— Net Sales Increased 35.5% —
— Comparable-Store Sales Growth of 9.7% in
Second Fiscal Quarter —
— Opened and Acquired 120 New Stores
—
Mattress Firm Holding Corp. (the “Company”) (NASDAQ:MFRM) today
announced its financial results for the second fiscal quarter (13
weeks) ended July 29, 2014. Net sales for the second fiscal quarter
increased 35.5% to $410.0 million, reflecting comparable-store
sales growth of 9.7% and incremental sales from new and acquired
stores. The Company reported second fiscal quarter earnings per
diluted share (“EPS”) on a generally accepted accounting principles
(“GAAP”) basis of $0.41, and EPS on a non-GAAP adjusted basis,
excluding acquisition-related costs, ERP system implementation
costs and impairment and severance charges (“Adjusted”), of $0.61.
Diluted EPS on a GAAP basis and Adjusted basis are reconciled in
the table below:
Second Fiscal Quarter Reconciliation of GAAP
to Adjusted EPSSee “Reconciliation of Reported (GAAP) to
Adjusted Statements of Operations Data” for Notes
Thirteen Weeks
Ended Twenty-Six Weeks Ended July
30, 2013 July 29, 2014 July 30, 2013 July 29,
2014 GAAP EPS $ 0.41 $ 0.41 $ 0.77 $ 0.64 Acquisition-related
costs (1) - 0.14 0.01 0.19 ERP system implementation costs (2) 0.02
0.03 0.03 0.05 Other expenses (3)
-
0.03 - 0.03
Adjusted EPS*
$ 0.43 $
0.61 $ 0.81 $
0.92
* Due to rounding to the nearest cent, totals may not equal the
sum of the lines in the table above.
“Our net sales of $410.0 million for the fiscal second quarter
and our 9.7% same store sales growth demonstrate the continuing
success of our deliberate growth and sales initiatives and
accretive acquisitions,” stated Steve Stagner, Mattress Firm’s
president and chief executive officer. “We are excited with the
sustained sales momentum that we have seen through the summer and
into the Labor Day weekend, and expect to capitalize further as the
stores acquired throughout this year become fully integrated into
our system. As external economic factors, such as consumer
confidence, continue to show improvement, we believe our Company is
well-positioned to take advantage of the potential ahead. Our
commitment to driving increased relative market share across the
chain should result in long-term growth of shareholder value
supported by our unwavering confidence in our ability to
deliver.”
Second Quarter Financial Summary
- Net sales for the second fiscal quarter
increased 35.5% to $410.0 million, reflecting comparable-store
sales growth of 9.7% and incremental sales from new and acquired
stores.
- Opened 53 new stores, closed five, and
acquired 67 bringing the total number of Company-operated stores to
1,480 as of the end of the fiscal quarter.
- Income from operations was $27.0
million. Excluding $11.0 million of acquisition-related, ERP system
implementation costs and impairment and severance charges, Adjusted
income from operations was $38.0 million, as compared with $26.9
million for the comparable prior year period. Adjusted operating
income margin was 9.3% of net sales as compared to 8.9% in the
second fiscal quarter of 2013, and included a ten basis-point
increase in gross margin, a 70 basis-point improvement in sales and
marketing expense leverage, offset by a 20 basis-point decrease
from general and administrative expense deleverage, and 20
basis-points of combined operating margin declines in other areas.
Please refer to “Reconciliation of Reported (GAAP) to Adjusted
Statements of Operations Data” for a reconciliation of income from
operations to Adjusted income from operations and other
information.
- Net income was $14.3 million and GAAP
EPS was $0.41. Excluding $6.8 million, net of income taxes, of
acquisition-related costs, ERP system implementation costs, and
impairment and severance charges, Adjusted net income was $21.1
million and Adjusted EPS was $0.61. Please refer to “Reconciliation
of Reported (GAAP) to Adjusted Statements of Operations Data” for a
reconciliation of net income and GAAP EPS to Adjusted net income
and Adjusted EPS, respectively, and other information.
