Attached files
| file | filename |
|---|---|
| 8-K - SELECT COMFORT CORP 8-K 10-19-2011 - Sleep Number Corp | form8k.htm |
| EX-99.2 - EXHIBIT 99.2 - Sleep Number Corp | ex99_2.htm |
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
|
Media Contact:
Gabby Nelson
(763) 551-7460
gabby.nelson@selectcomfort.com
|
Investor Contact:
Wendy Schoppert
(763) 551-7498
investorrelations@selectcomfort.com
|
SELECT COMFORT ANNOUNCES THIRD QUARTER 2011 RESULTS
| ● | Reports Earnings per Diluted Share of $0.31, Up 63 Percent vs. Prior Year | ||
| ● | Achieves Comparable Sales Growth of 26 Percent | ||
| ● | Raises 2011 and Long-term Guidance |
MINNEAPOLIS – (Oct. 19, 2011) – Select Comfort Corporation (NASDAQ: SCSS) today reported third-quarter results for the period ended Oct. 1, 2011. Net sales for the quarter increased 25 percent to $200 million, compared to $160 million in the third quarter of 2010, driven by company-controlled comparable sales growth of 26 percent and retail comparable sales growth of 29 percent. The company reported net income of $17.2 million, a 64 percent increase versus $10.5 million in the third quarter of 2010. Earnings per diluted share for the quarter increased 63 percent to $0.31, compared to $0.19 per diluted share in the third quarter of 2010.
“Our outstanding performance in the third quarter further demonstrates the strength of our unique product, our advantaged business model, and the success our strategic initiatives are having in driving profitable growth and increased share,” said Bill McLaughlin, president and CEO, Select Comfort Corporation. “We’re especially pleased with the quality and sustainability of our earnings, driven by continued double-digit revenue growth and record operating margins.”
McLaughlin added, “Given our low brand awareness and underpenetrated distribution in major markets, we believe we are still early in our growth curve. Our plan calls for continued share and earnings growth, fueled by sustained focus on executing our proven, consumer-driven product, marketing and distribution initiatives.”
Third-quarter Summary
In the third quarter, net sales increased by 25 percent as compared to the prior-year period. The increase in sales was driven by company-controlled comparable sales growth of 26
Select Comfort Announces Third Quarter 2011 Results – Page 2 of 10
percent, with average retail sales-per-store during the past 12 months reaching a record $1.6 million, a 29 percent improvement over the prior-year period.
Gross-profit margin in the third quarter of 2011 increased 50 basis points to 63.0 percent of net sales, compared with 62.5 percent in the prior-year period. The increase reflects manufacturing efficiencies and pricing actions, partially offset by $1.6 million of additional customer-service reserves during the quarter.
Sales and marketing costs in the third quarter of 2011 increased by 23 percent to $83.9 million, representing 42.1 percent of net sales. This compares to $68.3 million, or 42.6 percent of net sales in the prior-year period, reflecting continued leverage of sales and marketing. Media investments in the third quarter totaled $24 million, 38 percent higher than a year ago.
General and administrative expenses were $14.3 million in the third quarter, or 7.2 percent of net sales. This compares to $14.3 million, or 8.9 percent of net sales during the same period last year, again reflecting continued leverage of the company’s fixed-cost base.
Operating income of $26.5 million and operating margin of 13.3 percent each represented the best third-quarter performance in company history. This record operating performance resulted in earnings per diluted share of $0.31, a 63 percent improvement versus prior-year.
Cash flows from operating activities were $75 million for the first nine months of 2011 compared to $71 million in the year-ago period. Capital expenditures for the first nine months of 2011 increased to $14.5 million as compared to $3.5 million during the same time period last year, driven by increased investment in stores and information systems. As of the end of the quarter, cash, cash equivalents and marketable-debt securities totaled $136 million and the company had no borrowings under its revolving credit agreement.
Outlook
Based on its robust third-quarter performance, the company is increasing its fiscal 2011 outlook for earnings per diluted share from between $0.90 and $0.96 to between $0.99 and $1.01. Outlook for the fourth quarter of 2011 assumes company-controlled comparable sales growth of between 20 and 25 percent and earnings per diluted share of between $0.19 and $0.21, a 46 to 62 percent increase over prior year. The company expects to end 2011
Select Comfort Announces Third Quarter 2011 Results – Page 3 of 10
with approximately 380 stores after netting planned store openings and closings. Full-year 2011 capital expenditures are expected to be approximately $25 million.
