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Mattress Firm Announces Second Fiscal Quarter Financial Results

Second Quarter Financial Summary

  • Net sales increased $82.1 million, or 45.6%, to $262.0 million in the second quarter of fiscal year 2012. The increase in net sales was the result of comparable-store sales growth of 5.0%, adding $8.8 million in net sales, and incremental net sales of $75.3 million from the opening of new stores and acquired stores prior to their inclusion in comparable-stores sales results, with such increases offset by a reduction in net sales of $2.0 million related to closed stores.
  • During the second quarter of fiscal 2012, the Company acquired 181 Mattress Giant stores on May 2, 2012 for approximately $44 million, and opened 27 new stores, while closing six stores, bringing the total Company-operated stores to 957 as of July 31, 2012.
  • Acquisition-related costs of the Mattress Giant transaction totaled $5.9 million during the second fiscal quarter and consisted of $1.3 million classified as cost of sales attributable to duplicate warehouse facilities and costs of remerchandising the former Mattress Giant stores, and $4.6 million classified as general and administrative expenses related to direct costs of the transaction, costs of retraining Mattress Giant personnel and duplicate costs of the Mattress Giant corporate office. The acquisition-related costs, as a percentage of sales, increased cost of sales by 50 basis-points and general and administrative expenses by 175 basis-points during the second fiscal quarter. The Company has completed the majority of the transition of corporate office support functions to its Houston corporate office and continues the process of consolidating warehouse facilities, which is expected to be substantially complete by the end of fiscal 2012.
  • Income from operations for the second fiscal quarter was $17.6 million. Excluding $5.9 million of acquisition-related costs, adjusted income from operations was $23.5 million, an increase of $9.1 million, or 63.1%, over the prior year, and adjusted operating margin during the quarter improved 100 basis points from 8.0% in 2011 to 9.0% in 2012. This adjusted operating margin growth was driven primarily by a 25 basis-point improvement in gross profit margin and a 125 basis-point improvement in general and administrative expenses, net of a 30 basis-point expense leverage reduction in selling and marketing expense and a 20 basis-point decrease from other categories. See “Reported to Adjusted Statements of Operations Data” below for a reconciliation of income from operations as reported to adjusted income from operations.
  • Net income was $10.1 million in the second quarter of fiscal year 2012 and EPS was $0.30. Excluding acquisition-related costs, and related tax effects, adjusted net income was $14.2 million for the quarter and adjusted EPS was $0.42. See “Reported to Adjusted Statements of Operations Data” below for a reconciliation of net income as reported to adjusted net income.

Year-to-Date Financial Summary

For the two fiscal quarters (twenty-six weeks) ended July 31, 2011, net revenues increased $140.0 million or 42.2% to $471.8 million, from $331.8 million in the comparable prior-year period. The increase in net sales was the result of comparable-store sales growth of 10.1%, adding $32.8 million in net sales, and incremental net sales of $111.3 million from the opening of new stores and acquired stores prior to their inclusion in comparable-stores sales results, with such increases offset by a net of a reduction in net sales of $4.1 million related to stores that were closed. For the first two fiscal quarters of 2012, the Company opened 57 new stores and acquired 181 stores, while closing 10 stores.

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