Exhibit 99.2
SEALY CORPORATION
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On November 18, 2010, Sealy Corporation (the “Company”) divested the assets of its European manufacturing operations in France and Italy which represents its Europe segment. The unaudited Pro Forma Condensed Consolidated Statement of Operations for the years ended December 2, 2007, November 30, 2008 and November 29, 2009 and for the nine months ended August 30, 2009 and August 29, 2010 set forth below have been presented after giving effect to the disposition as if it had occurred at the beginning of the periods. The unaudited Pro Forma Condensed Consolidated Balance Sheet set forth below has been presented after giving effect to the sale of the Europe segment as if it had occurred on November 29, 2009.
The following unaudited pro forma information assumes that the divestiture of the Europe segment occurred as of the beginning of the period. The adjustments to historical financial statements consist primarily of adjustments to exclude revenues, costs, assets and liabilities relating to the Europe segment. This unaudited pro forma information should not be relied upon as necessarily being indicative of historical results that would have been obtained if the disposition had actually occurred on that date, nor of the results that may be obtained in the future.
Exhibit 99.2
The unaudited Pro Forma Condensed Consolidated Statement of Operations for the years ended December 2, 2007, November 30, 2008 and November 29, 2009 are as follows:
| | Twelve Months Ended
December 2, 2007 | | Twelve Months Ended
November 30, 2008 | | Twelve Months Ended
November 29, 2009 | |
| | As Reported | | Adjustments | | Pro Forma | | As Reported | | Adjustments | | Pro Forma | | As Reported | | Adjustments | | Pro Forma | |
Net sales | | $ | 1,702,065 | | $ | 140,325 | | $ | 1,561,739 | | $ | 1,498,023 | | $ | 148,740 | | $ | 1,349,283 | | $ | 1,290,064 | | $ | 111,600 | | $ | 1,178,464 | |
Cost and expenses: | | | | | | | | | | | | | | | | | | | |
Cost of goods sold | | 994,700 | | 106,725 | | 887,975 | | 915,977 | | 116,951 | | 799,026 | | 773,279 | | 83,535 | | 689,743 | |
Selling, general and administrative | | 545,608 | | 37,420 | | 508,188 | | 482,566 | | 36,256 | | 446,310 | | 416,420 | | 32,284 | | 384,136 | |
Asset impairment loss | | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Goodwill impairment loss | | — | | — | | — | | 27,475 | | 24,644 | (a) | 2,831 | | 1,188 | | — | | 1,188 | |
Amortization expense | | 3,356 | | 3,070 | (b) | 286 | | 3,692 | | 3,403 | (b) | 289 | | 3,308 | | 3,022 | (b) | 286 | |
Restructuring expenses and asset impairment | | — | | — | | — | | 3,126 | | — | | 3,126 | | 1,256 | | — | | 1,256 | |
Royalty (income) expense, net | | (18,562 | ) | — | | (18,562 | ) | (17,327 | ) | — | | (17,327 | ) | (16,442 | ) | — | | (16,442 | ) |
| | | | | | | | | | | | | | | | | | | |
Income from operations | | 176,963 | | (6,890 | ) | 183,853 | | 82,514 | | (32,514 | ) | 115,028 | | 111,055 | | (7,241 | ) | 118,296 | |
Interest expense | | 63,976 | | 1,526 | (c) | 62,450 | | 60,464 | | 2,264 | (c) | 58,200 | | 79,092 | | 1,245 | (c) | 77,847 | |
Loss on rights for convertible notes | | — | | — | | — | | — | | — | | — | | 4,549 | | — | | 4,549 | |
Gain on sale of subsidiary stock | | — | | — | | — | | — | | — | | — | | (1,292 | ) | — | | (1,292 | ) |
Refinancing and extinguishment of debt and interest rate derivatives | | 1,222 | | — | | 1,222 | | 5,378 | | — | | 5,378 | | 17,423 | | — | | 17,423 | |
Other (income) expense, net | | (421 | ) | — | | (421 | ) | (397 | ) | — | | (397 | ) | (77 | ) | — | | (77 | ) |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | 112,186 | | (8,415 | ) | 120,601 | | 17,069 | | (34,778 | ) | 51,847 | | 11,360 | | (8,486 | ) | 19,846 | |
Income tax provision (benefit) | | 34,865 | | (25 | ) | 34,890 | | 20,872 | | (191 | ) | 21,063 | | (2,125 | ) | 365 | | (2,490 | ) |
Equity in earnings of unconsolidated affiliates | | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 77,321 | | $ | (8,390 | ) | $ | 85,711 | | $ | (3,803 | ) | $ | (34,588 | ) | $ | 30,785 | | $ | 13,485 | | $ | (8,851 | ) | $ | 22,336 | |
| | | | | | | | | | | | | | | | | | | |
Earnings (loss) per common share - Basic | | $ | 0.85 | | | | $ | 0.94 | | $ | (0.04 | ) | | | $ | 0.34 | | $ | 0.15 | | | | $ | 0.24 | |
Earnings (loss) per common share - Diluted | | $ | 0.80 | | | | $ | 0.89 | | $ | (0.04 | ) | | | $ | 0.33 | (d) | $ | 0.10 | | | | $ | 0.15 | |
| | | | | | | | | | | | | | | | | | | |
Weighted average number of common shares outstanding: | | | | | | | | | | | | | | | | | | | |
Basic | | 91,299 | | | | 91,299 | | 91,231 | | | | 91,231 | | 92,258 | | | | 92,258 | |
Diluted | | 96,337 | | | | 96,337 | | 91,231 | | | | 93,729 | (d) | 185,639 | | | | 185,639 | |
(a) Represents the write off of the outstanding goodwill of the Europe segment.