The company also is communicating new annualized growth goals for the next three years, including company-controlled comparable sales growth of at least 10 to 12 percent, net store growth of between 5 and 7 percent, and earnings-per-diluted-share growth of at least 20 percent per year. The company added that it believes there may be opportunity to surpass these levels of growth in the near term.
Conference Call
Management will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. Eastern Time (4 p.m. Central; 2 p.m. Pacific) today. To listen to the call, please dial (800) 593-9959 (international participants dial (517) 308-9340) and reference the passcode “Sleep.” To access the webcast, please visit the investor relations area of the Sleep Number website at http://www.sleepnumber.com/eng/aboutus/InvestorRelations.cfm. The webcast replay will remain available in the investor relations area of the company’s website for approximately 60 days.
About Select Comfort Corporation
Select Comfort Corporation is leading the industry in setting a new standard in sleep by offering consumers high-quality, innovative and individualized sleep solutions, which includes a complete line of SLEEP NUMBER® beds and bedding. The company is the exclusive manufacturer, seller and servicer of the revolutionary Sleep Number bed, which allows individuals to adjust the firmness and support of each side at the touch of a button. The company offers further personalization through its solutions-focused line of Sleep Number pillows, sheets and other bedding products. And as the country’s only national specialty mattress retailer, consumers can take advantage of an enhanced mattress-buying experience at one of the approximately 374 Sleep Number stores across the country as well as online at www.sleepnumber.com or via phone at (800) Sleep Number or (800) 753-3768.
Forward-looking Statements
Statements used in this news release relating to future plans, events, financial results or performance are forward-looking statements subject to certain risks and uncertainties including, among others, such factors as general and industry economic trends; consumer confidence; the effectiveness of our marketing messages; the efficiency of our advertising and promotional
Select Comfort Announces Third Quarter 2011 Results – Page 4 of 10
efforts; consumer acceptance of our products, product quality, innovation and brand image; availability of attractive and cost-effective consumer credit options; execution of our retail store distribution strategy; our dependence on significant suppliers, and our ability to maintain relationships with key suppliers, including several sole-source suppliers; the vulnerability of key suppliers to recessionary pressures, labor negotiations, liquidity concerns or other factors; rising commodity costs and other inflationary pressures; industry competition; our ability to continue to improve our product line; warranty expenses; risks of pending and potentially unforeseen litigation; increasing government regulations, which have added or will add cost pressures and process changes to ensure compliance; the adequacy of our management information systems to meet the evolving needs of our business and evolving regulatory standards applicable to data privacy and security; our ability to attract and retain senior leadership and other key employees, including qualified sales professionals; and uncertainties arising from global events, such as terrorist attacks or a pandemic outbreak, or the threat of such events. Additional information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K, and other periodic reports filed with the SEC. The company has no obligation to publicly update or revise any of the forward-looking statements in this news release.
# # #
Select Comfort Announces Third Quarter 2011 Results – Page 5 of 10
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited – in thousands, except per share amounts)
|
Three Months Ended
|
||||||||||||||||
|
October 1,
|
% of
|
October 2,
|
% of
|
|||||||||||||
|
2011
|
Net Sales
|
2010
|
Net Sales
|
|||||||||||||
|
Net sales
|
$ | 199,600 | 100.0 | % | $ | 160,103 | 100.0 | % | ||||||||
