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Mattress Firm Announces Second Fiscal Quarter Financial Results



  Mattress Firm Announces Second Fiscal Quarter Financial Results

                        — Net Sales Increased 15.5% —

                           — Opened 35 New Stores —

 — Earnings per Diluted Share of $0.41 on a GAAP Basis, $0.43 on an Adjusted
                                   Basis —

             — Updates Financial Guidance for Fiscal Year 2013 —

Business Wire

HOUSTON -- September 6, 2013

Mattress Firm Holding Corp. (the “Company”) (NASDAQ:MFRM) today announced its
financial results for the second fiscal quarter (13 weeks) ended July 30,
2013. Net sales for the second fiscal quarter increased 15.5% to $302.5
million, reflecting incremental sales from new and acquired stores, offset by
a comparable-store sales decline of 0.3%. The Company reported second fiscal
quarter earnings per diluted share (“EPS”) on a generally accepted accounting
principles (“GAAP”) basis of $0.41, and EPS on a non-GAAP adjusted basis,
excluding acquisition-related and ERP system implementation costs
(“Adjusted”), of $0.43. Diluted EPS on a GAAP basis and Adjusted basis are
reconciled in the table below:

 
Second Fiscal Quarter Reconciliation of GAAP to Adjusted EPS

See “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations
Data” for Notes
 
                               Thirteen Weeks Ended        Twenty-Six Weeks
                                                           Ended
                               July 31,       July         July         July
                               2012           30,          31,          30,
                                              2013         2012         2013
GAAP EPS                       $  0.30        $ 0.41       $ 0.59       $ 0.77
Acquisition-related               0.12          -            0.14         0.01
costs (1)
ERP system
implementation costs              -             0.02         -            0.03
(2)
Adjusted EPS                   $  0.42        $ 0.43       $ 0.73       $ 0.81
 

“Our exciting growth story continued in the second quarter of 2013, as we
added 35 new stores organically, bringing our total company-operated store
count to over 1,100,” stated Steve Stagner, Mattress Firm’s president and
chief executive officer. “We saw revenues increase by 15% over the prior year
to $303 million, which evidences that our growth is outpacing the mattress
industry, which has experienced mid-single digit growth during the comparable
period. The former Mattress Giant stores continue to generate strong sales
growth that is driving operating margin expansion, while sales at our legacy
stores in those acquisition markets have also improved year over year, further
validating the strength of our relative market share strategy. We expect that
the second half of the year will benefit from a return to higher
industry-level advertising media spend relative to recent quarters that we
anticipate will drive improvement in customer traffic and sales trends in our
business.”

Second Quarter Financial Summary

  * Net sales for the second fiscal quarter increased 15.5% to $302.5 million,
    reflecting incremental sales from new and acquired stores, offset by a
    comparable-store sales decline of 0.3%.
  * Opened 35 new stores and closed 10 stores bringing the total number of
    Company-operated stores to 1,121 as of the end of the fiscal quarter.
  * Income from operations was $25.9 million. Excluding $1.0 million of
    acquisition-related costs and ERP system implementation costs, Adjusted
    income from operations was $26.9 million, representing an increase of $3.4
    million, or 14.3%, over Adjusted income from operations for the comparable
    prior year period. 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.
  * Adjusted operating margin decreased 10 basis points to 8.9% of net sales
    as compared to 9.0% in the same quarter of fiscal 2012, and consisted of a
    30 basis-point increase in gross margin, a 40 basis-point improvement in
    sales and marketing expense leverage, a 60 basis-point decline in general
    and administrative expense leverage and an aggregate 20 basis-point
    operating margin decline in other categories.
  * Net income was $14.1 million and GAAP EPS was $0.41. Excluding $0.6
    million, net of income taxes, of acquisition-related and ERP system
    implementation costs, Adjusted net income was $14.7 million and Adjusted
    EPS was $0.43, an increase of 3.7% over Adjusted EPS for the comparable
    prior year period. 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.

