Mattress Firm Announces First Quarter Financial Results

The following table contains a reconciliation of our net income determined in accordance with U.S. GAAP to EBITDA and Adjusted EBITDA for the periods indicated (in thousands):

			Thirteen Weeks Ended
			May 3,					May 1,
			2011					2012
Net income			$	1,029				$	9,736
Income tax expense				80					6,162
Interest income				(2	)				(1	)
Interest expense				8,277					2,075
Depreciation and amortization				4,394					4,704
Intangible assets and other amortization				387					580
EBITDA				14,165					23,256
Loss on store closings and impairment of store assets				174					17
Financial sponsor fees and expenses				90					-
Stock-based compensation				19					509
Vendor new store funds (a)				4					383
Acquisition related expenses (b)				79					1,179
Other (c)				125					69
Adjusted EBITDA			$	14,656				$	25,413

(a)		Adjustment to recognize vendor funds received upon the opening of a new store in the period opened, rather than over 36-months as presented in our financial statements, which is consistent with how management has historically reviewed its results of operations.
(b)		Noncash effect included in net income related to purchase accounting adjustments made to inventories resulting from acquisitions and other acquisition-related cash costs included in net income, such as direct acquisition costs and costs related to training and integration of acquired businesses.
(c)		Consists of various items that management excludes in reviewing the results of operations.

MATTRESS FIRM HOLDING CORP. Consolidated Balance Sheets (In thousands, except share amounts)
									January 31,					May 1
									2012					2012
Assets														(unaudited)
Current assets:
Cash and cash equivalents									$	47,946				$	51,622
Accounts receivable, net										18,607					15,395
Inventories										40,961					46,979
Deferred income taxes										12,574					10,800
Prepaid expenses and other current assets										12,054					12,918
Total current assets										132,142					137,714
Property and equipment, net										95,674					104,797
Intangible assets, net										84,795					85,112
Goodwill										291,141					291,141
Debt issue costs and other, net										9,729					9,016
Total assets									$	613,481				$	627,780
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities of long-term debt									$	2,414				$	2,415
Accounts payable										42,396					43,509
Accrued liabilities										31,780					31,898
Customer deposits										6,294					6,845
Total current liabilities										82,884					84,667
Long-term debt, net of current maturities										225,940					225,378
Deferred income taxes										31,045					31,564
Other noncurrent liabilities										49,353					51,667
Total liabilities										389,222					393,276
Stockholders' equity:
Common stock, $0.01 par value; 120,000,000 shares authorized;
33,768,828 shares issued and outstanding at
January 31, 2012 and May 1, 2012										338					338
Additional paid-in capital										361,717					362,226
Accumulated deficit										(137,796	)				(128,060	)
Total stockholders' equity										224,259					234,504
Total liabilities and stockholders' equity									$	613,481				$	627,780

MATTRESS FIRM HOLDING CORP. Consolidated Statements of Operations (In thousands, except share and per share amounts)
									Thirteen Weeks Ended
									May 3,					% of				May 1,					% of
									2011					Net Sales				2012					Net Sales
Net sales									$	151,924				100.0	%			$	209,814				100.0	%
Cost of sales										95,946				63.2	%				127,272				60.7	%
Gross profit from retail operations										55,978				36.8	%				82,542				39.3	%
Franchise fees and royalty income										987				0.6	%				1,205				0.6	%
										56,965				37.5	%				83,747				39.9	%
Operating expenses:
Sales and marketing expenses										35,637				23.5	%				49,128				23.4	%
General and administrative expenses										11,770				7.7	%				16,630				7.9	%
Loss on store closings and impairment of store assets										174				0.1	%				17				0.0	%
Total operating expenses										47,581				31.3	%				65,775				31.3	%
Income from operations										9,384				6.177	%				17,972				8.6	%
Other expense (income):
Interest income										(2	)			0.0	%				(1	)			0.0	%
Interest expense										8,277				5.4	%				2,075				1.0	%
										8,275				5.4	%				2,074				1.0	%
Income before income taxes										1,109				0.7	%				15,898				7.6	%
Income tax expense										80				0.1	%				6,162				2.9	%
Net income									$	1,029				0.7	%			$	9,736				4.6	%
Basic net income per common share									$	0.05								$	0.29
Diluted net income per common share									$	0.05								$	0.29
Reconciliation of weighted-average shares outstanding:
Basic weighted average shares outstanding										22,399,952									33,768,828
Effect of dilutive securities:
Stock options										-									156,385
Restricted shares										-									710
Diluted weighted average shares outstanding										22,399,952									33,925,923

