nine months of 2004, net sales increased 9.9% to $663.3 million, as compared to $603.8 million in the same period one year ago. Wholesale bedding net sales increased 11.0% to $617.0 million for the first nine months of 2004. Simmons' wholesale bedding unit shipments and wholesale bedding average unit selling price increased 4.4% and 4.7%, respectively, in the first nine months of 2004 versus the prior year. The company's non-juvenile wholesale bedding unit shipments and wholesale bedding average unit selling price in the first nine months, increased 3.8% and 5.1% respectively. The company's retail store net sales in the first nine months of 2004 decreased $9.6 million, or 13.2%, to $63.3 million from $72.9 million in the first nine months of 2003. On a comparable store basis, our retail store sales increased 19.1% for the first nine months of 2004 compared to the prior year period.
The company had net income of $19.4 million in the first nine months of 2004 compared to $26.5 million in the same period one year ago. The decrease in net income was due principally to increased interest expense, intangible amortization expense, and non-recurring expenses, the majority of which are related to the December 2003 acquisition of the company. Additionally, net income decreased due to an increase in income tax expense resulting from an increase in the Company's effective tax rate. Adjusted EBITDA for the first nine months of 2004 increased by $4.5 million, or 4.6 %, to $100.9 million from $96.4 million in the first nine months of 2003.
Eitel added: "While we were able to increase our operating earnings and cash flow during the third quarter, compared to a year ago, our results continued to be negatively impacted by increases in the cost of raw materials, primarily steel, wood and foam; increased distribution costs; and start-up costs for our two new manufacturing operations."
Net debt (total debt of $752.4 million less cash of $17.0 million) totaled $735.4 million as of September 25, 2004, an increase of $7.2 million during the third quarter, due principally to the acquisition of certain assets of Simmons Juvenile and the addition of our new manufacturing facility in Waycross, Georgia. For the first nine months of 2004, net debt decreased by $31.2 million as a result of increased cash flow from operations.
Eitel concluded: "We are pleased with our financial performance for the first nine months of 2004 and optimistic about our prospects for the future. We believe our new 2005 product lines, which were introduced in October at the International Home Furnishings Market, were very well received by our dealers. Continuing our focus on the premium retail sector, the Beautyrest, BackCare and BackCare Kids products will include the new HealthSmart removable mattress top that will help consumers wash away stains, germs, bacteria, dust mites, odors and perspiration, just like when you clean your sheets. The introduction of our new 2005 product lines along with a price increase implemented on existing products in late October will help mitigate the impact of raw material price increases which we have seen in 2004. We are also excited about the prospects for our new juvenile mattress business which is off to a good start since its introduction. We believe the impact of our new product lines, our recent acquisition, and our new manufacturing facilities bodes well for 2005."
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