HOUSTON - September 11, 2015 - (BUSINESS WIRE) - Mattress Firm Holding Corp. (the “Company”) (NASDAQ:MFRM) today announced its financial results for the second fiscal quarter (13 weeks) ended August 4, 2015. Net sales for the second fiscal quarter increased 61.2% over the prior year to $661.1 million, reflecting comparable-store sales growth of 2.8% and incremental sales from new and acquired stores. The Company reported second fiscal quarter earnings per diluted share (“EPS”) on a generally accepted accounting principles (“GAAP”) basis of $0.61, and EPS on a non-GAAP adjusted basis, excluding acquisition-related costs, secondary offering costs, and impairment and severance charges (“Adjusted”), of $0.67.
Expected diluted EPS on a GAAP basis and Adjusted basis are reconciled in the table below:
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We are pleased that we delivered 61% net sales growth and our eighth consecutive quarter of positive comps, against our most difficult comparison of the year,” stated Steve Stagner, Mattress Firm’s chief executive officer. “We saw strong results in the first half of the quarter, offset by softness in the second half of the quarter and renewed headwinds in our oil-affected markets. Our integration of multiple acquisitions is progressing, and we are excited about the continued outperformance of the Sleep Train business and the progress we are seeing in Chicago. Despite a solid Labor Day and recent positive sales trends, we still expect volatility in the oil-affected markets and have adjusted our guidance to reflect that. We continue to see results from our Relative Market Share model, and believe we can create long-term value for our shareholders as we integrate our acquisitions and execute our growth strategies.”
In September 2014, the Company completed the acquisition of the mattress specialty retail assets and operations of Back to Bed Inc., M World Mattress LLC, MCStores LLC and TBE Orlando LLC, which collectively operate Back to Bed and Bedding Experts retail stores in Illinois, Indiana and Wisconsin and Bedding Experts and Mattress Barn retail stores in Florida. The acquisition included approximately 131 mattress specialty retail stores primarily in the Chicago and Orlando metropolitan areas, for an aggregate purchase price of approximately $64.5 million. The rebranding of the acquired retail stores in the Chicago market was substantially complete by the end of May 2015. The Chicago market sales growth year-over-year (“YOY”) from those stores both prior to and subsequent to their rebranding is demonstrated by the chart above.
The Company had cash and cash equivalents of approximately $10.6 million at the end of the second fiscal quarter. Net cash provided by operating activities was $89.4 million for the second fiscal quarter. During the second quarter, the Company repaid $55.1 million of long-term debt, and as of August 4, 2015, there were no borrowings outstanding under the revolving portion of the 2014 Senior Credit Facility (as defined in the Company’s filings with the Securities and Exchange Commission) and approximately $4.2 million in outstanding letters of credit, with additional borrowing capacity of $90.4 million.
The Company is increasing the midpoint of its sales guidance range by $30 million primarily as a result of the anticipation of 30 incremental net new stores and the outperformance at the Sleep Train brand. The Company is revising its Adjusted EPS financial guidance for the full fiscal year (52 weeks) ending February 2, 2016 (“fiscal 2015”) based on year-to-date results, continued volatility inside oil-affected markets, and the discontinuation of the Mattress Pro concept. These projections are forecasts and are intended solely to give investors an understanding of management’s expectations for the full fiscal year in light of the recent consumer environment and sales trends. The projections do not take into account, or give effect for, acquisitions that may be completed by the Company during the fiscal year or any other events that are beyond the Company’s reasonable control. As used in the guidance table below, “Adjusted Cash EPS” is defined as adjusted net income as presented in the “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data”, plus tax effected stock compensation expense and depreciation and amortization, divided by the number of diluted shares. Please refer to “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data” for a reconciliation of GAAP EPS to Adjusted Cash EPS and other information which is not calculated on a GAAP basis. Comparable-store sales growth for fiscal year 2014 excludes incremental sales related to the 53rd week of operations. Adjusted data for future periods reflects management’s reasonable estimates of appropriate adjustments based on historical experience. Percentage growth calculations in the table below represent the midpoints of the guidance range provided. Net capital expenditures in the table below represent gross purchases of property and equipment, offset by cash construction allowances received from landlords.
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A conference call to discuss second fiscal quarter results is scheduled for today, September 11, 2015, at 8:30 a.m. Eastern Time. The call will be hosted by Steve Stagner, chief executive officer, Alex Weiss, chief financial officer and Scott McKinney, vice president of investor relations.
The conference call will be accessible by telephone and the internet. To access the call, participants from within the U.S. may dial (877) 705-6003, and participants from outside the U.S. may dial (201) 493-6725. Participants may also access the call via live webcast by visiting the Company’s investor relations web site at ir.mattressfirm.com.
The replay of the call will be available from approximately 11:30 a.m. Eastern Time on September 11, 2015 through midnight Eastern Time on September 25, 2015. To access the replay, the domestic dial-in number is (877) 870-5176, the international dial-in number is (858) 384-5517, and the passcode is 13618714. The archive of the webcast will be available on the Company’s web site for a limited time.
