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-- Fourth Quarter Net Sales Grew 8.4% -- -- Fourth Quarter International

Sales Increased 26.1% -- -- Fiscal 2006 Net Sales Improved 7.7% --

TRINITY, N.C., Feb. 20 /PRNewswire-FirstCall/ -- Sealy Corporation (NYSE: ZZ), the largest bedding manufacturer in the world, today announced results for its fourth quarter and full year fiscal 2006.

Net sales for the fiscal quarter ended November 26, 2006 increased 8.4% to $395.3 million from $364.6 million for the comparable period a year earlier on unit volume growth of 4.9% and average unit selling price increase of 3.3%. International net sales increased $22.9 million or 26.1% (18.8% excluding the effects of currency fluctuation) to $110.7 million. Domestic net sales increased 2.8% to $284.6 million as average unit selling price improved 4.4% and unit volume declined 1.6%.

Fourth quarter gross profit was $177.5 million, or 44.9% of sales, versus $159.5 million, or 43.7% of sales, for the comparable period a year earlier. The improvement in gross profit as a percent of sales was driven by improved manufacturing efficiencies including a reduction in the reserve for workers' compensation claims, partially offset by increased floor sample discounts and the strength of Sealy's international business and domestic promotional lines which carry lower gross margins compared to the Company average. The fourth quarter of 2006 gross profit includes a reduction in charges of $5.7 million due to changes in estimates underlying the reserves for workers' compensation claims as a result of a reduction in frequency and severity of historical claims experience. Of the $5.7 million reduction, $1.2 million relates to improved current year performance.

Adjusted EBITDA for the quarter increased to $60.2 million versus $50.3 million for the comparable period a year earlier.

Net income for the fourth quarter was $21.5 million, or $0.22 per diluted share, versus $15.2 million for the comparable period a year ago. Fourth quarter results include incremental pre-tax expenses of $5.9 million related to the launch of Sealy's new products and $0.4 million of incremental expense for non-cash compensation versus the comparable prior year period.

"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 during a year in which we also completed the biggest product transition in the Company's history," said David J. McIlquham, Sealy's Chairman and Chief Executive Officer.

Net sales for the fiscal year ended November 26, 2006 increased 7.7% to $1,582.8 million from $1,469.6 million for the comparable period a year earlier. Gross profit was $707.9 million, or 44.7% of sales, versus $651.6 million, or 44.3% of sales, for the comparable period a year earlier. Adjusted EBITDA(1) improved 7.4% to $250.3 million versus $233.0 million for the comparable period a year earlier. Net income was $74.0 million, versus net income of $68.5 million for the comparable period a year ago. These results include $34.2 million of charges related to the Company's IPO and associated debt extinguishments, $26.7 million of incremental cost related to the launch of Sealy's new products and $2.6 million of incremental expense for non-cash compensation versus the comparable prior year, partially offset by a reduction in charges of $5.7 million due to changes in estimates underlying the reserves for workers' compensation claims.

As of November 26, 2006, Sealy's cash and cash equivalent balance was $45.6 million versus $36.6 million at the beginning of the fiscal year. The Company has reduced total debt net of cash by $149.3 million to $786.9 million since the beginning of the fiscal year. This reduction was attributable to proceeds from our IPO and strong operating cash flow, partially offset by the addition of $26.5 million in financing obligations and $30.9 million in capital expenditures.

Mr. McIlquham continued, "Sealy is well-positioned going into 2007 with the recent management realignment designed to leverage our North American capabilities, the coming on-line of our Pennsylvania latex plant to further enhance our opportunity in the growing specialty segment, and the rollout of products compliant with new flame-retardant standards largely complete. Additionally, we introduced a number of new products in January, particularly innovative Stearns & Foster designs that we anticipate will drive sales in the second half of the year. We are confident that our improving new product development pipeline, an anticipated rebound in industry unit shipments and our commitment to operating improvements will allow us to achieve our annual long term goals."

Conference Call

The Company will host a conference call and audio webcast with investors, analysts and other interested parties today at 5:00 P.M. Eastern time. The live call can be accessed by dialing (800) 811-0667, or for international callers, (913) 981-4901. Participants should register at least 15 minutes prior to the commencement of the call. Additionally, a live audio webcast will be available to interested parties at http://www.sealy.com under the Investor Relations section. Participants should allow at least 15 minutes prior to the commencement of the call to register, download and install necessary audio software.

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, they are not intended to be measures of free cash flow for management's discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies.

About Sealy

Sealy is the largest bedding manufacturer in the world with sales of approximately $1.6 billion in 2006. The company manufactures and markets a broad range of mattresses and foundations under the Sealy(R), Sealy Posturepedic(R), Stearns & Foster(R), and Bassett(R) brands. Sealy has the largest market share and highest consumer awareness of any bedding brand in North America. Domestically, Sealy has 21 plants and sells its products to 2,900 customers with more than 7,000 retail outlets. Sealy is also a leading supplier to the hospitality industry. For more information, please visit http://www.sealy.com.

This document contains forward-looking statements within the meaning of the safe harbor provisions of the Securities Litigation Reform Act of 1995. Terms such as "expect," "believe," "continue," and "grow," as well as similar comments, are forward-looking in nature. Although the Company believes its growth plans are based upon reasonable assumptions, it can give no assurances that such expectations can be attained. Factors that could cause actual results to differ materially from the Company's expectations include: general business and economic conditions, competitive factors, raw materials purchasing, and fluctuations in demand. Please refer to the Company's Securities and Exchange Commission filings for further information.

