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Share Name | Share Symbol | Market | Type |
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Sleep Number Corporation Com USD0.01 | NASDAQ:SCSS | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 32.50 | 31.41 | 35.46 | 0 | 01:00:00 |
Select Comfort Corporation (NASDAQ: SCSS) today reported first quarter 2017 results for the period ended April 1, 2017.
“Consumers are responding enthusiastically to our brand and differentiated products. Our investments over the past few years have made us a stronger competitor and this is evident in our first quarter results,” said Shelly Ibach, President and CEO of Select Comfort. “In the second quarter, we will begin the phased introduction of the revolutionary Sleep Number 360 smart beds. This innovation will set a new standard for what people should expect from their bed.”
First Quarter Overview
Financial OutlookThe company has increased its full-year 2017 earnings per diluted share outlook to $1.25 to $1.50, compared with the previous outlook of $1.20 to $1.40 per share. The outlook continues to include an estimated $0.15 to $0.22 EPS impact from incremental costs related to the launch of the Sleep Number 360™ smart bed line and the redesign of our logistics network. The outlook assumes high single-digit sales growth, including 4 to 5 percentage points from net new store openings and low single-digit comp store growth. The company anticipates 2017 capital expenditures to be approximately $55 million.
Conference Call InformationManagement will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. EDT (4 p.m. CDT; 2 p.m. PDT) 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 for approximately 60 days.
About Select Comfort CorporationThirty years ago, Sleep Number transformed the mattress industry with the idea that ‘one size does not fit all’ when it comes to sleep. Today, the company is the leader in sleep innovation and ranked “Highest in Customer Satisfaction with Mattresses” by J.D. Power in 2015 and 2016. As the pioneer in biometric sleep tracking and adjustability, Sleep Number is proving the connection between quality sleep and health and wellbeing. Dedicated to individualizing sleep experiences, the company’s 3,800 employees are improving lives with innovative sleep solutions. To find better quality sleep visit one of the more than 540 Sleep Number® stores located in 49 states or SleepNumber.com.
Forward-looking StatementsStatements 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 current and future general and industry economic trends and consumer confidence; the effectiveness of our marketing messages; the efficiency of our advertising and promotional efforts; our ability to execute our company-controlled distribution strategy; our ability to achieve and maintain acceptable levels of product and service quality, and acceptable product return and warranty claims rates; our ability to continue to improve and expand our product line; consumer acceptance of our products, product quality, innovation and brand image; industry competition, the emergence of additional competitive products, and the adequacy of our intellectual property rights to protect our products and brand from competitive or infringing activities; the potential for claims that our products, processes or trademarks infringe the intellectual property rights of others; availability of attractive and cost-effective consumer credit options; pending and unforeseen litigation and the potential for adverse publicity associated with litigation; our “just-in-time” manufacturing processes with minimal levels of inventory, which may leave us vulnerable to shortages in supply; 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; risks inherent in global sourcing activities; risks of disruption in the operation of either of our two primary manufacturing facilities; increasing government regulations, which have added or may 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 to protect sensitive data from potential cyber threats; the costs, distractions and potential disruptions to our business related to upgrading our management information systems; our ability to attract, retain and motivate qualified management, executive and other key employees, including qualified retail sales professionals and managers; and uncertainties arising from global events, such as terrorist attacks, political unrest or a pandemic outbreak, or the threat of such events. Additional information concerning these and other risks and uncertainties is contained in the company’s filings with the Securities and Exchange Commission (SEC), including the 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 CORPORATION
