<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________________ to__________________
Commission file number 333-04841
---------
SIMMONS COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-1007444
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Concourse Parkway, Suite 600, Atlanta, Georgia 30328
- -------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 512-7700
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ x ] Yes [ ] No
The number of shares of the registrant's common stock outstanding as of
November 11, 1997 was 31,964,452.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
Simmons Company and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands)
(Unaudited)
Quarter ended
-------------------------------
September 27, September 28,
1997 1996
----------- -----------
<S> <C> <C>
Net sales $ 149,410 $ 154,527
Costs and expenses:
Cost of products sold 85,590 91,593
Selling, general and administrative 47,612 45,924
ESOP expense 1,710 1,251
Amortization of intangible assets 1,898 1,805
--------- ---------
136,810 140,573
--------- ---------
Income from operations 12,600 13,954
Interest expense, net 4,784 5,022
Other (income) expense, net 389 (3,528)
--------- ---------
Income before income taxes 7,427 12,460
Provision for income taxes 3,662 4,959
--------- ---------
Net income $ 3,765 $ 7,501
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 3
<TABLE>
<CAPTION>
Simmons Company and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands)
(Unaudited)
Successor Predecessor
-------------------------------- -----------
Period from Period from
Three March 22, December 31,
Quarters 1996 1995
ended through through
September 27, September 28, March 21,
1997 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 407,552 $ 288,576 $ 106,431
Costs and expenses:
Cost of products sold 239,267 176,194 66,630
Selling, general and administrative 139,440 92,016 35,846
ESOP expense 4,519 2,546 1,203
Amortization of intangible assets 5,767 3,917 1,324
--------- --------- ---------
388,993 274,673 105,003
--------- --------- ---------
Income from operations 18,559 13,903 1,428
Interest expense, net 14,448 10,461 1,489
Other expense, net 1,163 1,093 96
--------- --------- ---------
Income (loss) before income taxes and
extraordinary item 2,948 2,349 (157)
Provision for income taxes 1,490 1,691 282
--------- --------- ---------
Income (loss) before extraordinary item 1,458 658 (439)
Extraordinary loss from early extinguishment
of debt, net of an income tax benefit of $1,137 -- 1,706 --
--------- --------- ---------
Net income (loss) $ 1,458 $ (1,048) $ (439)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
<TABLE>
<CAPTION>
Simmons Company and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
September 27, December 28,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,539 $ 4,573
Accounts receivable, less allowance for
doubtful accounts of $6,100 and $5,644 74,791 66,634
Inventories 19,057 18,833
Other current assets 18,546 17,748
-------- --------
Total current assets 120,933 107,788
Property, plant and equipment, net 46,306 38,079
Patents, net of accumulated amortization of
$4,166 and $2,071 12,874 14,961
Goodwill, net of accumulated amortization of
$7,249 and $3,577 186,058 187,070
Other assets 19,241 19,951
-------- --------
$385,412 $367,849
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
<TABLE>
<CAPTION>
Simmons Company and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
September 27, December 28,
1997 1996
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,027 $ 24,800
Accrued advertising and incentives 24,135 17,124
Accrued warranties 2,820 1,956
Accrued interest 6,288 2,734
Other accrued expenses 15,331 14,187
Current maturities of long-term obligations 5,801 2,701
--------- ---------
Total current liabilities 82,402 63,502
Noncurrent liabilities:
Long-term obligations 184,949 194,114
Other noncurrent liabilities 20,795 18,942
--------- ---------
Total liabilities 288,146 276,558
--------- ---------
Series A Preferred Stock--ESOP, net of related
unearned compensation of $18,833 and $23,352 9,519 5,000
Common stockholders' equity:
Common stock, $.01 par value; 50,000 shares authorized,
31,964 shares issued 320 320
Additional paid-in capital 84,680 84,680
Retained earnings 2,770 1,312
Foreign currency translation adjustment (23) (21)
--------- ---------
Total common stockholders' equity 87,747 86,291
--------- ---------
$ 385,412 $ 367,849
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE> 6
<TABLE>
<CAPTION>
Simmons Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Successor Predecessor
-------------------------------- -----------
Period from Period from
