-- Expanded Store Count By 13.9% in the Fourth Quarter --
-- Acquisition of Mattress Giant in 2012 Will Make Mattress Firm the
Largest U.S. Specialty Sleep Retailer --
-- Provides Financial Guidance For 2012 --
Mattress Firm Holding Corp. (NASDAQ: MFRM) today announced its financial
results for the fiscal fourth quarter (13 weeks) and fiscal year (52
weeks) ended January 31, 2012.
Fourth Quarter Highlights
Gross profit increased 61.2% to $75.9 million
Adjusted EBITDA increased 56.3% to $25.5 million
Opened 41 stores
Completed acquisition of 55 specialty mattress stores from Mattress
Giant
"We completed fiscal year 2011 with great momentum, producing our
highest quarterly sales and comparable-store sales growth in the fourth
quarter and accentuating the strong financial results experienced
throughout the year," stated Steve Stagner, Mattress Firm's chief
executive officer. "Our results for the year, driven by solid
comparable-store sales growth that has continued for the past two years,
reflect the strength and expanding appeal of our brand, customer
loyalty, and benefits we derive from selling the leading brands in the
bedding industry. In addition, we are encouraged by the consistent sales
increases reported by the bedding industry as we believe pent-up
consumer demand and product innovations are driving customers into the
market."
Fiscal Fourth Quarter Results
Net income was $17.4 million for the fourth quarter of fiscal year 2011,
including a $3.8 million pre-tax loss on early extinguishment of debt in
connection with the initial public offering in November 2011 and an
after-tax deferred tax benefit of $14.2 million resulting from the
release of the valuation allowance on deferred tax assets. Earnings per
diluted share ("EPS") were $0.56 in the fourth quarter of fiscal year
2011 as compared with EPS of $(0.07) in the fourth quarter of fiscal
year 2010.
Net sales increased $61.1 million or 47.9% to $188.6 million in the
fourth quarter of fiscal year 2011 from $127.5 million in the fourth
quarter of fiscal year 2010. The increase in net sales was the result of
comparable-store sales growth of 24.8%, adding $30.6 million in net
sales, and incremental net sales of $32.0 million from the opening of
new stores and acquired stores prior to their inclusion in
comparable-stores sales results, with such increases offset by a
reduction in net sales of $1.5 million related to closed stores.
The Company opened 41 new stores and added 55 stores acquired from
Mattress Giant Corporation ("Mattress Giant") in the fourth quarter of
fiscal year 2011, while closing seven stores, bringing the total
Company-operated stores to 729 as of January 31, 2012.
Gross profit increased 61.2% to $75.9 million in the fourth quarter of
fiscal 2011 at a gross profit margin of 40.2% as compared to a 36.9%
gross profit margin for the fourth quarter of fiscal 2010. The 330 basis
improvement in gross profit margin was primarily as a result of
increasing leverage over occupancy and operating costs due to improving
sales per store.
Income from operations increased 177.7% to $15.3 million in the fourth
quarter of fiscal 2011, compared to the same period of the prior year.
As a percentage of sales, income from operations improved 380 basis
points to 8.1% from 4.3%. The improvement over the prior year resulted
primarily from the improvement in gross profit and reduction of loss on
store closings and impairment of store assets, which was offset slightly
by expected increases in sales and marketing expense.
Earnings before interest, taxes, depreciation and amortization and other
adjustments ("Adjusted EBITDA") increased 56.3% to $25.5 million in the
fourth quarter of fiscal year 2011, compared to $16.3 million in the
same period of fiscal year 2010. Adjusted EBITDA as a percentage of
sales improved 73 basis points to 13.5% from 12.8%. See "Non-GAAP
Financial Measures" below for a reconciliation of Adjusted EBITDA to net
income.
Full Fiscal Year Results
Net income was $34.4 million for fiscal year 2011, including a $5.7
million pre-tax loss on early extinguishment of debt retired in advance
of, and in connection with, the completion of the initial public
offering in November 2011 (including $3.8 million in the fourth quarter)
and an after-tax deferred tax benefit of $20.1 million resulting from
the release of the valuation allowance on deferred tax assets during
fiscal year 2011 (including $14.2 million in the fourth quarter). EPS
was $1.40 in fiscal year 2011 as compared with EPS of $0.02 in fiscal
year 2010.
