— Net Sales Increased 61.2% Over Prior
Year — — Eighth Consecutive Quarter of Positive
Comparable-Store Sales Growth —— Adjusted EBITDA Increased
Approximately 37.2% Over Prior Year —— Sleep Train Continues
to Outperform Expectations and Chicago Improving —— Updates
Full Year Adjusted EPS Guidance to $2.30 to $2.45 —
Mattress Firm Holding Corp. (the “Company”) (NASDAQ:MFRM) today
announced its financial results for the second fiscal quarter (13
weeks) ended August 4, 2015. Net sales for the second fiscal
quarter increased 61.2% over the prior year to $661.1 million,
reflecting comparable-store sales growth of 2.8% 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 $0.61, and EPS on
a non-GAAP adjusted basis, excluding acquisition-related costs,
secondary offering costs, and impairment and severance charges
(“Adjusted”), of $0.67.
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Expected diluted EPS on a GAAP basis and Adjusted basis are
reconciled in the table below:
Second Fiscal Quarter Reconciliation of
GAAP to Adjusted EPS and Adjusted Cash EPS**
See “Reconciliation of Reported (GAAP) to
Adjusted Statements of Operations Data” for Notes
Thirteen Weeks
Ended Twenty-Six Weeks Ended July
29, 2014 August 4, 2015 July 29,
2014 August 4, 2015 GAAP EPS $ 0.41
$ 0.61 $ 0.64 $ 0.77
Adjustments Acquisition-related costs
(1) 0.14 0.03 0.19 0.19 Secondary offering costs (2) - - - 0.01 ERP
system implementation costs (3) 0.03 - 0.05 0.01 Impairment charges
and other expenses (4)(5)
0.03
0.01 0.04 0.01
Adjusted EPS* $ 0.61
$ 0.67 $ 0.92
$ 1.00 Non-Cash Adjustments
Depreciation and amortization expense 0.20 0.29 0.36 0.56
Stock-based compensation expense
0.02
0.04 0.05 0.07
Adjusted Cash EPS* $ 0.83
$ 0.99 $ 1.32
$ 1.63
*
Due to rounding to the nearest cent,
totals may not equal the sum of the lines in the table above.
**
Reported sales results and expected GAAP
and Adjusted EPS are preliminary and remain subject to adjustment
until the filing of the Company's Quarterly Report on Form 10-Q
with the U.S. Securities and Exchange Commission.
“We are pleased that we delivered 61% net sales growth and our
eighth consecutive quarter of positive comps, against our most
difficult comparison of the year,” stated Steve Stagner, Mattress
Firm’s chief executive officer. “We saw strong results in the first
half of the quarter, offset by softness in the second half of the
quarter and renewed headwinds in our oil-affected markets. Our
integration of multiple acquisitions is progressing, and we are
excited about the continued outperformance of the Sleep Train
business and the progress we are seeing in Chicago. Despite a solid
Labor Day and recent positive sales trends, we still expect
volatility in the oil-affected markets and have adjusted our
guidance to reflect that. We continue to see results from our
Relative Market Share model, and believe we can create long-term
value for our shareholders as we integrate our acquisitions and
execute our growth strategies.”
Preliminary Second Quarter Financial Summary
- Net sales for the second fiscal quarter
increased 61.2% to $661.1 million as compared with the comparable
prior year period, reflecting incremental sales from acquired and
new stores, and comparable-store sales growth of 2.8%.
Comparable-store sales growth in the prior year period was
9.7%.
- Opened 71 new stores and closed 11
bringing the total number of Company-operated stores to 2,223 as of
the end of the second fiscal quarter.