For the full fiscal year-to-date:
- Net sales increased $165.0 million, or
28.5%, to $743.5 million, for the two fiscal quarters (twenty-six
weeks) ended July 29, 2014, from $578.5 million in the comparable
prior year period, reflecting comparable-store sales growth of 7.1%
and incremental sales from new and acquired stores.
- The Company opened 109 new stores,
closed 13, and acquired 159 during the first two fiscal quarters of
fiscal 2014, adding 255 net store units.
- Net income was $22.0 million for the
two fiscal quarters ended July 29, 2014 and GAAP EPS was $0.64.
Excluding $9.6 million, net of income taxes, of
acquisition-related, ERP system implementation costs, and
impairment and severance charges adjusted net income was $31.6
million for the two fiscal quarters and Adjusted EPS was $0.92. See
“Reconciliation of Reported (GAAP) to Adjusted Statements of
Operations Data” below for a reconciliation of net income as
reported to adjusted net income.
Acquisitions Completed During the Second Fiscal
Quarter
In June 2014, the Company completed the acquisition of
substantially all of the mattress specialty retail assets and
operations of Mattress Liquidators, Inc., which operated
Mattress King retail stores in Colorado and BedMart retail stores
in Arizona. The acquisition added 67 mattress specialty retail
stores to the Mattress Firm company-operated store base in markets
where the Company operates, primarily Denver, Colorado, Phoenix,
Arizona and Tucson, Arizona, for an aggregate purchase price of
approximately $35 million, subject to customary adjustments. The
acquisition was funded by cash reserves and revolver borrowings, as
well as a $3.5 million seller note that is payable in quarterly
installments over two years.
Pending Acquisitions
On August 18, 2014, the Company entered into an agreement to
acquire substantially all of the mattress specialty retail assets
and operations of Best Mattress Co., Inc., which operates retail
stores in Pennsylvania. The Company anticipates this transaction
will close in the third fiscal quarter of 2014. The acquisition
will add approximately 15 mattress specialty retail stores to the
Mattress Firm company-operated store base for an aggregate purchase
price of approximately $6.0 million, subject to customary
adjustments. The Company intends to rebrand these acquired stores
as Mattress Firm after the transaction closes.
On August 28, 2014, the Company entered into an agreement to
acquire substantially all of the mattress specialty retail assets
and operations of Back to Bed Inc., M World Mattress LLC, TBE
Orlando LLC and MCStores, LLC, which collectively operate Back to
Bed, Bedding Experts and Mattress Barn retail stores in Illinois,
Indiana, Wisconsin and Florida, primarily in the Chicago and
Orlando metropolitan areas. The Company anticipates this
transaction will close in the third fiscal quarter of 2014. The
acquisition will add approximately 135 mattress specialty retail
stores to the Mattress Firm company-operated store base for an
aggregate purchase price of approximately $60.0 million, subject to
customary adjustments. The Company intends to rebrand these
acquired stores as Mattress Firm after the transaction closes.
On September 3, 2014, the Company entered into an agreement to
acquire all of the outstanding equity interests in The Sleep Train,
Inc., which operates stores in California, Oregon, Washington,
Nevada, Idaho and Hawaii. The Company anticipates this transaction
will close in the fourth quarter of 2014. The acquisition will add
approximately 310 mattress specialty retail stores to the Mattress
Firm company-operated store base for an aggregate purchase price of
approximately $425.0 million, subject to customary adjustments. Ten
percent of the adjusted purchase price is payable in the form of
shares of common stock of the Company, having an equivalent
aggregate value as calculated in accordance with the purchase
agreement. As further consideration, the Company has agreed to
assume certain additional liabilities totaling approximately $15
million.
Balance Sheet
The Company had cash and cash equivalents of $18.1 million at
the end of the second fiscal quarter of 2014. Net cash provided by
operating activities was $51.2 million for the second fiscal
quarter of 2014. As of July 29, 2014, there were no borrowings
outstanding under the $100 million revolving portion of the 2012
Senior Credit Facility, as amended, and approximately $1.6 million
in outstanding letters of credit, with additional borrowing
capacity of $98.4 million.