Net sales increased $209.8 million or 42.5% to $703.9 million in fiscal
year 2011 from $494.1 million in fiscal year 2010 (52 weeks ended
February 1, 2011). The increase in net sales was the result of
comparable-store sales growth of 20.5%, adding $99.0 million in net
sales, and incremental net sales of $116.4 million from the opening of
new stores and acquired stores prior to their inclusion in
comparable-stores sales results, with such increases offset by a
reduction in net sales of $5.6 million related to closed stores.
During fiscal year 2011, the Company opened 106 new stores and added 55
stores acquired from Mattress Giant in the fourth quarter of fiscal year
2011, while closing 24 stores.
Income from operations increased 87.8% to $60.5 million, compared to the
same period of the prior year. As a percentage of sales, income from
operations improved 207 basis points to 8.6% from 6.5%. The improvement
over the prior year resulted primarily from the improvement in gross
profit, which was offset slightly by expected increases in sales and
marketing expense.
Pro forma net income and pro forma EPS for fiscal year 2011, as adjusted
to give effect to the initial public offering that was completed in
November 2011, including the application of the net proceeds therefrom
and the conversion of certain portions of outstanding debt into shares
of the Company's common stock in connection with the completion of the
offering, was $51.6 million and $1.53, respectively. See "Unaudited Pro
Forma Consolidated Statement of Operations" for more information. The
pro forma results include the after-tax deferred tax benefit of $20.1
million described above.
Adjusted EBITDA increased 53.2% to $87.5 million for fiscal year 2011,
compared to $57.1 for fiscal year 2010. Adjusted EBITDA as a percentage
of sales improved 87 basis points to 12.4% from 11.6%. See "Non-GAAP
Financial Measures" below for a reconciliation of Adjusted EBITDA to net
income.
The Company generated $81.7 million of operating cash flow during fiscal
year 2011 as compared with $42.4 million during fiscal year 2010.
Pending Acquisition of Mattress Giant
The Company today announced the signing of a purchase agreement for all
of the equity interests of Mattress Giant for approximately $47 million
in cash, subject to customary purchase-price and certain other
adjustments. The Company expects that the transaction, which remains
subject to customary closing conditions, will be completed during its
fiscal second quarter ending July 31, 2012. The Company expects to fund
the purchase price from cash reserves.
In a separate transaction described under "Fiscal Fourth Quarter
Results" above, the Company acquired 55 stores from Mattress Giant in
the Atlanta, St. Louis and Minneapolis markets in November 2011, and has
substantially completed the integration of those stores. Upon closing of
the pending acquisition, the Company expects to operate approximately
180 additional Mattress Giant specialty retail stores in Texas and
Florida, which represent the two largest states in which Mattress Firm
currently operates. The stores are located in seven metropolitan markets
including Miami, Naples/Ft. Myers, Orlando, Tampa and Jacksonville in
Florida and Houston and Dallas in Texas, all representing markets where
Mattress Firm currently operates a total of 240 stores.
The acquisition is expected to advance the Company's market-level
profitability model that is centered on the benefits of increasing its
"relative market share" in a given market. Currently, the Mattress Giant
stores are generating sales per store that, on average, are
approximately 75% of Mattress Firm's average. The Company believes that
the incremental sales and store-level contribution attributable to the
acquired stores, once rebranded as Mattress Firm stores, will support
the Company's ability to increase the advertising spend in each of the
markets, which is expected to drive sales increases in both the acquired
and existing Mattress Firm stores. This strategy is expected to provide
sales increases, greater leverage over market-level costs and improved
market-level profitability.
The Company expects to rebrand substantially all of the Mattress Giant
stores as Mattress Firm at an average cost of approximately $80,000 to
$85,000 per store in a two-step process (including cost of Mattress Firm
floor samples). Initially after transaction closing:
all stores will be merchandised with Mattress Firm's product offerings
and its unique "Comfort by Color®" merchandising
approach;
Mattress Giant employees will be trained and educated in Mattress
Firm's selling programs; and,
Mattress Firm's point of sale systems will be implemented and
temporary Mattress Firm signage will be installed.