Three March 22, December 31,
Quarters 1996 1995
ended through through
September 27, September 28, March 21,
1997 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
Net cash provided by (used in) operating activities $ 21,877 $ (5,826) $ 2,339
--------- --------- ---------
Cash flows from investing activities:
Purchases of property, plant and equipment (11,836) (7,959) (1,567)
Proceeds from sale of investment -- 4,700 --
Payment to the seller for the acquisition -- (151,625) --
Payments to option holders -- (6,950) --
Payments of acquisition costs -- (16,040) --
--------- --------- ---------
Net cash (used in) investing activities (11,836) (177,874) (1,567)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from Predecessor revolving line of
credit and long-term borrowings -- -- 3,334
Predecessor principal payments on revolving
line of credit, long-term debt and capital
lease obligations -- -- (3,490)
Payments of Predecessor debt -- (76,134) --
Proceeds of Successor long-term borrowings -- 276,000 --
Payments of Successor long-term borrowings -- (105,700) --
Net (payment) proceeds under revolving line
of credit and capital lease obligations (6,065) 10,964 --
Payments of financing costs -- (8,940) --
Proceeds from issuance of Successor common
stock -- 85,000 --
Treasury stock purchases -- -- (660)
--------- --------- ---------
Net cash provided by (used in) financing
activities (6,065) 181,190 (816)
--------- --------- ---------
Net effect of exchange rate changes on cash (10) (4) 9
--------- --------- ---------
Change in cash and cash equivalents 3,966 (2,514) (35)
Cash and cash equivalents, beginning of period 4,573 9,150 9,185
--------- --------- ---------
Cash and cash equivalents, end of period $ 8,539 $ 6,636 $ 9,150
========= ========= =========
Supplemental cash flow information:
Depreciation $ 3,609 $ 2,362 $ 874
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
<PAGE> 7
Simmons Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
For purposes of this report the "Company" refers to Simmons Company and
Subsidiaries, collectively.
The Condensed Consolidated Financial Statements of the Company have
been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission (the "SEC"). The accompanying unaudited condensed
consolidated financial statements contain all adjustments which, in the opinion
of management, are necessary to present fairly the financial position of the
Company at September 27, 1997, and its results of operations and cash flows for
the periods presented herein. All adjustments in the periods presented herein
are normal and recurring in nature unless otherwise disclosed. These condensed
consolidated financial statements should be read in conjunction with the
year-end consolidated financial statements and accompanying notes included in
the Company's Annual Report on Form 10-K, dated December 28, 1996. Operating
results for the period ended September 27, 1997, are not necessarily indicative
of future results that may be expected for the year ending December 27, 1997.
2. The Acquisition
On March 22, 1996, Simmons Holdings, Inc. ("Holdings"), through its
subsidiary formed for this purpose, Simmons Acquisition Corp. ("SAC"), acquired
100% of the outstanding common stock of the Company (the "Acquisition").
Holdings was formed to consummate the Acquisition on behalf of affiliates of
INVESTCORP S.A. ("Investcorp"), management and certain other investors.
Immediately following the completion of the Acquisition, SAC merged into the
Company, as a result of which 100% of the common stock of the Company became
owned by Holdings. For purposes of identification and description, Simmons
Company is referred to as the "Predecessor" for the period prior to the
Acquisition, the "Successor" for the period subsequent to the Acquisition, and
the "Company" for both periods.
The purchase price for the Acquisition was approximately $269.6 million
(including approximately $94.6 million in refinancing or assumption of existing
indebtedness, purchase of certain stock options, and the payments of fees and
expenses) which was allocated to the assets and liabilities of the Company based
upon their estimated fair market value at the date of the Acquisition, under the
purchase method of accounting.
The financing for the Acquisition (including the refinancing of
outstanding debt) was provided for by (i) borrowings under a new $115.0 million
Senior Credit Facility, which refinanced the Company's existing senior and
subordinated loans, (ii) the $100.0 million proceeds under a new Subordinated
Loan Facility, and (iii) $85.0 million of capital provided by affiliates of
Investcorp, management and certain other investors from Holdings.