Call Information
A conference call to discuss second fiscal quarter results is
scheduled for today, September 4, 2014, at 8:30 a.m. Eastern Time.
The call will be hosted by Steve Stagner, President and Chief
Executive Officer and Alex Weiss, Executive Vice President and
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) 705-6003, and participants from outside the U.S. may
dial (201) 493-6725. Participants may also access the call via live
webcast by visiting the Company’s investor relations web site at
http://www.mattressfirm.com.
The replay of the call will be available from approximately
11:30 a.m. Eastern Time on September 4, 2014 through noon Eastern
Time on September 18, 2014. 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 13589534. 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 for the thirteen and
twenty-six weeks ended July 29, 2014 as compared to the
corresponding prior year period were as follows (in millions):
Progression in Net Sales Thirteen
Weeks Twenty-Six Weeks Ended Ended
July 29, 2014 July 29, 2014
Net sales for prior year period $ 302.5 $ 578.5
Increase (Decrease)
in Net Sales
Comparable-store sales 28.8 40.3 New stores 40.4 75.8 Acquired
stores 43.1 58.9 Closed stores
(4.8
) (10.0 ) Increase in
net sales, net
107.5
165.0 Net sales for current year period
$ 410.0 $
743.5 % increase 35.5 % 28.5 %
The composition of net sales by major category of product and
services were as follows (in millions):
Thirteen Weeks Ended
Twenty-Six Weeks Ended July 30,
% of July 29, % of July
30, % of July 29, %
of 2013 Total
2014 Total
2013 Total
2014 Total Conventional
mattresses $ 148.5 49.1 % $ 195.6 47.7 % $ 270.1 46.7 % $ 359.3
48.3 % Specialty mattresses 129.2 42.7 % 177.5 43.3 % 259.0 44.8 %
313.8 42.2 % Furniture and accessories
19.1 6.3
%
28.7 7.0 %
38.3 6.6 %
55.7 7.5 % Total product sales 296.8 98.1 %
401.8 98.0 % 567.4 98.1 % 728.8 98.0 % Delivery service revenues
5.7 1.9 %
8.2 2.0 %
11.1 1.9 %
14.7 2.0 % Total net
sales
$ 302.5 100.0 %
$
410.0 100.0 %
$ 578.5 100.0
%
$ 743.5 100.0 %
The activity with respect to the number of Company-operated
store units was as follows:
Thirteen Weeks Twenty-Six Weeks
Ended Ended July 29, 2014 July 29, 2014
Store units, beginning of period 1,365 1,225 New stores 53 109
Acquired stores 67 159 Closed stores (5 ) (13 ) Store units, end of
period 1,480 1,480
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, GAAP and Adjusted EPS and
net store unit change for fiscal year 2014 and any anticipated
effects of the pending or recent acquisitions, are subject to
various risks and uncertainties, including but not limited to
downturns in the economy; reduction in discretionary spending by
consumers; our ability to execute our key business strategies and
advance our market-level profitability; our ability to profitably
open and operate new stores and capture additional market share;
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 our Annual Report on Form 10-K for the fiscal year
ended January 28, 2014 filed with the Securities and Exchange
Commission (“SEC”) on March 27, 2014 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. 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, as amended, between our indirect wholly
owned subsidiary, Mattress Holding Corp., certain lenders, and UBS
Securities LLC, as sole arranger, bookrunner, and lender (also
referred to as the 2012 Senior Credit Facility), are calculated
based on similar measures and 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):
Thirteen Weeks Ended
Twenty-Six Weeks Ended July 30,
July 29, July 30, July 29,
2013 2014
2013 2014 Net income
$ 14,123 $ 14,299 $ 26,132 $ 22,019 Income tax expense 8,965 9,194
16,639 14,085 Interest expense, net 2,795 3,469 5,642 6,285
Depreciation and amortization 7,231 9,509 13,441 18,201 Intangible
assets and other amortization
612
848 1,153
1,611 EBITDA
33,726
37,319 63,007
62,201 Loss on store closings and impairment of
store assets 483 648 744 906 Stock-based compensation 967 1,198
1,854 2,556 Vendor new store funds (a) 96 (346 ) 983 (443 )
Acquisition-related costs (b) 124 7,193 450 9,757 Other (c)
607 3,184
1,188 4,970 Adjusted EBITDA
$ 36,003 $
49,196 $ 68,226
$ 79,947
(a) We receive cash payments from certain vendors for each new
incremental store that we open (“new store funds”). New store funds
are initially recorded in other noncurrent liabilities when
received and are then amortized as a reduction of cost of sales
over 36 months in our financial statements. Historically, we have
considered new store funds as a component of Adjusted EBITDA when
received since new store funds are included in cash provided from
operations. The adjustment includes the amount of new store funds
received during the period presented and eliminates the non-cash
reduction in cost of sales included in our results of
operations.