The Company expects that the initial rebranding will allow the acquired
stores to benefit from the significant advertising investment and
Mattress Firm brand presence in these markets throughout the upcoming
2012 peak summer selling season. After Labor Day, permanent signing as
well as renovations required to bring all the stores, except those that
will close, up to Mattress Firm's standards will be undertaken and are
expected to be substantially complete by the start of fiscal year 2013.
"We are extremely excited about the pending acquisition of Mattress
Giant and the further advancement of our relative market share in
several of our largest markets," commented Steve Stagner. "We have a
consistent track record of supplementing our organic growth with
opportunistic acquisitions. By acquiring these stores, which
historically have represented the best performing locations in Mattress
Giant's system, we immediately strengthen our ability to capture
additional sales and better serve the consumer. We expect that through
the implementation of Mattress Firm's operating and marketing model
these stores will meaningfully contribute to our long-term creation of
shareholder value."
Financial Guidance
The Company is issuing guidance for net sales and EPS for the fiscal
year (52 weeks) ending January 29, 2013 ("fiscal year 2012"). Such
guidance includes the expected closing of the Mattress Giant acquisition
during the second quarter of fiscal year 2012 (and prior to the upcoming
Memorial Day weekend). Net sales are expected to be in the range from
$1.03 billion to $1.06 billion based on opening approximately 100 new
stores and comparable-store sales growth of 10.0% to 12.0%. Such net
sales guidance includes the addition of stores to be acquired from
Mattress Giant, which are expected to generate fiscal year 2012 sales in
the range of $90 million to $95 million. The Company currently expects
EPS for fiscal year 2012 in the range of $1.40 to $1.48 per diluted
share. Such EPS guidance for fiscal 2012 includes estimated nonrecurring
direct transaction and integration costs of the pending Mattress Giant
acquisition that are estimated to have a total per diluted share effect
of $0.17 to $0.19, consisting of $0.11 to $0.13 in the second quarter,
$0.04 to $0.05 in the third quarter and $0.02 in the fourth quarter. The
Company expects that the Mattress Giant acquisition will be accretive to
EPS for the fiscal year (52 weeks) ending January 28, 2014 ("fiscal year
2013") by $0.25 to $0.35 per dilutive share as a result of expected
increases in sales volumes of the rebranded Mattress Giant stores as
they achieve closer parity with existing Mattress Firm stores.
In connection with the acquisition of Mattress Giant, Barclays is acting
as financial advisor to Mattress Firm.
Call Information
A conference call to discuss fourth quarter and full year results is
scheduled for today, April 10, 2012, at 5:00 p.m. ET. The call will be
hosted by Steve Stagner, president and chief executive officer, and Jim
Black, chief financial officer.
The conference call will be accessible by telephone and the Internet. To
access the call, participants from within the U.S. may dial (877)
407-3982, and participants from outside the U.S. may dial (201)
493-6780. Participants may also access the call via live webcast by
visiting the Company's investor relations Web site at www.mattressfirm.com.
The replay of the call will be available from approximately 8:00 p.m.
Eastern Time on April 10, 2012 through midnight Eastern Time on April
24, 2012. To access the replay, the domestic dial-in number is (877)
870-5176, the international dial-in number is (858) 384-5517, and the
passcode is 391348. The archive of the webcast will be available on the
company's Web site for a limited time.
