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TheStreet Open House

(Graphic: Business Wire)

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 Fifty-Two Weeks Ended
January 31,     January 29, January 31,     January 29,
2012 2013 2012 2013
Net income $ 17,372 $ 7,594 $ 34,351 $ 39,871
Income tax expense (9,685 ) 6,726 (8,815 ) 26,698
Interest income (5 ) (10 ) (9 ) (11 )
Interest expense 3,831 2,872 29,310 9,258
Depreciation and amortization 4,499 7,075 17,450 23,507
Intangible assets and other amortization   464     534     1,718     1,506  
EBITDA   16,476     24,791     74,005     100,829  
Intangible asset impairment charge - 2,100 - 2,100
Loss on store closings and impairment of store assets 435 783 759 1,050
Loss from debt extinguishment 3,831 - 5,704 -
Financial sponsor fees and expenses 350 11 644 74
Stock-based compensation 465 1,203 523 2,856
Secondary offering costs - (20 ) - 1,915
Vendor new store funds (a) 2,396 16 3,169 953
Acquisition-related costs (b) 708 1,906 886 11,980
Other (c)   873     107     1,797     (789 )
Adjusted EBITDA $ 25,534   $ 30,897   $ 87,487   $ 120,968  
 

(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 our results of operations.

 

(b)

Consists of noncash 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.

 

Adjusted EPS and the other “Adjusted” data provided in this press release are also considered non-GAAP financial measures. We report our financial results in accordance with GAAP; however, management believes evaluating our ongoing operating results may be enhanced if investors have additional non-GAAP basis financial measures to facilitate year-over-year comparisons. Management reviews non-GAAP financial measures to assess ongoing operations and considers them to be effective indicators, for both management and investors, of our financial performance over time. Our management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. For more information, please refer to “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data” below.

         

MATTRESS FIRM HOLDING CORP.

Consolidated Balance Sheets

(In thousands, except share amounts)

 
January 31, January 29,
2012 2013

Assets

Current assets:
Cash and cash equivalents $ 47,946 $ 14,556
Accounts receivable, net 18,607 26,246
Inventories 40,961 63,228
Deferred income taxes 12,574 3,710
Prepaid expenses and other current assets   12,054     18,855  
Total current assets 132,142 126,595
Property and equipment, net 95,674 144,612
Intangible assets, net 84,795 82,479
Goodwill 291,141 358,978
Debt issue costs and other, net   9,729     12,015  
Total assets $ 613,481   $ 724,679  
 

Liabilities and Stockholders' Equity

Current liabilities:
Notes payable and current maturities of long-term debt $ 2,414 $ 33,930
Accounts payable 42,396 64,642
Accrued liabilities 31,780 41,106
Customer deposits   6,294     8,012  
Total current liabilities 82,884 147,690
Long-term debt, net of current maturities 225,940 219,069
Deferred income taxes 31,045 26,800
Other noncurrent liabilities   49,353     63,624  
Total liabilities   389,222     457,183  
 
Commitments and contingencies
 
Stockholders' equity:
Common stock, $0.01 par value; 120,000,000 shares authorized;
33,768,828 and 33,795,630 shares issued and outstanding at
January 31, 2012 and January 29, 2013, respectively 338 338
Additional paid-in capital 361,717 365,083
Accumulated deficit   (137,796 )   (97,925 )
Total stockholders' equity   224,259     267,496  
Total liabilities and stockholders' equity $ 613,481   $ 724,679  
 
                           