(1) Please see the attached tables below for a reconciliation of Adjusted EBITDA to net income and cash flow from operations.

SEALY CORPORATION

Consolidated Balance Sheets

(in thousands, except share amounts)

November 26, November 27,

2006 2005

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents $45,620 $36,554

Accounts receivable (net of allowance

for doubtful accounts, discounts and

returns, 2006-$22,580; 2005-$20,409) 193,838 175,414

Inventories 66,126 60,141

Assets held for sale 2,338 1,405

Prepaid expenses and other current

assets 24,710 14,320

Deferred income taxes 12,627 16,555

345,259 304,389

Property, plant and equipment-at

cost:

Land 11,793 11,671

Buildings and improvements 118,798 101,312

Machinery and equipment 233,873 218,898

Construction in progress 32,703 9,226

397,167 341,107

Less accumulated depreciation 178,957 162,313

218,210 178,794

Other assets:

Goodwill 388,204 384,646

Other intangibles-net of accumulated

amortization (2006-$5,591; 2005-$4,755) 13,026 14,962

Debt issuance costs, net, and other

assets 38,033 33,116

439,263 432,724

Total Assets $1,002,732 $915,907

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

Current portion-long term obligations $18,282 $12,927

Accounts payable 118,885 119,558

Accrued expenses:

Customer incentives and advertising 40,578 37,958

Compensation 35,484 44,138

Interest 17,286 18,480

Other 57,669 48,927

288,184 281,988

Long term obligations, net of current

portion 814,236 959,829

Other noncurrent liabilities 42,688 52,303

Deferred income taxes 10,199 12,356

Commitments and contingencies - -

Common stock and options subject to

redemption 20,263 21,654

Stockholders' deficit:

Preferred stock, $0.01 par value;

Authorized 50,000 shares;

Issued, none - -

Common stock, $0.01 par value;

Authorized 200,000 shares;

Issued and outstanding: 2006-90,983;

2005-70,480 (including shares

classified above as subject to

redemption: 2006-424; 2005-263) 904 702

Additional paid-in capital 664,609 365,900

Accumulated deficit (846,144) (781,463)

Accumulated other comprehensive

income 7,793 2,638

(172,838) (412,223)

Total Liabilities and Stockholders'

Deficit $1,002,732 $915,907

SEALY CORPORATION

Consolidated Statements Of Operations

(in thousands)

Year Ended

November 26, November 27, November 28,

2006 2005 2004

(unaudited)

Net sales-Non-affiliates $1,582,843 $1,469,574 $1,306,990

Net sales-Affiliates - - 7,030

Total net sales 1,582,843 1,469,574 1,314,020

Cost and expenses:

Cost of goods sold-Non-affiliates 874,927 817,978 736,074

Cost of goods sold-Affiliates - - 4,035

Total cost of goods sold 874,927 817,978 740,109

Gross profit 707,916 651,596 573,911

Selling, general and administrative

(including provisions for

bad debts $2,705; $3,231 and $3,149,

respectively) 499,614 456,281 430,883

Expenses associated with initial

public offering of common stock 28,510 - -

Recapitalization expense - 133,134

Plant closing and restructuring

charges - 624

Amortization of intangibles 5,707 566 1,208

Royalty income, net of royalty expense (18,855) (13,220) (14,171)

Income from operations 192,940 207,969 22,233

Interest expense 71,961 79,564 72,731

Debt extinguishment and refinancing

expenses 9,899 6,248 -

Other income, net (750) (895) (861)

Income (loss) before income taxes 111,830 123,052 (49,637)

Income tax expense (benefit) 37,576 54,573 (9,570)

Net income (loss) 74,254 68,479 (40,067)

Cumulative effect of the adoption of

FASB Interpretation No. 47, net of

related tax benefit of $191 287

Liquidation preference for common L &

M shares - - 7,841

Net income (loss) $73,967 $68,479 $(47,908)

Earnings (loss) per common

share-Basic:

Income (loss) before cumulative effect

of change in accounting principle $0.89 $0.97 $(0.53)

Cumulative effect of change in

accounting principle $0.00

Liquidation preference for common L&M

shares - - (0.11)

Net earnings (loss) available to

common shareholders-Basic $0.89 $0.97 $(0.64)

Earnings (loss) per common

share-Diluted:

Income (loss) before cumulative effect

of change in accounting principle $0.83 $0.91 $(0.53)

Cumulative effect of change in

accounting principle $0.00

Liquidation preference for common L&M

shares - - (0.11)

Net earnings (loss) available to

common shareholders-Diluted $0.83 $0.91 $(0.64)

Weighted average number of common

shares outstanding:

Basic 83,622 70,376 75,301

Diluted 89,558 75,418 75,301

The following table sets forth a reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA:

Year Ended

November 26, 2006

(in thousands)

Net Income before cumulative effect

of change in accounting principle $74,254

Interest 71,961

Income Taxes 37,576

Depreciation and Amortization 30,185

EBITDA 213,976

Management fees paid to KKR 721

Unusual items:

IPO expenses 28,510

Workers compensation change in estimate (4,489)

Bank refinancing charge and

deferred debt write off 9,899

Other (various) 1,648

Adjusted EBITDA $250,265

SOURCE Sealy Corporation