- Income from operations was $45.6
million. Excluding $3.0 million of acquisition-related costs,
secondary offering costs, and impairment and severance charges,
Adjusted income from operations was $48.6 million, as compared with
$38.0 million for the comparable prior year period. Adjusted
operating income margin was 7.4% of net sales as compared with 9.3%
in fiscal 2014, and included a 30 basis-point increase from general
and administrative expense leverage, offset by a 90 basis-point
decline in gross margin, 120 basis-points of expense deleverage
from sales and marketing expense, and 10 basis-points of combined
operating margin declines in franchise fees. 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 $21.9 million and GAAP
EPS was $0.61. Excluding $1.9 million, net of income taxes, of
acquisition-related costs, secondary offering costs, and impairment
and severance charges, Adjusted net income was $23.8 million and
Adjusted EPS was $0.67. 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 $480.1 million, or
64.6%, to $1,223.6 million, for the two fiscal quarters (twenty-six
weeks) ended August 4, 2015, from $743.5 million in the comparable
year period, reflecting comparable store sales growth of 2.1% and
incremental sales from new and acquired stores. Comparable-store
sales growth in the prior year comparable period was 7.1%.
- The Company opened 149 new stores and
closed 20 during the first two fiscal quarters of fiscal 2015,
adding 129 net store units.
- Income from operations was $64.4
million, for the two fiscal quarters ended August 4, 2015.
Excluding $13.2 million of acquisition-related costs, ERP system
implementation costs, secondary offering costs, and impairment and
severance charges, Adjusted income from operations was $77.6
million for the two fiscal quarters ended August 4, 2015, as
compared with $58.0 million for the comparable prior year period.
Adjusted operating income margin was 6.3% of net sales as compared
with 7.8% in fiscal 2014, and included a 40 basis-point increase
from general and administrative expense leverage, offset by a 70
basis-point decline in gross margin, 100 basis-points of expense
deleverage from sales and marketing expense, and 20 basis-points of
combined operating margin declines in franchise fees and from
losses on store closings. 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 $27.4 million for the
two fiscal quarters ended August 4, 2015 and GAAP EPS was $0.77.
Excluding $8.3 million, net of income taxes, of acquisition-related
costs, ERP system implementation costs, secondary offering costs,
and impairment and severance charges, Adjusted net income was $35.7
million for the two fiscal quarters and Adjusted EPS was $1.00.
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.
Acquisitions
In September 2014, the Company completed the acquisition of the
mattress specialty retail assets and operations of Back to Bed
Inc., M World Mattress LLC, MCStores LLC and TBE Orlando LLC, which
collectively operate Back to Bed and Bedding Experts retail stores
in Illinois, Indiana and Wisconsin and Bedding Experts and Mattress
Barn retail stores in Florida. The acquisition included
approximately 131 mattress specialty retail stores primarily in the
Chicago and Orlando metropolitan areas, for an aggregate purchase
price of approximately $64.5 million. The rebranding of the
acquired retail stores in the Chicago market was substantially
complete by the end of May 2015. The Chicago market sales growth
year-over-year (“YOY”) from those stores both prior to and
subsequent to their rebranding is demonstrated by the chart
above.
Balance Sheet
The Company had cash and cash equivalents of approximately $10.6
million at the end of the second fiscal quarter. Net cash provided
by operating activities was $89.4 million for the second fiscal
quarter. During the second quarter, the Company repaid $55.1
million of long-term debt, and as of August 4, 2015, there were no
borrowings outstanding under the revolving portion of the 2014
Senior Credit Facility (as defined in the Company’s filings with
the Securities and Exchange Commission) and approximately $4.2
million in outstanding letters of credit, with additional borrowing
capacity of $90.4 million.
Financial Guidance
The Company is increasing the midpoint of its sales guidance
range by $30 million primarily as a result of the anticipation of
30 incremental net new stores and the outperformance at the Sleep
Train brand. The Company is revising its Adjusted EPS financial
guidance for the full fiscal year (52 weeks) ending February 2,
2016 (“fiscal 2015”) based on year-to-date results, continued
volatility inside oil-affected markets, and the discontinuation of
the Mattress Pro concept. These projections are forecasts and are
intended solely to give investors an understanding of management’s
expectations for the full fiscal year in light of the recent
consumer environment and sales trends. The projections do not take
into account, or give effect for, acquisitions that may be
completed by the Company during the fiscal year or any other events
that are beyond the Company’s reasonable control. As used in the
guidance table below, “Adjusted Cash EPS” is defined as adjusted
net income as presented in the “Reconciliation of Reported (GAAP)
to Adjusted Statements of Operations Data”, plus tax effected stock
compensation expense and depreciation and amortization, divided by
the number of diluted shares. Please refer to “Reconciliation of
Reported (GAAP) to Adjusted Statements of Operations Data” for a
reconciliation of GAAP EPS to Adjusted Cash EPS and other
information which is not calculated on a GAAP basis.