Acquisitions

With respect to the acquisitions of former Mattress Giant stores in November
2011 and May 2012, the rebranding of the acquired stores was substantially
complete by the end of fiscal 2012. The per store sales results of those
stores for the months since the date of rebranding and for one year thereafter
are demonstrated by the charts accompanying this release.

Year-to-Date Financial Summary

Net revenues increased $106.7 million, or 22.6%, to $578.5 million, for the
two fiscal quarters (twenty-six weeks) ended July 30, 2013, from $471.8
million in the comparable prior year period, reflecting incremental sales from
new and acquired stores, offset by a comparable-store sales decline of 2.5%.

The Company opened 81 new stores while closing 17 stores during the first half
of fiscal 2013, adding 64 net store units.

Net income was $26.1 million for the two fiscal quarters ended July 30, 2013
and GAAP EPS was $0.77. Excluding acquisition-related and ERP system
implementation costs, adjusted net income was $27.5 million for the two fiscal
quarters and Adjusted EPS was $0.81. See “Reconciliation of Reported (GAAP) to
Adjusted Statements of Operations Data” below for a reconciliation of net
income as reported to adjusted net income.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $6.4 million at the end of the
second fiscal quarter. Net cash provided by operating activities was $24.7
million for the second fiscal quarter. As of July 30, 2013, there was $5.0
million of borrowings outstanding under the revolving portion of the 2012
Senior Credit Facility (as defined in the Company’s filings with the
Securities and Exchange Commission) and approximately $1.4 million in
outstanding letters of credit, with additional borrowing capacity of $93.6
million.

Financial Guidance

The Company is updating its guidance for the fiscal year (52 weeks) ending
January 28, 2014 (“fiscal year 2013”), which was originally issued in March
2013.

 
                                           Prior Guidance       Updated Range
                                           Range
Full Fiscal Year Ending January
28, 2014
Net sales (in billions)                    $1.237 to $1.250     $1.194 to
                                                                $1.207
New stores                                 110 to 120           130 to 140
Net store unit increase                    90 to 95             105 to 110
GAAP EPS                                   $1.81 to $1.89       $1.66 to $1.74
Acquisition-related costs per              $0.01                $0.01
share
ERP system implementation costs            $0.07 to $0.09       $0.07 to $0.09
per share
Adjusted EPS                               $1.90 to $1.98       $1.75 to $1.83
Comparable-store sales growth              low single digit     flat
 

Call Information

A conference call to discuss second fiscal quarter results is scheduled for
today, September 6, 2013, at 8:30 a.m. Eastern Time. The call will be hosted
by Steve Stagner, Chief Executive Officer, and Jim Black, Chief Financial
Officer.

The conference call will be accessible by telephone and the internet. To
access the call, participants from within the U.S. may dial (877) 407-3982,
and participants from outside the U.S. may dial (201) 493-6780. Participants
may also access the call via live webcast by visiting the Company’s investor
relations web site at http://www.mattressfirm.com.

The replay of the call will be available from approximately 11:30 a.m. Eastern
Time on September 6, 2013 through midnight Eastern Time on September 20, 2013.
To access the replay, the domestic dial-in number is (877) 870-5176, the
international dial-in number is (858) 384-5517, and the passcode is 419608.
The archive of the webcast will be available on the Company’s web site for a
limited time.

Net Sales and Store Unit Information

The components of the net sales increase for the thirteen and twenty-six weeks
ended July 30, 2013 as compared to the corresponding prior year period were as
follows (in millions):

 
                                 Increase (Decrease) in Net Sales
                                 Thirteen Weeks       Twenty-Six Weeks
                                 Ended                Ended
                                 July 30, 2013        July 30, 2013
Comparable-store sales           $   (0.7   )         $    (11.5   )
New stores                           33.5                  62.4
Acquired stores                      11.4                  61.7
Closed stores                        (3.7   )              (5.9    )
                                 $   40.5             $    106.7    
 

The composition of net sales by major category of product and services were as
follows (in millions):

