Higher foam costs hurt Simmons Canada
Michael J. Knell -- Furniture Today, March 19, 2006
Mississauga, Ontario — Big increases in the cost of foam and continuing competitive pressures at retail dragged down earnings for SCI Income Trust, parent of bedding producer Simmons Canada, in the fourth quarter and year, despite increases in revenues.
Revenues in the quarter were C$33.3 million, a 9% increase from C$30.5 million in 2004's fourth quarter. Net income dropped 26.8% to C$1.75 million, or 22 Canadian cents per trust unit, from C$2.4 million, or 30 cents per unit, in the prior year's comparable quarter.
"Our fourth-quarter fundamentals were good, with bedding volumes and sales exceeding last year's fourth quarter," said Simmons Canada President and CEO Terry Pace, citing a 37% cost increase for foam that took effect Nov. 1, and higher warranty costs, as hurting earnings.
He said marketing and selling costs also were higher in the fourth quarter, offset in part by lower tax expenses.
For the year, revenues came to C$137.2 million, up 6% over 2004. Net income slipped 2.3% to C$10 million, or C$1.27 per unit. Cash distributions to unitholders for the year remained relatively stable at C$8.38 million, or C$1.08 per unit.
"Bottom-line growth (in 2005) was challenged by continued retail pressures, higher marketing costs, significantly higher foam costs and higher pension and warranty costs," Pace said.
Strong acceptance by retailers of new products and programs at the January Toronto market bodes well for 2006, he said. Simmons Canada sells to Canada's largest department stores, specialty sleep shops, buying groups and independent retailers.
| SCI Income Trust (a) | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Year ended 23/31 | 2005 | 2004 | Change |
| (a) In Canadian dollars. | |||
| Revenues | $137,183,000 | $128,788,000 | 6.5% |
| Operating income | 15,277,000 | 16,276,000 | (6.1%) |
| Net income | 10,022,000 | 10,237,000 | (2.1%) |
| Earnings per share | 1.28 | 1.32 | (3.0%) |
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Higher foam costs hurt Simmons Canada
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