Eitel answers critics, defends performance
Former Simmons CEO Charlie Eitel is making a strong defense of the company’s performance under his watch, saying that sales increased substantially and that he built lasting relationships with retailers – and “sold a lot of beds” - by entertaining them on his boats and in his homes.
I asked Eitel the other day if he wanted to respond to recent stories in The New York Times on Simmons and on his performance that sparked a burst of comments on my blog and have been the talk of the industry in recent weeks.
His response was a two-page letter which I received yesterday. He said he had come to me as a friend to “set the record straight.”
Eitel described as “inaccurate” the story in the Times that he said “attacked” his character. That story has been “a hard pill to swallow,” he said, but he also said he has been “overwhelmed with support from Simmons associates, our customers, and of course, my wonderful wife Cindy of 38 years and my family.”
He said he didn’t want to respond to The New York Times writer because “I learned a long time ago ‘not to swap spit with a skunk.’”
Eitel also hinted at a return to the industry, saying “I am not finished.”
Here, in full, is Eitel’s letter to me, which he has given me permission to publish.
Dear David:
First and foremost I want to say that I have enjoyed working with you over the last 10 years during my tenure at Simmons. We have not always agreed but for sure, we have both always spoken and written our truths.
The inaccurate article that appeared in the New York Times that attacked my character has been a hard pill to swallow. By the same token, I have been overwhelmed with support from Simmons associates, our customers and of course, my wonderful wife Cindy of 38 years and my family.
We had a hint that this article might appear because the writer contacted many current and former employees. It became clear a few weeks ago she was trying hard to create a sensationalistic article focused on corporate greed.
On several occasions she tried to speak with me; however, my former partners at Thomas H. Lee would not permit me to talk with her. Upon reflection, I wish I had because I believe she would have realized that her key sources of information from former disgruntled employees was completely influenced by their anger and separation from the company.
So let me set the record straight.
During my tenure at Simmons, sales grew from $600 million to $1.1 billion and adjusted EBITDA rose from $60 million to $157 million. We moved from third in market share to second.
Four years after I arrived, we sold the company for over twice what my former partners (Fenway) paid. While they did extremely well on their investment, it is important to note that the Simmons ESOP owners received over $100 million in payout as the stock grew from $6.73/share to $28.91/share. If you were to ask most ESOP owners what they thought the stock was worth prior to 2000, most would say, “zero.”
For the record, 75% of my compensation came in the form of stock appreciation. We call this “pay for performance.”
The compensation package I received at Simmons was identical to my predecessor. The difference is that we made it work.
As you know, several references were made about our lifestyle. Yes, I have been in boating for 30 years. It has been a fun hobby but more importantly, an opportunity for Cindy and me to share this experience with hundreds of customers. We sold a lot of beds and built a lot of lasting relationships on our boats and also by welcoming them into our homes, like family. We have no regrets – only good memories.
Anyone that is knowledgeable of Simmons realizes how powerful and effective “The Great Game of Life” has been over the last many years. It is all about caring and support, not criticism.
Furthermore, I extended (at Simmons’ expense) the opportunity for many of our great retailers to experience this new way of thinking and acting. To this day, great companies like Mattress Firm, Art Van Furniture, Sleep Train and Sit’N Sleep have incorporated this behavior into their own culture.
As far as “managing from afar” – this is correct! Guess where I was? With our retailers, building relationships and growing the company. Many of them have become close friends and allies. Guess where else I was? In our plants, walking the floors, participating in business reviews and caring about every associate of our company.
No, I was not sitting behind a desk in Atlanta where less than 5% of our workforce resides. I was focused on Safety, Quality, lower Cost, Better Service and less Waste.
With the exception of Healthsmart, I will put Simmons’ performance up against any competitor over the last nine years. Yes, the current balance sheet is financially stressed and yes, the company is being sold. This is what happens when a company is overleveraged in a down economy.
Simmons continues to be a great operating company, and if the new owners recognize the power of the culture, they will do well. Otherwise, they will fail.
Several people have asked, “Why didn’t you respond to the writer at the New York Times?” Here is my answer. I learned a long time ago “not to swap spit with a skunk.” Instead, I have come to you my friend to set the record straight.
Thanks for your friendship. One final note. “I am not finished.”
Respectfully
Charlie Eitel
Miffed in Montreal commented:
Bob Bruce asks "Where have all the great leaders gone.? Isn't Bob Bruce the ad manager from Canada who created the TV spot using "Richard Simmons?" Nice leadership Bob. You know what they say about people in glass houses?