The components of the net sales increase for the thirteen and twenty-six weeks ended August 4, 2015 as compared to the corresponding prior year period were as follows (in millions):
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The composition of net sales by major category of product and services were as follows (in millions):
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The activity with respect to the number of Company-operated store units was as follows:
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Certain statements contained in this press release are not based on historical fact and are “forward-looking statements” within the meaning of applicable federal securities laws and regulations. In many cases, you can identify forward-looking statements by terminology such as “may,” “would,” “should,” “could,” “forecast,” “feel,” “project,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “continue” or the negative of these terms or other comparable terminology; however, not all forward-looking statements contain these identifying words. The forward-looking statements contained in this press release, such as those relating to our net sales, GAAP and Adjusted EPS and net store unit change for fiscal year 2015 and any anticipated effects of any recent acquisitions, are subject to various risks and uncertainties, including but not limited to downturns in the economy; reduction in discretionary spending by consumers; our ability to execute our key business strategies and advance our market-level profitability; our ability to profitably open and operate new stores and capture additional market share; our relationship with our primary mattress suppliers; our dependence on a few key employees; the possible impairment of our goodwill or other acquired intangible assets; the effect of our planned growth and the integration of our acquisitions on our business infrastructure; the impact of seasonality on our financial results and comparable-store sales; our ability to raise adequate capital to support our expansion strategy; our success in pursuing and completing strategic acquisitions; the effectiveness and efficiency of our advertising expenditures; our success in keeping warranty claims and comfort exchange return rates within acceptable levels; our ability to deliver our products in a timely manner; our status as a holding company with no business operations; our ability to anticipate consumer trends; risks related to our primary stockholder, J.W. Childs Associates, L.P.; heightened competition; changes in applicable regulations; risks related to our franchises, including our lack of control over their operation and our liabilities if they default on note or lease obligations; risks related to our stock and other factors set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 3, 2015 filed with the Securities and Exchange Commission (“SEC”) on April 3, 2015 and our other SEC filings. Forward-looking statements relate to future events or our future financial performance and reflect management’s expectations or beliefs concerning future events as of the date of this press release. Actual results of operations may differ materially from those set forth in any forward-looking statements, and the inclusion of a projection or forward-looking statement in this press release should not be regarded as a representation by us that our plans or objectives will be achieved. We do not undertake to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise.
Adjusted EBITDA is defined as net income before income tax expense, interest income, interest expense, depreciation and amortization (“EBITDA”), without giving effect to non-cash goodwill and intangible asset impairment charges, gains or losses on store closings and impairment of store assets, gains or losses related to the early extinguishment of debt, financial sponsor fees and expenses, non-cash charges related to stock-based awards and other items that are excluded by management in reviewing the results of operations. We have presented Adjusted EBITDA because we believe that the exclusion of these items is appropriate to provide additional information to investors about our ongoing operating performance excluding certain non-cash and other items and to provide additional information with respect to our ability to comply with various covenants in documents governing our indebtedness and as a means to evaluate our period-to-period results. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. We have provided this information to analysts, investors and other third parties to enable them to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of our ongoing operations. Management also uses Adjusted EBITDA to determine executive incentive compensation payment levels. In addition, our compliance with certain covenants under the 2014 Senior Credit Facility, are calculated based on similar measures and differ from Adjusted EBITDA primarily by the inclusion of pro forma results for acquired businesses and new stores in those similar measures. Other companies in our industry may calculate Adjusted EBITDA differently than we do. Adjusted EBITDA is not a measure of performance under U.S. GAAP and should not be considered as a substitute for net income prepared in accordance with U.S. GAAP. Adjusted EBITDA has significant limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.
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):
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Adjusted EPS and the other “Adjusted” data provided in this press release, including Adjusted Cash EPS, 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.
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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.
With more than 2,300 company-operated and franchised stores across 41 states, Mattress Firm Holding Corp. (MFRM) has the largest geographic footprint in the United States among multi-brand mattress retailers. Founded in 1986, Houston-based MFRM is the nation's leading specialty bedding retailer with over $2.2 billion in sales over the past 12 months. MFRM, through its family of brands, including Mattress Firm and Sleep Train, offers a broad selection of both traditional and specialty mattresses, bedding accessories and other related products from leading manufacturers, including Sealy, Tempur-Pedic, Serta, Simmons, Stearns & Foster, and Hampton & Rhodes. More information is available at www.mattressfirm.com. MFRM's website is not part of this press release.
SOURCE Mattress Firm Holding Corp.
Scott McKinney
Mattress Firm Holding Corp.
Investor Relations
713-343-3652
Vice President of Investor Relations
ir@mfrm.com
Kimberly Wise
Media Relations
214-646-1659
kwise@jacksonspalding.com
Mattress Firm Holding Corp. (MFRM) has the largest geographic footprint in the United States among multi-brand mattress retailers.