 
                       Thirteen Weeks Ended                            Twenty-Six Weeks Ended
                       July        % of        July        % of        July        % of        July        % of
                       31,                     30,                     31,                     30,
                       2012        Total       2013        Total       2012        Total       2013        Total
Conventional           $ 112.4     42.9  %     $ 148.5     49.1  %     $ 197.8     41.9  %     $ 270.1     46.7  %
mattresses
Specialty                127.6     48.7  %       129.2     42.7  %       233.9     49.6  %       259.0     44.8  %
mattresses
Furniture
and                      17.2      6.6   %       19.1      6.3   %       31.3      6.6   %       38.3      6.6   %
accessories
Total
product                  257.2     98.2  %       296.8     98.1  %       463.0     98.1  %       567.4     98.1  %
sales
Delivery
service                  4.8       1.8   %       5.7       1.9   %       8.8       1.9   %       11.1      1.9   %
revenues
Total net              $ 262.0     100.0 %     $ 302.5     100.0 %     $ 471.8     100.0 %     $ 578.5     100.0 %
sales
 

The activity with respect to the number of Company-operated store units was as
follows:

 
                                         Thirteen Weeks       Twenty-Six Weeks
                                         Ended                Ended
                                         July 30, 2013        July 30, 2013
Store units, beginning of                1,096                1,057
period
New stores                               35                   81
Closed stores                            (10       )          (17        )
Store units, end of period               1,121                1,121       
 

Forward-Looking Statements

Certain statements contained in this press release are not based on historical
fact and are “forward-looking statements” within the meaning of applicable
federal securities laws and regulations. In many cases, you can identify
forward-looking statements by terminology such as “may,” “would,” “should,”
“could,” “forecast,” “feel,” “project,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “predict,” “intend,” “potential,” “continue” or the
negative of these terms or other comparable terminology; however, not all
forward-looking statements contain these identifying words. The
forward-looking statements contained in this press release, such as those
relating to our net sales, GAAP and Adjusted EPS and net store unit change for
fiscal year 2013, are subject to various risks and uncertainties, including
but not limited to downturns in the economy; reduction in discretionary
spending by consumers; our ability to execute our key business strategies and
advance our market-level profitability; our ability to profitably open and
operate new stores and capture additional market share; our relationship with
our primary mattress suppliers; our dependence on a few key employees; the
possible impairment of our goodwill or other acquired intangible assets; the
effect of our planned growth and the integration of our acquisitions on our
business infrastructure; the impact of seasonality on our financial results
and comparable-store sales; our ability to raise adequate capital to support
our expansion strategy; our success in pursuing and completing strategic
acquisitions; the effectiveness and efficiency of our advertising
expenditures; our success in keeping warranty claims and comfort exchange
return rates within acceptable levels; our ability to deliver our products in
a timely manner; our status as a holding company with no business operations;
our ability to anticipate consumer trends; risks related to our controlling
stockholder, J.W. Childs Associates, L.P.; heightened competition; changes in
applicable regulations; risks related to our franchises, including our lack of
control over their operation and our liabilities if they default on note or
lease obligations; risks related to our stock and other factors set forth
under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year
ended January 29, 2013 filed with the Securities and Exchange Commission
(“SEC”) on April 1, 2013 and our other SEC filings. Forward-looking statements
relate to future events or our future financial performance and reflect
management’s expectations or beliefs concerning future events as of the date
of this press release. Actual results of operations may differ materially from
those set forth in any forward-looking statements, and the inclusion of a
projection or forward-looking statement in this press release should not be
regarded as a representation by us that our plans or objectives will be
achieved. We do not undertake to publicly update or revise any of these
forward-looking statements, whether as a result of new information, future
events or otherwise.

