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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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