Net Sales and Store Unit Information
The components of the net sales increase were as follows (in millions):
Increase (decrease) in net sales
13 Weeks
Ended
January 31,
2012
Fiscal 2011
Comparable-store sales
$
30.6
$
99.0
New stores
24.9
83.4
Acquired stores
7.1
33.0
Closed stores
(1.5
)
(5.6
)
$
61.1
$
209.8
The activity with respect to the number of Company-operated store units
was as follows:
13 Weeks
Ended
January 31,
2012
Fiscal 2011
Store units, beginning of period
640
592
New stores
41
106
Acquired stores
55
55
Closed stores
(7
)
(24
)
Store units, end of period
729
729
Forward-Looking Statements
Certain statements contained in this press release are not based on
historical fact and are "forward-looking statements" within the meaning
of applicable federal securities laws and regulations. In many cases,
you can identify forward-looking statements by terminology such as
"may," "would," "should," "could," "forecast," "feel," "project,"
"expect," "plan," "anticipate," "believe," "estimate," "predict,"
"intend," "potential," "continue" or the negative of these terms or
other comparable terminology; however, not all forward-looking
statements contain these identifying words. The forward-looking
statements contained in this press release, such as those relating to
our net sales and EPS for fiscal year 2012 and the net sales and EPS
effect for fiscal years 2012 and 2013 of the expected completion of our
acquisition of Mattress Giant and the integration of Mattress Giant
operations into ours, are subject to various risks and uncertainties,
including but not limited to downturns in the economy and a reduction in
discretionary spending by consumers; our ability to profitably open and
operate new stores; our relationship with our primary mattress
suppliers; our dependence on a few key employees; the possible
impairment of our goodwill or other acquired intangible assets; the
effect of our planned growth and the integration of our acquisitions on
our business infrastructure; the impact of seasonality on our financial
results and comparable-store sales; our ability to raise adequate
capital to support our expansion strategy; our success in pursuing and
completing strategic acquisitions; the effectiveness and efficiency of
our advertising expenditures; our success in keeping warranty claims and
comfort exchange return rates within acceptable levels; our ability to
deliver our products in a timely manner; our status as a holding company
with no business operations; our ability to anticipate consumer trends;
risks related to our controlling stockholder, J.W. Childs Associates,
L.P.; heightened competition; changes in applicable regulations; risks
related to our franchises, including our lack of control over their
operation and our liabilities if they default on note or lease
obligations; risks related to our stock and other factors set forth
under "Risk Factors" in the Company's prospectus filed pursuant to Rule
424(b) under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission ("SEC") on November 18, 2011 and our other SEC
filings. Forward-looking statements relate to future events or our
future financial performance and reflect management's expectations or
beliefs concerning future events as of the date of this press release.
Actual results of operations may differ materially from those set forth
in any forward-looking statements, and the inclusion of a projection or
forward-looking statement in this press release should not be regarded
as a representation by us that our plans or objectives will be achieved.
Except as required by applicable law, we do not undertake to publicly
update or revise any of these forward-looking statements, whether as a
result of new information, future events or otherwise.
Non-GAAP Financial Measures
Adjusted EBITDA is defined as net income before income tax expense,
interest income, interest expense, depreciation and amortization
("EBITDA"), without giving effect to non-cash goodwill and intangible
asset impairment charges, gains or losses on store closings and
impairment of store assets, gains or losses related to the early
extinguishment of debt, financial sponsor fees and expenses, non-cash
charges related to stock based awards and other items that are excluded
by management in reviewing the results of operations. We have presented
Adjusted EBITDA because we believe that the exclusion of these items is
appropriate to provide additional information to investors about our
ongoing operating performance excluding certain non-cash and other items
and to provide additional information with respect to our ability to
comply with various covenants in documents governing our indebtedness
and as a means to evaluate our period-to-period results. In evaluating
Adjusted EBITDA, you should be aware that in the future we may incur
expenses that are the same as or similar to some of the adjustments in
this presentation. Our presentation of Adjusted EBITDA should not be
construed to imply that our future results will be unaffected by any
such adjustments. We have provided this information to analysts,
investors and other third parties to enable them to perform more
meaningful comparisons of past, present and future operating results and
as a means to evaluate the results of our ongoing operations. Management
also uses Adjusted EBITDA to determine executive incentive compensation
payment levels. In addition, our compliance with certain covenants under
the credit agreement between our indirect wholly owned subsidiary,
Mattress Holding Corp., certain lenders, and UBS Securities LLC, as sole
arranger and bookrunner and a lender, are calculated based on similar
measures, which differ from Adjusted EBITDA primarily by the inclusion
of pro forma results for acquired businesses in those similar measures.
Other companies in our industry may calculate Adjusted EBITDA
differently than we do. Adjusted EBITDA is not a measure of performance
under U.S. GAAP and should not be considered as a substitute for net
income prepared in accordance with U.S. GAAP. Adjusted EBITDA has
significant limitations as an analytical tool, and you should not
consider it in isolation or as a substitute for analysis of our results
as reported under U.S. GAAP.