Non-GAAP Financial Measures

Adjusted EBITDA is defined as net income before income tax expense, interest
income, interest expense, depreciation and amortization (“EBITDA”), without
giving effect to non-cash goodwill and intangible asset impairment charges,
gains or losses on store closings and impairment of store assets, gains or
losses related to the early extinguishment of debt, financial sponsor fees and
expenses, non-cash charges related to stock-based awards and other items that
are excluded by management in reviewing the results of operations. We have
presented Adjusted EBITDA because we believe that the exclusion of these items
is appropriate to provide additional information to investors about our
ongoing operating performance excluding certain non-cash and other items and
to provide additional information with respect to our ability to comply with
various covenants in documents governing our indebtedness and as a means to
evaluate our period-to-period results. In evaluating Adjusted EBITDA, you
should be aware that in the future we may incur expenses that are the same as
or similar to some of the adjustments in this presentation. Our presentation
of Adjusted EBITDA should not be construed to imply that our future results
will be unaffected by any such adjustments. We have provided this information
to analysts, investors and other third parties to enable them to perform more
meaningful comparisons of past, present and future operating results and as a
means to evaluate the results of our ongoing operations. Management also uses
Adjusted EBITDA to determine executive incentive compensation payment levels.
In addition, our compliance with certain covenants under the credit agreement
between our indirect wholly owned subsidiary, Mattress Holding Corp., certain
lenders, and UBS Securities LLC, as sole arranger, bookrunner, and lender, are
calculated based on similar measures and differ from Adjusted EBITDA primarily
by the inclusion of pro forma results for acquired businesses in those similar
measures. Other companies in our industry may calculate Adjusted EBITDA
differently than we do. Adjusted EBITDA is not a measure of performance under
U.S. GAAP and should not be considered as a substitute for net income prepared
in accordance with U.S. GAAP. Adjusted EBITDA has significant limitations as
an analytical tool, and you should not consider it in isolation or as a
substitute for analysis of our results as reported under U.S. GAAP.

The following table contains a reconciliation of our net income determined in
accordance with U.S. GAAP to EBITDA and Adjusted EBITDA for the periods
indicated (in thousands):

 
                              Thirteen Weeks Ended          Twenty-Six Weeks Ended
                              July 31,       July 30,       July 31,       July 30,
                              2012           2013           2012           2013
Net income                    $ 10,085       $ 14,123       $ 19,821       $ 26,132
Income tax expense              5,326          8,965          11,488         16,639
Interest expense,               2,214          2,795          4,288          5,642
net
Depreciation and                5,471          7,231          10,175         13,441
amortization
Intangible assets
and other                       607            612            1,187          1,153
amortization
EBITDA                          23,703         33,726         46,959         63,007
Loss on store
closings and                    54             483            71             744
impairment of store
assets
Financial sponsor               51             12             51             24
fees and expenses
Stock-based                     493            967            1,002          1,854
compensation
Vendor new store                250            96             633            983
funds (a)
Acquisition-related             5,893          124            7,049          450
costs (b)
Other (c)                       (856   )       595            (764   )       1,164
Adjusted EBITDA               $ 29,588       $ 36,003       $ 55,001       $ 68,226
 

 
        We receive cash payments from certain vendors for each new incremental
        store that we open (“new store funds”). New store funds are initially
        recorded in other noncurrent liabilities when received and are then
        amortized as a reduction of cost of sales over 36 months in our
(a)     financial statements. Historically, we have considered new store funds
        as a component of Adjusted EBITDA when received since new store funds
        are included in cash provided from operations. The adjustment includes
        the amount of new store funds received during the period presented and
        eliminates the non-cash reduction in cost of sales included in our
        results of operations.
         
        Reflects both non-cash effects included in net income related to
        acquisition accounting adjustments made to inventories and other
(b)     acquisition-related cash costs included in net income, such as direct
        acquisition costs and costs related to integration of acquired
        businesses.
         
        Consists of various items that management excludes in reviewing the
(c)     results of operations, including $0.6 million and $1.2 million of ERP
        system implementation costs incurred during the thirteen and
        twenty-six weeks ended July 30, 2013, respectively.
 

Adjusted EPS and the other “Adjusted” data provided in this press release are
also considered non-GAAP financial measures. We report our financial results
in accordance with GAAP; however, management believes evaluating our ongoing
operating results may be enhanced if investors have additional non-GAAP basis
financial measures to facilitate year-over-year comparisons. Management
reviews non-GAAP financial measures to assess ongoing operations and considers
them to be effective indicators, for both management and investors, of our
financial performance over time. Our management does not advocate that
investors consider such non-GAAP financial measures in isolation from, or as a
substitute for, financial information prepared in accordance with GAAP. For
more information, please refer to “Reconciliation of Reported (GAAP) to
Adjusted Statements of Operations Data” below.

