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January 14, 2010
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Sealy Corp. (ZZ), the largest global manufacturer of bedding products, has reported strong fiscal 2009 fourth quarter results with earnings of 2 cents per share compared to a loss of 45 cents in the year-earlier quarter. The earnings also exceeded the Zacks Consensus Estimate by a penny. The better-than-expected results were primarily driven by robust sales particularly in the U.S. and reduced operating costs through continued improvements in manufacturing efficiencies, partially offset by unfavorable pricing trends.
During the quarter, total U.S. net sales increased 6.1% year-over-year to $233.0 million, while wholesale domestic net sales (which exclude third-party sales from Sealy's component plants) increased 7.3% to $227.7 million. New product introductions such as the Stearns & Foster line helped Sealy to offset a weak retail environment and drive profitable market share gains. However, international net sales decreased 6.6% to $99.1 million during the quarter due to relatively weak sales in Canada. Net sales for full fiscal year 2009 decreased 13.9% to $1.3 billion from $1.5 billion in fiscal 2008.
Sealy reported a gross profit of $131.1 million during the quarter compared to $117.9 million in the year-ago quarter. Gross profit margin during the quarter increased 331 basis points to 39.5% compared to the prior year fourth quarter, primarily due to lower material costs in the U.S. For full fiscal year 2009, gross profit was $516.8 million (40.1% of net sales) versus $582.0 million (38.9% of net sales) for fiscal 2008.
Selling, general, and administrative expenses reduced $3.1 million year-over-year to $113.9 million during the quarter due to stringent cost-control measures. Fixed operating costs (excluding compensation expense) of Sealy decreased $10.5 million due to reduction in discretionary and severance related costs. Income from operations for the fourth quarter increased to 5.9% of net sales from a loss in the prior year period. Total adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the quarter increased 465 basis points on a year-over-year basis to $37.0 million. For full fiscal 2009, income from operations was $111.1 million (8.6% of net sales) compared to $82.5 million (5.5% of net sales) for fiscal 2008. Total adjusted EBITDA for fiscal 2009 was $167.7 million (13.0% of net sales) compared to $166.9 million (11.1% of net sales) for fiscal 2008.
During fiscal 2009, Sealy reduced its year-over-year net debt by $40.8 million to $716.0 million. Total cash and equivalents at quarter end was $131.4 million compared to $26.6 million in the year-ago period. Amid positive signs of recovery in the macro-economic environment and retail industry conditions, the strong quarterly results of the company indicate stabilization in demand and profitability. In addition, product innovation and operational improvements of Sealy have strengthened its position in the market and will help drive profitable market share gains in the future.
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