The facts are... commented:
Charlie is a great man with a great heart. He is a visionary leader that broke the mold of the autocractic leadership styles that litter our industry. As a result, people were given opportunities to grow and Simmons prospered. A debt load that was perfectly acceptable until the economy faltered is out of his hands. The outstanding management of Simmons through the gauntlet of a reorganization has been masterfully executed and honestly a process that would have most managers wilting under the pressure. In the end, Charlie built a cadre of leaders that will grow talent, ideas and businesses that otherwise would not have existed.
An Observer commented:
His arrogance is amazing. It can only be surpassed by anyone that would be stupid enough to believe that by giving a customer a ride on a boat would be reason enough to buy a bedding line. I pity the poor souls who would buy into this blatant lie. No wonder the company is broke
Family commented:
Lisa, this is family pain. Butt out!
Lisa Stansbury commented:
Oh the comments from the nameless again. Fantastic. Thanks for sharing Charlie's response Dave.
I stand by my statement that he has given a lot to this industry.
Bob Bruce commented:
As with an earlier commentor, I had been a proud 16 year member of the Simmons Canada management Team.In my humble estimation the American buy-out in 2006 was a big step backwards in the further development of what was a great company. Charlie talked a great story, but right, wrong or indifferently... there was no follow through or delivery. The true values which allow a company to grow and prosper lie in "integrity, trust, loyalty and respect." Unfortunately corporate financial greed has moved to the forefront. I hold fond memories of great days with substantial sustained business growth. It's unfortunate to see a great thing go bad....and a true leader would not have allowed it to go down on "his watch."
Failure and throwing creditors under the bus can't be defended.
As a great man once asked... "Where Have All The Leaders Gone?"
These are indeed..Sad times!
bummed out commented:
just think how many more beds would have been sold if the debt load factor hadn't been on top of those beds.. seems a shame... and the smoke shows that they put on at markets about a national advertising campaign was sold to the dealers but never ran ANYWHERE but on the wall at highpoint.... strange trip
SpringingLoose commented:
It’s refreshing to see the comments and truth emerging in this saga of failure – Owners: Wesray, Simmons ESOP, Merrill Lynch, Investcorp, Fenway Partners, Thomas H. Lee and now Ares. Starting in 1982 there were others: Gulf & Western, Wicks, William Simon. Every owner walked away in the plus $ category, Simmons was the vehicle and for the most part the CEO’s were the drivers. Each one of them guided by personal gain as they took advantage of driving a classic Cash Cow, (Simmons Brand). For personal gain.
Eitle surfaces as the top driver and winner of the NASCAR equivalent of the Championship. The guy was given the best car in the race, and a new engine (Beautyrest No Flip), buy the way prior to his arrival the product had already been conceived and prototyped. Who took credit? Certainly not the inventor. Charlie rode this thoroughbred race car and in the end was rewarded with countless industry and financial reward. The guy was savvy, hires Bill Creekmuir away from LADD furniture and the folly begins enhanced by a buying and selling blitz of owners under their lets get rich engineering plan.
Yes, the wine flowed, the yacht emerged, the leased jet program initiated and the lavish sales events, one including our former President George Bush. Wonder what that cost? There were other CLOWNS associated with these guys who contributed to the failures, however, they were rewarded with lavish salaries and benefits after drinking the cool aid. They became subordinates to the two greatest scam artists ever associated with Simmons.
Charlie and Bill, it’s time to disappear and chill out. Enjoy your remaining time on the planet and be prepared to answer to the almighty for your unethical deeds.
All of the employees, suppliers, contractors and others who made the company work under the extreme demands and pressure handed out by your GOON subordinates deserve recognition, It’s time to bend over and kiss yourselves goodbye.
observer commented:
No, Eitel didn't do this alone- THL, the board and the other execs all were part of the game. None of them ever understood that managing a company is also a stewardship. Simmons and its bondholders and employees weren't a kingdom they conquered and had a right to pillage. What sad and terrible legacies these guys have created for themselves.
Dumbfounded commented:
Charlie got an enormous amount of money for the job (read: the poor job) he did at Simmons. He can blame Tommy Lee, the market, or the NY Times. But, it was his poor performance that, ultimately, brought down this once venerable company. When Charlie looks in the mirror he sees David Nevin. To the rest of us he looks more like Bela Lugosi.