|
Cost of sales
|
73,838 | 37.0 | % | 60,114 | 37.5 | % | ||||||||||
|
Gross profit
|
125,762 | 63.0 | % | 99,989 | 62.5 | % | ||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Sales and marketing
|
83,936 | 42.1 | % | 68,252 | 42.6 | % | ||||||||||
|
General and administrative
|
14,331 | 7.2 | % | 14,286 | 8.9 | % | ||||||||||
|
Research and development
|
1,029 | 0.5 | % | 454 | 0.3 | % | ||||||||||
|
Asset impairment charges
|
7 | 0.0 | % | 217 | 0.1 | % | ||||||||||
|
Total operating expenses
|
99,303 | 49.8 | % | 83,209 | 52.0 | % | ||||||||||
|
Operating income
|
26,459 | 13.3 | % | 16,780 | 10.5 | % | ||||||||||
|
Other income (expense), net
|
23 | 0.0 | % | (50 | ) | 0.0 | % | |||||||||
|
Income before income taxes
|
26,482 | 13.3 | % | 16,730 | 10.4 | % | ||||||||||
|
Income tax expense
|
9,246 | 4.6 | % | 6,242 | 3.9 | % | ||||||||||
|
Net income
|
$ | 17,236 | 8.6 | % | $ | 10,488 | 6.6 | % | ||||||||
|
Net income per share – basic
|
$ | 0.31 | $ | 0.19 | ||||||||||||
|
Net income per share – diluted
|
$ | 0.31 | $ | 0.19 | ||||||||||||
|
Reconciliation of weighted-average shares outstanding:
|
||||||||||||||||
|
Basic weighted-average shares outstanding
|
55,214 | 54,129 | ||||||||||||||
|
Effect of dilutive securities:
|
||||||||||||||||
|
Options
|
777 | 682 | ||||||||||||||
|
Restricted shares
|
504 | 432 | ||||||||||||||
|
Diluted weighted-average shares outstanding
|
56,495 | 55,243 | ||||||||||||||
Select Comfort Announces Third Quarter 2011 Results – Page 6 of 10
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited – in thousands, except per share amounts)
|
Nine Months Ended
|
||||||||||||||||
|
October 1,
|
% of
|
October 2,
|
% of
|
|||||||||||||
|
2011
|
Net Sales
|
2010
|
Net Sales
|
|||||||||||||
|
Net sales
|
$ | 554,130 | 100.0 | % | $ | 457,008 | 100.0 | % | ||||||||
|
Cost of sales
|
202,763 | 36.6 | % | 172,470 | 37.7 | % | ||||||||||
|
Gross profit
|
351,367 | 63.4 | % | 284,538 | 62.3 | % | ||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Sales and marketing
|
234,724 | 42.4 | % | 201,325 | 44.1 | % | ||||||||||
|
General and administrative
|
43,074 | 7.8 | % | 40,369 | 8.8 | % | ||||||||||
|
Research and development
|
2,983 | 0.5 | % | 1,721 | 0.4 | % | ||||||||||
|
Asset impairment charges
|
103 | 0.0 | % | 217 | 0.0 | % | ||||||||||
|
Total operating expenses
|
280,884 | 50.7 | % | 243,632 | 53.3 | % | ||||||||||
|
Operating income
|
70,483 | 12.7 | % | 40,906 | 9.0 | % | ||||||||||
|
Other expense, net
|
(37 | ) | 0.0 | % | (1,826 | ) | (0.4 | %) | ||||||||
|
Income before income taxes
|
70,446 | 12.7 | % | 39,080 | 8.6 | % | ||||||||||
|
Income tax expense
|
25,338 | 4.6 | % | 14,630 | 3.2 | % | ||||||||||
|
Net income
|
$ | 45,108 | 8.1 | % | $ | 24,450 | 5.4 | % | ||||||||
|
Net income per share – basic
|
$ | 0.82 | $ | 0.45 | ||||||||||||
|
Net income per share – diluted
|
$ | 0.80 | $ | 0.44 | ||||||||||||
|
Reconciliation of weighted-average shares outstanding:
|
||||||||||||||||
|
Basic weighted-average shares outstanding
|
54,966 | 53,885 | ||||||||||||||
|
Effect of dilutive securities:
|
||||||||||||||||
|
Options
|
804 | 870 | ||||||||||||||
|
Restricted shares
|
536 | 444 | ||||||||||||||
|
Diluted weighted-average shares outstanding
|
56,306 | 55,199 | ||||||||||||||
Select Comfort Announces Third Quarter 2011 Results – Page 7 of 10
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share amounts)
subject to reclassification
|
(unaudited)
|
||||||||
|
October 1,
|
January 1,
|
|||||||
|
2011
|
2011
|
|||||||
|
Assets
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 96,367 | $ | 76,016 | ||||
|
Marketable debt securities – current
|
19,988 | - | ||||||
|
Accounts receivable, net of allowance for doubtful accounts of $325 and $302, respectively
|
7,973 | 9,909 | ||||||
|
Inventories
|
20,996 | 19,647 | ||||||
|
Prepaid expenses
|
6,930 | 6,388 | ||||||
|
Deferred income taxes
|
4,129 | 4,297 | ||||||
|
Other current assets
|
5,927 | 652 | ||||||
|
Total current assets
|
162,310 | 116,909 | ||||||
|
Marketable debt securities – non-current
|
20,080 | - | ||||||
|
Property and equipment, net
|
38,847 | 32,953 | ||||||
