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Sealy Corp. Reports Operating Results (10-Q)

June 26, 2012 | About:
10qk

10qk

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Sealy Corp. (ZZ) filed Quarterly Report for the period ended 2012-05-27.

Sealy Corporation has a market cap of $183 million; its shares were traded at around $1.7 with and P/S ratio of 0.2.

Highlight of Business Operations:

Gross Profit. Our consolidated gross profit for the quarter was $127.0 million, an increase of $1.9 million from the comparable prior year period. As a percentage of net sales, gross profit increased 1.8 percentage points to 40.7%. The increase in percentage of net sales was primarily due to an increase in gross profit margin in our U.S. operations, which was partially offset by decreases in gross profit margin in our Mexico and Canada operations. U.S. gross profit margin increased 2.5 percentage points to 40.8% of net sales. The increase in the U.S. gross profit percentage was due, in part, to advances made in the manufacturing processes, which resulted in a 1.3 percentage point increase in U.S. gross profit margin. A reduction in product launch costs compared to those experienced in the second quarter of fiscal 2011 for our Next Generation Posturepedic product, contributed an additional 1.3 percentage point increase in U.S. gross profit margin. We also saw an improvement of 1.0 percentage points in U.S. gross profit margin due to improved pricing and a shift in the mix of our product sales to higher priced Next Generation Stearns & Foster products in the second quarter of fiscal 2012. These improvements were partially offset by the deleveraging of costs on lower unit volume. In local currency, the gross profit margin in Canada was 40.1% as a percentage of net sales, which represents a decrease of 0.5 percentage points. This decrease was primarily driven by the impact of higher raw material costs.

Selling, General, and Administrative. Selling, general, and administrative expenses decreased $0.9 million to $106.5 million for the second quarter of fiscal 2012 compared to $107.4 million for the second quarter of fiscal 2011. As a percentage of net sales, selling, general, and administrative expenses were 34.1% for the second quarter of fiscal 2012 compared with 33.4% for the second quarter of fiscal

Net Sales. Our consolidated net sales for the six months ended May 27, 2012, were $624.3 million, a decrease of $2.5 million, or 0.4%, from the six months ended May 29, 2011. This decrease was driven by lower unit sales in our domestic market partially offset by increases in the international markets. Total U.S. net sales were $480.6 million for the first half of fiscal 2012, a decrease of 2.4% from the first half of fiscal 2011. The U.S. net sales decrease, excluding the effects of third party sales from our component plants, was attributable to a 7.3% decrease in wholesale unit volume partially offset by a 4.7% increase in wholesale average unit selling price. The decrease in unit volume is attributable to lower sales volumes for our Posturepedic and Sealy branded beds. The increase in our average unit selling price was primarily driven by price increases enacted in the latter half of fiscal 2011 and a disproportionate increase in sales of our newly introduced Next Generation Stearns & Foster product line. International net sales increased $9.1 million, or 6.8%, from the first half of fiscal 2011 to $143.8 million. This increase was primarily due to increased sales in Canada coupled with stronger sales performance in our Argentina and Mexico markets. In Canada, local currency sales increases of 8.1% translated into increases of 5.4% in U.S. dollars due to a weaker Canadian dollar. Local currency sales performance in Canada was driven by a 8.8% increase in unit volume, partially offset by a 0.6% decrease in average unit selling price. The increase in unit volume was attributable to strategic

Gross Profit. Our consolidated gross profit for the six months ended May 27, 2012 was $249.4 million, an increase of $5.8 million from the comparable prior year period. As a percentage of net sales, gross profit increased 1.0 percentage points to 39.9%. The increase in percentage of net sales was primarily due to an increase in gross profit margin in our U.S. and international operations. U.S. gross profit margin increased 1.7 percentage points to 39.8% of net sales. The increase in the U.S. gross profit percentage was due primarily to improved pricing and a shift in the mix of our product sales to higher priced Next Generation Stearns & Foster products, which resulted in an improvement in our gross profit percentage by approximately 1.7 percentage points. A reduction in product launch costs compared to those experienced in the second quarter of fiscal 2011 for our Next Generation Posturepedic product contributed an additional 1.2 percentage point improvement in U.S. gross profit margin. Additionally, advances made in the manufacturing processes resulted in a 0.7 percentage point increase in U.S. gross profit margin. These improvements were partially offset by the deleveraging of costs on lower unit volume. The gross profit margin in Canada was 40.7% as a percentage of net sales, which represents a decrease of 0.5 percentage points. This decrease was primarily driven by the impact of the decrease in average unit selling price discussed above.

Selling, General, and Administrative. Selling, general, and administrative expenses decreased $4.6 million to $206.6 million for the first half of fiscal 2012 compared to $211.2 million for the first half of fiscal 2011. As a percentage of net sales, selling, general, and administrative expenses were 33.1% for the first half of fiscal 2012 compared with 33.7% for the first half of fiscal 2011. The primary changes in selling, general, and administrative expenses between the first half of fiscal 2012 and 2011 were as follows:

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