 
MATTRESS FIRM HOLDING CORP.

Consolidated Balance Sheets

(In thousands, except share amounts)

(unaudited)
 
                                                 January 29,     July 30,
                                                 2013            2013
Assets
Current assets:
Cash and cash equivalents                        $ 14,556        $   6,370
Accounts receivable, net                           26,246            24,911
Inventories                                        63,228            77,943
Deferred income tax asset                          3,710             3,663
Prepaid expenses and other current                 18,855            20,139   
assets
Total current assets                               126,595           133,026
Property and equipment, net                        144,612           159,376
Intangible assets, net                             82,479            85,678
Goodwill                                           358,978           360,391
Debt issue costs and other, net                    12,015            11,924   
Total assets                                     $ 724,679       $   750,395  
                                                                  
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities of          $ 33,930        $   29,567
long-term debt
Accounts payable                                   64,642            68,494
Accrued liabilities                                41,106            41,925
Customer deposits                                  8,012             11,311   
Total current liabilities                          147,690           151,297
Long-term debt, net of current                     219,069           203,095
maturities
Deferred income tax liability                      26,800            28,323
Other noncurrent liabilities                       63,624            70,697   
Total liabilities                                  457,183           453,412  
                                                                  
Commitments and contingencies
                                                                  
Stockholders' equity:
Common stock, $0.01 par value;
120,000,000 shares authorized;
33,795,630 and 33,865,752 shares issued
and outstanding at
January 29, 2013 and July 30, 2013,                338               339
respectively
Additional paid-in capital                         365,083           368,437
Accumulated deficit                                (97,925 )         (71,793 )
Total stockholders' equity                         267,496           296,983  
Total liabilities and stockholders'              $ 724,679       $   750,395  
equity
 

 
MATTRESS FIRM HOLDING CORP.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(unaudited)
 
                         Thirteen Weeks Ended                                      Twenty-Six Weeks Ended
                         July 31,         % of        July 30,         % of        July 31,         % of        July 30,         % of
                         2012             Sales       2013             Sales       2012             Sales       2013             Sales
Net sales                $ 262,018        100.0 %     $ 302,541        100.0 %     $ 471,832        100.0 %     $ 578,498        100.0 %
Cost of sales              159,854        61.0  %       182,096        60.2  %       287,126        60.9  %       353,611        61.1  %
Gross profit
from retail                102,164        39.0  %       120,445        39.8  %       184,706        39.1  %       224,887        38.9  %
operations
Franchise fees
and royalty                1,327          0.5   %       1,438          0.5   %       2,532          0.5   %       2,687          0.4   %
income
                           103,491        39.5  %       121,883        40.3  %       187,238        39.6  %       227,574        39.3  %
Operating
expenses:
Sales and
marketing                  66,564         25.4  %       75,768         25.0  %       115,692        24.5  %       139,499        24.1  %
expenses
General and
administrative             19,248         7.3   %       19,749         6.5   %       35,878         7.6   %       38,918         6.7   %
expenses
Loss on store
closings and               54             0.0   %       483            0.2   %       71             0.0   %       744            0.1   %
impairment of
store assets
Total operating            85,866         32.8  %       96,000         31.7  %       151,641        32.1  %       179,161        30.9  %
expenses
Income from                17,625         6.7   %       25,883         8.6   %       35,597         7.5   %       48,413         8.4   %
operations
Other expense:
Interest                   2,214          0.8   %       2,795          1.0   %       4,288          0.9   %       5,642          1.0   %
expense, net
Income before              15,411         5.9   %       23,088         7.6   %       31,309         6.6   %       42,771         7.4   %
income taxes
Income tax                 5,326          2.1   %       8,965          2.9   %       11,488         2.4   %       16,639         2.9   %
expense
Net income               $ 10,085         3.8   %     $ 14,123         4.7   %     $ 19,821         4.2   %     $ 26,132         4.5   %
                                                                                                                                  
