<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: August 31, 1995
---------------
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 1-8738
------
SEALY CORPORATION *
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3284147
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
520 PIKE STREET, SEATTLE, WASHINGTON 98101
----------------------------------------- ----------
(Address of principal executive offices)* (Zip Code)
Registrant's telephone number, including area code (206) 625-1233
--------------
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 and Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares of the registrant's common stock outstanding as of
October 10, 1995 was 29,441,080.
- ---------------- ----------
* All Corporate and administrative services are provided by Sealy, Inc., 10th
Floor Halle Building, 1228 Euclid Avenue, Cleveland, Ohio 44115.
================================================================================
<PAGE> 2
<TABLE>
PART I. FINANCIAL INFORMATION
--------------------------------
Item 1 - Financial Statements
SEALY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
AUGUST 31, AUGUST 31,
1995 1994
-------------- -------------
<S> <C> <C>
Net Sales $179,880 $193,624
-------- --------
Cost and expenses:
Cost of goods sold 96,032 102,206
Selling, general and administrative 53,005 57,634
Amortization of intangibles 3,515 3,517
Interest expense, net 8,094 7,776
---------- ----------
160,646 171,133
-------- --------
Income before income tax 19,234 22,491
Income tax 11,003 9,029
--------- -----------
Net income $ 8,231 $ 13,462
========= =========
Earnings per common share $ .27 $ .44
Weighted average number of
common shares and equivalents
outstanding during period 30,499 30,768
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE> 3
<TABLE>
SEALY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
AUGUST 31, AUGUST 31,
1995 1994
------------ ------------
<S> <C> <C>
Net Sales $482,964 $525,982
-------- --------
Cost and expenses:
Cost of goods sold 265,202 278,740
Selling, general and administrative 153,470 164,051
Amortization of intangibles 10,544 10,546
Interest expense, net 23,958 25,585
--------- ---------
453,174 478,922
--------- ---------
Income before income tax 29,790 47,060
Income tax 17,040 19,841
--------- ---------
Net income $ 12,750 $ 27,219
========= =========
Earnings per common share $ .42 $ .89
Weighted average number of
common shares and equivalents
outstanding during period 30,712 30,642
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE> 4
<TABLE>
SEALY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
AUGUST 31, NOVEMBER 30,
1995 1994
---------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,256 $ 21,309
Accounts receivable, less allowance for doubtful
accounts ( 1995 - $9,395; 1994 - $7,774) 88,956 78,313
Inventories 39,853 42,623
Prepaid expenses and deferred taxes 19,705 18,470
-------- --------
150,770 160,715
Property, plant and equipment - at cost 159,185 157,388
Less: accumulated depreciation 23,146 16,308
-------- --------
136,039 141,080
Other assets:
Goodwill and other intangibles - net of
accumulated amortization
(1995 - $36,357; 1994 - $25,840) 482,873 493,390
Debt issuance costs and other assets 15,952 15,464
-------- --------
498,825 508,854
-------- --------
$785,634 $810,649
======== ========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE> 5
<TABLE>
SEALY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
August 31, November 30,
1995 1994
---------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion - long-term obligations $ 11,255 $ 20,361
Accounts payable 26,425 28,113
Accrued interest payable 6,968 2,482
Accrued compensation 10,978 16,884
Other accrued expenses 47,903 40,348
-------- --------
103,529 108,188
Long-term obligations 291,709 329,528
Other non-current liabilities 34,656 29,605
Deferred income taxes 26,291 21,095
Stockholders' equity:
Common stock 294 294
Additional paid-in capital 263,437 269,229
Retained earnings 66,667 53,917
Foreign currency translation adjustment (949) (1,207)
-------- --------
329,449 322,233
Commitments and contingencies -- --
-------- --------
$785,634 $810,649
======== ========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE> 6
<TABLE>
SEALY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
AUGUST 31, AUGUST 31,
1995 1994
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $33,184 $42,383
Net cash used in investing activities:
Property, plant and equipment, net (5,312) (5,392)
Net cash used in financing activities:
Repayment of long-term obligations, net (46,925) (39,979)
-------- --------
Change in cash and equivalents (19,053) (2,988)
Cash and equivalents:
Beginning of period 21,309 20,919
-------- --------
End of period $ 2,256 $17,931
======== =======
Supplemental disclosures:
-------------------------
Taxes paid, net $ 4,824 $ 4,598
Interest paid $17,051 $20,702
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
6
<PAGE> 7
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED AUGUST 31, 1995 AND 1994
================================================================================
NOTE A -- BASIS OF PRESENTATION
This report covers Sealy Corporation and its subsidiaries (collectively, the
"Company").
