Exhibit 99.1
Contact: Mark Boehmer
VP & Treasurer
(336) 861-3603
FOR IMMEDIATE RELEASE
SEALY REPORTS CONTINUED STRONG SALES AND EARNINGS IMPROVEMENTS
FOR FIRST FISCAL QUARTER OF 2006
Sales Growth of 10.2%; Net Income Rises 11.3%
ARCHDALE, North Carolina (May 17, 2006) - Sealy Corporation reported net sales of $395.7 million for the quarter ending February 26, 2006, an increase of 10.2% from $359.0 million for the same period a year earlier. Gross profit was $176.7 million or 44.7% of sales as compared with $159.1 million or 44.3% of sales for the same prior year period. Net income was $23.0 million after a $0.3 million reduction due to the cumulative effect of a change in accounting. This represents an 11.3% increase over the $20.6 million in the same period a year ago.
“We are pleased with our first quarter results,” said David J. McIlquham, Sealy’s Chairman and Chief Executive Officer. “During the quarter we saw strong international performance, a successful launch of our new Stearns & Foster product line and the introduction of our new Posturepedic line. Strong demand for our brands, continuous focus on improving efficiencies in our facilities, and the commitment of our employees continue to drive our success in the market place.”
First Quarter Revenues:
· Domestic net sales increased 9.7% to $314.5 million as average unit selling price improved 10.1% and unit volume declined 0.4%
· International net sales grew 12.3% to $81.2 million driven by Canadian sales growth of 21.7% in local currency and 27.8% in U.S. Dollars
Operating income for the quarter was $56.7 million, as compared to $53.2 million in the first quarter of 2005. Last year’s results included foreign currency exchange gains of $2.4 million.
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Sealy also announced its fiscal first quarter conference call for Thursday, May 18 at 4:30 p.m. ET. To participate in the conference call, investors and analysts are invited to call 866-770-7125 in the U.S. and Canada, or +1 617-213-8066 outside of the U.S. and enter the code 60041686. A replay will be available following the call until midnight on Wednesday, May 31, 2006. To access the replay, call 888-286-8010 in the U.S., or +1 617-801-6888 outside of the U.S. and enter the code 43314490.
Sealy is the largest bedding manufacturer in the world with sales of nearly $1.5 billion in 2005. The company manufactures and markets a broad range of mattresses and foundations under the Sealy® , Sealy Posturepedic®, Stearns & Foster®, and Basset® brands. Sealy has the largest market share and highest consumer awareness of any bedding brand in North America. Domestically, Sealy has 20 plants and sells its products to 2,900 customers with more than 7,000 retail outlets. Sealy is also a leading supplier to the hospitality industry. For more information, please visit www.sealy.com.
This document contains forward-looking statements within the meaning of the safe harbor provisions of the Securities Litigation Reform Act of 1995. Terms such as “expect,” “believe,” “continue,” and “grow,” as well as similar comments, are forward-looking in nature. Although the Company believes its growth plans are based upon reasonable assumptions, it can give no assurances that such expectations can be attained. Factors that could cause actual results to differ materially from the Company’s expectations include: general business and economic conditions, competitive factors, raw materials purchasing, and fluctuations in demand. Please refer to the Company’s Securities and Exchange Commission filings for further information.
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SEALY CORPORATION
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
| | Quarter Ended | |
| | February 26,
2006 | | February 27,
2005 | |
Net sales | | $ | 395,735 | | $ | 359,023 | |
Cost of goods sold | | 219,038 | | 199,973 | |
Gross Profit | | 176,697 | | 159,050 | |
| | | | | |
Selling, general and administrative | | 123,604 | | 108,331 | |
Amortization of intangibles | | 122 | | 175 | |
Royalty income, net of royalty expense | | (3,689 | ) | (2,628 | ) |
Income from operations | | 56,660 | | 53,172 | |
Interest expense | | 18,736 | | 19,727 | |
Other income, net | | (187 | ) | (93 | ) |
Income before income tax expense | | 38,111 | | 33,538 | |
Income tax expense | | 14,852 | | 12,904 | |
Income before cumulative effect of a change in accounting principle | | 23,259 | | 20,634 | |
Cumulative effect on prior years (to November 28, 2005) of the adoption of FASB Interpretation No. 47, net of related tax benefit of $191 | | 287 | | — | |
Net income | | $ | 22,972 | | $ | 20,634 | |
Earnings per common share - Basic | | | | | |
Income before cumulative effect of a change in accounting principle | | $ | 0.33 | | $ | 0.29 | |