Basic net income         $ 0.30                       $ 0.42                       $ 0.59                       $ 0.77
per common share
Diluted net
income per               $ 0.30                       $ 0.41                       $ 0.59                       $ 0.77
common share
                                                                                                                                  
Reconciliation
of
weighted-average
shares
outstanding:
Basic weighted
average shares             33,768,828                   33,853,733                   33,768,828                   33,832,928
outstanding
Effect of
dilutive
securities:
Stock options              70,588                       248,451                      97,350                       206,826
Restricted                 1,293                        47,456                       980                          36,813
shares
Diluted weighted
average shares             33,840,709                   34,149,640                   33,867,158                   34,076,567
outstanding
 

 
MATTRESS FIRM HOLDING CORP.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)
 
                                                   Twenty-Six Weeks Ended
                                                   July 31,        July 30,
Cash flows from operating activities:              2012            2013
Net income                                         $ 19,821        $ 26,132
Adjustments to reconcile net income to
cash flows
provided by operating activities:
Depreciation and amortization                        10,175          13,441
Loan fee and other amortization                      1,217           1,050
Deferred income tax expense                          4,261           1,842
Stock-based compensation                             1,002           1,854
Loss on store closings and impairment of             71              744
store assets
Effects of changes in operating assets and
liabilities, excluding business
acquisitions:
Accounts receivable                                  (3,116  )       1,337
Inventories                                          (14,672 )       (14,699 )
Prepaid expenses and other current assets            (1,354  )       (1,268  )
Other assets                                         391             (2,074  )
Accounts payable                                     1,763           2,130
Accrued liabilities                                  7,913           819
Customer deposits                                    850             3,181
Other noncurrent liabilities                         1,774           6,175    
Net cash provided by operating activities            30,096          40,664   
Cash flows from investing activities:
Purchases of property and equipment                  (31,667 )       (27,886 )
Business acquisitions, net of cash                   (43,984 )       (2,042  )
acquired
Net cash used in investing activities                (75,651 )       (29,928 )
Cash flows from financing activities:
Proceeds from issuance of debt                       15,000          25,000
Principal payments of debt                           (11,203 )       (45,424 )
Proceeds from exercise of common stock               -               1,272
options
Excess tax benefits associated with                  -               230      
stock-based awards
Net cash provided by (used) in financing             3,797           (18,922 )
activities
Net decrease in cash and cash equivalents            (41,758 )       (8,186  )
Cash and cash equivalents, beginning of              47,946          14,556   
period
Cash and cash equivalents, end of period           $ 6,188         $ 6,370    
                                                                              

 
MATTRESS FIRM HOLDING CORP.

Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data

(In thousands, except share and per share amounts)
 
                            Thirteen Weeks Ended
                            July 31, 2012                                                           July 30, 2013
                            Income         Income                        Diluted                    Income         Income                        Diluted       
                            From           Before In-     Net            Weighted       Diluted     From           Before In-     Net            Weighted       Diluted
                            Operations     come Taxes     Income         Shares         EPS         Operations     come Taxes     Income         Shares         EPS
As Reported                 $ 17,625       $ 15,411       $ 10,085       33,840,709     $  0.30     $ 25,883       $ 23,088       $ 14,123       34,149,640     $  0.41
% of sales                    6.7    %       5.9    %       3.8    %                                  8.6    %       7.6    %       4.7    %
Acquisition-related           5,893          5,893          4,130                          0.12       124            124            75                             0.00
costs (1)
ERP system
implementation                -              -              -                              -          894            894            547                            0.02
costs (2)
Total adjustments             5,893          5,893          4,130        -                 0.12       1,018          1,018          622          -                 0.02
As Adjusted                 $ 23,518       $ 21,304       $ 14,215       33,840,709     $  0.42     $ 26,901       $ 24,106       $ 14,745       34,149,640     $  0.43
% of sales                    9.0    %       8.1    %       5.4    %                                  8.9    %       8.0    %       4.9    %
                                                                                                                                                                 