The accompanying unaudited condensed consolidated financial statements
should be read together with the Company's Annual Report on Form 10-K for the
year ended November 30, 1994.
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 August 31, 1995, 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.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
NOTE B -- INVENTORIES
The major components of inventories were as follows:
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30,
1995 1994
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials $31,982 $34,081
Work in process 3,233 3,244
Finished goods 4,638 5,298
------- -------
$39,853 $42,623
======= =======
</TABLE>
7
<PAGE> 8
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED AUGUST 31, 1995 AND 1994
================================================================================
NOTE C -- LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30,
1995 1994
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Secured Credit Agreement:
Revolving Credit Facility $ -0- $ 14,000
Term Loan Facility 100,000 130,000
9 1/2% Senior Subordinated Notes Due 2003 200,000 200,000
Other 2,964 5,889
-------- --------
302,964 349,889
Less current portion 11,255 20,361
-------- --------
$291,709 $329,528
======== ========
</TABLE>
The Secured Credit Agreement provides for loans of up to $225 million
as of August 31, 1995, and consists of the $125 million Revolving Credit
Facility and the $100 million Term Loan Facility. The Revolving Credit
Facility provides for a $30 million discretionary letter of credit facility
("Letters of Credit") and a discretionary swing loan facility of up to $5
million. The Revolving Credit Facility terminates and is due and payable on
November 30, 1999.
The Term Loan Facility is a $100 million term loan, as of August 31,
1995 with a final maturity of November 30, 1999 and amortizes in fiscal
quarterly principal payments. As a result of prepayments by the Company
applied pro rata over the remaining mandatory payments, the current
amortization schedule is as follows:
<TABLE>
<CAPTION>
Fiscal year ending Principal Payment
------------------ -----------------
<S> <C>
11/30/96 $ 20,188
11/30/97 23,474
11/30/98 28,169
11/30/99 28,169
--------
$100,000
========
</TABLE>
Under terms of the Secured Credit Agreement, the Company is obligated
to pay a commitment fee rate of 0.375% per annum on the unused portion of the
Revolving Credit Facility. The fee, which is payable quarterly in arrears, is
reduced or increased depending on certain financial ratios. Two separate
interest rate options exist under the Secured Credit Agreement and are
available to the Company at its option as follows:
(a) A Floating Rate which is the greater of
(I) A Corporate Base Rate plus a margin, if applicable, or
(ii) A Federal Funds Rate plus 0.25% plus a margin, if
applicable, or
(b) A Eurodollar Rate plus an applicable margin.
The applicable margin is zero for the Floating Rate option and 1.25%
for the Eurodollar Rate option.
8
<PAGE> 9
SEALY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED AUGUST 31, 1995 AND 1994
================================================================================
The applicable margin is reduced or increased depending on certain financial
ratios.
During the nine months ended August 31, 1995, the maximum amount
outstanding under the Revolving Credit Facility, excluding Letters of Credit,
was $21 million. At August 31, 1995, the Company had approximately $113
million available under the Revolving Credit Facility, with Letters of Credit
issued totaling approximately $12 million.
All obligations of the Company under the Secured Credit Agreement are
jointly and severally guaranteed by each direct and indirect domestic
subsidiary of the Company and secured by first priority liens on and security
interests in substantially all of the assets of the Company and its domestic
subsidiaries and by first priority pledges of substantially all of the capital
stock of most of the subsidiaries of the Company.
