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- Net Sales Grew 4.3% -

- Domestic Unit Volume Gains of 4.5% -

- International Sales Improved 18.1% -

TRINITY, N.C., April 4 /PRNewswire-FirstCall/ -- Sealy Corporation (NYSE: ZZ), the largest bedding manufacturer in the world, today announced results for its first quarter of fiscal 2007.

Net sales for the fiscal quarter ended February 25, 2007 increased 4.3% to $412.6 million from $395.7 million for the comparable period a year earlier on unit volume growth of 12.2%. Partially offsetting this increase was a 7.1% decrease in average unit selling price (AUSP). International net sales increased $14.7 million or 18.1% to $95.9 million. This translates to a 14.8% increase excluding the effects of currency fluctuation. The increase internationally represents a 33.2% increase in unit volume, partially offset by a decrease in AUSP primarily due to strategic pricing actions in Canada and increased sales of lower priced OEM products in Europe.

Domestic net sales increased $2.1 million to $316.7 million on a 4.5% increase in volume, partially offset by a 3.7% decrease in AUSP. The increase in volume is primarily attributable to the strong growth of promotional and specialty bedding products. The decrease in AUSP is due to the higher volume of promotional bedding sales and strategic pricing actions on selected Stearns & Foster and TrueForm products.

First quarter gross profit was $177.3 million, or 43.0% of sales, versus $176.7 million, or 44.7% of sales, for the comparable period a year earlier. The decline in gross profit as a percentage of sales was driven by a planned increase in sales of lower margin promotional products, strategic pricing actions, the additional product costs required to bring the majority of our products in compliance with the July 2007 flame retardant regulations and the startup costs associated with the Company's new latex facility in Mountain Top, Pennsylvania. These factors were partially offset by continued improvements in manufacturing efficiencies.

Net income for the first quarter increased 7.2% to $24.6 million versus $23.0 million for the comparable period a year ago. Earnings per fully diluted share were $0.26.

"As we anticipated and communicated over the past few quarters, the momentum in domestic volume that has been building continued during the first quarter as unit growth turned positive, due primarily to strength in our promotional and specialty product lines," said David J. McIlquham, Sealy's Chairman and Chief Executive Officer. "We are also pleased with the ongoing superior performance in our international markets as we build demand for our brands around the world. We are enthusiastic about the arrival onto our customers' floors, beginning this quarter, of the innovative products which we introduced in January at the Las Vegas Furniture Market. This, combined with the start-up of our new domestic latex facility, the further integration of the new North American management team, and the expansion of our "lean" manufacturing program, should allow Sealy to continue to grow its market share and cash flow."

As of February 25, 2007, Sealy's cash and cash equivalent balance was $31.8 million versus $13.8 million as of February 26, 2006. The Company's debt net of cash was $803.0 million at February 25, 2007, compared to net debt of $958.2 million at the same time in the prior year.

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) 811-8824, or for international callers, (913) 981-4903. 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.

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 operates 26 plants in North America, and has the largest market share and highest consumer awareness of any bedding brand on the continent. In the United States, Sealy 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.

SEALY CORPORATION

Consolidated Balance Sheets

(in thousands, except share amounts)

(Unaudited - Preliminary results)

February 25, November 26, February 26,

2007 2006 2006

ASSETS

Current assets:

Cash and cash equivalents $31,750 $45,620 $13,760

Accounts receivable, net of

allowances for bad debts, cash

discounts and returns 217,704 193,838 203,977

Inventories 65,334 66,126 66,485

Assets held for sale 2,338 2,338 1,405

Prepaid expenses and other current

assets 22,835 24,710 14,976

Deferred income taxes 12,932 12,627 16,661

352,893 345,259 317,264

Property, plant and equipment - at

cost 411,685 397,167 347,587

Less accumulated depreciation (182,934) (178,957) (167,802)

228,751 218,210 179,785

Other assets:

Goodwill 387,685 388,204 385,487

Other intangibles, net of

accumulated amortization 12,284 13,026 14,889

Debt issuance costs, net,

and other assets 39,316 38,033 32,309

439,285 439,263 432,685

$1,020,929 $1,002,732 $929,734

LIABILITIES AND STOCKHOLDERS'

DEFICIT

Current liabilities:

Current portion - long-term

obligations $22,996 $18,282 $11,446

Accounts payable 129,001 118,885 110,473

Accrued incentives and advertising 36,973 40,578 34,480

Accrued compensation 37,892 35,484 46,168

Accrued interest 11,220 17,286 10,085

Other accrued expenses 54,144 57,669 58,603

292,226 288,184 271,255

Long-term obligations, net of

current portion 811,756 814,236 960,531

Other noncurrent liabilities 42,382 42,688 51,838

Deferred income taxes 10,837 10,199 12,492

Common stock and options subject to

redemption 17,517 20,263 21,478

Stockholders' deficit:

Common stock 909 904 702

Additional paid-in capital 666,815 664,609 366,174

Accumulated deficit (828,366) (846,144) (758,491)

Accumulated other comprehensive

income 6,853 7,793 3,755

(153,789) (172,838) (387,860)

$1,020,929 $1,002,732 $929,734

SEALY CORPORATION

Consolidated Statements of Operations

(in thousands)

(Unaudited - Preliminary results)

Three Months Ended

February February

25, 26,

2007 2006

Net sales $412,567 $395,735

Cost of goods sold 235,293 219,038

Gross profit 177,274 176,697

Selling, general and administrative

expenses 126,913 123,604

Amortization of intangibles 783 122

Royalty income, net of royalty

expense (5,292) (3,689)

Income from operations 54,870 56,660

Interest expense 15,905 18,736

Other income, net (80) (187)

Income before income tax expense 39,045 38,111

Income tax expense 14,411 14,852

Income before cumulative effect of

change in accounting principle 24,634 23,259

Cumulative effect of the adoption of

FASB Interpretation No. 47,

net of related tax benefit of $191 - 287

Net income $24,634 $22,972

Earnings per common share -- Basic

Income before cumulative effect of

change in accounting principle $0.27 $0.33

Cumulative effect of a change in

accounting principle - -

Earnings per common share -- Basic $0.27 $0.33

Earnings per common share -- Diluted

Income before cumulative effect of

change in accounting principle $0.26 $0.30

Cumulative effect of a change in

accounting principle - -

Earnings per common share -- Diluted $0.26 $0.30

Weighted average number of common

shares outstanding:

Basic 91,349 70,482

Diluted 96,585 76,386

SEALY CORPORATION

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited - Preliminary results)

Three Months Ended

February 25, February 26,

2007 2006

Cash flows from operating activities:

Net income $24,634 $22,972

Adjustments to reconcile net income

to net cash provided by (used in)

operating activities:

Depreciation and amortization 7,322 5,700

Deferred income taxes 429 (23)

Non-cash interest expense:

Senior Subordinated PIK Notes - 2,113

Amortization of debt issuance

costs and other 687 235

Stock-based compensation 639 372

Excess tax benefits from share-

based payment arrangements (4,348) -

Loss on sale of assets 161 22

Cumulative effect of accounting change - 287

Other, net (1,031) (717)

Changes in operating assets and liabilities:

Accounts receivable (24,358) (28,563)

Inventories 899 (6,344)

Prepaid expenses and other current assets 1,724 (150)

Accounts payable 9,961 (9,085)

Accrued expenses (12,135) 350

Other liabilities (331) (1,225)

Net cash provided by (used in)

operating activities 4,253 (14,056)

Cash flows from investing activities:

Purchase of property, plant and

equipment (12,913) (5,577)

Proceeds from sale of property,

plant and equipment 77 29

Net cash used in investing activities (12,836) (5,548)

Cash flows from financing activities:

Cash dividends (6,856) -

Borrowings under revolving credit

facilities 8,627 78,841

Repayments under revolving credit

facilities (11,249) (82,136)

Exercise of employee stock options,

including related excess tax benefits 4,592 -

Other (344) (17)

Net cash used in financing activities (5,230) (3,312)

Effect of exchange rate changes on cash (57) 122

Change in cash and cash equivalents (13,870) (22,794)

Cash and cash equivalents:

Beginning of period 45,620 36,554

End of period $31,750 $13,760

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are not recognized terms under GAAP (Generally Accepted Accounting Principles) 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.

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

Three Months Ended

February 25, 2007 February 26, 2006

(in thousands)

Net income $24,634 $22,972

Interest expense 15,905 18,736

Income taxes 14,411 14,852

Depreciation and amortization 7,322 5,700

Cumulative effect of change in

accounting principle - 287

EBITDA 62,272 62,547

Unusual and nonrecurring losses:

Other (various) (a) 1,547 1,359

Adjusted EBITDA $63,819 $63,906

(a) Consists of various immaterial adjustments

Three Months Ended

February 25, 2007 February 26, 2006

(in thousands)

EBITDA $62,272 $62,547

Adjustments to EBITDA to arrive at

cash flow from operations:

Interest expense (15,905) (18,736)

Income taxes (14,411) (14,852)

Non-cash charges against

(credits to) net income (3,463) 2,002

Changes in operating assets &

liabilities (24,240) (45,017)

Cash flow from operations $4,253 (14,056)

SOURCE Sealy Corporation