In connection with the Acquisition, the Simmons Employee Stock
Ownership Plan ("ESOP") sold 6,001,257 shares of the Company's common stock
(representing all of the allocated shares) for cash, and converted all of the
remaining 5,670,406 shares of common stock of the Company (unallocated shares)
into 5,670,406 shares of Series A Preferred Stock. The Series A Preferred Stock
is convertible into common stock of the Company on a one-to-one basis and is
entitled to an aggregate liquidation preference of approximately $28.4 million
($5.00 per share). The ESOP also
7
<PAGE> 8
Simmons Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited)
has the right, upon the occurrence of certain events, to require the Company to
purchase the stock owned by the ESOP for $5.00 per share.
On April 18, 1996, the Company issued $100.0 million in 10.75% Senior
Subordinated Notes, pursuant to an offering (the "Offering"). The proceeds of
the Offering were used to retire loans under the Subordinated Loan Facility
mentioned above.
3. Inventories
Inventories consisted of the following at September 27, 1997 and December 28,
1996 (in thousands):
<TABLE>
<CAPTION>
September 27, December 28,
1997 1996
------------- ------------
<S> <C> <C>
Raw materials $11,640 $12,044
Work in progress 1,584 1,888
Finished goods 5,833 4,901
------- -------
$19,057 $18,833
======= =======
</TABLE>
4. Long-Term Obligations
Long-term obligations consisted of the following at September 27, 1997 and
December 28, 1996 (in thousands):
<TABLE>
<CAPTION>
September 27, December 28,
1997 1996
<S> <C> <C>
Senior loans: ------------- ------------
Tranche A term loan $ 35,516 $ 35,516
Tranche B term loan 34,784 34,784
Revolving loan 5,000 16,000
10.75% Series A Senior Subordinated
Notes due 2006 100,000 100,000
Industrial Revenue Bonds, 7.00%, due 2017 9,700 9,700
Industrial Revenue Bonds, 4.30%, due 2016 5,000 --
Other, including capital lease obligations 750 815
--------- ---------
190,750 196,815
Less current portion (5,801) (2,701)
--------- ---------
$ 184,949 $ 194,114
========= =========
</TABLE>
The interest rates per annum in effect at September 27, 1997 for the
revolving credit, Tranche A term, and Tranche B term loans were 8.2%, 8.2%, and
8.8%, respectively.
At September 27, 1997, the amount under the revolving credit portion of
the Senior Credit Facility that was available to be drawn was approximately
$31.1 million, after giving effect to $5.0 million of borrowings and $3.9
million that was reserved for the Company's reimbursement obligations with
respect to outstanding letters of credit. The remaining availability under the
revolving credit facility may be utilized to meet the Company's current working
capital requirements, including issuance of stand-by and trade letters of
credit. The Company also may utilize the remaining availability under
8
<PAGE> 9
Simmons Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited)
the revolving credit facility to fund acquisitions and capital expenditures.
The Senior Credit Facility contains certain covenants and restrictions
on actions by the Company and its subsidiaries. In addition, the Senior Credit
Facility requires that the Company comply with specified financial ratios and
tests, including minimum cash flow, a maximum ratio of indebtedness to cash flow
and a minimum interest coverage ratio. As of September 27, 1997, the Company was
in compliance with respect to all covenants under the Senior Credit Facility.
Future maturities of long-term obligations as of September 27, 1997 are as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
1997 $ 2,701
1998 7,310
1999 9,319
2000 11,329
2001 19,739
Thereafter 140,352
-------
$190,750
=======
</TABLE>
5. Significant Customer Developments
During the third quarter, Montgomery Ward & Co. ("Wards") and Levitz
Furniture Inc. ("Levitz"), two of the Company's larger customers, filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. As of September 27,
1997 and the date of each of the bankruptcy filings, the Company had reserves
necessary to cover its estimated exposure. For a period prior to the filings
under the bankruptcy code, the Company halted shipments to minimize its
exposure. Subsequent to the filing, the Company recommenced shipments to the
retailers. The Company's management will continue to monitor the reorganization
progress of Wards and Levitz and attempt to limit exposure as deemed prudent
under the circumstances. Management believes that these situations will not have
a material adverse effect on the Company's financial position or results of
operations.