NOTE D -- CONTINGENCIES
In accordance with procedures established under the Environmental
Cleanup Responsibility Act (now known as the Industrial Site Recovery Act),
Sealy and one of its subsidiaries are parties to an Administrative Consent
Order ("ACO") issued by the New Jersey Department of Environmental Protection
("DEP") pursuant to which the Company and such subsidiary agreed to conduct
soil and ground water sampling to determine the extent of environmental
contamination at the plant owned by the subsidiary in South Brunswick, New
Jersey. The Company does not believe that any of its manufacturing processes
were a source of any of the contaminants found to exist above regulatorily
acceptable levels in the groundwater. As the current owners of the facility,
however, the Company and its subsidiary are primarily responsible for the
investigation and any necessary clean up plan approved by the DEP under the
terms of the ACO. In March 1994, the Company filed a claim in the U.S.
District Court for the district of New Jersey against former owners of the site
and their lenders under the Comprehensive Environmental Response, Compensation
and Liability Act seeking contribution for site investigation and remedial
costs.
In March, 1995, the DEP approved the Company's soil/remediation plans
and in June, 1995, the Company's groundwater remediation plans, which include
additional monitoring by the Company and, depending upon the results of such
monitoring, the possible installation of a groundwater containment system.
While the Company cannot predict the ultimate timing or cost to remediate this
facility based on facts currently known, management believes the previously
established accrual for site investigation and remediation costs is adequate to
cover the Company's probable liability. If additional remediation is required,
however, such as the installation of a groundwater containment system,
management estimates it could cost the Company up to an additional $3 million.
Management does not believe that resolution of this matter will have a material
adverse effect on the Company's financial position or future operations.
9
<PAGE> 10
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1995 AND 1994
NET SALES Net sales decreased $13.7 million (7.1%) for the three
months ended August 31, 1995, as compared to the third quarter of fiscal 1994.
The decrease is attributable to an $8.7 million decrease in conventional
bedding sales and a $5.0 million decrease in sales of other products.
The bedding sales decrease represents a 11.7%, or $20.7 million,
decline in conventional bedding unit shipments, offset partially by a 7.7%, or
$12.0 million, increase in the average unit selling price. Bedding shipments
declined due to lower volume of promotional and private label bedding units,
primarily attributable to the loss of the Sears private label business. In
addition, sales decreased due to the loss of product placements of Sealy
brand products at lower retail price points. The loss of placements
occurred as a result of certain changes associated with new bedding lines
introduced in March, 1995. The Company has recaptured a significant number
of the lost product placements through improved product assortment and
pricing strategies.
The decrease in sales of other products is a result of the Company's
decision in March, 1995 to close its sleep sofa business, $3.1 million and
a decrease of $1.9 million in wood bedroom furniture sales.
COST OF GOODS SOLD Cost of goods sold for the three months ended
August 31, 1995, as a percentage of net sales, increased 0.6 percentage point
to 53.4%. This increase is primarily attributable to the effect of lower sales
volume on fixed manufacturing costs.
SELLING, GENERAL, AND ADMINISTRATIVE Selling, general, and
administrative expenses decreased $4.6 million from the third quarter of
fiscal 1994, primarily due to a $3.8 million decrease in Performance Share
Plan expense. Performance Share Plan expense declined based upon an estimated
reduction in the plan's final value, of which $1.1 million is applicable to
fiscal 1995 and $2.7 million is a reversal of prior years' expense. A
description of the Performance Share Plan is provided in the Company's Form
10-K for the year ended November 30, 1994. Advertising and promotion expenses
increased $2.5 million, while other selling, general and administrative
expenses decreased $3.3 million.
INTEREST EXPENSE Interest expense, net of interest income, increased
$0.3 million primarily due to the effect of increased interest rates on the
Term and Revolving Credit Facilities, partially offset by lower average debt
levels in 1995.
INCOME TAX The Company's effective income tax rate differs from the
Federal statutory rate as a result of the application of purchase accounting,
certain foreign tax rate differentials, and state and local taxes. The
effective income tax rate for 1995 is approximately 57.2% compared to 48.0% for
fiscal year 1994.
