Sealy Corporation Reports Fiscal Fourth Net Sales Increase of 0.4% YoY

Sealy Corporation ZZ, the bedding industry's largest global bedding manufacturer, today announced results from continuing operations for its fourth quarter and full fiscal year 2010. Unless otherwise noted, the reported financial data pertains to Sealy's continuing operations, which excludes its discontinued operations in Europe and Brazil. Fiscal 2010 4th Quarter Results Net sales for the fourth fiscal quarter were $296.6 million, an increase of 0.4% compared to the same prior year period. Gross profit for the fourth fiscal quarter increased by $1.5 million to $122.9 million from the prior year quarter. Gross margin increased by 35 basis points to 41.4%. Income from operations for the fourth fiscal quarter increased by $9.1 million to $28.9 million. The increase was driven primarily by reductions in SG&A expenses. Net income from continuing operations for the fourth quarter was $3.5 million or $0.03 per diluted share, compared to $2.8 million or $0.02 per diluted share in the prior year quarter. The corresponding share counts for 2010 fourth quarter EPS and 2009 fourth quarter EPS were 296.2 million and 278.4 million, respectively. For further information on the calculation of diluted shares, please see the attached Reconciliation of Fully Diluted Sharecount schedule. Adjusted EBITDA for the fourth fiscal quarter increased 13.7% to $39.9 million from $35.1 million. Adjusted EBITDA margin increased to 13.4%, compared to 11.9% in the prior year period. Total U.S. net sales decreased 3.6% to $224.6 million from the fourth quarter of fiscal 2009. Wholesale unit volume decreased 1.7%, while wholesale average unit selling price decreased 1.8% on a year-over-year basis. The decrease in unit volume is primarily attributable to lower sales related to the company's Posturepedic line, partially offset by the growth of its Sealy branded promotional line. The decrease in wholesale average unit selling price is due to the company's response to competitive pressure including a growing mix of Sealy branded products. International net sales increased $9.5 million, or 15.2%, from the fourth quarter of 2009 to $72.0 million. Excluding the effects of currency fluctuation, international net sales increased 11.4% from the fourth quarter of 2009. This increase was primarily due to increased sales in the Canadian market driven by strategic promotional activity and the success of the company's Stearns & Foster line. Canadian unit volume for the quarter increased 12.5% from the comparable prior year quarter. Gross profit for the fourth fiscal quarter increased by $1.5 million to $122.9 million from the prior year quarter. Gross margin increased by 35 basis points to 41.4%, driven primarily by gains in our international businesses and increased operating efficiencies. U.S. gross profit margin decreased 72 basis points to 40.8%. The decrease in percentage of net sales was driven primarily by higher discounting on products that are at the end of their life cycle, and an increasing mix of Sealy branded promotional product, as well as the impact of inflation on material costs. Offsetting these decreases were improvements in operational efficiencies as well as gains in our international businesses. Selling, general, and administrative (SG&A) expenses were $99.0 million for the fourth quarter of fiscal 2010, a decrease of $5.8 million versus the comparable period a year earlier. The decrease was primarily due to a reduction in compensation and expected defined contribution plan payments. Net income from continuing operations for the fourth quarter was $0.03 per diluted share. Net loss from discontinued operations for the period was $(0.03) per diluted share. Included in the net loss from discontinued operations, are the operational results related to the European and Brazilian businesses and the related losses on disposition. Net loss for the fourth fiscal quarter was $0.00 per diluted shares. For further information on the calculation of diluted shares, please see the attached Reconciliation of Fully Diluted Sharecount schedule. Fiscal 2010 Full Year Results Net sales for the fiscal year ended November 28, 2010 increased 3.8% to $1,219.5 million from $1,174.6 million for the prior fiscal year. Gross profit was $509.5 million, or 41.8% of net sales, versus $487.5 million, or 41.5% of net sales, for the prior fiscal year. Net income from continuing operations was $24.7 million. Net loss from discontinued operations was $(38.4) million. Net loss for the fiscal year was $(13.7) million. Adjusted EBITDA increased 6.5% to $177.9 million, or 14.6% of net sales, from $167.0 million, or 14.2% of net sales, compared to the prior fiscal year. As of November 28, 2010, the Company's debt net of cash was $686.0 million and Net Debt to Adjusted EBITDA ratio (excluding the Convertible Payment In Kind Notes) was 2.84x. "We were pleased to deliver positive year over year sales and Adjusted EBITDA growth in 2010, despite a difficult retail environment. As we look forward into 2011, we are focused on a successful launch of the Next Generation Posturepedic line, driving performance from our 2010 product launches, replenishing our innovation pipeline, and making investments to strengthen our brand. With new and innovative product across our entire portfolio we believe we are well positioned to drive improved sales and Adjusted EBITDA growth for 2011," concluded Mr. Rogers.