AND SUBSIDIARIES Consolidated Statements of Operations (unaudited – in thousands, except per share amounts) Three Months Ended April 1, % of April 2, % of 2017 Net Sales 2016 Net Sales Net sales $ 393,899 100.0 % $ 352,980 100.0 % Cost of sales 147,440 37.4 % 143,906 40.8 % Gross profit 246,459 62.6 % 209,074 59.2 % Operating expenses: Sales and marketing 169,266 43.0 % 150,668 42.7 % General and administrative 33,769 8.6 % 30,906 8.8 % Research and development 7,596 1.9 % 7,602 2.2 % Total operating expenses 210,631 53.5 % 189,176 53.6 % Operating income 35,828 9.1 % 19,898 5.6 % Other expense, net (138 ) 0.0 % (97 ) 0.0 % Income before income taxes 35,690 9.1 % 19,801 5.6 % Income tax expense 11,229 2.9 % 6,832 1.9 % Net income $ 24,461 6.2 % $ 12,969 3.7 % Net income per share – basic $ 0.57 $ 0.27 Net income per share – diluted $ 0.56 $ 0.27Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding 42,750 48,100 Dilutive effect of stock-based awards 962 745 Diluted weighted-average shares outstanding 43,712 48,845 SELECT COMFORT CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (unaudited – in thousands, except per share amounts) subject to reclassificationApril 1,
December 31, 2017 2016 Assets Current assets: Cash and cash equivalents $ 36,452 $ 11,609Accounts receivable, net of allowance for doubtful accounts of $967 and $884, respectively
18,227 19,705 Inventories 66,858 75,026 Prepaid expenses 10,673 8,705 Other current assets 16,812 23,282 Total current assets 149,022 138,327 Non-current assets: Property and equipment, net 207,192 208,367 Goodwill and intangible assets, net 79,223 80,817 Deferred income taxes - 4,667 Other non-current assets 27,308 24,988 Total assets $ 462,745 $ 457,166 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 106,661 $ 105,375 Customer prepayments 30,650 26,207 Accrued sales returns 18,201 15,222 Compensation and benefits 31,058 19,455 Taxes and withholding 28,068 23,430 Other current liabilities 37,551 35,628 Total current liabilities 252,189 225,317 Non-current liabilities: Deferred income taxes 996 - Other non-current liabilities 75,409 71,529 Total liabilities 328,594 296,846 Shareholders’ equity:Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding
- -Common stock, $0.01 par value; 142,500 shares authorized, 41,676 and 43,569 shares issued and outstanding, respectively
417 436 Additional paid-in capital - - Retained earnings 133,734 159,884 Total shareholders’ equity 134,151 160,320 Total liabilities and shareholders’ equity $ 462,745 $ 457,166 SELECT COMFORT CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (unaudited - in thousands) subject to reclassification Three Months Ended April 1, April 2, 2017 2016 Cash flows from operating activities: Net income $ 24,461 $ 12,969Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 16,205 13,854 Stock-based compensation 3,704 3,766 Net loss on disposals and impairments of assets - 1 Excess tax benefits from stock-based compensation - (26 ) Deferred income taxes 5,663 1,622 Changes in operating assets and liabilities: Accounts receivable 1,478 8,816 Inventories 8,168 5,633 Income taxes 5,541 16,558 Prepaid expenses and other assets 2,880 (1,272 ) Accounts payable (1,394 ) (495 ) Customer prepayments 4,443 (20,537 ) Accrued compensation and benefits 11,693 10,677 Other taxes and withholding (903 ) 7,493 Other accruals and liabilities 4,930 4,922 Net cash provided by operating activities 86,869 63,981 Cash flows from investing activities: Purchases of property and equipment (13,211 ) (12,289 ) Proceeds from sales of property and equipment - 14 Proceeds from marketable debt securities - 15,090 Decrease in restricted cash 3,150 - Net cash (used in) provided by investing activities (10,061 ) 2,815 Cash flows from financing activities: Net increase (decrease) in short-term borrowings 2,369 (6,661 ) Repurchases of common stock (54,794 ) (51,240 ) Proceeds from issuance of common stock 460 6 Excess tax benefits from stock-based compensation - 26 Debt issuance costs - (401 ) Net cash used in financing activities (51,965 ) (58,270 ) Net increase in cash and cash equivalents 24,843 8,526 Cash and cash equivalents, at beginning of period 11,609 20,994 Cash and cash equivalents, at end of period $ 36,452 $ 29,520 SELECT COMFORT CORPORATION AND SUBSIDIARIES Supplemental Financial Information (unaudited) Three Months Ended April 1, April 2, 2017 2016 Percent of sales: Retail 91.5 % 91.0 % Online and phone 6.7 % 6.3 % Wholesale/other 1.8 % 2.7 % Total 100.0 % 100.0 % Sales change rates: Retail comparable-store sales 2 % (4 %) Online and phone 18 % 8 % Company-Controlled comparable sales change 3 % (4 %) Net opened/closed stores 10 % 5 % Total Company-Controlled Channel 13 % 1 % Wholesale/other (23 %) 10 % Total 12 % 1 % Stores open: Beginning of period 540 488 Opened 16 14 Closed (10 ) (5 ) End of period 546 497 Other metrics: Average sales per store ($ in 000's) 1 $ 2,365 $ 2,363 Average sales per square foot 1 $ 926 $ 960 Stores > $1 million net sales 1 97 % 98 % Stores > $2 million net sales 1 59 % 61 % Average revenue per mattress unit 2 $ 4,053 $ 3,978 1 Trailing twelve months for stores open at least one year.2 Represents Company-Controlled Channel total net sales divided by Company-Controlled Channel mattress units.