The following table contains a reconciliation of our net income
determined in accordance with U.S. GAAP to EBITDA and Adjusted EBITDA
for the periods indicated (in thousands):
13 Weeks Ended
Fiscal Year
February 1,
January 31,
2011
2012
2010
2011
Net income (loss)
$
(1,633
)
$
17,372
$
349
$
34,351
Income tax expense (benefit)
(1,046
)
(9,684
)
846
(8,815
)
Interest income
(5
)
(5
)
(6
)
(9
)
Interest expense
8,211
3,831
31,063
29,310
Depreciation and amortization
4,009
4,499
15,448
17,450
Intangible assets and other amortization
458
464
1,327
1,718
EBITDA
9,994
16,477
49,027
74,005
Goodwill impairment charge
536
-
536
-
Loss on store closings and impairment of store assets
1,972
435
2,486
759
Loss from debt extinguishment
-
3,832
-
5,704
Financial sponsor fees and expenses
94
350
407
644
Stock-based compensation
27
465
(515
)
523
Vendor new store funds (a)
817
2,396
1,540
3,169
Acquisition related expenses (b)
449
708
453
886
Other (various) (c)
2,447
871
3,161
1,797
Adjusted EBITDA
$
16,336
$
25,534
$
57,095
$
87,487
_________________________
(a)
Adjustment to recognize vendor funds received upon the opening of
a new store in the period opened, rather than over 36-months as
presented in our financial statements, which is consistent with
how management has historically reviewed its results of operations.
(b)
Noncash effect included in net income related to purchase
accounting adjustments made to inventories resulting from
acquisitions and other acquisition related cash costs included in
net income, such as direct acquisition costs and costs related to
training and integration of acquired businesses.
(c)
Consists of various items that management excludes in reviewing
the results of operations.
MATTRESS FIRM HOLDING CORP.
Consolidated Balance Sheets
(In thousands, except share amounts)
February 1,
January 31,
2011
2012
Assets
Current assets:
Cash and cash equivalents
$
4,445
$
47,946
Accounts receivable, net
12,033
18,607
Inventories
26,726
40,961
Deferred income taxes
82
12,574
Prepaid expenses and other current assets
10,746
12,054
Total current assets
54,032
132,142
Property and equipment, net
77,601
95,674
Intangible assets, net
84,913
84,795
Goodwill
287,379
291,141
Debt issue costs and other, net
9,708
9,729
Total assets
$
513,633
$
613,481
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities of long-term debt
$
6,255
$
2,414
Accounts payable
29,237
42,396
Accrued liabilities
21,865
31,780
Customer deposits
4,371
6,294
Total current liabilities
61,728
82,884
Long-term debt, net of current maturities
233,784
225,940
Long-term debt due to related parties
158,664
-
Deferred income taxes
29,960
31,045
Other noncurrent liabilities
45,179
49,353
Total liabilities
529,315
389,222
Stockholders' equity:
Common stock, $0.01 par value; 120,000,000 shares authorized;
22,399,952 and 33,768,828 shares issued and outstanding at
February 1, 2011 and January 31, 2012, respectively
224
338
Additional paid-in capital
156,241
361,717
Accumulated deficit
(172,147
)
(137,796
)
Total Stockholders' (deficit) equity
(15,682
)
224,259
Total liabilities and Stockholders' equity
$
513,633
$
613,481
MATTRESS FIRM HOLDING CORP.
