Bedding products maker Sealy Corp. (ZZ), Wednesday reported a swing to profit in the fourth quarter, reflecting an increase in U.S. wholesale bedding sales as well as lower sales cost, corporate expenses and impairment charges. Both earnings and revenue came in ahead of Street estimates.
The Trinity, North Carolina-based company's net income for the fourth quarter was $2.57 million or $0.02 per share, compared to a loss of $41.42 million or $0.45 per share in the same quarter of the previous year.
On average, eight analysts polled by Thomson Reuters expected the company to report earnings of $0.01 per share for the quarter. Analysts' estimates typically exclude special items.
Results for the year ago quarter included a non-cash charge of $27.48 million related to the impairment of goodwill at the company's European and Puerto Rican reporting units.
Net sales for the quarter increased 1.9% to $332.06 million from $325.76 million a year ago due mainly to a 7.3% growth in U.S. wholesale bedding sales. Analysts expected revenues of $309.41 million for the quarter.
Total U.S. net sales increased 6.1% to $233.0 million from last year. Wholesale domestic net sales, which exclude third party sales from Sealy's component plants, grew 7.3% to $227.7 million, compared to the fourth quarter of 2008. Unit volume increased 7.9%, while wholesale average unit selling price decreased 0.6% on a year-over-year basis.
International net sales decreased 6.6% to $99.1 million from the fourth quarter of 2008. Excluding the effects of currency fluctuation, International net sales declined 8.8% primarily due to soft sales in the Canadian business unit, which experienced a challenging retail environment and reduced promotional activity.
Larry Rogers, Sealy's president and chief executive officer, said, "Our successful roll-out of the new Stearns & Foster line reinforced our commitment to developing innovative products and was an important driver in our profitable market share gains and in strengthening our partnerships with our retailers and suppliers."
"Our relentless focus on permanently reducing our cost structure has aligned our operations with current market conditions and our increased cash flow has provided greater financial flexibility in making further investments in the growth and efficiency of our business," Rogers added.
Income from operations for the quarter was $19.63 million, compared to a loss from operations of $23.94 million the similar period last year.
Costs of goods sold declined to $200.93 million from $207.90 million last year. Gross profit was $131.13 million, compared to $117.85 million a year ago.
Gross margin for the quarter increased 331 basis points to 39.5% from the prior year quarter, driven by a 371 basis point gain in the company's U.S. market. U.S. gross profit margin increased 371 basis points to 41.5%.
Selling, general and administrative expenses declined to $113.89 million from $117.03 million last year. Goodwill impairment loss for the quarter were $1.19 million, down from $27.48 million in the year-ago period.
Loss before tax for the quarter was $2.85 million, compared to $44.56 million in the previous year. Income tax benefit for the quarter increased to $5.43 million from $3.14 million in the same quarter of the previous year.
Weighted average number of common shares outstanding at the end of the quarter increased significantly to 278.4 million from 91.8 million last year.
For the fiscal 2009, net income was $13.48 million or $0.10 per share, compared to a loss of $3.80 million or $0.04 per share last year. Net sales for the year declined to $1.29 billion from $1.50 billion in the previous year.
Analysts expected the company to report earnings of $0.16 per share, on revenues of $1.27 billion for the fiscal 2009.
ZZ closed Wednesday's regular trading at $3.83, up 0.06 or 1.59%, on a volume of 2.83 million shares on the NYSE. In after hours, the stock further gained 0.08 or 2.09%, trading at $3.91.
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