NET INCOME For the reasons set forth above, the Company recorded net
income of $8.2 million for the three months ended August 31, 1995 versus $13.5
million for the comparable period in 1994.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED AUGUST 31, 1995 AND 1994
NET SALES Net sales decreased $43.0 million (8.2%) for the nine
months ended August 31, 1995, as compared to the nine months ended August 31,
1994. The decrease is attributable to a $35.3 million decrease in
conventional bedding sales and a $7.7 million decrease in other
products.
The bedding sales decrease represents a 13.6%, or $64.4 million,
decline in conventional bedding unit shipments, offset partially by a 7.1%, or
$29.1 million, increase in the average unit selling price. Bedding shipments
declined due to lower volume of promotional and private label bedding units,
primarily attributable to the loss of the Sears private label business. In
addition, sales decreased due to the loss of product placements of Sealy
brand products at lower retail price points. The loss of placements
occurred as a result of certain changes associated with new bedding lines
introduced in March, 1995. The Company has recaptured a significant number of
the lost product placements through improved product assortment and pricing
strategies.
The decrease in sales of other products is due primarily to
Company's decision in March of 1995 to close its sleep sofa business.
COST OF GOODS SOLD As a percentage of net sales, cost of goods sold
for the nine months ended August 31, 1995 increased 1.9 percentage points to
54.9%. Rising material costs accounted for 0.9 percentage points of the
increase. Manufacturing costs, as a percent of net sales, also increased
0.9 percentage point due primarily to the effect of lower net sales on fixed
manufacturing costs.
SELLING, GENERAL, AND ADMINISTRATIVE Selling, general, and
administrative expenses decreased $10.6 million for the nine months ended
August 31, 1995, primarily due to a $9.0 million decrease in Performance
Share Plan expense. Performance Share Plan expense declined based upon an
estimated reduction in the plan's final value, of which $3.2 million is
applicable to fiscal 1995 and $5.8 million is a reversal of prior years'
expense. A description of the Performance Share Plan is provided in the
Company's Form 10-K for the year ended November 30, 1994. Other selling,
general and administrative expenses decreased $4.3 million. Partially
offsetting the decreases in selling, general and administrative expenses was a
$2.7 million charge in the second quarter of fiscal 1995 for closing the sleep
sofa business.
INTEREST EXPENSE Interest expense, net of interest income, decreased
$1.6 million, primarily due to reductions in total indebtedness. Compared to
August 31, 1994, outstanding debt declined approximately $64 million to $303
million.
INCOME TAX The Company's effective income tax rate differs from the
Federal statutory rate as a result of the application of purchase accounting,
certain foreign tax rate differentials, and state and local taxes. The
effective income tax rate for 1995 is approximately 57.2% compared to 48.0% for
fiscal year 1994.
NET INCOME. For the reasons set forth above, the Company recorded net
income of $12.8 million for the nine months ended August 31, 1995 versus $27.2
million for the comparable period in 1994.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended August 31, 1995, the Company's principal
source of funds consisted of cash flow from operating activities of $33.2
million. Its principal use of funds consisted of payments of principal,
interest, and capital expenditures. Capital expenditures totaled $10.2 million
for the nine months ended August 31, 1995. Management believes that annual
capital expenditure limitations in its Secured Credit Agreement will not
significantly inhibit the Company from meeting its ongoing operating needs. At
August 31, 1995, the Company had approximately $113 million available under its
Revolving Credit Facility with Letters of Credit issued totaling approximately
$12 million. At August 31, 1995, the weighted average interest rate on the
Term Loan Facility was 7.3%.
Management believes that the Company will have the necessary liquidity
for the next several years to fund its expected capital expenditures,
obligations under its credit agreement and subordinated note indenture,
environmental liabilities, and for other needs required to manage its business,
through cash flow from operations, and availability under the Revolving Credit
Facility.
12
<PAGE> 13
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
See Note D to the Condensed Consolidated Financial Statements, Part I,
Item 1, included herein.
