<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 June 28, 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
August 12, 1997 was 31,964,452.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Simmons Company and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended
------------------------
June 28, June 29,
1997 1996
--------- --------
<S> <C> <C>
Net sales $ 124,726 $ 121,163
Costs and expenses:
Cost of products sold 72,902 75,559
Selling, general and administrative 44,273 41,466
ESOP expense 1,558 1,186
Amortization of intangible assets 1,911 1,994
--------- ---------
120,644 120,205
--------- ---------
Income from operations 4,082 958
Interest expense, net 4,861 4,978
Other deductions, net 395 312
--------- ---------
Loss before income taxes and
extraordinary item (1,174) (4,332)
Provision for income tax benefit 569 957
--------- ---------
Loss before extraordinary item (605) (3,375)
Extraordinary loss from early extinguishment
of debt, net of income tax benefit of $1,137 -- 1,706
--------- ---------
Net loss $ (605) $ (5,081)
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 3
Simmons Company and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
-------------------------------- ---------
Period from Period from
Two March 22, December 31,
Quarters 1996 1995
ended through through
June 28, June 29, March 21,
1997 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 258,142 $ 134,049 $ 106,431
Costs and expenses:
Cost of products sold 153,677 84,601 66,630
Selling, general and administrative 91,828 46,092 35,846
ESOP expense 2,809 1,295 1,203
Amortization of intangible assets 3,869 2,112 1,324
--------- --------- ---------
252,183 134,100 105,003
--------- --------- ---------
Income from operations 5,959 (51) 1,428
Interest expense, net 9,664 5,439 1,489
Other deductions, net 774 4,621 96
--------- --------- ---------
Loss before income taxes and
extraordinary item (4,479) (10,111) (157)
Provision for income tax benefit (expense) 2,172 3,268 (282)
--------- --------- ---------
Loss before extraordinary item (2,307) (6,843) (439)
Extraordinary loss from early extinguishment
of debt, net of an income tax benefit of $1,137 -- 1,706 --
--------- --------- ---------
Net loss $ (2,307) $ (8,549) $ (439)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE> 4
Simmons Company and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 28, December 28,
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,335 $ 4,573
Accounts receivable, less allowance for
doubtful accounts of $6,587 and $5,644 61,975 66,634
Inventories 20,746 18,833
Other current assets 24,295 17,748
------- -------
Total current assets 112,351 107,788
Property, plant and equipment, net 43,070 38,079
Patents, net of accumulated amortization of
$3,476 and $2,071 13,600 14,961
Goodwill, net of accumulated amortization of
$6,041 and $3,577 187,266 187,070
Other assets 19,518 19,951
------- -------
$375,805 $367,849
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
Simmons Company and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 28, December 28,
1997 1996
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,238 $ 24,800
Accrued advertising and incentives 23,253 17,124
Other accrued expenses 20,504 18,877
Current maturities of long-term obligations 5,801 2,701
---------- ----------
Total current liabilities 71,796 63,502
Noncurrent liabilities:
Long-term obligations 189,971 194,114
Other noncurrent liabilities 22,209 18,942
---------- ----------
Total liabilities 283,976 276,558
---------- ----------
Series A Preferred Stock--ESOP, net of related
unearned compensation of $20,543 and $23,352 7,809 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 (accumulated deficit) (995) 1,312
Foreign currency translation adjustment 15 (21)
---------- ----------
Total common stockholders' equity 84,020 86,291
---------- ----------
$ 375,805 $ 367,849
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
Simmons Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
--------------------------- -----------
Period from Period from
Two March 22, December 31,
Quarters 1996 1995
ended through through
June 28, June 29, March 21,
1997 1996 1996
--------- --------- -----------
<S> <C> <C> <C>
Net cash provided by (used in) operating activities $ 9,301 $ (10,757) $ 2,339
--------- --------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (7,488) (4,486) (1,567)
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 (7,488) (179,101) (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 -- (75,900) --
Proceeds of Successor long-term borrowings -- 275,000 --
Payments of Successor long-term borrowings -- (100,000) --
Net (payment) proceeds under revolving line
of credit and capital lease obligations (1,043) 13,686 --
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 (1,043) 188,846 (816)
--------- --------- ---------
Net effect of exchange rate changes on cash (8) (8) 9
--------- --------- ---------
Change in cash and cash equivalents 762 (1,020) (35)
Cash and cash equivalents, beginning of period 4,573 9,150 9,185
--------- --------- ---------
Cash and cash equivalents, end of period $ 5,335 $ 8,130 $ 9,150
========= ========= =========
Supplemental cash flow information:
Depreciation $ 2,497 $ 1,122 $ 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 June 28, 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 June 28, 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 June 28, 1997 and December
28, 1996 (in thousands):
<TABLE>
<CAPTION>
June 28, December 28,
1997 1996
-------- --------
<S> <C> <C>
Raw materials $ 12,102 $ 12,044
Work in progress 1,773 1,888
Finished goods 6,871 4,901
-------- --------
$ 20,746 $ 18,833
======== ========
</TABLE>
4. Long-Term Obligations
Long-term obligations consisted of the following at June 28, 1997 and
December 28, 1996 (in thousands):
<TABLE>
<CAPTION>
June 28, 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 10,000 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 772 815
--------- ---------
195,772 196,815
Less current portion (5,801) (2,701)
--------- ---------
$ 189,971 $ 194,114
========= =========
</TABLE>
The interest rates per annum in effect at June 28, 1997 for the
revolving credit, Tranche A term, and Tranche B term loans were 8.5%, 8.3%, and
8.8%, respectively.
