It looks like relatively pleasant dreams at Sealy (NYSE: ZZ ) , following the company's report Tuesday of a firming of fourth-quarter results. It also appears that much of the strengthening at the company resulted from improved international volumes during the quarter and the 2006 fiscal year, while domestic activity softened slightly.
For the quarter, net income grew to $21.5 million, or $0.22 per diluted share, from $15.2 million in the prior year, when Sealy was still private. The apparent consensus among the approximately 10 analysts following the company was for the per-share figure to come in closer to $0.19.
Net sales for the quarter, which ended Nov. 26, 2006, were up 8.4% to $395.3 million, from $364.6 million in the comparable prior-year quarter. Of the increase, the company said that 4.9% was attributable to volume growth, while the remaining 3.3% reflected increases in pricing. The company's international sales were significantly stronger, coming in at $110.7 million for the quarter, or up 26.1% year over year. Excluding the effects of currency fluctuations, however, the increase was 18.8%. On the domestic side, net sales were up 2.8% to $284.6 million with the unit selling price increasing 4.4% and unit volumes dropping 1.6%.
Sealy's gross margin improved in the quarter to 44.9% of sales, versus 43.7% a year earlier. The improvement was driven by manufacturing efficiencies that included a lowering of the reserve for workers' compensation claims, offset somewhat by floor sample discounts and the strength of lower-margin promotional lines.
In announcing the results, Sealy's chairman and CEO David J. McIlquham said, "I am pleased with our achievements in 2006, including over 20% growth in our international markets, near doubling of our specialty business, an improving trend in domestic unit shipments, and ongoing strengthening in promotional mattresses, a segment where we were historically underrepresented. We accomplished these in light of a challenging industry and competitive environment ..."
The quarterly release of results for Sealy, which went public last spring, followed solid quarters at rivals Tempur-Pedic (NYSE: TPX ) , which released strong results late last month, and Select Comfort (Nasdaq: SCSS ) , which also posted earnings strength in its early February release.
I must admit to being intrigued by the relative performances of the three key participants in the mattress industry, where the players clearly don't travel in a pack. Sealy, for instance, has seen its stock remain essentially unchanged since its early 2006 IPO, while Select Comfort's shares have declined about 15% over the past year -- the same period in which Tempur-Pedic's shares have more than doubled in value.
But looking at Sealy in particular, its shareholders' deficit, and more than $800 million in long-term debt lead me to recommend that Fools sleep on any thoughts of acquiring the company's shares at this time.
For related Foolishness:
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments. The Motley Fool has a full disclosure policy.
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