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Factoring in allowances

Accounting change has impact on numbers

David Perry -- Furniture Today, May 29, 2005

High Point — An accounting change, adopted by companies who make filings with the Securities and Exchange Commission, can affect the numbers that bedding producers report to the public.

The change, in accordance with Emerging Issues Task Force Issue 01-09, stipulates that companies must record reductions to revenue for customer incentive programs, including volume discounts and promotional allowances, in their public filings.

Those allowances are significant for some of the largest bedding companies. This year, Furniture/Today is following the same practice it used last year, allowing companies to add those allowances back into their shipment figures.

If those figures were subtracted, each of bedding's three largest producers would show lower shipment numbers, but their relative ranking would be unchanged.

However, the revised figures do provide a slightly different view of the competitive landscape for the major players.

If sales allowances are deducted, No. 3 Serta would narrow the gap between it and No. 2 Simmons. The adjusted sales allowance figure for Simmons is $788 million, compared to $757 million for Serta. Serta is $31 million behind Simmons on that scale.

With the sales allowances for Serta and Simmons added back in, Serta is $83 million behind Simmons.

Sealy's sales allowances last year were $70 million. The allowances totaled $78 million for Simmons, according to audited figures those companies supplied to Furniture/Today.

The accompanying table shows how the shipment numbers for Sealy, Simmons and Serta look if the sales allowances are excluded. Note, also, that the revised numbers reflect slightly different percentage changes in sales growth for each of those producers.

As a privately held company, Serta does not report sales figures. But that company did provide audited shipment figures to Furniture/Today. Sealy and Simmons do make public filings, and the net shipment figures in those filings exclude the sales allowances.

Shipments minus sales allowances and incentives
	in $ millions		Percent change
Company	2004	2003	2003 to 2004
Figures are by estimated U.S. wholesale bedding shipments, excluding EITF 01-09 sales allowances, incentives and cash discounts. All figures for calendar 2004 and 2003. All sales information is accountant-verified or audited. Figures have been rounded to the nearest million. Source: Furniture/Today market research
Sealy	$1,124	$1,025	9.7%
Simmons	$788	$729	8.1%
Serta	$757	$714	6.0%

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