MATTRESS FIRM HOLDING CORP.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

 
Thirteen Weeks Ended Fifty-Two Weeks Ended
January 31,     % of     January 29, % of January 31,     % of     January 29, % of
2012 Sales 2013 Sales 2012 Sales 2013 Sales
Net sales $ 188,558 100 % $ 258,246 100 % $ 703,910 100 % $ 1,007,337 100 %
Cost of sales   112,685   59.8 %   160,273   62.1 %   428,018   60.8 %   614,572   61.0 %
Gross profit from retail operations 75,873 40.2 % 97,973 37.9 % 275,892 39.2 % 392,765 39.0 %
Franchise fees and royalty income   1,296   0.7 %   1,374   0.6 %   4,697   0.7 %   5,396   0.5 %
  77,169   40.9 %   99,347   38.5 %   280,589   39.9 %   398,161   39.5 %
Operating expenses:
Sales and marketing expenses 45,471 24.2 % 62,388 24.2 % 167,605 23.9 % 245,555 24.4 %
General and administrative expenses 15,919 8.4 % 16,894 6.5 % 51,684 7.3 % 73,640 7.3 %
Intangible asset impairment charge - 0.0 % 2,100 0.8 % - 0.0 % 2,100 0.2 %
Loss on store closings and impairment of store assets   435   0.2 %   783   0.3 %   759   0.1 %   1,050   0.1 %
Total operating expenses   61,825   32.8 %   82,165   31.8 %   220,048   31.3 %   322,345   32.0 %
Income from operations   15,344   8.1 %   17,182   6.7 %   60,541   8.6 %   75,816   7.5 %
Other expense (income):
Interest income (5 ) 0.0 % (10 ) 0.1 % (9 ) 0.0 % (11 ) 0.0 %
Interest expense 3,831 2.0 % 2,872 1.1 % 29,310 4.2 % 9,258 0.9 %
Loss from debt extinguishment   3,831   2.0 %   -   0.0 %   5,704   0.8 %   -   0.0 %
  7,657   4.0 %   2,862   1.2 %   35,005   5.0 %   9,247   0.9 %
Income before income taxes 7,687 4.1 % 14,320 5.5 % 25,536 3.6 % 66,569 6.6 %
Income tax expense (benefit)   (9,685 ) -5.1 %   6,726   2.6 %   (8,815 ) -1.3 %   26,698   2.6 %
Net income $ 17,372   9.2 % $ 7,594   2.9 % $ 34,351   4.9 % $ 39,871   4.0 %
 
Basic net income per common share $ 0.56 $ 0.22 $ 1.40 $ 1.18
Diluted net income per common share $ 0.56 $ 0.22 $ 1.40 $ 1.18
 
Reconciliation of weighted-average shares outstanding:
Basic weighted average shares outstanding 31,145,241 33,776,630 24,586,274 33,770,779
Effect of dilutive securities:
Stock options - 17,999 - 76,669
Restricted shares   -     3,361     -     5,828  
Diluted weighted average shares outstanding   31,145,241     33,797,990     24,586,274     33,853,276  
 
                   

MATTRESS FIRM HOLDING CORP.

Consolidated Statements of Cash Flows

(In thousands)

 
Fiscal Fiscal

Cash flows from operating activities:

2011 2012
Net income $ 34,351 $ 39,871
Adjustments to reconcile net income to cash flows
provided by operating activities:
Depreciation and amortization 17,450 23,507
Interest expense accrued and paid-in-kind 20,575 -
Loan fee and other amortization 2,530 2,361
Loss from debt extinguishment 5,704 -
Deferred income tax expense (benefit) (11,271 ) 17,131
Stock-based compensation 523 2,856

Intangible asset impairment charge

- 2,100
Loss on store closings and impairment of store assets 324 894
Effects of changes in operating assets and liabilities,
excluding business acquisitions:
Accounts receivable (6,574 ) (4,947 )
Inventories (10,555 ) (15,714 )
Prepaid expenses and other current assets (1,306 ) (3,616 )
Other assets (2,914 ) (3,219 )
Accounts payable 13,159 9,324
Accrued liabilities 9,333 1,389
Customer deposits 1,518 (218 )
Other noncurrent liabilities   8,828     7,019  
Net cash provided by operating activities   81,675     78,738  

Cash flows from investing activities:

Purchases of property and equipment (34,356 ) (68,604 )
Business acquisitions, net of cash acquired   (7,958 )   (63,051 )
Net cash used in investing activities   (42,314 )   (131,655 )

Cash flows from financing activities:

Proceeds from issuance of debt 40,198 56,000
Principal payments of debt (145,231 ) (36,983 )
Proceeds from issuance of common stock, net of costs 110,446 -
Proceeds from exercise of common stock options - 510
Debt issuance costs   (1,273 )   -  
Net cash provided by financing activities   4,140     19,527  
Net increase (decrease) in cash and cash equivalents 43,501 (33,390 )
Cash and cash equivalents, beginning of period   4,445     47,946  
Cash and cash equivalents, end of period $ 47,946   $ 14,556  
 

                                       

MATTRESS FIRM HOLDING CORP.

Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data

(In thousands, except share and per share amounts)

 
Thirteen Weeks Ended
January 31, 2012 January 29, 2013
Income Income Diluted Income Income Diluted
From Before In- Net Weighted Diluted From Before In- Net Weighted Diluted
Operations come Taxes Income Shares EPS* Operations come Taxes Income Shares EPS*
As Reported $ 15,344 $ 7,687 $ 17,372 31,145,241 $ 0.56 $ 17,182 $ 14,320 $ 7,594 33,797,990 $ 0.22
% of sales 8.1 % 4.1 % 9.2 % 6.7 % 5.5 % 2.9 %

IPO Pro Forma Adjustments (1)

Diluted share count adjustment 2,623,587 (0.04 )
Management fees 350 350 220 0.01 - - - -
Interest expense - 1,746 1,098 0.03 - - - -
Loss from debt extinguishment - 3,831 2,410 0.07 - - - -

Other Adjustments

Acquisition-related costs (2) - - - - 1,906 1,906 937 0.03
Secondary offering costs (3) - - - - (20 ) (20 ) (40 ) (0.00 )
Impairment charges (4) - - - - 2,256 2,256 1,386 0.04
Other expenses (5) - - - - 180 180 111 0.00
Release of valuation allowance
on deferred tax assets (6)   -     -     (14,107 )     (0.42 )   -     -     -       -  
Total adjustments   350     5,927     (10,379 ) 2,623,587   (0.35 )   4,322     4,322     2,394   -   0.07  
As Adjusted $ 15,694   $ 13,614   $ 6,993   33,768,828 $ 0.21   $ 21,504   $ 18,642   $ 9,988   33,797,990 $ 0.30  
% of sales 8.3 % 7.2 % 3.7 % 8.3 % 7.2 % 3.9 %
 
 
Fiscal Year (Fifty-Two Weeks) Ended
January 31, 2012 January 29, 2013
Income Income Diluted Income Income Diluted
From Before In- Net Weighted Diluted From Before In- Net Weighted Diluted
Operations come Taxes Income Shares EPS* Operations come Taxes Income Shares EPS*
As Reported $ 60,541 $ 25,536 $ 34,351 24,586,274 $ 1.40 $ 75,816 $ 66,569 $ 39,871 33,853,276 $ 1.18
% of sales 8.6 % 3.6 % 4.9 % 7.5 % 6.6 % 4.0 %

IPO Pro Forma Adjustments (1)

Diluted share count adjustment 9,182,554 (0.38 )
Management fees 644 644 405 0.01 - - - -
Interest expense - 21,131 13,291 0.39 - - - -
Loss from debt extinguishment - 5,688 3,578 0.11 - - - -

Other Adjustments

Acquisition-related costs (2) - - - - 11,980 11,980 7,616 0.23
Secondary offering costs (3) - - - - 1,915 1,915 1,403 0.04
Impairment charges (4) - - - - 2,256 2,256 1,386 0.04
Other expenses (5) - - - - 180 180 111 0.00
Release of valuation allowance -
on deferred tax assets (6)   -     -     (20,050 )     (0.59 )   -     -     -       -  
Total adjustments   644     27,463     (2,776 ) 9,182,554   (0.46 )   16,331     16,331     10,516   -   0.31  
As Adjusted $ 61,185   $ 52,999   $ 31,575   33,768,828 $ 0.94   $ 92,147   $ 82,900   $ 50,387   33,853,276 $ 1.49  
% of sales 8.7 % 7.5 % 4.5 % 9.1 % 8.2 % 5.0 %
 

_____________________

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