(b) Reflects both non-cash effects included in net income
related to acquisition accounting adjustments made to inventories
and other acquisition-related cash costs included in net income,
such as direct acquisition costs and costs related to integration
of acquired businesses.
(c) Consists of various items that management excludes in
reviewing the results of operations, including $1.6 million and
$0.6 million of ERP system implementation costs incurred during the
thirteen weeks ended July 29, 2014 and July 30, 2013, respectively,
and $2.9 million and $1.2 million of cost incurred during the
twenty-six weeks ended July 29, 2014 and July 30, 2013,
respectively.
Adjusted EPS and the other “Adjusted” data provided in this
press release are also considered non-GAAP financial measures. We
report our financial results in accordance with GAAP; however,
management believes evaluating our ongoing operating results may be
enhanced if investors have additional non-GAAP basis financial
measures to facilitate year-over-year comparisons. Management
reviews non-GAAP financial measures to assess ongoing operations
and considers them to be effective indicators, for both management
and investors, of our financial performance over time. Our
management does not advocate that investors consider such non-GAAP
financial measures in isolation from, or as a substitute for,
financial information prepared in accordance with GAAP. For more
information, please refer to “Reconciliation of Reported (GAAP) to
Adjusted Statements of Operations Data” below.
MATTRESS FIRM HOLDING CORP.
Consolidated Balance Sheets
(In thousands, except share
amounts)
(unaudited)
January 28, July 29,
2014 2014
Assets
Current assets: Cash and cash equivalents $ 22,878 $ 18,143
Accounts receivable, net 20,812 36,469 Inventories 81,507 104,845
Deferred income tax asset 4,729 4,090 Prepaid expenses and other
current assets
16,348
27,367 Total current assets 146,274 190,914
Property and equipment, net 174,770 199,831 Intangible assets, net
84,391 91,796 Goodwill 366,647 468,530 Debt issue costs and other,
net
12,549 13,765
Total assets
$ 784,631 $
964,836
Liabilities and
Stockholders' Equity
Current liabilities: Notes payable and current maturities of
long-term debt $ 3,621 $ 8,877 Accounts payable 72,165 100,338
Accrued liabilities 42,435 71,004 Customer deposits
9,318 15,492 Total
current liabilities 127,539 195,711 Long-term debt, net of current
maturities 217,587 292,983 Deferred income tax liability 37,921
37,563 Other noncurrent liabilities
73,092
79,242 Total liabilities
456,139 605,499
Commitments and contingencies Stockholders' equity:
Common stock, $0.01 par value; 120,000,000
shares authorized; 34,002,981 and 33,990,381 shares issued and
outstanding at January 28, 2014; and 34,183,133 and 34,170,533
shares issued and outstanding at July 29, 2014, respectively
340 342 Additional paid-in capital 373,153 381,977 Accumulated
deficit
(45,001 )
(22,982 ) Total stockholders' equity
328,492 359,337
Total liabilities and stockholders' equity
$
784,631 $ 964,836
MATTRESS FIRM HOLDING CORP.