Comparable-store sales growth for fiscal year 2014 excludes
incremental sales related to the 53rd week of operations. Adjusted
data for future periods reflects management’s reasonable estimates
of appropriate adjustments based on historical experience.
Percentage growth calculations in the table below represent the
midpoints of the guidance range provided. Net capital expenditures
in the table below represent gross purchases of property and
equipment, offset by cash construction allowances received from
landlords.
Fifty-Three
Fifty-Two Weeks Ended Weeks Ended February
3, 2015 February 2, 2016 % Growth New Store
Growth (net of closures) 201 250 - 270 -- Acquired Store Growth 668
-- -- Net Sales (in millions) $1,806 $2,530 - $2,550 41%
Comparable-Store Sales Growth 6.1% Low Single Digit -- Adjusted
EBITDA (in millions) $190 $253 - $262 35% GAAP EPS $1.27 $2.03 -
$2.15 65% Adjustments (per share) $0.76 $0.27 - $0.30 -- Adjusted
EPS $2.03 $2.30 - $2.45 17% Adjusted Cash EPS $2.99 $3.65 - $3.80
25% Diluted Share Count (in millions) 34.8 35.7 -- Adjusted
Tax Rate 39.5% 38.2% -- Depreciation and Amortization (in millions)
$47 $68 45% Interest Expense (in millions) $22 $40 82% Stock-based
Compensation Expense (in millions) $8 $11 35% Net Capital
Expenditures (in millions) $72 $110 52% Ending Net Debt (in
millions) $757 $680 -10%
Call Information
A conference call to discuss second fiscal quarter results is
scheduled for today, September 11, 2015, at 8:30 a.m. Eastern Time.
The call will be hosted by Steve Stagner, chief executive officer,
Alex Weiss, chief financial officer and Scott McKinney, vice
president of investor relations.
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
ir.mattressfirm.com.
The replay of the call will be available from approximately
11:30 a.m. Eastern Time on September 11, 2015 through midnight
Eastern Time on September 25, 2015. 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 13618714. 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 August 4, 2015 as compared to the
corresponding prior year period were as follows (in millions):
Progression in Net Sales
Thirteen Weeks Twenty-Six Weeks
Ended Ended August 4, 2015
August 4, 2015 Net sales for prior year period
$ 410.0 $ 743.5
Increase (Decrease)
in Net Sales
Comparable-store sales 11.2 15.2 New stores 57.4 103.1 Acquired
stores 185.5 367.3 Closed stores
(3.0
) (5.5 ) Increase in
net sales, net
251.1
480.1 Net sales for current year period
$ 661.1 $
1,223.6 % increase 61.2 % 64.6 %
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 29,
% of August 4,
% of July 29, % of
August 4, % of
2014 Total
2015 Total
2014 Total
2015 Total Conventional
mattresses $ 195.6 47.7% $ 350.0 53.0% $ 359.3 48.3% $ 623.8 51.0%
Specialty mattresses 177.5 43.3% 256.6 38.8% 313.8 42.2% 491.1
40.2% Furniture and accessories
28.7 7.0%
46.5 7.0%
55.7 7.5%
93.5
7.6% Total product sales 401.8 98.0% 653.1 98.8% 728.8 98.0%
1,208.4 98.8% Delivery service revenues
8.2 2.0%
8.0 1.2%
14.7 2.0%
15.2 1.2%
Total net sales
$ 410.0 100.0%
$ 661.1
100.0%
$ 743.5 100.0%
$ 1,223.6 100.0%
The activity with respect to the number of Company-operated
store units was as follows:
Thirteen Weeks Twenty-Six
Weeks Ended Ended August 4, 2015 August
4, 2015 Store units, beginning of period 2,163 2,094 New stores
71 149 Closed stores (11 ) (20 ) Store units, end of period 2,223
2,223
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 2015 and any anticipated
effects of any 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 primary