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
INTRODUCTION
The Company employed the purchase method of accounting for the
Acquisition. As a result of the required purchase accounting adjustments, the
post-Acquisition financial statements for the three quarters ended September 27,
1997 and the period from March 22, 1996 to September 28, 1996 (the "Successor
Financials") are not comparable to the financial statements for the periods
prior to the Acquisition (the "Predecessor Financials").
RESULTS OF OPERATIONS
For purposes of the discussion below, the results of operations for the
three quarters ended September 28, 1996 represent the mathematical addition of
the historical amounts for the Predecessor period (December 31, 1995 through
March 21, 1996) and the Successor period (March 22, 1996 through September 28,
1996) and are not indicative of the results that would actually have been
obtained if the Acquisition had occurred on December 30, 1995.
QUARTER ENDED SEPTEMBER 27, 1997 AS COMPARED TO QUARTER ENDED SEPTEMBER 28, 1996
Net Sales. Net sales for the quarter ended September 27, 1997 decreased
3.3%, or $5.1 million, from $154.5 million in 1996 to $149.4 million in 1997.
This decrease was due primarily to a 7.1% or $10.9 million decrease in bedding
unit sales volume, offset, in part, by a 4.1% or $5.8 million increase in
bedding average unit selling price. The decline in bedding unit sales volume
resulted primarily from the repositioning of the BackCare(R) product line to be
consistent with the Company's overall marketing strategy. The strong improvement
in bedding average unit selling price is attributable to a higher mix of
Beautyrest(R) sales and sales of higher priced BackCare(R) products.
The bankruptcy filings of Montgomery Ward & Co. and Levitz Furniture,
Inc., coupled with the Company's decision to discontinue its supply relationship
with Mattress Discounters, led to the slight decline in volume. However, due to
the breadth of penetration and continued consumer acceptance of the Company's
Beautyrest(R) and repositioned BackCare(R) product lines, the Company expects to
replace, in the near term, revenues lost as a result of its decision to
discontinue its relationship with Mattress Discounters. The bankruptcy filings
and the Mattress Discounters' decision have not had, nor are expected to have
any material adverse effect on the Company's financial condition.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
for the quarter ended September 27, 1997 decreased 2.0 percentage points from
59.3% in 1996 to 57.3% in 1997. The improvement is attributable to the
following: (i) a higher product mix concentration of Beautyrest(R) products;
(ii) relatively stable raw material costs; and (iii) improved operating
efficiencies at certain operating facilities.
Selling, General and Administrative Expenses. As a percentage of net
sales, selling, general and administrative expenses for the quarter ended
September 27, 1997 increased 2.2 percentage points from 29.7% in 1996 to 31.9%
in 1997. The increase is attributable to the following: (i) an increase in
selling expenses related to competitive sales promotion programs and additional
sales personnel; (ii) an increase in distribution costs due to contractual
increases and expansion into outlying territories; (iii) higher outside
consulting fees associated with special projects undertaken by the Company; (iv)
a higher provision for uncollectible accounts; and (v) the slightly lower
revenue base, as discussed above, relative to the fixed expense component of
selling, general and administrative expenses.
10
<PAGE> 11
Simmons Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations - Continued
Other (Income) Expense, Net. Other (income) expense, net for the
quarter ended September 28, 1996 includes a $4.0 million gain on the sale of
minority interests in certain foreign affiliates. (See Note 9 of "Notes to
Consolidated Financial Statements," included in the Company's Form 10-K for the
year ended December 28, 1996.) This income was offset, in part, by normal
recurring non-operating expenses.
Provision for Income Taxes. The Company's effective tax rates for the
quarters ended September 27, 1997 and September 28, 1996 differ from the federal
statutory rate primarily because of non tax-deductible amortization of goodwill.
