Simmons delays earnings report, talks with lender

Mattress producer seeks to revise financial covenants

Larry Thomas -- Furniture Today, 11/14/2008 7:52:00 AM

UPDATED  ATLANTA — Bedding producer Simmons, which last month said it probably breached one of its loan covenants, has delayed its third-quarter earnings announcement while it negotiates a forbearance agreement with its senior lenders.

The forbearance agreement would give the company more time to hammer out an amendment to its credit facility that would include revised financial covenants, the company said.

Earnings for the third quarter, which ended Sept. 27, were scheduled to be announced Nov. 11, but no new date was set.

Simmons earlier said it doesn't expect to be in compliance with the maximum coverage ratio for its senior credit facility, which consists of a $75 million revolving loan and a $465 million term loan.

Tim Oakhill, executive vice president of marketing, said Simmons' cash flow remains strong and that the issue won't cause the company to pare back its product development or research.

"Because of the turmoil in the financial markets, consumer spending on durable goods has been slow," Oakhill said. "But it has not altered our optimism about this category."

He said the company is confident the credit facility can be amended, but he could not predict when that would occur because changes must be approved by lead lender Deutsche Bank and some 20 other financial institutions.

For the third quarter, Simmons has projected sales of $273 million to
$278 million, a decline of 10% to 13% from the same period in 2007.

The company didn't make a projection for net income, but said it would include a $3.6 million bad debt charge stemming from the recent Chapter 11 bankruptcy filing by Mattress Discounters, one of its largest customers.