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 February 3, 2015 filed with the Securities and Exchange
Commission (“SEC”) on April 3, 2015 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 2014 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 and new
stores 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 29,
August 4, July 29,
August 4, 2014 2015
2014 2015 Net income $
14,299 $ 21,881 $ 22,019 $ 27,359 Income tax expense 9,194 13,678
14,085 16,778 Interest expense, net 3,469 10,046 6,285 20,299
Depreciation and amortization 9,509 14,752 18,201 28,746 Intangible
assets and other amortization
848
1,366 1,611
2,703 EBITDA
37,319
61,723 62,201
95,885 Loss on store closings and impairment of store
assets 648 1,173 906 1,468 Stock-based compensation 1,198 2,050
2,556 3,880 Secondary offering costs - 169 - 480 Vendor new store
funds (a) (346 ) 223 (443 ) 611 Acquisition-related costs (b) 7,193
2,021 9,757 11,195 Other (c)
3,184
151 4,970
770 Adjusted EBITDA
$ 49,196
$ 67,510 $
79,947 $ 114,289
(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 of ERP system
implementation costs incurred during the thirteen weeks ended July
29, 2014, and $0.7 million and $2.9 million of ERP system
implementation costs incurred during the twenty-six weeks ended
August 4, 2015 and July 29, 2014, respectively.
Adjusted EPS and the other “Adjusted” data provided in this
press release, including Adjusted Cash EPS, 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)
February 3, August 4,
2015 2015
Assets
Current assets: Cash and cash equivalents $ 13,475 $ 10,637
Accounts receivable, net 51,193 54,604 Inventories 163,518 159,074
Deferred income tax asset 8,882 8,890 Prepaid expenses and other
current assets
43,019
48,970 Total current assets 280,087 282,175 Property
and equipment, net 267,602 296,847 Intangible assets, net 215,953
214,705 Goodwill 821,349 823,565 Debt issue costs and other, net
24,033 24,208 Total
assets
$ 1,609,024 $
1,641,500
Liabilities and
Stockholders' Equity
Current liabilities: Notes payable and current maturities of
long-term debt $ 9,947 $ 10,150 Accounts payable 149,612 154,856
Accrued liabilities 98,250 108,496 Customer deposits
19,398 26,062 Total current
liabilities 277,207 299,564 Long-term debt, net of current
maturities 760,091 704,875 Deferred income tax liability 41,455
41,434 Other noncurrent liabilities
94,788
125,763 Total liabilities
1,173,541 1,171,636
Commitments and contingencies Stockholders' equity:
Common stock, $0.01 par value; 120,000,000
shares authorized; 35,134,187 and 35,101,632 shares issued and
outstanding at February 3, 2015; and 35,227,677 and 35,194,372
shares issued and outstanding at August 4, 2015, respectively
351 352 Additional paid-in capital 435,882 442,903 Accumulated
(deficit) retained earnings
(750 )
26,609 Total stockholders' equity
435,483 469,864 Total
liabilities and stockholders' equity
$
1,609,024 $ 1,641,500
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 29,
% of August 4,
% of July 29, % of
August 4, % of 2014
Sales 2015
Sales 2014
Sales 2015
Sales Net sales $ 409,951 100.0 % $ 661,064
100.0 % $ 743,453 100.0 % $ 1,223,618 100.0 % Cost of sales
246,547 60.1 %
403,557 61.0 %
459,199 61.8 %
764,840 62.5
% Gross profit from retail operations 163,404 39.9 % 257,507 39.0 %
284,254 38.2 % 458,778 37.5 % Franchise fees and royalty income
1,092 0.2 %
1,285 0.1 %
2,278 0.3 %
2,400 0.2 %
Total gross profit
164,496 40.1 %
258,792 39.1 %
286,532 38.5 %
461,178 37.7 %
Operating expenses: Sales
and marketing expenses 99,998 24.3 % 169,121 25.5 % 175,663 23.6 %