Net Income. For the reasons set forth above, the quarter ended
September 27, 1997 resulted in a net income of $3.8 million as compared to $7.5
million for the quarter ended September 28, 1996.
NINE MONTHS ENDED SEPTEMBER 27, 1997 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
28, 1996
Net Sales. Net sales for the nine months ended September 27, 1997
increased 3.2%, or $12.5 million, from $395.0 million in 1996 to $407.6 million
in 1997. This increase was due primarily to a 4.2% or $16.4 million increase in
bedding average unit selling price, offset, in part, by a 0.8% or $3.2 million
decrease in bedding unit sales volume. The strong improvement in bedding average
unit selling price is predominantly attributable to a higher mix of
Beautyrest(R) sales. The decrease in bedding unit sales volume resulted
primarily from a decrease in BackCare(R) units relating to a repositioning of
the product line to be consistent with the Company's overall marketing strategy.
The decrease in BackCare(R) sales was offset, in part, by strong Beautyrest(R)
sales.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
for the nine months ended September 27, 1997 decreased 2.8 percentage points
from 61.5% in 1996 to 58.7% in 1997. The improvement is attributable to: (i) a
higher product mix concentration of Beautyrest(R) products; (ii) relatively
stable raw material costs; (iii) the cost of goods sold in 1996 reflecting the
sale of finished goods inventory which had been written up, as required by
generally accepted accounting principles, to fair market value as of the date of
the Acquisition; and (iv) improved operating efficiencies.
Selling, General and Administrative Expenses. As a percentage of net
sales, selling, general and administrative expenses for the nine months ended
September 27, 1997 increased 1.8 percentage points from 32.4% in 1996 to 34.2%
in 1997. The increase is attributable to the following: (i) an increase in
selling expenses related to competitive sales promotion programs and additional
sales personnel; (ii) an increase in distribution costs due to contractual
increases and expansion into outlying territories; (iii) higher outside
consulting fees associated with special projects undertaken by the Company; and
(iv) a higher provision for uncollectible accounts.
Amortization of Intangible Assets. Amortization of intangible assets
for the nine months ended September 27, 1997 increased $0.5 million due in part
to the effect of an increase in goodwill resulting from purchase accounting
adjustments made in connection with the Acquisition.
Interest Expense, Net. Interest expense, net for the nine months ended
September 27, 1997 increased $2.5 million to $14.4 million due primarily to
interest expense on increased total indebtedness, which resulted from the
issuance of senior subordinated notes and a new senior credit
11
<PAGE> 12
Simmons Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations - Continued
facility as financing for the Acquisition. (See "Notes to Condensed Consolidated
Financial Statements.")
Other Expense, Net. Other expense, net for the nine months ended
September 27, 1997 were relatively flat. Non-recurring expenses of $4.3 million
were incurred in the nine months ended September 28, 1996 in connection with the
Acquisition, of which, approximately $3.8 million was attributable to special
compensation agreements entered into by the Company with certain members of
management of the Company. These non-recurring expenditures were offset, in
part, by a $4.0 million gain on the sale of minority interests in certain
foreign affiliates.
Provision for Income Taxes. The Company's effective tax rates for the
nine months ended September 27, 1997 and September 28, 1996 differ from the
federal statutory rate primarily because of non tax-deductible amortization of
goodwill.
Extraordinary Item. In April 1996, the Company recorded a $1.7 million
charge, net of an income tax benefit of $1.1 million, representing the remaining
unamortized debt issuance costs related to long term obligations repaid as a
result of the refinancing in connection with the Acquisition.