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
13 Weeks Ended
Fiscal Year
February 1,
January 31,
2011
2012
2010
2011
Net sales
$
127,494
$
188,558
$
494,115
$
703,910
Cost of sales
80,439
112,685
313,962
428,018
Gross profit from retail operations
47,055
75,873
180,153
275,892
Franchise fees and royalty income
943
1,296
3,195
4,697
47,998
77,169
183,348
280,589
Operating expenses:
Sales and marketing expenses
30,483
45,471
113,963
167,605
General and administrative expenses
9,480
15,918
34,111
51,684
Goodwill impairment charge
536
-
536
-
Loss on store closings and impairment of store assets
1,972
435
2,486
759
Total operating expenses
42,471
61,824
151,096
220,048
Income from operations
5,527
15,345
32,252
60,541
Other expense (income):
Interest income
(5
)
(5
)
(6
)
(9
)
Interest expense
8,211
3,831
31,063
29,310
Loss from debt extinguishment
-
3,832
-
5,704
8,206
7,658
31,057
35,005
Income (loss) before income taxes
(2,679
)
7,687
1,195
25,536
Income tax expense (benefit)
(1,046
)
(9,685
)
846
(8,815
)
Net income (loss)
$
(1,633
)
$
17,372
$
349
$
34,351
Basic and diluted net income (loss) per common share
$
(0.07
)
$
0.56
$
0.02
$
1.40
Basic and diluted weighted average shares outstanding
22,399,952
31,145,241
22,399,952
24,586,274
MATTRESS FIRM HOLDING CORP.
Consolidated Statements of Cash Flows
(In thousands)
Fiscal Year
2010
2011
Cash flows from operating activities:
Net income
$
349
$
34,351
Adjustments to reconcile net income to cash flows
provided by operating activities:
Depreciation and amortization
15,448
17,450
Interest expense accrued and paid-in-kind
23,201
20,575
Loan fee and other amortization
2,221
2,530
Loss from debt extinguishment
-
5,704
Deferred income tax benefit
(118
)
(11,271
)
Stock-based compensation
(515
)
523
Goodwill impairment charge
536
-
Loss on store closings and impairment of store assets
1,034
324
Effects of changes in operating assets and liabilities,
excluding business acquisitions:
Accounts receivable
(6,028
)
(6,574
)
Inventories
(2,056
)
(10,555
)
Prepaid expenses and other current assets
(2,178
)
(1,306
)
Other assets
(2,773
)
(2,914
)
Accounts payable
6,265
13,159
Accrued liabilities
1,454
9,333
Customer deposits
1,068
1,518
Other noncurrent liabilities
4,521
8,828
Net cash provided by operating activities
42,429
81,675
Cash flows from investing activities:
Purchases of property and equipment
(27,330
)
(34,356
)
Business acquisitions, net of cash acquired
(10,762
)
(7,958
)
Net cash used in investing activities
(38,092
)
(42,314
)
Cash flows from financing activities:
Proceeds from issuance of debt
2,985
40,198
Principal payments of debt
(3,271
)
(145,231
)
Proceeds from issuance of common stock, net of costs
-
110,446
Debt issuance costs
-
(1,273
)
Net cash (used in) provided by financing activities
(286
)
4,140
Net increase in cash and cash equivalents
4,051
43,501
Cash and cash equivalents, beginning of period
394
4,445
Cash and cash equivalents, end of period
$
4,445
$
47,946
Unaudited Pro Forma Consolidated Statement of Operations
The pro forma consolidated statements of operations for the fifty-two
weeks ended January 31, 2012, are unaudited and have been derived from
our historical consolidated financial statements, as adjusted to give
effect to the initial public offering that was completed on November 23,
2011, including the application of the net proceeds therefrom and the
conversion of all of the 12% convertible notes due July 18, 2016
("Convertible Notes") and the conversion of certain amounts of the 12%
payment-in-kind investor notes maturing at various times from October
24, 2012 through March 19, 2015 ("PIK Notes") for which such conversion
was elected, into shares of our common stock in connection with the
completion of the offering, as if all such transactions had occurred on
February 2, 2011.
The unaudited pro forma adjustments are based on available information
and certain assumptions that we believe are reasonable and are described
in the accompanying notes, which should be read in conjunction with
these unaudited pro forma consolidated financial statements. The
unaudited pro forma consolidated statement of operations should be read
in conjunction with the historical financial results included elsewhere
in this press release.
The unaudited pro forma statement of operations are for illustrative and
informational purposes only and should not be considered indicative of
the results that would have been achieved had the transactions been
consummated for the period indicated. Also, the unaudited pro forma
consolidated statement of operations should not be viewed as indicative
of statement of operations data as of any future dates or for any future
period.
MATTRESS FIRM HOLDING CORP.