301,017 24.6 % General and administrative expenses 36,888 9.0 %
42,893 6.5 % 67,574 9.1 % 94,257 7.7 % Loss on store closings and
impairment of store assets
648 0.2 %
1,173 0.2 %
906 0.1 %
1,468 0.1 % Total operating expenses
137,534 33.5 %
213,187 32.2 %
244,143 32.8 %
396,742 32.4
% Income from operations
26,962 6.6 %
45,605 6.9 %
42,389 5.7 %
64,436 5.3 %
Other expense: Interest expense,
net
3,469 0.9 %
10,046 1.5
%
6,285 0.8 %
20,299 1.7 %
Income before income taxes 23,493 5.7 % 35,559 5.4 % 36,104 4.9 %
44,137 3.6 % Income tax expense
9,194 2.2 %
13,678 2.1 %
14,085 1.9 %
16,778 1.4 % Net income
$
14,299 3.5 %
$ 21,881 3.3 %
$ 22,019 3.0 %
$
27,359 2.2 % Basic net income per common share
$ 0.42 $ 0.62 $ 0.65 $ 0.78 Diluted net income per common share $
0.41 $ 0.61 $ 0.64 $ 0.77
Reconciliation of
weighted-average shares outstanding: Basic weighted average
shares outstanding 34,135,060 35,188,368 34,081,500 35,167,565
Effect of dilutive securities: Stock options 321,740 319,819
321,054 332,038 Restricted shares
66,820
92,108 61,484
84,421 Diluted weighted average shares outstanding
34,523,620 35,600,295
34,464,038 35,584,024
MATTRESS FIRM HOLDING CORP. Consolidated
Statements of Cash Flows (In thousands)
(unaudited) Twenty-Six Weeks
Ended July 29, August 4,
Cash flows from
operating activities:
2014 2015 Net income $
22,019 $ 27,359 Adjustments to reconcile net income to cash flows
provided by operating activities: Depreciation and amortization
18,201 28,746 Loan fee and other amortization 2,239 3,797 Deferred
income tax expense 1,711 3,766 Stock-based compensation 2,556 4,352
Loss on store closings and impairment of store assets 906 1,468
Construction allowances from landlords 2,988 5,913 Excess tax
benefits associated with stock-based awards (761 ) (915 ) Effects
of changes in operating assets and liabilities, excluding business
acquisitions: Accounts receivable (14,136 ) (3,515 ) Inventories
(14,784 ) 4,400 Prepaid expenses and other current assets (9,497 )
(5,952 ) Other assets (1,730 ) (2,307 ) Accounts payable 19,473
11,310 Accrued liabilities 24,557 9,455 Customer deposits 4,943
6,664 Other noncurrent liabilities
(416
) 24,614 Net cash provided
by operating activities
58,269
119,155
Cash flows from
investing activities:
Purchases of property and equipment (34,658 ) (68,480 ) Business
acquisitions, net of cash acquired
(106,908
) 119 Net cash used in
investing activities
(141,566 )
(68,361 )
Cash flows from
financing activities:
Proceeds from issuance of debt 169,000 58,000 Principal payments of
debt (93,268 ) (114,302 ) Proceeds from exercise of common stock
options 2,069 1,755 Excess tax benefits associated with stock-based
awards
761 915
Net cash provided by (used in) financing activities
78,562 (53,632
) Net decrease in cash and cash equivalents (4,735 )
(2,838 ) Cash and cash equivalents, beginning of period
22,878 13,475 Cash
and cash equivalents, end of period
$
18,143 $ 10,637
Cash paid
for:
Interest
$ 6,620 $
20,070 Income taxes
$
2,175 $ 6,038
Supplemental
disclosure of noncash investing activity:
Capital expenditures included in accounts payable and accruals at
end of period
$ 5,929
$ 6,933 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 29, 2014 August 4,
2015 Income Income
Diluted Income Income Diluted
From Before In- Net Weighted
Diluted From Before In- Net
Weighted Diluted Operations
come Taxes Income
Shares EPS*
Operations come Taxes
Income Shares
EPS* As Reported $ 26,962 $ 23,493 $ 14,299
34,523,620 $ 0.41 $ 45,605 $ 35,559 $ 21,881 35,600,295 $ 0.61 % of
