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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
NOVEMBER 30, 1997 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 98101
SEATTLE, WASHINGTON (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)*
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(206) 625-1233
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
WARRANTS TO PURCHASE CLASS B COMMON STOCK
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 23, 1998 was $49,419,835.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The number of shares of the registrant's common stock outstanding as of
February 23, 1998 was 30,344,756.2711.
DOCUMENTS OR PARTS THEREOF INCORPORATED BY REFERENCE: NONE
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* All Corporate and administrative services are provided by Sealy, Inc., 10th
Floor Halle Building, 1228 Euclid Avenue, Cleveland, Ohio 44115.
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This Amendment No. 1 amends Item 7, Item 8 and Item 12 of the Annual Report
on Form 10-K filed by Sealy Corporation (the "Company") with the Securities
and Exchange Commission on March 2, 1998 (the "Form 10-K"). Portions of each
item that have been amended are included. Text that has not been amended is
not included.
PART II.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company hereby amends the fifth full paragraph on page 13 of the
Form 10-K as follows:
Selling, General and Administrative. Selling, general and administrative
expenses were flat versus the prior year, but decreased as a percent of net
sales from 33.1% to 31.1%. Increased operating expenses of $16.8 million were
offset by a decrease in marketing spending of $14.1 million and a prior year
$2.7 million charge associated with closing the sleep sofa business. The
increase in operating expenses is due primarily to increases in incentive
bonuses and administrative and sales salaries. Additionally, the Company
incurred executive severance and transition expenses of $1.9 million.
Marketing spending declined from $117.8 million in Fiscal 1995 to $103.7
million in Fiscal 1996 as a result of adjustments in the Company's marketing
strategies.
The Company hereby amends the third full paragraph on page 16 of the
Form 10-K as follows:
The Tranche A Term Loans mature in December 2002. The AXELs Series B mature
in December 2004. The AXELs Series C mature in December 2005. The AXELs Series
D mature in December 2006. The Tranche A Term Loans are subject to quarterly
amortization payments commencing in March 1999, the AXELs Series B, the AXELs
Series C and the AXELs Series D are subject to quarterly amortization payments
commencing in March 1998 with the AXELs Series B amortizing in nominal amounts
until the maturity of the Tranche A Term Loans, the AXELs Series C amortizing
in nominal amounts until the maturity of the AXELs Series B and the AXELs
Series D amortizing in nominal amounts until the maturity of the AXELs Series
C. The Revolving Credit Facility matures in December 2002. In addition, the
Senior Credit Agreements provide for mandatory repayments, subject to certain
exceptions, of the Term Loans, and reductions in the Revolving Credit
Facility, based on the net proceeds of certain asset sales outside the
ordinary course of business of the Issuer and its subsidiaries, the net
proceeds of insurance, the net proceeds of certain debt and equity issuances,
and excess cash flow (as defined in the Senior Credit Agreements).
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company hereby amends the first full paragraph on page 45 of the
Form 10-K as follows:
The Tranche A Term Loans mature in December 2002. The AXELs Series B mature
in December 2004. The AXELs Series C mature in December 2005. The AXELs Series
D mature in December 2006. The Tranche A Term Loans are subject to quarterly
amortization payments commencing in March 1999, the AXELs Series B, the AXELs
Series C and the AXELs Series D are subject to quarterly amortization payments
commencing in March 1998 with the AXELs Series B amortizing in nominal amounts
until the maturity of the Tranche A Term Loans, the AXELs Series C amortizing
in nominal amounts until the maturity of the AXELs Series B and the AXELs
Series D amortizing in nominal amounts until the maturity of the AXELs Series
C. The Revolving Credit Facility matures in December 2002. In addition, the
Senior Credit Agreements provide for mandatory repayments, subject to certain
exceptions, of the Term Loans, and reductions in the Revolving Credit
Facility, based on the net proceeds of certain asset sales outside the
ordinary course of business of the Issuer and its subsidiaries, the net
proceeds of insurance, the net proceeds of certain debt and equity issuances,
and excess cash flow (as defined in the Senior Credit Agreements).
