Mattress Firm reports Q2 results

NEWS RELEASE

Mattress Firm Announces Second Fiscal Quarter Financial Results

Fiscal Q2 Net Sales Increased 48.2% Over Prior Year

Sleepy’s Integration Continues to Progress As Planned

HOUSTON–(BUSINESS WIRE)– Mattress Firm Holding Corp. (the “Company”) (NASDAQ: MFRM), the nation’s largest specialty mattress retailer, today announced its financial results for the second fiscal quarter (13 weeks) ended August 2, 2016. Net sales for the second fiscal quarter increased 48.2% over the prior year period to $980.0 million, reflecting incremental sales from acquired and new stores, partially offset by a comparable-store sales decline of 1.1%. The Company reported second fiscal quarter earnings (loss) per diluted share (“EPS”) on a generally accepted accounting principles (“GAAP”) basis of $(0.06), and EPS on a non-GAAP adjusted basis, excluding acquisition-related costs, fixed asset impairment costs, ERP system implementation training costs and severance charges (“Adjusted”), of $0.51. Excluding the non-cash amortization of tradenames, Adjusted EPS excluding Tradename Amortization was $0.57.

Expected diluted EPS on a GAAP basis, adjusted basis and adjusted basis excluding tradename amortization are reconciled in the table below:

Second Fiscal Quarter Reconciliation of GAAP to Adjusted EPS and Adjusted EPS Excluding Tradename

Amortization **

See “Reconciliation of Reported GAAP to Adjusted Statements of Operations Data” for Notes
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 4, 2015 August 2, 2016 August 4, 2015 August 2, 2016
GAAP Diluted EPS $ 0.61 $ (0.06 ) $ 0.77 $ (3.27 )
Adjustments
Intangible asset impairment charge (1) 2.32
Acquisition-related costs (2) 0.03 0.40 0.19 0.92
Fixed asset impairment charge(3) 0.01 0.09 0.01 0.24
ERP system implementation training costs (4) 0.01 0.01 0.01
Secondary offering costs (5) 0.01 0.01
Other expenses (6) 0.01 0.07 0.01 0.10
Adjusted Diluted EPS* $ 0.67 $ 0.51 $ 1.00 $ 0.34
Tradename amortization (7) 0.01 0.06 0.02 0.14
Adjusted Diluted EPS Exluding Tradename Amortization* $ 0.68 $ 0.57 $ 1.02 $ 0.48
* Due to rounding to the nearest cent, totals may not equal the sum of the lines in the table above.
** Reported sales results and expected GAAP and Adjusted EPS are preliminary and remain subject to adjustment until the filing of the Company’s Quarterly Report on Form 10-Q with the U.S. Securities and Exchange Commission.

“We remain excited about the future opportunities for our business as we build a national chain in the U.S,” commented Steve Stagner, executive chairman and chairman of the board. “We are also moving towards the completion of our transaction with Steinhoff, and believe Steinhoff is the ideal long-term partner for our customers, employees, suppliers and other stakeholders.”

Preliminary Second Quarter Financial Summary

  • Net sales for the second fiscal quarter increased 48.2% as compared with the comparable prior year period to $980.0 million, reflecting incremental sales from acquired and new stores, partially offset by a comparable-store sales decline of 1.1%. Comparable-store sales growth in the prior year period was 2.8%.
  • The Company opened 59 new stores and closed 49 stores, bringing the total number of Company-operated stores to 3,482 as of the end of the fiscal quarter.
  • Income from operations was $22.5 million. Excluding a total of $33.2 million of acquisition-related costs, fixed asset impairment costs, ERP system implementation training costs, loss on disposal of properties and severance charges, Adjusted income from operations was $55.7 million, as compared with $48.6 million for the comparable prior year period. Adjusted operating income margin was 5.7% of net sales as compared to 7.4% in the second fiscal quarter of 2015, and included a 260 basis-point decline in gross margin, a 50 basis-point improvement in general and administrative expense leverage and a 40 basis-point increase from sales and marketing expense leverage. Please refer to “Reconciliation of Reported GAAP to Adjusted Statements of Operations Data” for a reconciliation of income from operations to Adjusted income from operations and other information.
  • Net loss attributable to Mattress Firm Holding Corp. was $2.2 million and GAAP EPS was $(0.06). Excluding $21.2 million, net of income taxes, of acquisition-related costs, fixed asset impairment costs, ERP system implementation training costs, loss on disposal of properties and severance charges, Adjusted net income was $19.0 million and Adjusted EPS was $0.51. Please refer to “Reconciliation of Reported GAAP to Adjusted Statements of Operations Data” for a reconciliation of net income (loss) and GAAP EPS to Adjusted net income (loss) and Adjusted EPS, respectively, and other information.

As previously announced, on August 6, 2016, the Company entered into an Agreement and Plan of Merger with Steinhoff International Holdings N.V. (“Steinhoff”). Due to the proposed acquisition, the Company will not be updating its outlook for fiscal 2016 and will not be holding a conference call to discuss its second quarter fiscal 2016 results. The acquisition is expected to close by or around the end of the third calendar quarter, subject to satisfaction of a majority tender condition and other closing conditions.

Additional Information Regarding the Acquisition by Steinhoff and Where to Find It

Nothing in this press release is a recommendation, an offer to purchase or a solicitation of an offer to sell shares of Mattress Firm Holding Corp. stock. STOCKHOLDERS ARE URGED TO READ THE TENDER OFFER STATEMENT ON SCHEDULE TO (INCLUDING THE OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND OTHER OFFER DOCUMENTS) FILED BY STEINHOFF WITH THE SEC AND THE SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 FILED BY THE COMPANY WITH THE SEC, AS THEY CONTAIN IMPORTANT INFORMATION, INCLUDING THE TERMS AND CONDITIONS OF THE TENDER OFFER. Stockholders can obtain these documents free of charge from the SEC’s website at http://www.sec.gov, or from the Company upon written request to Secretary, Mattress Firm Holding Corp., 5815 Gulf Freeway, Houston, Texas 77023, telephone number (713) 923-1090 or from the Company’s website, http://ir.mattressfirm.com. Such materials filed by Steinhoff are also available for free at Steinhoff’s website, http://www.steinhoff.com.

About Mattress Firm Holding Corp.

With more than 3,600 company-operated and franchised stores across 49 states, Mattress Firm Holding Corp. (NASDAQ: 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 $3.5 billion in pro forma sales in 2015. MFRM, through its brands including Mattress Firm, Sleepy’s and Sleep Train, offers a broad selection of both traditional and specialty mattresses, bedding accessories and other related products from leading manufacturers, including Serta, Simmons, Tempur-Pedic, Sealy, Stearns & Foster, King Coil and Hampton & Rhodes. More information is available at www.mattressfirm.com. The Company’s website is not part of this release.

Mattress Firm Investor Relations Contact:
Scott McKinney, 713-328-3417
Vice President of Investor Relations
ir@mfrm.com
or
Mattress Firm Media Contact:
Erica Martinez, 214-269-4404
emartinez@jacksonspalding.com

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