Consolidated Statements of
Operations
(In thousands, except share and per
share amounts)
(unaudited)
Thirteen Weeks Ended Twenty-Six Weeks
Ended July 30, % of July
29, % of July 30, % of
July 29, % of
2013 Sales
2014 Sales
2013 Sales
2014 Sales Net sales $
302,541 100.0 % $ 409,951 100.0 % $ 578,498 100.0 % $ 743,453 100.0
% Cost of sales
182,096 60.2 %
246,547 60.1 %
353,611 61.1 %
459,199 61.8 % Gross profit from retail
operations 120,445 39.8 % 163,404 39.9 % 224,887 38.9 % 284,254
38.2 % Franchise fees and royalty income
1,438
0.5 %
1,092 0.3 %
2,687 0.4
%
2,278 0.3 %
121,883 40.3
%
164,496 40.1 %
227,574
39.3 %
286,532 38.5 %
Operating
expenses: Sales and marketing expenses 75,768 25.0 % 99,998
24.3 % 139,499 24.1 % 175,663 23.6 % General and administrative
expenses 19,749 6.5 % 36,888 9.0 % 38,918 6.7 % 67,574 9.1 % Loss
on store closings and impairment of store assets
483 0.2 %
648 0.2 %
744 0.1 %
906 0.1 % Total
operating expenses
96,000 31.7 %
137,534 33.5 %
179,161 30.9 %
244,143 32.8 % Income from operations
25,883 8.6 %
26,962 6.6 %
48,413 8.4 %
42,389 5.7 %
Other
expense: Interest expense, net
2,795 1.0 %
3,469 0.9 %
5,642 1.0 %
6,285 0.8 % Income before income taxes 23,088
7.6 % 23,493 5.7 % 42,771 7.4 % 36,104 4.9 % Income tax expense
8,965 2.9 %
9,194 2.2 %
16,639 2.9 %
14,085 1.9 %
Net income
$ 14,123 4.7 %
$
14,299 3.5 %
$ 26,132 4.5 %
$ 22,019 3.0 % Basic net income
per common share $ 0.42 $ 0.42 $ 0.77 $ 0.65 Diluted net income per
common share $ 0.41 $ 0.41 $ 0.77 $ 0.64
Reconciliation
of weighted-average shares outstanding: Basic weighted average
shares outstanding 33,853,733 34,135,060 33,832,928 34,081,500
Effect of dilutive securities: Stock options 248,451 321,740
206,826 321,054 Restricted shares
47,456
66,820 36,813
61,484 Diluted weighted average shares outstanding
34,149,640 34,523,620
34,076,567 34,464,038
MATTRESS FIRM HOLDING CORP.
Consolidated Statements of Cash
Flows
(In thousands)
(unaudited)
Twenty-Six Weeks Ended July 30,
July 29,
Cash flows from
operating activities:
2013 2014 Net income $
26,132 $ 22,019 Adjustments to reconcile net income to cash flows
provided by operating activities: Depreciation and amortization
13,441 18,201 Loan fee and other amortization 1,050 2,239 Deferred
income tax expense 1,842 1,711 Stock-based compensation 1,854 2,556
Loss on store closings and impairment of store assets 744 906
Construction allowances from landlords 2,765 2,988 Excess tax
benefits associated with stock-based awards (230 ) (761 ) Effects
of changes in operating assets and liabilities, excluding business
acquisitions: Accounts receivable 1,475 (14,136 ) Inventories
(14,699 ) (14,784 ) Prepaid expenses and other current assets
(1,268 ) (9,497 ) Other assets (2,074 ) (1,730 ) Accounts payable
2,130 19,473 Accrued liabilities 1,049 24,557 Customer deposits
3,181 4,943 Other noncurrent liabilities
3,272
(416 ) Net cash provided by
operating activities
40,664
58,269
Cash flows from
investing activities:
Purchases of property and equipment (27,886 ) (34,658 ) Business
acquisitions, net of cash acquired
(2,042
) (106,908 ) Net cash
used in investing activities
(29,928
) (141,566 )
Cash flows from
financing activities:
Proceeds from issuance of debt 25,000 169,000 Principal payments of
debt (45,424 ) (93,268 ) Proceeds from exercise of common stock
options 1,272 2,069 Excess tax benefits associated with stock-based
awards
230 761
Net cash (used in) provided by financing activities
(18,922 ) 78,562
Net decrease in cash and cash equivalents (8,186 ) (4,735 )
Cash and cash equivalents, beginning of period
14,556 22,878 Cash
and cash equivalents, end of period
$
6,370 $ 18,143
Cash paid
for:
Interest
$ 5,641 $
6,620 Income taxes
$
11,637 $ 2,175
Supplemental
disclosure of noncash investing activity:
Capital expenditures included in accounts payable and accruals at
end of period
$ 3,823
$ 5,929
MATTRESS FIRM HOLDING CORP.