sales 6.6 % 5.7 % 3.5 % 6.9 % 5.4 % 3.3 % Adjustments
Acquisition-related costs (1) 7,691 7,691 4,695 - 0.14 2,021 2,021
1,246 - 0.03 Secondary offering costs (2) - - - - - 169 169 169 -
0.00 ERP system implementation costs (3) 1,738 1,738 1,060 - 0.03 -
- - - - Impairment charges(4) 482 482 294 - 0.01 735 735 452 - 0.01
Other expenses (5)
1,154
1,154 705
- 0.02 116
116 71
- 0.00 Total adjustments
11,065 11,065
6,754 - 0.20
3,041 3,041
1,938 -
0.05 As Adjusted
$ 38,027
$ 34,558 $
21,053 34,523,620 $
0.61 $ 48,646
$ 38,600 $
23,819 35,600,295 $
0.67 % of sales 9.3 % 8.4 % 5.1 % 7.4 % 5.8 % 3.6 %
Non-Cash Adjustments Depreciation and amortization 11,154 11,154
6,795 - 0.20 16,764 16,764 10,282 - 0.29 Stock-based compensation
expense
1,198 1,198
729 -
0.02 2,050
2,050 1,257
- 0.04 Total adjustments
12,352 12,352
7,524 - 0.22
18,814 18,814
11,540 -
0.32 Adjusted Cash EPS
$
50,379 $ 46,910
$ 28,578
34,523,620 $ 0.83
$ 67,460 $
57,414 $ 35,358
35,600,295 $ 0.99
Twenty-Six Weeks Ended July 29,
2014 August 4, 2015 Income
Income Diluted Income Income
Diluted From Before In- Net
Weighted Diluted From Before In-
Net Weighted Diluted
Operations come Taxes
Income Shares
EPS* Operations
come Taxes Income
Shares EPS* As Reported $
42,389 $ 36,104 $ 22,019 34,464,038 $ 0.64 $ 64,436 $ 44,137 $
27,359 35,584,024 $ 0.77 % of sales 5.7 % 4.9 % 3.0 % 5.3 % 3.6 %
2.2 % Adjustments Acquisition-related costs (1) 10,701 10,701 6,540
- 0.19 11,195 11,195 6,885 - 0.19 Secondary offering costs (2) - -
- - - 480 480 480 - 0.01 ERP system implementation costs (3) 3,089
3,089 1,888 - 0.05 666 666 409 - 0.01 Impairment charges(4) 482 482
294 - 0.01 735 735 452 - 0.01 Other (5)
1,351
1,351 826
- 0.02
116 116
71 - 0.00
Total adjustments
15,623
15,623 9,548
- 0.28 13,192
13,192 8,297
- 0.23 As Adjusted
$ 58,012 $
51,727 $ 31,567
34,464,038 $ 0.92
$ 77,628 $
57,329 $ 35,656
35,584,024 $ 1.00 %
of sales 7.8 % 7.0 % 4.2 % 6.3 % 4.7 % 2.9 % Non-Cash Adjustments
Depreciation and amortization 20,440 20,440 12,487 - 0.36 32,543
32,543 19,981 - 0.56 Stock-based compensation expense
2,556 2,556
1,561 - 0.05
3,880 3,880
2,382 -
0.07 Total adjustments
22,996
22,996 14,048
- 0.41
36,423 36,423
22,364 - 0.63
Adjusted Cash EPS
$ 81,008
$ 74,723 $
45,615 34,464,038 $
1.32 $ 114,051
$ 93,752 $
58,020 35,584,024 $
1.63
* Due to rounding to the nearest cent,
totals may not equal the sum of the lines 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 March 3, 2014, we
acquired the assets and operations of Yotes, Inc., including 34
mattress specialty retail stores. On March 3, 2014, we acquired the
Virginia assets and operations of Southern Max LLC, including 3
mattress specialty retail stores. On April 3, 2014, we acquired the
outstanding partnership interests in Sleep Experts Partners, L.P.,
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. On September 8,
2014, we acquired substantially all of the mattress specialty
retail assets and operations of Best Mattress Co., Inc., related to
the operation of 15 mattress specialty retail stores under the
brand Mattress Discounters in Pennsylvania. On September 30, 2014,
we acquired substantially all of the mattress specialty retail
assets and operations of Back to Bed Inc., M World Mattress LLC,
MCStores LLC and TBE Orlando LLC, related to the operation of 131
mattress specialty retail stores under the brands Back to Bed and
Bedding Experts in the Chicago metropolitan area and Mattress Barn
in the Orlando metropolitan area. On October 20, 2014, we acquired
100% of the outstanding equity interests in The Sleep Train, Inc.,