At June 28, 1997, the amount under the revolving credit portion of the
Senior Credit Facility that was available to be drawn was approximately $26.1
million, after giving effect to $10.0 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 the
8
<PAGE> 9
Simmons Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited)
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 June 28, 1997, the Company was in
compliance with respect to all covenants under the Senior Credit Facility.
Future maturities of long-term obligations as of June 28, 1997 are as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
1997 $ 2,701
1998 7,310
1999 9,319
2000 11,329
2001 24,739
Thereafter 140,374
-------
$195,772
=======
</TABLE>
5. Subsequent Event
On July 7, 1997, Montgomery Ward & Co., one of the Company's larger
customers, filed for protection under Chapter 11 of the U.S. Bankruptcy Code. As
of June 28, 1997 and the subsequent date of the bankruptcy filing, the Company
had reserves necessary to cover its estimated exposure with Montgomery Ward &
Co. Shortly prior to the filing under the bankruptcy code, the Company halted
shipments inorder to minimize its exposure to Montgomery Ward & Co. The Company,
subsequent to the filing, commenced shipments to the retailer. The Company's
management will continue to monitor Montgomery Ward & Co.'s reorganization
progress and attempt to limit exposure as deemed prudent under the
circumstances. Management believes that this situation 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 completed in March 1996. As a result of the required purchase
accounting adjustments, the post-Acquisition financial statements for the two
quarters ended June 28, 1997 and the period from March 22, 1996 to June 29, 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
two quarters ended June 29, 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 June 29, 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 JUNE 28, 1997 AS COMPARED TO QUARTER ENDED JUNE 29, 1996
Net Sales. Net sales for the quarter ended June 28, 1997 increased
2.9%, or $3.6 million, from $121.1 million in 1996 to $124.7 million in 1997.
This increase was due primarily to a 6.0% or $7.0 million increase in bedding
average unit selling price, offset, in part, by a 2.7% or $3.3 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 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 decline in BackCare(R) units were
offset, in part, by an increase in Beautyrest(R) units.
During the first quarter, the Company elected to discontinue its supply
relationship with one of its customers, Mattress Discounters, when the terms of
the relationship did not meet management's account profitability expectations.
The Company ceased supplying products to Mattress Discounters late in the second
quarter of 1997. Because of the breadth of penetration and continued consumer
acceptance of the Company's Beautyrest(R) and BackCare(R) product lines,
management believes, although there can be no assurance, that the discontinuance
of its relationship with Mattress Discounters will not have any long-term or
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 June 28, 1997 decreased 4.0 percentage points from 62.4%
in 1996 to 58.4% 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 June
28, 1997 increased 1.3 percentage points from 34.2% in 1996 to 35.5% in 1997.
The increase is attributable to an increase in marketing expenditures in order
to respond to competitive pressures and higher outside consulting fees
associated with special projects undertaken by the Company.
10
<PAGE> 11
Simmons Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations - Continued
Provision (Benefit) for Income Taxes. The Company's effective tax rates
for the quarters ended June 28, 1997 and June 29, 1996 differ from the federal
statutory rate primarily because of non tax-deductible amortization of goodwill.
Extraordinary Item. During the second quarter ended June 29, 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 quarter ended
June 28, 1997 resulted in a net loss of $0.6 million as compared to a loss of
$5.8 million for the quarter ended June 29, 1996.
SIX MONTHS ENDED JUNE 28, 1997 AS COMPARED TO SIX MONTHS ENDED JUNE 29, 1996
Net Sales. Net sales for the six months ended June 28, 1997 increased
7.3%, or $17.6 million, from $240.5 million in 1996 to $258.1 million in 1997.
This increase was due primarily to a 4.4% or $10.9 million increase in bedding
average unit selling price and a 3.1% or $7.3 million increase 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 increase
in bedding unit sales volume resulted primarily from strong Beautyrest(R) sales.