Net (Loss) Income. For the reasons set forth above, the nine months
ended September 27, 1997 resulted in net income of $1.4 million as compared to a
net loss of $1.5 million for the nine months ended September 28, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of cash to fund its liquidity needs is net
cash provided by operating activities and availability under its revolving
credit facility. Net cash provided by operating activities was $21.9 million for
the nine months ended September 27, 1997 compared to a $3.5 million use of cash
in 1996, due primarily to net income in the nine months ended September 27, 1997
as described above and the timing of accounts receivable collections and
payments of accounts payable and accrued liabilities. The Company's principal
use of funds consists of payments of principal, interest, and capital
expenditures. Capital expenditures totaled $11.8 million for the nine months
ended September 27, 1997. These capital expenditures consisted primarily of
normal recurring capital expenditures in the amount of $6.9 million, capital
expenditures relating to the construction of new manufacturing facilities in the
amount of $2.4 million and capitalized expenditures related to the Company's
systems upgrade project in the amount of $2.5 million. Management believes that
annual capital expenditure limitations in its Senior Credit Facility will not
significantly inhibit the Company from meeting its ongoing capital needs.
The Company may seek to make selective acquisitions in the bedding
industry. Although the Company has discussions from time to time with potential
candidates, the Company currently has no commitments with respect to any such
acquisitions.
At September 27, 1997, the amount under the revolving credit portion of
the Senior Credit Facility that was available to be drawn was approximately
$31.1 million, after giving effect to $5.0 million of borrowings and $3.9
million that was reserved for the Company's reimbursement obligations with
respect to outstanding letters of credit. The remaining availability under the
revolving credit facility may be utilized to meet the Company's current working
capital requirements, including issuance
12
<PAGE> 13
Simmons Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations - Continued
of stand-by and trade letters of credit. The Company also may utilize the
remaining availability under the revolving credit facility to fund acquisitions
and capital expenditures. At September 27, 1997, the Company's weighted average
borrowing cost was 9.5%.
Management believes that the Company will have the necessary liquidity
for the foreseeable future from cash flow from operations and amounts available
under its revolving credit facility in the Senior Credit Facility to fund: (i)
its obligations under the Senior Credit Facility and the New Notes; (ii)
expected capital expenditures; (iii) selective acquisitions in the bedding
industry; and (iv) other needs required to manage and operate its business.
The Company is in the process of implementing a major upgrade of its
computer systems, internally referred to as SWIFT, that when fully completed is
'Year 2000' compliant. The Company also utilizes various PC based computer
software packages as tools in running its daily operations. Management does not
believe that the Company will encounter any material problems or expenditures
with this software as a result of the change of the millennium on January 1,
2000.
Forward looking statements in this Form 10-Q are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
There are certain important factors that could cause results to differ from
those anticipated by some of the statements made above. Investors are cautioned
that all forward looking statements involve risk and uncertainty. In addition to
the factors discussed above, among the other factors that could cause actual
results to differ are the following: consumer spending and debt levels;
continuity of relationships with and financial viability of major customers;
product mix; competitive pressure on sales and pricing, and increase in material
or production cost which cannot be recouped in product pricing.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27.0 Financial Data Schedule
(b) Reports on Form 8-K:
None.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Simmons Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SIMMONS COMPANY
By: /s/ Zenon S. Nie
------------------------------------
Zenon S. Nie
Chairman of the Board of Directors,
Chief Executive Officer and Director
(Principal Executive Officer)
By: /s/ Jonathan C. Daiker
------------------------------------
Jonathan C. Daiker
Executive Vice President-Finance and
Administration, Chief Financial Officer
and Director
(Principal Accounting Officer)
Date: November 11, 1997
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-27-1997
<CASH> 8,539
<SECURITIES> 0
<RECEIVABLES> 85,245
<ALLOWANCES> 10,454
<INVENTORY> 19,057
<CURRENT-ASSETS> 120,933
<PP&E> 51,673
<DEPRECIATION> 5,367
<TOTAL-ASSETS> 385,412
<CURRENT-LIABILITIES> 82,402
<BONDS> 184,949
9,519
0
<COMMON> 320
<OTHER-SE> 87,427
<TOTAL-LIABILITY-AND-EQUITY> 385,412
<SALES> 407,552
<TOTAL-REVENUES> 407,552
<CGS> 239,267
<TOTAL-COSTS> 239,267
<OTHER-EXPENSES> 0
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</TABLE>