1
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The Company hereby amends page 51 of the Form 10-K as follows:
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEALY CORPORATION
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEALY COMBINED COMBINED
SEALY MATTRESS GUARANTOR NON-GUARANTOR
CORPORATION COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- -------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $ -- $37,973 $708,914 $75,042 $(17,095) $804,834
Costs and expenses:
Cost of goods sold.... -- 23,256 400,785 48,878 (17,014) 455,905
Selling, general and
administrative....... 1,336 11,464 233,512 17,346 -- 263,658
Amortization of
intangibles.......... -- 411 11,764 1,089 -- 13,264
Interest expense,
net.................. 32,114 -- (75) (643) -- 31,396
Loss (income) from
equity investees..... 8,969 8,258 -- -- (17,227) --
Loss (income) from
non-guarantor equity
investees............ -- 20 (4,104) -- 4,084 --
Capital charge and
intercompany interest
allocation........... (69,376) 3,689 64,821 866 -- --
-------- ------- -------- ------- -------- --------
Income/(loss) before
income taxes,
extraordinary item and
cumulative effect of a
change in accounting
principle.............. 26,957 (9,125) 2,211 7,506 13,062 40,611
Income taxes............ 13,103 (156) 6,140 3,422 -- 22,509
-------- ------- -------- ------- -------- --------
Income/(loss) before
extraordinary item and
cumulative effect of
change in accounting
principle.............. 13,854 (8,969) (3,929) 4,084 13,062 18,102
Extraordinary item.... 2,030 -- -- -- -- 2,030
Cumulative effect of a
change in accounting
principle............ -- -- 4,329 -- -- 4,329
-------- ------- -------- ------- -------- --------
Net income/(loss)....... $ 11,824 $(8,969) $ (8,258) $ 4,084 $ 13,062 $ 11,743
======== ======= ======== ======= ======== ========
</TABLE>
2
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The Company hereby amends page 52 of the Form 10-K as follows:
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEALY CORPORATION
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 1, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEALY COMBINED COMBINED
SEALY MATTRESS GUARANTOR NON-GUARANTOR
CORPORATION COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- -------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $ -- $ 33,296 $560,540 $120,223 $(16,421) $697,638
Costs and expenses:
Cost of goods sold.... -- 19,867 305,100 88,592 (16,300) 397,259
Selling, general and
administrative....... 150 9,082 190,628 21,593 -- 221,453
Loss on net assets
held for sale........ -- 11,762 -- -- -- 11,762
Amortization of
intangibles.......... -- 411 11,450 1,733 -- 13,594
Interest expense,
net.................. 30,364 -- 91 (1,658) -- 28,797
Loss (income) from
equity investees..... (2,608) 1,796 -- -- 812 --
Income from non-
guarantor equity
investees............ -- (15,829) (2,920) -- 18,749 --
Capital charge and
intercompany interest
allocation........... (35,043) 3,209 41,595 (9,761) -- --
-------- -------- -------- -------- -------- --------
Income/(loss) before
income taxes........... 7,137 2,998 14,596 19,724 (19,682) 24,773
Income taxes............ 7,522 390 16,392 975 -- 25,279
-------- -------- -------- -------- -------- --------
Net income/(loss)....... $ (385) $ 2,608 $ (1,796) $ 18,749 $(19,682) $ (506)
======== ======== ======== ======== ======== ========
</TABLE>
SEALY CORPORATION
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEALY COMBINED COMBINED
SEALY MATTRESS GUARANTOR NON-GUARANTOR
CORPORATION COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- -------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $ -- $30,460 $537,672 $96,296 $(10,486) $653,942
Costs and expenses:
Cost of goods sold.... -- 16,548 286,088 70,209 (10,429) 362,416
Selling, general and
administrative....... (13,080) 8,382 192,205 15,903 -- 203,410
Amortization of
intangibles.......... -- 411 12,143 1,502 -- 14,056
Interest expense,
net.................. 33,113 -- (819) (1,276) -- 31,018
Income from equity
investees............ (11,870) (9,001) -- -- 20,871 --