Item 2. Changes in Securities.
As scheduled, warrants ("Merger Warrants") issued pursuant to a
Warrant Agreement dated as of August 1, 1989 between the Company and Society
National Bank (the successor "Warrant Agent") became exercisable subsequent to
August 9, 1995. Each Merger Warrant entitles the holder to receive
one-fiftieth (1/50) of one share of Class B Common Stock ("Warrant Shares") of
the Company in exchange for the exercise price of $0.01 per share, subject to
adjustment under certain circumstances and payment of cash by the Company in
lieu of fractional Warrant Shares. The Company and Warrant Agent amended the
Warrant Agreement to provide that holders may make payment of the exercise
price by surrendering to the Company Merger Warrants having a value equal to
the aggregate exercise price payable with respect to the number of Warrant
Shares to be purchased. This amendment allows holders to exercise without
paying cash consideration.
Item 4. Submission of Matters to a Vote of Security Holders.
By written consent dated June 27, 1995, in lieu of an annual meeting,
the majority stockholder (owner of 26,143,506 shares) reelected existing
directors and amended the Company's 1993 Non-Employee Director Stock Option
Plan. No other votes or consents were cast in these matters.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(4.11) Amendment No.1 to Warrant Agreement between Sealy
Corporation and Society National Bank as Warrant Agent.
(27) Financial Data Schedule.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Sealy Corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SEALY CORPORATION
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C> <C>
By: /s/ Lyman M. Beggs Chairman, President and Chief Executive Officer
--------------------------------------------- (Principal Executive Officer)
Lyman M. Beggs
By: /s/ Jesse E. Hogan Senior Vice President and Chief Financial Officer
----------------------------------------------- (Principal Accounting Officer)
Jesse E. Hogan
Date: October 13, 1995
</TABLE>
14
<PAGE> 1
Exhibit 4.11
AMENDMENT NO. 1
TO WARRANT AGREEMENT BETWEEN
SEALY CORPORATION AND
SOCIETY NATIONAL BANK AS WARRANT AGENT
THIS AMENDMENT NO. 1 TO WARRANT AGREEMENT between SEALY CORPORATION
(successor in interest to the Ohio Mattress Holding Company), a Delaware
corporation (the "Company"), and SOCIETY NATIONAL BANK as the Warrant Agent
(successor to First Chicago Trust Company), is dated as of the ______ day of
________________, 1995. Capitalized terms not otherwise defined in this
Amendment No. 1 shall have the meanings given them in the Warrant Agreement (as
defined below).
WITNESSETH:
WHEREAS: The Company and the original Warrant Agent entered into a
Warrant Agreement, dated as of the 1st day of August 1989 (the "Warrant
Agreement"), to issue the Warrants which entitled the holders thereof to
purchase shares of Class B Common Stock of the Company; and
WHEREAS: The Company plans to offer its Common Stock for sale to the
public (the "Offering") pursuant to a Registration Statement of Form S-2 to be
filed with the Securities and Exchange Commission; and
WHEREAS: The Company plans on amending its Restated Certificate of
Incorporation to provide for the automatic conversion upon consummation of the
Offering of shares of Class B Common Stock into Common Stock, $.01 par value
per share ("Common Stock"); and
WHEREAS: The Company and the Warrant Agent desire to amend the Warrant
Agreement to accelerate the exercise date of the Warrants to a date beginning
30 days after consummation of the Offering, and to permit holders of the
Warrants to exercise the same through the surrender of Warrants having a value
equal to the exercise price of the underlying shares of Common Stock.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth in the Warrant Agreement and this Amendment, the parties hereby agree
as follows:
1. Section 1.01 of the Warrant Agreement is hereby amended by adding
the following definitions thereto:
<PAGE> 2
"Offering" means the public offering of the Company's Common Stock
described in the registration statement of Form S-2 (File No. 33_________) under
the Securities Act of 1933 filed with the Securities and Exchange Commission on
________________,1995.
"Representatives" means the representatives of the underwriters for the
Offering.