The increase in Beautyrest(R) sales was offset, in part, by the repositioning of
the BackCare(R) product line to be consistent with the Company's overall
marketing strategy.
During the first quarter, the Company elected to discontinue its supply
relationship with one of its customers, Mattress Discounters, when the terms of
the relationship did not meet management's account profitability expectations.
The Company ceased supplying products to Mattress Discounters late in the second
quarter of 1997. Because of the breadth of penetration and continued consumer
acceptance of the Company's Beautyrest(R) and BackCare(R) product lines,
management believes, although there can be no assurance, that the discontinuance
of its relationship with Mattress Discounters will not have any long-term or
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 six months ended June 28, 1997 decreased 3.4 percentage points from
62.9% in 1996 to 59.5% 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) economies of scale due to the increase in volume.
Selling, General and Administrative Expenses. As a percentage of net
sales, selling, general and administrative expenses for the six months ended
June 28, 1997 increased 1.5 percentage points from 34.1% in 1996 to 35.6% in
1997. The increase is attributable to an increase in marketing expenditures in
order to respond to competitive pressures and higher outside consulting fees
associated with special projects undertaken by the Company.
11
<PAGE> 12
Simmons Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations - Continued
Amortization of Intangible Assets. Amortization of intangible assets
for the six months ended June 28, 1997 increased $0.4 million due in part to the
effect of an increase in goodwill resulting from purchase accounting adjustments
made in connection with the Acquisition in March 1996.
Interest Expense, Net. Interest expense, net for the six months ended
June 28, 1997 increased $2.7 million to $9.7 million due primarily to interest
expense on increased total indebtedness, which resulted from the issuance of
senior subordinated notes and a new senior credit facility as financing for the
Acquisition. ("See Notes to Condensed Consolidated Financial Statements")
Other (Income) Deductions, Net. Other (income) deductions, net for the
six months ended June 28, 1997 declined $3.9 million. Non-recurring expenses of
$4.3 million were incurred in the six months ended June 29, 1996 in connection
with the Acquisition. Approximately $3.8 million was attributable to special
compensation agreements entered into by the Company with certain members of
management of the Company.
Provision (Benefit) for Income Taxes. The Company's effective tax rates
for the six months ended June 28, 1997 and June 29, 1996 differ from the federal
statutory rate primarily because of non tax-deductible amortization of goodwill.
Extraordinary Item. During the second quarter ended June 29, 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 six months
ended June 28, 1997 resulted in a net loss of $2.3 million as compared to a net
loss of $9.0 million for the six months ended June 29, 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 $9.3 million for
the six months ended June 28, 1997 compared to a $8.4 million use of cash in
1996, due primarily to lower net loss in the six months ended June 28, 1997 as
described above and the timing of accounts receivable collections and payments
of accrued liabilities. The Company's principal use of funds consists of
payments of principal, interest, and capital expenditures. Capital expenditures
totaled $7.4 million for the six months ended June 28, 1997. These capital
expenditures consisted primarily of normal recurring capital expenditures in the
amount of $2.0 million, capital expenditures relating to the construction of new
manufacturing facilities in the amount of $3.7 million and capitalized
expenditures related to the Company's systems upgrade project in the amount of
$1.7 million. The Company estimates that total normal recurring capital
expenditures will be approximately $8.5 million in 1997. In addition, total
expenditures for completing the systems upgrade project are expected to be
approximately $2.5 million in 1997. Management believes that annual capital
expenditure limitations in its Senior Credit Facility will not significantly
inhibit the Company from meeting its ongoing capital needs.
12
<PAGE> 13
Simmons Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations - Continued
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 June 28, 1997, the amount under the revolving credit portion of the
Senior Credit Facility that was available to be drawn was approximately $26.1
million, after giving effect to $10.0 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 the revolving credit
facility to fund acquisitions and capital expenditures. At June 28, 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 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 purchases by 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: August 12, 1997
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUN-28-1997
<CASH> 5,335
<SECURITIES> 0
<RECEIVABLES> 72,483
<ALLOWANCES> 10,508
<INVENTORY> 20,746
<CURRENT-ASSETS> 112,351
<PP&E> 47,325
<DEPRECIATION> 4,255
<TOTAL-ASSETS> 375,805
<CURRENT-LIABILITIES> 71,794
<BONDS> 189,971
<COMMON> 320
7,809
0
<OTHER-SE> 83,700
<TOTAL-LIABILITY-AND-EQUITY> 375,805
<SALES> 258,142
<TOTAL-REVENUES> 258,142
<CGS> 153,677
<TOTAL-COSTS> 153,677
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,250
<INTEREST-EXPENSE> 9,664
<INCOME-PRETAX> (4,479)
<INCOME-TAX> (2,172)
<INCOME-CONTINUING> (2,307)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,307)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