Income from non-
guarantor equity
investees............ -- (1,346) (4,160) -- 5,506 --
Capital charge and
intercompany interest
allocation........... (32,794) 2,773 29,678 343 -- --
-------- ------- -------- ------- -------- --------
Income/(loss) before
income taxes........... 24,631 12,693 22,537 9,615 (26,434) 43,042
Income taxes............ 5,104 823 13,536 4,109 -- 23,572
-------- ------- -------- ------- -------- --------
Net income/(loss)....... $ 19,527 $11,870 $ 9,001 $ 5,506 $(26,434) $ 19,470
======== ======= ======== ======= ======== ========
</TABLE>
3
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PART III.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Company hereby amends page 64 of the Form 10-K as follows:
L Common are entitled to a preference over Class A Common with respect to any
distribution by the Company to holders of its capital stock equal to the
original cost of such share ($40.50) plus an amount which accrues on a daily
basis at a rate of 10% per annum, compounded annually. The Class B Common is
identical to the Class A Common and the Class M Common is identical to the
Class L Common except that the Class B Common and the Class M common are
nonvoting. The Class B Common and the Class M Common are convertible into
Class A Common and Class L Common, respectively, automatically upon
consummation of an initial public offering by the Company. The Board of
Directors of the Company is authorized to issue preferred stock, par value
$0.01 per share, with such designations and other terms as may be stated in
the resolutions providing for the issue of any such preferred stock adopted
from time to time by the Board of Directors.
The following table sets forth certain information regarding the beneficial
ownership of each class of common stock held by each person (other than
directors and executive officers of the company) known to the Company to own
more than 5% of the outstanding voting common stock of the Company. To the
knowledge of the Company, each of such stockholders has sole voting and
investment power as to the shares shown unless otherwise noted. Beneficial
ownership of the securities listed in the table has been determined in
accordance with the applicable rules and regulations promulgated under the
Exchange Act.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
-----------------------
CLASS A COMMON CLASS B COMMON CLASS L COMMON CLASS M COMMON
-------------------- ----------------------- ----------------------- -----------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE
SHARES OF CLASS SHARES OF CLASS SHARES OF CLASS SHARES OF CLASS
--------- ---------- ------------ ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL STOCKHOLDERS:
Bain Funds(1)(2)........ 9,450,000 48.4% 612,284.54 7.9% 1,050,000 48.4% 68,031.62 7.9%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Harvard Private Capital
Holdings, Inc. ........ 4,000,000 20.5 -- -- 444,444.4444 20.5 -- --
c/o Harvard Management
Company, Inc.
600 Atlantic Avenue
Boston, MA 02210
Sealy Investors 1,
LLC(2)................. 973,989 5.0 5,086,617.06 65.3 108,221 5.0 565,179.6733 65.3
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Sealy Investors 2,
LLC(2)................. 973,989 5.0 2,056,314.03 26.4 108,221 5.0 228,479.3367 26.4
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Sealy Investors 3,
LLC(2)................. 973,989 5.0 36,112.01 * 108,221 5.0 4,012.4456 *
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Zell/Chilmark Fund,
L.P. .................. 2,862,000 14.7 -- -- 318,000 14.7 -- --
Two North Riverside
Drive
Suite 1500
Chicago, IL 60606
</TABLE>
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* Less than one percent
(1) Amounts shown reflect the aggregate number of shares of Class A Common and
Class L Common held by Bain Capital Fund V, L.P. ("Fund V"), Bain
CapitalFund V-B, L.P., BCIP Trust Associates, L.P. ("BCIP Trust") and BCIP
Associates ("BCIP") (collectively, the "Bain Funds"), for the Bain Funds
and Messrs. Bekenstein, Edgerley and Krupka.