MATTRESS FIRM HOLDING CORP. Consolidated Statements of Cash Flows (In thousands)
									Thirteen Weeks Ended
									May 3,					May 1,
Cash flows from operating activities:									2011					2012
Net income									$	1,029				$	9,736
Adjustments to reconcile net income to cash flows
provided by operating activities:
Depreciation and amortization										4,394					4,704
Interest expense accrued and paid-in-kind										6,072					-
Loan fee and other amortization										598					586
Deferred income tax expense										-					2,293
Stock-based compensation										19					509
Loss on store closings and impairment of store assets										(65	)				17
Effects of changes in operating assets and liabilities,
excluding business acquisitions:
Accounts receivable										458					3,212
Inventories										(1,618	)				(6,018	)
Prepaid expenses and other current assets										1,053					(864	)
Other assets										21					(151	)
Accounts payable										739					1,113
Accrued liabilities										(522	)				118
Customer deposits										533					551
Other noncurrent liabilities										819					2,324
Net cash provided by operating activities										13,530					18,130
Cash flows from investing activities:
Purchases of property and equipment										(3,319	)				(13,854	)
Net cash used in investing activities										(3,319	)				(13,854	)
Cash flows from financing activities:
Principal payments of debt										(1,384	)				(600	)
Net cash used in financing activities										(1,384	)				(600	)
Net increase in cash and cash equivalents										8,827					3,676
Cash and cash equivalents, beginning of period										4,445					47,946
Cash and cash equivalents, end of period									$	13,272				$	51,622

MATTRESS FIRM HOLDING CORP. Reported to Adjusted Statements of Operations Data (In thousands, except share and per share amounts)
							Thirteen Weeks Ended
							May 3, 2011				May 1, 2012
															Acquisition-
															Related
							As Reported				As Reported				Costs (1)				As Adjusted
Income from operations							$	9,384			$	17,972			$	1,179			$	19,151
Other expense, net								8,275				2,074				-				2,074
Income before income taxes								1,109				15,898				1,179				17,077
Income tax expense (2)								80				6,162				457				6,619
Net income							$	1,029			$	9,736			$	722			$	10,458
Basic net income per common share							$	0.05			$	0.29			$	0.02			$	0.31
Diluted net income per common share							$	0.05			$	0.29			$	0.02			$	0.31
Basic weighted average shares outstanding								22,399,952				33,768,828				33,768,828				33,768,828
Diluted weighted average shares outstanding								22,399,952				33,925,923				33,925,923				33,925,923

(1)		In April 2012, we announced the signing of a purchase agreement for all of the equity interests of Mattress Giant, including approximately 180 specialty retail stores. The acquisition closed on May 2, 2012. Acquisition-related costs, consisting of direct transaction costs and integration costs are included in the results of operations as incurred. During the thirteen weeks ended May 1, 2012, we incurred $1.2 million of acquisition-related costs.
(2)		Reflects effective income tax rate of 38.8% for 2012.

Our "As Adjusted" data is considered a non-U.S. GAAP financial measure and is not in accordance with, or preferable to, "As Reported," or GAAP financial data. However, we are providing this information as we believe it facilitates year-over-year comparisons for investors and financial analysts.

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