Simmons slashes net losses despite 5.7% sales slip in 2001
By Furniture Today Staff -- Furniture Today, March 18, 2002
ATLANTA — Simmons Co. said sales slipped 5.7% in 2001, but the big mattress producer reported significant increases in operating income and in earnings before interest, taxes, depreciation and amortization, or EBITA.
Operating income for the year ended Dec. 29 leaped 54.6% to $64.5 million, while adjusted EBITDA rose 27.1% to $78.3 million.
Sales for the 52-week year totaled $679.5 million, compared with $720.8 million for the 53-week year ended Dec. 30, 2000. Adjusting for the extra week in 2000, sales were down 3.9%, said Simmons Chairman Charlie Eitel.
Simmons' net loss for the year came to $1.1 million, compared with $10.9 million in 2000.
In a conference call with securities analysts, Eitel said sales were hurt by the weak economy, as well as the bankruptcies of three major retail customers — Montgomery Ward, Heilig-Meyers and HomeLife Furniture.
"Although economists are now saying we didn't have a recession, I can assure you … that the bedding industry had one," he said.
Eitel said fourth-quarter sales were also hurt when numerous sleep sets had to be recalled from dealers because of an objectionable odor in the foam cushioning. The foam was produced by Foamex, the bedding industry's biggest foam supplier, but he said the problem was traced to a chemical supplied to Foamex by Dow Chemical.
He declined to say how many mattresses had to be recalled, but said the problem cost Simmons $8 million to $10 million in December sales.
A portion of last year's decline in sales was offset by a 5% price increase Simmons implemented on its flagship Beautyrest line last April, but Simmons President Bob Hellyer said no price increases are planned in 2002.
Eitel said the company was able to boost operating margins through stringent cost controls and the on-going "zero waste" program in its factories.
| Quarter ended 12/29 | 2001 | 2000 | Change |
|---|---|---|---|
| Sales | $161,782,000 | $169,518,000 | (4.6%) |
| Operating income | 17,774,000 | 8,340,000 | 113.1% |
| Net income | (a)(3,601,000) | (b)(2,393,000) | — |
| Year ended 12/29(c) | 2001 | 2000 | Change |
| Sales | $679,518,000 | $720,767,000 | (5.7%) |
| Operating income | 64,548,000 | 41,744,000 | 54.6% |
| Net income | (a)(1,132,000) | (b)(10,943,000) | — |
| (a) Includes pretax charges for non-cash variable stock compensation of $9.3 million in the 2001 quarter and $14.8 million in the 2001 year, pretax ESOP expense of $876,000 in the 2001 quarter and $2.8 million in the 2001 year, pretax charges for severance-related management compensation of $530,000 in the 2001 quarter and $2.1 million in the 2001 year, income tax benefits of $8.1 million in the 2001 quarter and $6.3 million in the 2001 year and a $507,000 extraordinary loss from early retirement of debt in both periods. (b) Includes pretax charges for non-cash variable stock compensation of $574,000 in both 2000 periods, pretax ESOP expense of $1.8 million in the 2000 quarter and $7.1 million in the 2000 year and income tax benefits of $2.5 million in the 2000 quarter and $3.9 million in the 2000 year. The 2000 year also includes a $3.8 million pretax charge for severance-related management compensation. (c) The 2001 year is 52 weeks; the 2000 year is 53 weeks. | |||