                            Twenty-Six Weeks Ended
                            July 31, 2012                                                           July 30, 2013
                            Income         Income                        Diluted                    Income         Income                        Diluted
                            From           Before In-     Net            Weighted       Diluted     From           Before In-     Net            Weighted       Diluted
                            Operations     come Taxes     Income         Shares         EPS         Operations     come Taxes     Income         Shares         EPS
As Reported                 $ 35,597       $ 31,309       $ 19,821       33,867,158     $  0.59     $ 48,413       $ 42,771       $ 26,132       34,076,567     $  0.77
% of sales                    7.5    %       6.6    %       4.2    %                                  8.4    %       7.4    %       4.5    %
Acquisition-related           7,049          7,049          4,829                          0.14       450            450            276                            0.01
costs (1)
ERP system
implementation                -              -              -                              -          1,845          1,845          1,131                          0.03
costs (2)
Total adjustments             7,049          7,049          4,829        -                 0.14       2,295          2,295          1,407        -                 0.04
As Adjusted                 $ 42,646       $ 38,358       $ 24,650       33,867,158     $  0.73     $ 50,708       $ 45,066       $ 27,539       34,076,567     $  0.81
% of sales                    9.0    %       8.1    %       5.2    %                                  8.8    %       7.8    %       4.8    %
 

(1) On May 2, 2012, we acquired all of the equity interests of MGHC Holding
Corporation (“Mattress Giant”), including 181 mattress specialty retail
stores. On September 25, 2012, we acquired the leasehold interests, store
assets, distribution center assets and related inventories, and assumption of
certain liabilities of Mattress XPress, Inc. and Mattress XPress of
Georgia, Inc. (collectively, “Mattress X-Press”), including 34 mattress
specialty retail stores. On December 11, 2012, we acquired the assets and
operations of Factory Mattress & Water Bed Outlet of Charlotte, Inc.
(“Mattress Source”), including 27 mattress specialty retail stores. On June
14, 2013, we acquired the assets and operations of Olejo, Inc., an online
retailer primarily focused on mattresses and bedding-related products.
Acquisition-related costs, consisting of direct transaction costs and
integration costs are included in the results of operations as incurred.
During the thirteen weeks ended July 31, 2012 and July 30, 2013, we incurred
approximately $5.9 million and $0.1 million of acquisition-related costs,
respectively. During the twenty-six weeks ended July 31, 2012 and July 30,
2013, we incurred approximately $7.1 million and $0.5 million of
acquisition-related costs, respectively.

(2) Reflects implementation costs included in the results of operations as
incurred, consisting primarily of training-related costs in connection with
the roll-out of the Microsoft Dynamics AX for Retail Enterprise Resource
Planning system (“ERP system”). During the thirteen and twenty-six weeks ended
July 30, 2013, we incurred approximately $0.9 million and $1.8 million of ERP
system implementation costs, respectively.

Our “As Adjusted” data is considered a non-U.S. GAAP financial measure and is
not in accordance with, or preferable to, “As Reported,” or GAAP financial
data. However, we are providing this information as we believe it facilitates
year-over-year comparisons for investors and financial analysts.

About Mattress Firm

Houston-based Mattress Firm is a high growth specialty retailer, recognized as
the nation's leading bedding specialty retailer, offering a broad selection of
both traditional and specialty mattresses, bedding accessories and related
products from leading manufacturers. With more than 1,200 company-operated and
franchisee stores across 31 states, Mattress Firm has the largest geographic
footprint in the United States among multi-brand mattress specialty retailers.
Mattress Firm offers customers comfortable store environments, guarantees on
price, comfort and service, and highly-trained sales professionals. More
information is available at http://www.mattressfirm.com. Mattress Firm’s
website is not part of this press release.

Photos/Multimedia Gallery Available:
http://www.businesswire.com/multimedia/home/20130906005131/en/

Multimedia
Available:http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50703818&lang=en

Contact:

Investor Relations:
Brad Cohen,  713-343-3652
ir@mattressfirm.com
or
Media:
Sari Martin, 203-682-8345
mattressfirm@icrinc.com
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