|
Deferred income taxes
|
12,383 | 15,965 | ||||||
|
Other assets
|
4,303 | 4,130 | ||||||
|
Total assets
|
$ | 237,923 | $ | 169,957 | ||||
|
Liabilities and Shareholders’ Equity
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ | 45,819 | $ | 42,025 | ||||
|
Customer prepayments
|
13,614 | 12,944 | ||||||
|
Compensation and benefits
|
25,827 | 24,857 | ||||||
|
Taxes and withholding
|
10,172 | 5,359 | ||||||
|
Other current liabilities
|
17,179 | 11,671 | ||||||
|
Total current liabilities
|
112,611 | 96,856 | ||||||
|
Non-current liabilities:
|
||||||||
|
Warranty liabilities
|
2,991 | 2,815 | ||||||
|
Other long-term liabilities
|
12,208 | 12,309 | ||||||
|
Total non-current liabilities
|
15,199 | 15,124 | ||||||
|
Total liabilities
|
127,810 | 111,980 | ||||||
|
Shareholders’ equity:
|
||||||||
|
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding
|
- | - | ||||||
|
Common stock, $0.01 par value; 142,500 shares authorized, 56,174 and 55,455 shares issued and outstanding, respectively
|
562 | 555 | ||||||
|
Additional paid-in capital
|
43,791 | 36,799 | ||||||
|
Retained earnings
|
65,731 | 20,623 | ||||||
|
Accumulated other comprehensive income
|
29 | - | ||||||
|
Total shareholders’ equity
|
110,113 | 57,977 | ||||||
|
Total liabilities and shareholders’ equity
|
$ | 237,923 | $ | 169,957 | ||||
NOTE: In the first quarter of fiscal 2011 we began reporting cash resulting from credit and debit card transactions when received, rather than on an in-transit basis. To maintain consistency and comparability, previously reported amounts have been reclassified to conform to the current-year presentation.
Select Comfort Announces Third Quarter 2011 Results – Page 8 of 10
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited - in thousands)
subject to reclassification
|
Nine Months Ended
|
||||||||
|
October 1,
|
October 2,
|
|||||||
|
2011
|
2010
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income
|
$ | 45,108 | $ | 24,450 | ||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
9,786 | 11,313 | ||||||
|
Stock-based compensation
|
3,674 | 2,761 | ||||||
|
Net disposals and impairments of assets
|
92 | 213 | ||||||
|
Excess tax benefits from stock-based compensation
|
(1,700 | ) | (1,298 | ) | ||||
|
Deferred income taxes
|
2,579 | (1,757 | ) | |||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
1,936 | 4,382 | ||||||
|
Inventories
|
(1,349 | ) | (620 | ) | ||||
|
Income taxes
|
5,187 | 8,657 | ||||||
|
Prepaid expenses and other assets
|
(3,486 | ) | 3,293 | |||||
|
Accounts payable
|
2,887 | 5,785 | ||||||
|
Customer prepayments
|
670 | (351 | ) | |||||
|
Accrued compensation and benefits
|
1,176 | 7,744 | ||||||
|
Other taxes and withholding
|
2,199 | 1,496 | ||||||
|
Warranty liabilities
|
1,210 | (137 | ) | |||||
|
Other accruals and liabilities
|
4,556 | 4,668 | ||||||
|
Net cash provided by operating activities
|
74,525 | 70,599 | ||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property and equipment
|
(14,492 | ) | (3,521 | ) | ||||
|
Proceeds from sales of property and equipment
|
11 | 10 | ||||||
|
Investments in marketable debt securities
|
(40,021 | ) | - | |||||
|
Increase in restricted cash
|
(2,650 | ) | - | |||||
|
Net cash used in investing activities
|
(57,152 | ) | (3,511 | ) | ||||
|
Cash flows from financing activities:
|
||||||||
|
Net decrease in short-term borrowings
|
(537 | ) | (889 | ) | ||||
|
Repurchases of common stock
|
(350 | ) | (1,373 | ) | ||||
|
Proceeds from issuance of common stock
|
2,165 | 859 | ||||||
|
Excess tax benefits from stock-based compensation
|
1,700 | 1,298 | ||||||
|
Debt issuance costs
|
- | (143 | ) | |||||
|
Net cash provided by (used in) financing activities
|
2,978 | (248 | ) | |||||
|
Net increase in cash and cash equivalents
|
20,351 | 66,840 | ||||||
|
Cash and cash equivalents, at beginning of period
|
76,016 | 12,184 | ||||||
|
Cash and cash equivalents, at end of period
|
$ | 96,367 | $ | 79,024 | ||||
NOTE: To maintain consistency and comparability, certain amounts from previously reported financial statements have been reclassified to conform to the current-year presentation. See Note on page 7.
