The Company generated $81.7 million of operating cash flow during fiscal year 2011 as compared with $42.4 million during fiscal year 2010.
Pending Acquisition of Mattress Giant
The Company today announced the signing of a purchase agreement for all of the equity interests of Mattress Giant for approximately $47 million in cash, subject to customary purchase-price and certain other adjustments. The Company expects that the transaction, which remains subject to customary closing conditions, will be completed during its fiscal second quarter ending July 31, 2012. The Company expects to fund the purchase price from cash reserves.
In a separate transaction described under “Fiscal Fourth Quarter Results” above, the Company acquired 55 stores from Mattress Giant in the Atlanta, St. Louis and Minneapolis markets in November 2011, and has substantially completed the integration of those stores. Upon closing of the pending acquisition, the Company expects to operate approximately 180 additional Mattress Giant specialty retail stores in Texas and Florida, which represent the two largest states in which Mattress Firm currently operates. The stores are located in seven metropolitan markets including Miami, Naples/Ft. Myers, Orlando, Tampa and Jacksonville in Florida and Houston and Dallas in Texas, all representing markets where Mattress Firm currently operates a total of 240 stores.The acquisition is expected to advance the Company’s market-level profitability model that is centered on the benefits of increasing its “relative market share” in a given market. Currently, the Mattress Giant stores are generating sales per store that, on average, are approximately 75% of Mattress Firm’s average. The Company believes that the incremental sales and store-level contribution attributable to the acquired stores, once rebranded as Mattress Firm stores, will support the Company’s ability to increase the advertising spend in each of the markets, which is expected to drive sales increases in both the acquired and existing Mattress Firm stores. This strategy is expected to provide sales increases, greater leverage over market-level costs and improved market-level profitability.
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