Simmons Co. - Specimen Stock Certificate

Specimen Stock printed by American Bank Note Company.

Key Dates of the Simmons Company:

1870: Zalmon Simmons operates Simmons Manufacturing, making various products.

1915: Company incorporates as Simmons Co.

1919: Headquarters are moved to New York City.

1926: Company debuts Beautyrest mattress.

1940: Hide-A-Bed sofa is introduced.

1958: Simmons begins selling queen and king-sized mattresses.

1975: Company relocates to Atlanta.

1979: Simmons is sold to Gulf & Western.

1985: Gulf & Western sells company to Wickes Co.

1986: Wesray Capital engineers first leveraged buyout of Simmons.

1989: Wesray group sells firm back to its employees.

1991: Merrill Lynch Capital Partners acquires most of company for $32 million.

1993: New chairman and chief executive is named; market share begins to rise.

2000: Charles Eitel becomes chairman and CEO.

Company History:

Simmons Company is one of the leading U.S. mattress manufacturers, selling one of the best-known brands of bedding, Beautyrest. The company operates 18 manufacturing facilities in the United States, licenses its name to foreign makers, and sells its products in over 100 countries across the globe. Simmons makes mattresses, box springs, bedding frames, and other sleep accessories. The company was responsible for popularizing several major innovations in bedding, including the innerspring mattress and the queen and king size mattress. A family business until the late 1970s, the company is now majority owned by a New York-based investment firm, Fenway Partners. A remaining percentage of the company is owned by Investcorp, a Bahrain-based investment firm which once owned 85 percent of the company, and by Simmons employees.

Simmons Company began as one of many projects of Wisconsin businessman Zalmon Simmons. Simmons was president of the Rock Island Railroad and of the Northwest Telegraph Company, and at one point was the mayor of Kenosha, Wisconsin. He entered the bedding industry circuitously in 1870, after purchasing a cheesebox factory that year. This became the Simmons Manufacturing Company. Zalmon Simmons was not interested in cheeseboxes; rather, he hoped to use the factory's equipment to manufacture a wooden telegraph insulator he had designed himself. In the meantime, he also owned a Kenosha general store, and he took an unusual item in payment one day from a customer without cash money. This gentleman sold Simmons a patent for a woven wire bedspring. This unknown inventor was not the first person to patent a bedspring. At least one earlier patent was held by a New York inventor. But the technology was expensive, and mattresses in the 1870s were by and large stuffed with horsehair or cotton. Simmons went to work on the bedspring idea, and managed to bring down the cost of manufacturing each spring to around 80 cents. Nevertheless, the idea seemed before its time. The Simmons Company's most successful product was instead a fine brass bed. The company continued to make beds and ship them all around the world throughout the tenure of Zalmon Simmons.

Simmons's son, Zalmon Simmons, Jr., took over the company in 1911. The company incorporated as Simmons Co. in 1915. The younger Simmons became known as "The Chief" throughout his company. He was a legendary gambler, said to have bet an automobile a hole during a game of golf. He also seemed to have a flair for showmanship and advertising, and he brought his company to national prominence within a few short years. He did this by making the innerspring mattress something middle-class consumers could afford. Though Simmons Co. had held a mattress spring patent since the 1870s, it had turned to bed frames and let the idea languish. In 1900 a Canadian inventor patented a mattress with springs held within individual cloth pockets. His "Marshall ventilated mattress" was made by hand, and sold to luxury hotels. The unlucky Titanic was fitted with Marshall ventilated mattresses, as were other famous liners including the Lusitania and the Mauritania. It was Zalmon Simmons, Jr., who made the innerspring mattress a widely available item.

Simmons moved its company headquarters to New York in 1919, ready to make itself a national name. The company acquired a string of mattress makers at this time. It bought a firm in Atlanta, another in San Francisco, one in Montreal, and the Newark Spring Mattress Company in Newark, New Jersey. Despite the geographic spread of Simmons's new mattress firms, none of these made a mattress that Zalmon Simmons considered worthy of being promoted as a nationwide brand. The mattresses were still made by hand, often stuffed with the cuttings left over from tailor's shops and other cheap material. Simmons drafted one of the machinists from his original Kenosha factory to study the feasibility of making a spring mattress cheaply by machine. The machinist worked for three years, and finally revealed something similar to the Marshall ventilated mattress, with springs held inside individual cloth pockets. The equipment to make it was called the Beautyrest Pocket Machine, and the resulting mattress was the Beautyrest.