2. Section 3.02 is deleted in its entirety and replaced with the
following:
"SECTION 3.02 EXERCISE PERIODS. Subject to the terms and conditions set
forth herein (including Sections 3.03 and 3.08), the Warrants shall be
exercisable at any time or from time to time:
(i) subsequent to August 9, 1995;
(ii) subsequent to the occurrence of any Triggering Event;
(iii) in connection with an Initial Public Offering, but only to
the extent that Warrant Shares issued upon exercise of the Warrants are
included in the registration statement pertaining to the Initial Public
Offering pursuant to Section 4.01, and subsequently sold in such Initial Public
Offering;
(iv) during the 90-day period subsequent to the date of notice by
the Company of the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Company ("Liquidation"); or
(v) subsequent to the thirtieth day following the first date that
the Company receives payment for its shares sold in the Offering from the
Representatives."
3. Section 3.04 is deleted in its entirety and replaced with the
following:
"SECTION 3.04 MANNER OF EXERCISE. A Warrant may be exercised
upon (i) surrender to the Company of the certificate evidencing the Warrant at
the office of the Warrant Agent, together with the form of election to purchase
on the reverse thereof duly filled in and signed and (ii) payment to the Warrant
Agent, for the account of the Company, of the Exercise Price for the number of
Warrant Shares in respect of which such Warrant is then exercised. Such payment
shall be made (a) by a certified or official bank check payable to the order of
the Warrant Agent as agent for the Company or by wire transfer of funds to any
account designated by the Company for such purpose and/or (b) by surrendering to
the Company Warrants having
-2-
<PAGE> 3
a value equal to the aggregate exercise price payable with respect to the
number of Warrant Shares to be purchased. In the event that a Holder of the
Warrants determines to pay the exercise price for Warrant Shares by
surrendering to the Company a portion of such Holder's Warrants, the number of
Warrants to be surrendered in exchange for each Warrant share shall be
determined by multiplying the Current Market Value of a share of Common Stock
by one fiftieth of one percent (.0002). Subject to Section 3.02, the rights of
purchase represented by the Warrants shall be exercisable at the election of
the Holders either in full at any time or from time to time in part and in the
event that a Warrant Certificate is surrendered for exercise in respect of less
than all of the Warrant Shares purchasable on such exercise, a new Warrant
Certificate exercisable for the remaining Warrant Shares will be issued. The
Warrant Agent shall countersign and deliver the required new Warrant
Certificates, and the Company, at the Warrant Agent's request, shall supply
the Warrant Agent with Warrant Certificates duly signed on behalf of the
Company for such purpose."
4. Except as set forth herein, the Warrant Agreement shall remain in
full force and effect and shall be otherwise unaffected hereby.
5. This Amendment No. 1 may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be duly executed, all as of the day and year first above written.
SEALY CORPORATION
By: __________________________________
Its: __________________________________
SOCIETY NATIONAL BANK AS
SUCCESSOR WARRANT AGENT
By: __________________________________
Its: __________________________________
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of Sealy Corporation and Subsidiaries as of August 31, 1995 and the
related consolidated statement of income for the nine months ended August 31,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000748015
<NAME> SEALY CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> AUG-31-1995
<CASH> 2,256
<SECURITIES> 0
<RECEIVABLES> 98,351
<ALLOWANCES> 9,395
<INVENTORY> 39,853
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<PP&E> 159,185
<DEPRECIATION> 23,146
<TOTAL-ASSETS> 785,634
<CURRENT-LIABILITIES> 103,529
<BONDS> 291,709
<COMMON> 294
0
0
<OTHER-SE> 329,155
<TOTAL-LIABILITY-AND-EQUITY> 785,634
<SALES> 482,964
<TOTAL-REVENUES> 482,964
<CGS> 265,202
<TOTAL-COSTS> 265,202
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,021
<INTEREST-EXPENSE> 23,958
<INCOME-PRETAX> 29,790
<INCOME-TAX> 17,040
<INCOME-CONTINUING> 12,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,750
<EPS-PRIMARY> $0.42
<EPS-DILUTED> $0.42
</TABLE>