Select Comfort Announces Third Quarter 2011 Results – Page 9 of 10
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Supplemental Financial Information
(unaudited)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
October 1,
|
October 2,
|
October 1,
|
October 2,
|
|||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Percent of sales:
|
||||||||||||||||
|
Retail
|
89.3 | % | 86.4 | % | 87.7 | % | 84.2 | % | ||||||||
|
Direct and E-Commerce
|
7.5 | % | 9.6 | % | 8.5 | % | 10.9 | % | ||||||||
|
Wholesale
|
3.2 | % | 4.0 | % | 3.8 | % | 4.9 | % | ||||||||
|
Total
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
Sales growth rates:
|
||||||||||||||||
|
Retail comparable-store sales
|
29 | % | 16 | % | 28 | % | 24 | % | ||||||||
|
Direct and E-Commerce
|
(2 | %) | 4 | % | (6 | %) | 9 | % | ||||||||
|
Company-Controlled comparable sales change
|
26 | % | 15 | % | 24 | % | 21 | % | ||||||||
|
Net closed stores/other
|
0 | % | (4 | %) | (1 | %) | (5 | %) | ||||||||
|
Total Company-Controlled Channels
|
26 | % | 11 | % | 23 | % | 16 | % | ||||||||
|
Wholesale
|
(1 | %) | (32 | %) | (6 | %) | (32 | %) | ||||||||
|
Total
|
25 | % | 9 | % | 21 | % | 12 | % | ||||||||
|
Stores open:
|
||||||||||||||||
|
Beginning of period
|
375 | 395 | 386 | 403 | ||||||||||||
|
Opened
|
3 | 2 | 9 | 2 | ||||||||||||
|
Closed
|
(4 | ) | (5 | ) | (21 | ) | (13 | ) | ||||||||
|
End of period
|
374 | 392 | 374 | 392 | ||||||||||||
|
Other metrics:
|
||||||||||||||||
|
Average sales per store ($ in 000's)1
|
$ | 1,611 | $ | 1,252 | ||||||||||||
|
Average sales per square foot1
|
$ | 1,071 | $ | 850 | ||||||||||||
|
Stores > $1 million net sales1
|
90 | % | 68 | % | ||||||||||||
|
Stores > $2 million net sales1
|
18 | % | 6 | % | ||||||||||||
|
Average mattress sales per mattress unit - Company Controlled Channels2
|
$ | 2,252 | $ | 2,031 | $ | 2,191 | $ | 2,002 | ||||||||
|
1
|
Trailing twelve months for stores open at least one year.
|
|
2
|
Includes revenue from adjustable foundations which has become a more significant part of the mattress mix. The prior definition excluded revenue from adjustable foundations. Previously reported amounts have been reclassified to conform to the current-year presentation.
|
Select Comfort Announces Third Quarter 2011 Results – Page 10 of 10
SELECT COMFORT CORPORATION AND SUBSIDIARIES
Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)
(in thousands)
We define earnings before interest, taxes, depreciation and amortization (EBITDA) as net income plus: income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation and asset impairments consistent with the definition used in our debt covenant calculations. Management believes EBITDA is a useful indicator of the Company's financial performance. Our definition of EBITDA may not be comparable to similarly titled definitions used by other companies. The tables below reconcile EBITDA, which is a non-GAAP financial measure, to comparable GAAP financial measures:
|
Three Months Ended
|
Trailing-Twelve Months Ended | |||||||||||||||
|
October 1,
|
October 2,
|
October 1,
|
October 2,
|
|||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Net income
|
$ | 17,236 | $ | 10,488 | $ | 52,226 | $ | 59,759 | ||||||||
|
Income tax expense (benefit)
|
9,246 | 6,242 | 29,630 | (14,232 | ) | |||||||||||
|
Interest expense
|
24 | 69 | 234 | 2,896 | ||||||||||||
|
Depreciation and amortization
|
3,390 | 3,162 | 13,043 | 13,158 | ||||||||||||
|
Stock-based compensation
|
1,418 | 1,270 | 4,875 | 3,455 | ||||||||||||
|
Asset impairments
|
7 | 217 | 145 | 416 | ||||||||||||
|
EBITDA
|
$ | 31,321 | $ | 21,448 | $ | 100,153 | $ | 65,452 | ||||||||
|
Note -
|
Our EBITDA calculation is considered a non-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 analysis of the Company's financial performance by investors and financial analysts.
|
GAAP - generally accepted accounting principles