(b) Represents amortization expense related to the Pirelli license agreement.
(c) Interest expense relates to the outstanding debt of the Europe segment that was assumed by the purchaser or retired as part of the disposition.
(d) As the adjustments result in a positive net income for the year ended November 30, 2008, the outstanding potential common shares are no longer considered to be antidilutive and therefore are included in the computation of diluted earnings per share.
The unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine months ended August 30, 2009 and August 29, 2010 are as follows:
| | Nine Months Ended
August 30, 2009 | | Nine Months Ended
August 29, 2010 | |
| | As Reported | | Adjustments | | Pro Forma | | As Reported | | Adjustments | | Pro Forma | |
| | | | | | | | | | | | | |
Net sales | | $ | 958,004 | | $ | 76,283 | | $ | 881,722 | | $ | 1,002,336 | | $ | 76,830 | | $ | 925,506 | |
Cost and expenses: | | | | | | | | | | | | | |
Cost of goods sold | | 572,353 | | 57,426 | | 514,927 | | 596,413 | | 58,279 | | 538,134 | |
Selling, general and administrative | | 302,533 | | 23,639 | | 278,894 | | 323,636 | | 22,781 | | 300,855 | |
Asset impairment loss | | — | | — | | — | | 22,963 | | 22,963 | (a) | — | |
Goodwill impairment loss | | — | | — | | — | | — | | — | | — | |
Amortization expense | | 2,435 | | 2,220 | (b) | 215 | | 522 | | 306 | (b) | 216 | |
Restructuring expenses and asset impairment | | 1,448 | | — | | 1,448 | | — | | — | | — | |
Royalty (income) expense, net | | (12,186 | ) | — | | (12,186 | ) | (12,343 | ) | — | | (12,343 | ) |
| | | | | | | | | | | | | |
Income from operations | | 91,421 | | (7,002 | ) | 98,423 | | 71,145 | | (27,498 | ) | 98,643 | |
Interest expense | | 56,551 | | 802 | (c) | 55,749 | | 65,890 | | 596 | (c) | 65,294 | |
Loss on rights for convertible notes | | 4,549 | | — | | 4,549 | | — | | — | | — | |
Gain on sale of subsidiary stock | | (1,292 | ) | — | | (1,292 | ) | — | | — | | — | |
Refinancing and extinguishment of debt and interest rate derivatives | | 17,461 | | — | | 17,461 | | 3,759 | | — | | 3,759 | |
Other (income) expense, net | | (60 | ) | — | | (60 | ) | (161 | ) | — | | (161 | ) |
| | | | | | | | | | | | | |
Income (loss) before income taxes | | 14,212 | | (7,804 | ) | 22,016 | | 1,657 | | (28,094 | ) | 29,751 | |
Income tax provision (benefit) | | 3,201 | | (386 | ) | 3,587 | | 13,619 | | 149 | | 13,470 | |
Equity in earnings of unconsolidated affiliates | | — | | — | | — | | 2,702 | | — | | 2,702 | |
| | | | | | | | | | | | | |
Net income (loss) | | $ | 11,011 | | $ | (7,418 | ) | $ | 18,429 | | $ | (9,260 | ) | $ | (28,243 | ) | $ | 18,983 | |
| | | | | | | | | | | | | |
Earnings (loss) per common share - Basic | | $ | 0.12 | | | | $ | 0.20 | | $ | (0.10 | ) | | | $ | 0.20 | |
Earnings (loss) per common share - Diluted | | $ | 0.07 | | | | $ | 0.14 | | $ | (0.10 | ) | | | $ | 0.11 | (d) |
| | | | | | | | | | | | | |
Weighted average number of common shares outstanding: | | | | | | | | | | | | | |
Basic | | 91,836 | | | | 91,836 | | 95,384 | | | | 95,384 | |
Diluted | | 153,602 | | | | 153,602 | | 95,384 | | | | 287,895 | (d) |
(a) This asset impairment charge was recognized related to the long-lived assets of the Europe segment.