Simmons Co. listed its stock on the New York Stock Exchange in 1924. Two years later, the Beautyrest mattress debuted in a national advertising campaign. Simmons set a standard retail price for its new product, $39.50. This was nearly twice what consumers were used to paying for a mattress, but Simmons gambled that the public would soon find the Beautyrest worth it. Simmons recruited a host of luminaries to declare the value of a good night's sleep. Henry Ford, George Bernard Shaw, Thomas Edison, and many others, appeared in full-page Beautyrest ads. In its first year, the Beautyrest mattress brought in $3 million. By 1929, the company had sales of $9 million. The company was soaring, and made acquisitions in the furniture and textile industries that year.

Zalmon Simmons, Jr., gave way the presidency of the company to his son, Grant Simmons, Sr., in 1929. Simmons's stock had been flying high, at close to $200 at the height of 1929. By 1932, it was almost worthless, at less than three cents a share. Grant Simmons, Sr., nursed the company through the bad years by borrowing money and by selling off the furniture companies his father had recently acquired. Simmons Co. became profitable again by 1935, and then entered a period of steadily growing sales. Simmons made great use of advertisement, often featuring a beautiful model or Hollywood star resting on a Beautyrest. The company funded sleep research in the 1930s, which tracked for the first time how the body actually moved in sleep. These studies continued after World War II at the Simmons-supported Sleep Research Center. Simmons also resorted to stunts to show how well-made its mattresses were. It devised a machine to hammer its products, and compared these to its competitors. The company took the Beautyrest to the circus and photographed an elephant standing on it. Even the elephant's bulk could not break the Beautyrest spring. The company continued to recruit famous people to speak on its behalf. Eleanor Roosevelt furnished her bedrooms with Beautyrest mattresses, and Simmons featured her in a full-page ad declaiming her satisfaction.

Simmons also came out with new products in the postwar era. It debuted the Hide-A-Bed sofa in 1940, the famous sofa with a mattress tucked inside. Grant Simmons, Sr., retired in 1957, and his son Grant Simmons, Jr., took over the company. In 1958 Simmons brought out another landmark in mattress history, the Beautyrest Supersize. The Supersize was the first queen- or king-size mattress widely distributed in the United States. By this time, the company was a national leader in bedding products, well-known and profitable. Company documents show the proverbial arrow on the sales chart climbing up and up from 1930 to 1970. Simmons had a profit of over $8 million in 1968, and very little debt.

The company diversified during this time period, too, particularly in the 1960s. By the late 1960s, Simmons had subsidiaries in a variety of businesses. A company that it bought in 1962, Thonet Industries, specialized in making wood furniture for public use. Simmons also ran a division that specialized in hospital furniture, and another that made patient handling equipment. Simmons's Juvenile Products Division made children's wooden furniture, including cribs. Simmons Co. also owned two high-fashion furniture importers and distributors. In the textile industry, Simmons owned Katzenbach and Warren, a high-end wallpaper and fabric wall covering manufacturer, and Greeff Fabrics, a manufacturer of fashionable upholstery and drapery fabrics. By 1970, Simmons had also diversified into the casket industry, owning one casket manufacturer and one manufacturer of metal casket linings. By 1970 Simmons had also diversified abroad, running foreign subsidiaries to make bedding in Canada, Mexico, Venezuela, Argentina, England, France, and elsewhere.

The company had grown rapidly in the 1960s, and by 1970 it had become a multinational conglomerate in the mid-ranks of the Fortune 500. Much of the firm's diversification had been orchestrated by Grant Simmons, Jr., great-grandson of founder Zalmon. Chairman Simmons became unhappy with the decentralization of the company, which now had dozens of manufacturing plants all across North America. He implemented a management restructuring, which coincided with moving the company headquarters out of New York to Atlanta, Georgia. Some managers were let go or retired early, and the company got a new president, Robert Tyler. The move and management change took three years to complete, but by late 1975, Simmons had relocated to its new wooded headquarters. Grant Simmons explained to Fortune magazine (May 1976) how the move had energized the company and made executives more productive. Yet a look at the balance sheet showed something different. Earnings began falling in 1973, falling off 50 percent between that year and 1977. Sales for 1977 were just over $468 million, showing almost no increase over 1973. Perhaps most ominous, the company lost market share. It had been the number one bedding maker in 1974, with a market share of 21 percent. Its next nearest competitor, Sealy, had only an 11 percent share. But by 1978, Sealy had pulled ahead. Simmons's bedding operations began losing money in 1976, and its only profitable units were its international divisions and non-bedding subsidiaries.