Pro Forma Consolidated Statement of Operations
52 Weeks Ended January 31, 2012
(In thousands, except share and per share amounts)
Pro Forma
Historical
Adjustments
Pro Forma
Net sales
$
703,910
$
-
$
703,910
Cost of sales
428,018
-
428,018
Gross profit from retail operations
275,892
-
275,892
Franchise fees and royalty income
4,697
-
4,697
280,589
-
280,589
Operating expenses:
Sales and marketing expenses
167,605
-
167,605
General and administrative expenses
51,684
(644
)
(a)
51,040
Loss on store closings and impairment of store assets
759
-
759
Total operating expenses
220,048
(644
)
219,404
Income from operations
60,541
644
61,185
Other expense (income):
Interest income
(9
)
-
(9
)
Interest expense
29,310
(21,131
)
(b)
8,179
Loss from debt extinguishment
5,704
(5,688
)
(c)
16
35,005
(26,819
)
8,186
Income before income taxes
25,536
27,463
52,999
Income tax expense (benefit)
(8,815
)
10,189
(d)
1,374
Net income
$
34,351
$
17,274
$
51,625
Pro forma basic and diluted net income per common
share (e)
$
1.40
$
1.53
Pro forma basic and diluted weighted average shares
outstanding (e)
24,586,274
33,768,828
(a)
Represents the reduction of management fees included in general
and administrative expenses related to termination of the
management agreement.
(b)
Represents the reduction of interest expense in the amount of
$20.5 million related to the reduction in the principal amount of
debt, and the reduction in the amortization of debt issue costs
and debt discount in the amounts of $0.2 million and $0.4 million,
respectively, related to (1) the prepayment of the loan facility
between Mattress Intermediate Holdings, Inc., Mattress Holding
Corp.'s direct subsidiary, and a group of lenders maturing in
January 2015 (the "2009 Loan Facility") on July 19, 2011, (2) the
use of proceeds from the Company's initial public offering to
repay the remaining outstanding balance of the 2009 Loan Facility
and the amount of PIK Notes for which a cash prepayment was
elected, and (3) the conversion of Convertible Notes and the
conversion of the PIK Notes for which a cash prepayment was not
elected into shares of the Company's common stock in connection
with the Company's initial public offering.
(c)
Represents the reduction of loss from extinguishment of debt in
connection with the completion of the initial public offering,
including prepayments of the 2009 Loan Facility, the PIK Notes and
the Convertible Notes.
(d)
Represents the income tax effects of the pro forma adjustments at
an effective income tax rate of 37.1%. The effective tax rate is
the combination of the federal rate of 35% and the aggregate state
rate, net of federal income tax benefit, of 2.1%. Both historical
and pro forma results include a deferred income tax benefit of
$20.1 million related to the release of the valuation allowance on
deferred tax assets during fiscal year 2011.
(e)
The historical results give effect to a 227,058-for-one stock
split effected on November 3, 2011 resulting in 22,399,952 shares
of common stock outstanding, as if the stock split had been
effected as of the beginning of the period, and the weighted
number of shares outstanding at January 31, 2012 from the issuance
of (1) 6,388,888 shares of the Company's common stock in
connection with the initial public offering, (2) 2,205,953
additional shares upon the conversion of the Convertible Notes in
connection with the offering and (3) 2,774,035 additional shares
upon the conversion of the PIK Notes in connection with the
offering, in each case at a price or conversion rate equal to the
initial public offering price of $19.00 per share. The following
table provides the pro forma number of weighted average shares
outstanding, which gives effect to issuance of share described in
this note as if they had been issued at the beginning of the
period:
Basic and Diluted
Weighted Average
Shares Outstanding
Shares outstanding at beginning of year (giving effect to stock
split)
22,399,952
Issuance for (1)
6,388,888
Issuance for (2)
2,205,953
Issuance for (3)
2,774,035
Pro forma
33,768,828
About Mattress Firm
Houston-based Mattress Firm is one of the nation's leading specialty
bedding retailers, offering a broad selection of both traditional and
specialty mattresses from leading manufacturers, including Sealy, Serta,
Simmons, Stearns & Foster and Tempur-Pedic.
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