(2) The members of Sealy Investors 1, LLC ("SI1") are Chase Equity Associates,
L.P. and Bain Capital Partners V, L.P. ("BCPV"). The members of Sealy
Investors 2, LLC ("SI2") are CIBC WG Argosy Merchant Fund 2, L.L.C. and
BCPV. The members of Sealy Investors 3, LLC ("SI3" and, collectively with
SI1 and SI2, the "LLCs") are BancBoston Investments, Inc. and BCPV. BCPV
is the administrative member of each LLC and beneficially owns 1% of the
equity of each LLC. Accordingly, BCPV may be deemed to beneficially own
certain shares owned by the LLCs, although BCPV disclaims such beneficial
ownership.
4
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The Company hereby amends page 65 of the Form 10-K as follows:
The following table sets forth certain information regarding the beneficial
ownership of each class of common stock held by each director of the Company,
each Named Executive Officer and all of the Company's directors and executive
officers as group. To the knowledge of the Company, each of such stockholders
has sole voting and investment power as to the shares shown unless otherwise
noted. Beneficial ownership of the securities listed in the table has been
determined in accordance with the applicable rules and regulations promulgated
under the Exchange Act.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------------------------------------------------------
CLASS A COMMON CLASS B COMMON CLASS L COMMON CLASS M COMMON
--------------------- ----------------- ------------------------- -----------------
NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE
SHARES OF CLASS SHARES OF CLASS SHARES OF CLASS SHARES OF CLASS
---------- ---------- ------ ---------- -------------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DIRECTORS & EXECUTIVE OFFICERS:
Josh Bekenstein(1)(3)... 9,450,000 48.4% -- -- 1,050,000 48.4% -- --
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Paul Edgerley(1)(3)..... 9,450,000 48.4 -- -- 1,050,000 48.4 -- --
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Michael Krupka(1)(3).... 9,450,000 48.4 -- -- 1,050,000 48.4 -- --
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
John M. Sallay(4)....... 4,000,000 20.5 -- -- 444,444.4444 20.5 -- --
c/o Harvard Management
Company, Inc.
600 Atlantic Avenue
Boston, MA 02210
Ronald Jones(5)......... 939,996 4.6 -- -- 104,444 4.6 -- --
c/o Sealy Corporation
1228 Euclid Avenue
Cleveland, OH 44115
Gary T. Fazio(6)........ 75,285 * -- -- 8,365 * -- --
c/o Sealy Corporation
1228 Euclid Avenue
Cleveland, OH 44115
Douglas Fellmy.......... 75,285 * -- -- 8,365 * -- --
c/o Sealy Corporation
1228 Euclid Avenue
Cleveland, OH 44115
David McIlquham......... 41,994 * -- -- 4,666 * -- --
c/o Sealy Corporation
1228 Euclid Avenue
Cleveland, OH 44115
Lawrence J. Rogers...... 75,285 * -- -- 8,365 * -- --
c/o Sealy Corporation
1228 Euclid Avenue
Cleveland, OH 44115
All directors and
executive officers as a
group (15 persons)..... 14,944,630 71.8% -- -- 1,660,514.4444 71.8% -- --
</TABLE>
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* Less than one percent
5
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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
/s/ Ronald L. Jones
By: _________________________________
RONALD L. JONES PRESIDENT AND
CHIEF EXECUTIVE OFFICER (PRINCIPAL
EXECUTIVE OFFICER)
Date: April 3, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE
/s/ Richard F. Sowerby Vice President-- April 3, 1998
- ------------------------------------- Controller
RICHARD F. SOWERBY (Principal
Accounting Officer)
/s/ Josh Bekenstein Director April 3, 1998
- -------------------------------------
JOSH BEKENSTEIN
/s/ Paul Edgerley Director April 3, 1998
- -------------------------------------
PAUL EDGERLEY
/s/ James W. Johnston Director April 3, 1998
- -------------------------------------
JAMES W. JOHNSTON
/s/ Ronald L. Jones Director April 3, 1998
- -------------------------------------
RONALD L. JONES
/s/ Michael Krupka Director April 3, 1998
- -------------------------------------
MICHAEL KRUPKA
/s/ John M. Sallay Director April 3, 1998
- -------------------------------------
JOHN M. SALLAY
/s/ Jonas Steinman Director April 3, 1998
- -------------------------------------
JONAS STEINMAN
6