Chairman Simmons responded to the company's evident stagnation by cutting the workforce, closing several plants, and reducing production capacity. Simmons also cut back the number of styles of mattresses the company manufactured, and endeavored to correct problems with quality control and inventory flow. Though Grant Simmons had promised that things would get better over 1978, the company continued its poor performance. In June 1978, the company's board asked Simmons to resign. The company was then headed by Theodore Greeff, who ran Simmons's Greeff Fabrics subsidiary. In 1979 the company was acquired by Gulf & Western, a large conglomerate which had been buying up Simmons stock since 1976. Simmons became a wholly owned subsidiary of that company.

Gulf & Western was a sprawling conglomerate that later metamorphosed into the movie company Paramount Communications. In 1985 Gulf & Western sold Simmons Co. to Wickes, another conglomerate with lumber and furniture holdings. Wickes, too, was on the verge of a major reorganization. Wickes held onto Simmons for only one year. In 1986, a management group and the investment firm Wesray Capital raised $120 million for a leveraged buyout of Simmons. Wesray was headed by William E. Simon, who was a former secretary of the U.S. Treasury, and his partner Ray Chambers, and was one of the major buyout firms of the 1980s. Seventeen Wesray partners, plus 18 Simmons executives, borrowed almost the entire purchase price to secure the company. Over the next two years, the new management sold off pieces of Simmons, until almost all the debt was repaid.

In 1989, the management group decided to try something Wesray had done successfully before with other companies it had taken over. This was to sell Simmons to its employees through an employee stock ownership plan, or ESOP. This was a seriously flawed deal that soon saw Simmons at the brink of bankruptcy and all the involved parties battling it out in court. Wesray engineered the sale to the ESOP, helping the employee entity borrow the purchase price, $241 million, just over twice the amount Wesray and partners had paid for the company in 1986.

Again the company was loaded with debt. But this time, its most valuable assets had already been sold off. Within four months, Simmons found itself with a $19 million shortfall, and it had to call an emergency meeting with Chemical Bank, the main underwriter of the deal. The bank and Wesray squabbled over who was responsible for the problems. Simmons's employees, the nominal owners of the company, were slow to understand the complexity of the buyout, which left their retirement accounts pegged to the now almost worthless Simmons stock. Unable to meet its debt payments, Simmons looked like it would go bankrupt. Then in March 1991 Merrill Lynch Capital Partners offered to buy 60 percent of the company for the astonishingly low price of $32 million. Employees were left with an approximately 30 percent share in the company. Simmons employees filed a class-action suit against Wesray and Simmons managers, which eventually settled out of court with a payment of about $15 million to the ESOP.

By the mid-1990s the company began to focus again on advertising and marketing. Simmons got a new chairman in 1993, Zenon Nie, and in 1994 the company switched to a new advertising agency. In 1996 Simmons came out with an evocative television ad, which showed a bowling ball dropped on a Beautyrest mattress and not knocking down ten bowling pins standing on it. Beautyrest sales increased by over 50 percent within a month of the ad's debut. The company also brought out a new mattress in 1996, its BackCare brand, which was also promoted with television advertising. The company's profits grew through the mid-1990s, and its overall sales growth was about double the mattress industry average. In March 1996, Merrill Lynch sold its stake in Simmons to a Bahrain-based investment group, Investcorp. The ESOP also sold part of its stake in the company, leaving it with 15 percent, and Investcorp with 85 percent. The investment group paid $250 million for its share of Simmons, and assumed some of the company's debt. By 1997, Simmons had sales of over $550 million, with a profit of about $50 million.

The company changed hands again in 1998 when a private investment firm, Fenway Partners, bought out most of Investcorp's share. The New York-based Fenway paid about $500 million for roughly 75 percent of the company. Simmons continued to boost its advertising spending and to recover market share. By 1998 Simmons reported it held over a 15 percent share of the bedding industry, putting it in the number two spot behind Sealy. The company continued to innovate in the late 1990s and into the new century. It hired a new advertising agency in 1999, and vowed to bring out a new campaign that would top even its successful bowling ball spots. Simmons came up with a new brand for the millennium, the Beautyrest 2000 NoFlip mattress. Zenon Nie resigned as chairman and chief executive in 2000, and he was replaced by Charles R. Eitel, formerly president of a fabric and flooring company. Simmons began licensing its name to a textile manufacturer in 2001 to make sheets, comforters, accessories, and window treatments under the Beautyrest, BackCare, and other Simmons brand names. Sales for 2000 were reported at over $727 million, and the company was vying for the lead in the bedding market that it had helped to revolutionize. (From Fundinguniverse.com)

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