(b) Represents amortization expense related to the Pirelli license agreement.
(c) Interest expense relates to the outstanding debt of the Europe segment that was assumed by the purchaser or retired as part of the disposition.
(d) As the adjustments result in a positive net income for the nine months ended August 29, 2010, the outstanding potential common shares are no longer considered to be antidilutive and therefore are included in the computation of diluted earnings per share.
The unaudited Pro Forma Condensed Consolidated Balance Sheets as of November 29, 2009 and August 29, 2010 are as follows:
| | November 29, 2009 | | August 29, 2010 | |
| | As reported | | Adjustments | | Pro Forma | | As reported | | Adjustments | | Pro Forma | |
| | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | |
Cash and equivalents | | $ | 131,427 | | $ | 2,686 | | $ | 128,741 | | $ | 82,510 | | $ | 576 | | $ | 81,934 | |
Accounts receivable, net | | 156,850 | | 21,889 | | 134,961 | | 181,758 | | 14,578 | | 167,180 | |
Inventories | | 56,810 | | 10,548 | | 46,262 | | 68,634 | | 12,510 | | 56,124 | |
Other current assets and deferred income taxes | | 41,302 | | 709 | | 40,593 | | 35,285 | | 484 | | 34,801 | |
Total current assets | | 386,389 | | 35,832 | | 350,557 | | 368,187 | | 28,148 | | 340,039 | |
| | | | | | | | | | | | | |
Property, plant and equipment, at cost | | 446,989 | | 68,295 | | 378,694 | | 416,354 | | 35,858 | | 380,496 | |
Less accumulated depreciation | | (239,508 | ) | (37,479 | ) | (202,029 | ) | (246,468 | ) | (34,072 | ) | (212,396 | ) |
| | 207,481 | | 30,816 | | 176,665 | | 169,886 | | 1,786 | | 168,100 | |
| | | | | | | | | | | | | |
Other assets: | | | | | | | | | | | | | |
Goodwill | | 360,583 | | — | | 360,583 | | 360,878 | | — | | 360,878 | |
Intangible assets, net | | 1,937 | | — | | 1,937 | | 1,517 | | 57 | | 1,460 | |
Debt issuance costs, net and other assets | | 59,080 | | 936 | | 58,144 | | 64,415 | | 935 | | 63,480 | |
| | 421,600 | | 936 | | 420,664 | | 426,810 | | 992 | | 425,818 | |
| | | | | | | | | | | | | |
Total assets | | $ | 1,015,470 | | $ | 67,584 | | $ | 947,886 | | $ | 964,883 | | $ | 30,926 | | $ | 933,957 | |
| | | | | | | | | | | | | |
Liabilities and Stockholders’ (Deficit) Equity | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | |
Current portion - long-term obligations | | $ | 13,693 | | $ | 10,134 | | $ | 3,559 | | $ | 7,634 | | $ | 5,326 | | $ | 2,308 | |
Accounts payable | | 88,971 | | 23,067 | | 65,904 | | 89,229 | | 19,042 | | 70,187 | |
Accrued customer incentives and advertising | | 31,804 | | 1,263 | | 30,541 | | 33,215 | | 877 | | 32,338 | |
Accrued compensation | | 43,105 | | 6,052 | | 37,053 | | 26,466 | | 3,988 | | 22,478 | |
Accrued interest | | 15,230 | | 205 | | 15,025 | | 17,616 | | 181 | | 17,435 | |
Other accrued liabilities | | 36,436 | | 2,094 | | 34,342 | | 32,617 | | 2,279 | | 30,338 | |
Total current liabilities | | 229,239 | | 42,815 | | 186,424 | | 206,777 | | 31,693 | | 175,084 | |
| | | | | | | | | | | | | |
Long-term obligations | | 833,766 | | 7,868 | | 825,898 | | 794,658 | | 5,517 | | 789,141 | |
Other liabilities | | 59,625 | | 5,898 | | 53,727 | | 58,004 | | 5,280 | | 52,724 | |
Deferred income tax liabilities | | 832 | | — | | 832 | | 875 | | — | | 875 | |
Stockholders’ equity (deficit) | | (107,992 | ) | 11,003 | | (118,995 | ) | (95,431 | ) | (11,564 | ) | (83,867 | ) |
| | | | | | | | | | | | | |
Total liabilities and stockholders’ equity (deficit) | | $ | 1,015,470 | | $ | 67,584 | | $ | 947,886 | | $ | 964,883 | | $ | 30,926 | | $ | 933,957 | |
