Mattress Firm Holding Corp, the nation's largest specialty mattress retailer, recently 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.

“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.

For the full fiscal year-to-date:

Net sales increased $595.8 million, or 48.7%, to $1,819.4 million, for the two fiscal quarters (twenty-six weeks) ended August 2, 2016, from $1,223.6 million in the comparable year period, 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 comparable period was 2.1%.

The Company acquired 1,065 stores, opened 144 new and closed 86 stores during the first two fiscal quarters of fiscal 2016, adding 1,123 net store units.

Loss from operations was $145.2 million, for the two fiscal quarters ended August 2, 2016. Excluding $214.6 million of intangible asset impairment charges, 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 $69.4 million for the two fiscal quarters ended August 2, 2016, as compared with $77.6 million for the comparable prior year period. Adjusted operating income margin was 3.8% of net sales as compared with 6.3% in fiscal 2015, and included a 260 basis-point decline in gross margin, a 20 basis-point decrease from sales and marketing expense deleverage, a 10 basis-point decline in franchise fees and royalty income, partially offset by a 40 basis-point improvement in general and administrative 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 $121.4 million for the two fiscal quarters ended August 2, 2016 and GAAP EPS was $(3.27). Excluding $134.0 million, net of income taxes, of intangible asset impairment charges, acquisition-related costs, fixed asset impairment costs, ERP system implementation training costs and severance charges, Adjusted net income was $12.6 million for the two fiscal quarters and Adjusted EPS was $0.34. Please refer to "Reconciliation of Reported GAAP to Adjusted Statements of Operations Data" for a reconciliation of net income and GAAP EPS to Adjusted net income and Adjusted EPS, respectively, and other information.

Balance Sheet

The Company had cash and cash equivalents of $13.6 million on August 2, 2016, the end of the fiscal second quarter. Net cash provided by operating activities was $81.1 million for the two fiscal quarters ended August 2, 2016. As of August 2, 2016, there were $40.0 million in borrowings outstanding under the revolving portion of the Senior Credit Facility (as defined in the Company’s filings with the Securities and Exchange Commission) and approximately $12.3 million in outstanding letters of credit, with additional borrowing capacity of $114.4 million.

(Source: Furniture World Magazine)