Reconciliation of Reported (GAAP) to
Adjusted Statements of Operations Data
(In thousands, except share and per
share amounts)
Thirteen Weeks Ended July 30,
2013 July 29, 2014 Income
From Income Net Diluted Weighted
Income From Income Net Diluted
Weighted Diluted
Before Income
Diluted
Before Income
Operations
Taxes
Income Shares
EPS* Operations
Taxes
Income Shares
EPS* As Reported $ 25,883 $ 23,088 $ 14,123
34,149,640 $ 0.41 $ 26,962 $ 23,493 $ 14,299 34,523,620 $ 0.41 % of
sales 8.6 % 7.6 % 4.7 % 6.6 % 5.7 % 3.5 % Acquisition-related costs
(1) 124 124 75 - 0.00 7,691 7,691 4,695 - 0.14 ERP system
implementation costs (2) 894 894 547 - 0.02 1,738 1,738 1,060 -
0.03 Other expenses (3)
-
- - -
- 1,636
1,636 999
- 0.03 Total adjustments
1,018 1,018
622 - 0.02
11,065 11,065
6,754 -
0.20 As Adjusted
$ 26,901
$ 24,106 $
14,745 34,149,640 $
0.43 $ 38,027
$ 34,558 $
21,053 34,523,620 $
0.61 % of sales 8.9 % 8.0 % 4.9 % 9.3 % 8.4 % 5.1 %
Twenty-Six Weeks
Ended
July 30, 2013 July 29, 2014
Income From Income Net Diluted
Weighted Income From Income Net
Diluted Weighted
Before Income
Diluted
Before Income
Diluted Operations
Taxes
Income Shares
EPS* Operations
Taxes
Income Shares
EPS* As Reported $ 48,413 $ 42,771 $ 26,132
34,076,567 $ 0.77 $ 42,389 $ 36,104 $ 22,019 34,464,038 $ 0.64 % of
sales 8.4 % 7.4 % 4.5 % 5.7 % 4.9 % 3.0 % Acquisition-related costs
(1) 450 450 276 - 0.01 10,701 10,701 6,540 - 0.19 ERP system
implementation costs (2) 1,845 1,845 1,131 - 0.03 3,089 3,089 1,888
- 0.05 Other (3)
- -
- -
- 1,833
1,833 1,120
- 0.03 Total adjustments
2,295 2,295
1,407 - 0.04
15,623 15,623
9,548 -
0.28 As Adjusted
$ 50,708
$ 45,066 $
27,539 34,076,567 $
0.81 $ 58,012
$ 51,727 $
31,567 34,464,038 $
0.92 % of sales 8.8 % 7.8 % 4.8 % 7.8 % 7.0 % 4.2 %
*Due to rounding to the nearest cent, totals may not equal the sum
of the lines in the table above.
* Due to rounding to the nearest cent per diluted share, totals
may not equal the sum of the line items in the table above.