related to the operation of 314 mattress specialty retail stores in
California, Oregon, Washington, Nevada, Idaho and Hawaii. On
January 6, 2015, we acquired substantially all of the mattress
specialty retail assets and operations of Sleep America LLC, which
operated approximately 45 Sleep America retail stores in Arizona.
On January 13, 2015 we acquired substantially all of the mattress
specialty retail assets and operations of Mattress World, Inc.,
related to the operation of 4 mattress specialty retail stores
under the brand Mattress World in Pennsylvania. Acquisition-related
costs, consisting of direct transaction costs and integration
costs, are included in the results of operations as incurred. We
incurred approximately $2.0 million and $7.7 million of
acquisition-related costs during the thirteen weeks ended August 4,
2015 and July 29, 2014, respectively. We incurred approximately
$11.2 million and $10.7 million of acquisition-related costs during
the twenty-six weeks ended August 4, 2015 and July 29, 2014,
respectively. (2) Reflects approximately $0.2 million and
$0.5 million for the thirteen and twenty-six weeks ended August 4,
2015, respectively, of costs borne by us in connection with a
secondary offering of common stock by certain of our selling
shareholders which was completed in April 2015. No offering
proceeds were received by the Company. (3) 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, we incurred
approximately $1.7 million of ERP system implementation costs which
includes $0.1 million of accelerated depreciation expense on our
legacy ERP system. During the twenty-six weeks ended August 4, 2015
and July 29, 2014, we incurred approximately $0.7 million and $3.1
million, respectively, of ERP system implementation costs which
includes approximately none and $0.2 million , respectively, of
accelerated depreciation expense on our legacy ERP system.
(4) Reflects approximately $0.7 million and $0.5 million of
impairment of store assets recorded in the thirteen and twenty-six
weeks ended August 4, 2015 and July 29, 2014, respectively.
(5) Reflects expensed legal fees related to our February 2014 debt
amendment and extension recorded in the thirteen weeks ended April
29, 2014, 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. Reflects severance expense recorded in the thirteen weeks
ended August 4, 2015
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 Holding Corp.
With more than 2,300 company-operated and franchised stores
across 41 states, Mattress Firm Holding Corp. (MFRM) has the
largest geographic footprint in the United States among multi-brand
mattress retailers. Founded in 1986, Houston-based MFRM is the
nation's leading specialty bedding retailer with over $2.2 billion
in sales over the past 12 months. MFRM, through its family of
brands, including Mattress Firm and Sleep Train, offers a broad
selection of both traditional and specialty mattresses, bedding
accessories and other related products from leading manufacturers,
including Sealy, Tempur-Pedic, Serta, Simmons, Stearns &
Foster, and Hampton & Rhodes. More information is available at
www.mattressfirm.com. MFRM's website is not part of this press
release.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150911005144/en/
Mattress Firm Holding Corp.Investor Relations
Contact:Scott McKinney, 713-343-3652Vice President of Investor
Relationsir@mfrm.comorMedia Contact:Kimberly Wise,
214-646-1659kwise@jacksonspalding.com
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