Cumulative effect of a change in accounting principle | | | | — | |
Earnings per common share - Basic | | $ | 0.33 | | $ | 0.29 | |
Earnings per common share - Diluted | | | | | |
Income before cumulative effect of a change in accounting principle | | $ | 0.30 | | $ | 0.28 | |
Cumulative effect of a change in accounting principle | | | | — | |
Earnings per common share - Diluted | | $ | 0.30 | | $ | 0.28 | |
Weighted average number of common shares outstanding: | | | | | |
Basic | | 70,482 | | 70,247 | |
Diluted | | 76,386 | | 73,831 | |
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SEALY CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
| | February 26,
2006 | | November 27,
2005 | |
| | (Unaudited) | | | |
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 13,760 | | $ | 36,554 | |
Accounts receivable, net of allowances for bad debts, cash discounts and returns | | 203,977 | | 175,414 | |
Inventories | | 66,485 | | 60,141 | |
Assets held for sale | | 1,405 | | 1,405 | |
Prepaid expenses and other current assets | | 14,976 | | 14,320 | |
Deferred income taxes | | 16,661 | | 16,555 | |
| | 317,264 | | 304,389 | |
Property, plant and equipment—at cost | | 335,415 | | 328,935 | |
Less: accumulated depreciation | | (166,447 | ) | (160,958 | ) |
| | 168,968 | | 167,977 | |
Other assets: | | | | | |
Goodwill | | 385,487 | | 384,646 | |
Other intangibles | | 4,486 | | 4,559 | |
Debt issuance costs, net, and other assets | | 32,309 | | 33,116 | |
| | 422,282 | | 422,321 | |
| | $ | 908,514 | | $ | 894,687 | |
Liabilities and Stockholders’ Deficit | | | | | |
Current liabilities: | | | | | |
Current portion of long-term obligations | | $ | 11,288 | | $ | 12,769 | |
Accounts payable | | 110,473 | | 119,558 | |
Accrued incentives and advertising | | 34,480 | | 37,958 | |
Accrued compensation | | 46,168 | | 44,138 | |
Accrued interest | | 10,019 | | 18,414 | |
Other accrued expenses | | 57,105 | | 47,429 | |
| | 269,533 | | 280,266 | |
Long-term obligations, net of current portion | | 949,677 | | 948,975 | |
Other noncurrent liabilities | | 43,194 | | 43,659 | |
Deferred income taxes | | 12,492 | | 12,356 | |
Commitments and contingencies | | — | | — | |
Common stock and options subject to redemption | | 21,478 | | 21,654 | |
Stockholders’ deficit: | | | | | |
Common stock, $0.01 par value; Authorized 200,000 shares; Issued: 2006 — 70,488; 2005 — 70,480 (including shares classified above as subject to redemption: 2006 — 265; 2005 — 263) | | 702 | | 702 | |
Additional paid-in capital | | 366,294 | | 365,900 | |
Accumulated deficit | | (758,491 | ) | (781,463 | ) |
Accumulated other comprehensive income | | 3,755 | | 2,638 | |
Treasury stock | | (120 | ) | — | |
| | (387,860 | ) | (412,223 | ) |
| | $ | 908,514 | | $ | 894,687 | |
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SEALY CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| | Quarter Ended | |
| | February 26,
2006 | | February 27,
2005 | |
Cash flows from operating activities: | | | | | |
Net income | | $ | 22,972 | | $ | 20,634 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | | |
Depreciation and amortization | | 5,700 | | 5,488 | |
Deferred income taxes | | (23 | ) | 8,545 | |
Non-cash interest expense: | | | | | |
Senior Subordinated PIK Notes | | 2,113 | | 1,918 | |
Amortization of debt issuance costs and other | | 235 | | 886 | |
Stock-based compensation | | 372 | | 156 | |
(Gain) loss on sale of assets | | 22 | | (179 | ) |
Cumulative effect of accounting change | | 287 | | — | |
Other, net | | (717 | ) | (204 | ) |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable | | (28,563 | ) | (24,546 | ) |
Inventories | | (6,344 | ) | (5,254 | ) |
Prepaid expenses and other current assets | | (150 | ) | 2,360 | |
Accounts payable | | (9,085 | ) | 11,345 | |
Accrued expenses | | 350 | | (17,840 | ) |
Other liabilities | | (1,225 | ) | (1,417 | ) |
Net cash provided by (used in) operating activities | | (14,056 | ) | 1,892 | |
Cash flows from investing activities: | | | | | |
Purchase of property, plant and equipment, net | | (5,577 | ) | (5,698 | ) |
Proceeds from the sale of property, plant and equipment | | 29 | | 4,648 | |
Net cash used in investing activities | | (5,548 | ) | (1,050 | ) |
Cash flows from financing activities: | | | | | |
Repayments of long-term obligations | | — | | (5,000 | ) |
Net borrowings (repayments) under revolving credit facilities | | (3,295 | ) | 17,251 | |
Other | | (17 | ) | 2,938 | |
Net cash provided by (used in) financing activities | | (3,312 | ) | 15,189 | |
Effect of exchange rate changes on cash | | 122 | | (972 | ) |
Change in cash and cash equivalents | | (22,794 | ) | 15,059 | |
Cash and cash equivalents: | | | | | |
Beginning of period | | 36,554 | | 22,779 | |
End of period | | $ | 13,760 | | $ | 37,838 | |
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