(1) Acquisition-related costs, which are included in the “As
Reported” results of operations, consist of acquisition-related
costs as defined under U.S. GAAP, including advisory, legal,
accounting, valuation, and other professional or consulting fees
and, in addition, costs of integrating store and warehouse
operations and corporate functions that are not expected to recur
as acquisitions are absorbed. On May 2, 2012, we acquired all
of the equity interests of MGHC Holding Corporation (“Mattress
Giant”), including 181 mattress specialty retail stores. On
September 25, 2012, we acquired the assets and operations of
Mattress XPress, Inc. and Mattress XPress of
Georgia, Inc. (collectively, “Mattress X-Press”), including 34
mattress specialty retail stores. On December 11, 2012, we
acquired the assets and operations of Factory Mattress &
Water Bed Outlet of Charlotte, Inc. (“Mattress Source”),
including 27 mattress specialty retail stores. On June 14,
2013, we acquired the assets and operations of Olejo, Inc., an
online retailer primarily focused on mattresses and bedding-related
products. On November 13, 2013, we acquired the equity
interests of NE Mattress People, LLC (“Mattress People”),
including five mattress specialty retail stores. On
December 10, 2013, we acquired the assets and operations of
Perfect Mattress of Wisconsin, LLC (“Perfect Mattress”),
including 39 mattress specialty retail stores. On
December 31, 2013, we acquired the assets and operations of
two mattress specialty retail stores in Houston, Texas (“Mattress
Expo”). On March 3, 2014, we acquired the assets and
operations of Yotes, Inc. (“Yotes”), including 34 mattress
specialty retail stores. On March 3, 2014, we acquired the
Virginia assets and operations of Southern Max LLC (“Southern
Max”), including three mattress specialty retail stores. On
April 3, 2014, we acquired the outstanding partnership
interests in Sleep Experts Partners, L.P. (“Sleep Experts”),
including 55 mattress specialty retail stores. On June 4,
2014, we acquired substantially all of the mattress specialty
retail assets and operations of Mattress Liquidators, Inc.,
including 67 mattress specialty retail stores, which operated
Mattress King retail stores in Colorado and BedMart retail stores
in Arizona. Acquisition-related costs, consisting of direct
transaction costs and integration costs, are included in the
results of operations as incurred. We incurred approximately $7.7
million and $0.1 million of acquisition-related costs during the
thirteen weeks ended July 29, 2014 and July 30, 2013,
respectively. We incurred approximately $10.7 million and $0.5
million of acquisition-related costs during the twenty-six weeks
ended July 29, 2014 and July 30, 2013, respectively.
(2) Reflects implementation costs included in the results of
operations as incurred, consisting primarily of training-related
costs, related to the roll-out of the Microsoft Dynamics AX for
Retail ERP system. During the thirteen weeks ended July 29,
2014 and July 30, 2013, we incurred approximately $1.7 million
and $0.9 million, respectively, of ERP system implementation costs.
During the twenty-six weeks ended July 29, 2014 and July 30, 2013,
we incurred approximately $3.1 million and $1.8 million,
respectively, of ERP system implementation costs.
(3) Reflects expensed legal fees relating to our
February 2014 debt amendment and extension recorded in the
thirteen weeks ended April 29, 2014, and an impairment of
store assets and severance expense resulting from the Company's
realignment of its management structure at the beginning of the
second fiscal quarter recorded in the thirteen weeks ended July 29,
2014.
Our “As Adjusted” data is considered a non-U.S. GAAP financial
measure and is not in accordance with, or preferable to, “As
Reported,” or GAAP financial data. However, we are providing this
information as we believe it facilitates year-over-year comparisons
for investors and financial analysts.
About Mattress Firm
Houston-based Mattress Firm (NASDAQ:MFRM) is a high growth
specialty retailer, recognized one of the nation's leading
specialty bedding companies, offering a broad selection of both
traditional and specialty mattresses, bedding accessories and
related products from leading manufacturers. With more than 1,500
company-operated and franchised stores across 36
states, Mattress Firm has the largest geographic
footprint in the United States among multi-brand mattress
specialty retailers. Mattress Firm offers customers
comfortable store environments, guarantees on price, comfort and
service, and highly-trained sales professionals. More information
is available at http://www.mattressfirm.com. Mattress Firm's
website is not part of this press release.
for Mattress FirmInvestor Relations:Brad Cohen,
713-343-3652ir@mattressfirm.comorMedia:Joanna Singleton,
214-269-4401jsingleton@jacksonspalding.com
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