Semper Fi commented:
I wondered where some of those retailers learned to rip off their hard working employees. They learned it from Charlie.
JVOMI commented:
One of the primary jobs of a CEO is to improve the sales and profits of the company and to protect the company’s assets from predators. The assets can include property, equipment, products, reputation or employees. Predators can include competitors, the government or the ownership of the company. Ownership groups -- whether private, public, private equity or venture capital groups aren’t necessarily bad by their nature. But when greed becomes the overriding driver of ownership, the assets and the future of the company are jeopardized.
The problem for the Simmons Company was that the CEO failed to protect the long-term health and assets of the company. Clearly, his loyalties were elsewhere.
calling a spade a spade commented:
Charlie's departure at his previous employer, Interface, closely resembles his departure at Simmons. People need to see through his BS.
Not Disgruntled but Former Employee commented:
Charlie was in the factories even less frequently than the HQ. His relationship with the Great Game of Life (GGOL) is a whole different chapter. Incidentally, the GGOL consulting company was his son-in-laws previous employer before he was placed in a director's role at dad's company. On the open job market, he would not have been seriously considered for either position or the Director of Marketing position that he was subsequently awarded.
Charlie is correct about the ESOP appreciation. The NYT story is largely true and is a sad story of executive privaledge run amok BUT the one significant question that was never asked or answered - where was the Board of Directors in all of this? To whom are they answering?
I am a former but not disgruntled employee. I still think the Beautyrest is the top bed but it is a shame than such an iconic brand has been ruined.
This observer commented:
It is not negative , the truth is the truth.We all have compassion.But when you run a company into the ground and walk away with millions it is not good.Have every right to be upset.The employees are very mad.And we have not lost our cars ,houses or our jobs.This was the greatest bedding company in the world.
interested observer commented:
The negative people who have commented are simply venting because they have lost jobs, homes and cars. It's all they have left. Your lack of compassion speaks volumes about your true feelings toward the employees of this company.
Proud Employee commented:
To "negative people":
Do the math, 01/00-12/08 doesn't make ten years.
Even if he claims to still be in the industry, ten years hasn't passed.
negative people commented:
He has been in the industry for 10 years. Once again another stupid comment.
Proud Employee commented:
According to the company website, Charlie started in January, 2000 and resigned December 2008. His letter starts by stating his tenure with the company was 10 years. Enough said! Is there anything real about him?
fmrmattressfan commented:
I disagree that Charlie and Dave were too busy counting their money to care about their employees. I can personally attest that Dave knew every sales rep by name and was a great guy to work for. As for Charlie, no one complained when they were riding the wave doing great. The people responsible are the owners and the boards.
mattress person commented:
Charlie is not alone. Take a look at what Dave McIIquham and Jim Hirshorn took away from Sealy when they left. It is no wonder why the big S's suffered during the Consumer Report survey. Dave and Charlie were too busy counting their money to be concerned about the long term health of these brands or it's employees.
negative people commented:
It's amazing to me how many stupid people there are on this blog and in this industry. Do you really think the CEO has the authority to leverage the Company like this? Thomas H Lee partners are the ones responsible for the debt. They owned 73% of the Company and they are the ones who overleveraged the Company with two dividends. As an operating Company Simmons is peforming very well. There are hundreds of Companies that are in a very similar situation. The reason why Ares and Canadian Teachers Fund is buying Simmons is because they can't refinance Serta's 700+ Million debt. It's also a great deal for them. Remember when Maytag and Whirpool mergered? Remember that Sealy went public at $17 a share. Now look at their stock at $3 a share. Think about the losses of all those shareholders. What a bunch of winning babies there are out there.
matman commented:
funny..taking buyers on the yacht & bribing them while the shareholders take it with up the rear. Nice of him to take credit for other cultures.lol. art van owes everything to him. matt firm has been overlevereged. look at their balance sheet.what about the company jet??
Upset commented:
Come on SPIN-SPIN-SPIN. Simmons is bankrupt.Who was the CEO? Be Responsible for your actions.
industry servant commented:
All that can be said is the "the spin doctor" spins on. The evidence of his leadership is in the bankruptcy. The tragedy of the matter is in his denial of events and behavior. Why did he get to run a company into the ground and walk away with a golden parachute? It is the way of the VC firms!
mattressman commented:
Eitel likely signed the papers that brought on the enormous debt load. That would make him the responsible party. The skunk was lurking in the debt load that he brought on and endorsed as CEO.