SELECT COMFORT CORPORATION AND SUBSIDIARIES Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) (in thousands) We define earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as net income plus: income tax expense, interest expense, depreciation and amortization, stock-based compensation and asset impairments. Management believes Adjusted EBITDA is a useful indicator of our financial performance and our ability to generate cash from operating activities. Our definition of Adjusted EBITDA may not be comparable to similarly titled definitions used by other companies. The table below reconciles Adjusted EBITDA, which is a non-GAAP financial measure, to the comparable GAAP financial measure: Three Months Ended Trailing-Twelve Months Ended April 1, April 2, April 1, April 2, 2017 2016 2017 2016 Net income $ 24,461 $ 12,969 $ 62,909 $ 34,689 Income tax expense 11,229 6,832 28,913 16,664 Interest expense 182 106 887 256 Depreciation and amortization 16,152 13,757 59,305 50,129 Stock-based compensation 3,704 3,766 11,899 11,274 Asset impairments - 15 59 67 Adjusted EBITDA $ 55,728 $ 37,445 $ 163,972 $ 113,079 Free Cash Flow (in thousands) Three Months Ended Trailing-Twelve Months Ended April 1, April 2, April 1, April 2,2017
20162017
2016 Net cash provided by operating activities $ 86,869 $ 63,981 $ 174,533 $ 123,059 Subtract: Purchases of property and equipment 13,211 12,289 58,774 80,079 Free cash flow $ 73,658 $ 51,692 $ 115,759 $ 42,980Note - Our Adjusted EBITDA calculation and our "free cash flow" data are considered non-GAAP financial measures and are 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 in the U.S. SELECT COMFORT CORPORATION AND SUBSIDIARIES Calculation of Return on Invested Capital (ROIC) (in thousands) ROIC is a financial measure we use to determine how efficiently we deploy our capital. It quantifies the return we earn on our invested capital. Management believes ROIC is also a useful metric for investors and financial analysts. We compute ROIC as outlined below. Our definition and calculation of ROIC may not be comparable to similarly titled definitions and calculations used by other companies. The tables below reconcile net operating profit after taxes (NOPAT) and total invested capital, which are non-GAAP financial measures, to the comparable GAAP financial measures: Trailing-Twelve Months Ended April 1, April 2, 2017 2016Net operating profit after taxes (NOPAT)
Operating income $ 92,580 $ 51,270 Add: Rent expense 1 69,217 63,204 Add: Interest income 128 340 Less: Depreciation on capitalized operating leases 2 (17,550 ) (16,501 ) Less: Income taxes 3 (48,050 ) (31,992 ) NOPAT $ 96,325 $ 66,321Average invested capital
Total equity $ 134,151 $ 187,184 Less: Cash greater than target 4 - - Add: Long-term debt 5 - - Add: Capitalized operating lease obligations 6 553,736 505,632 Total invested capital at end of period $ 687,887 $ 692,816 Average invested capital 7 $ 692,896 $ 729,234 Return on invested capital (ROIC) 8 13.9 % 9.1 %1 Rent expense is added back to operating income to show the impact of owning versus leasing the related assets.
2 Depreciation is based on the average of the last five fiscal quarters' ending capitalized operating lease obligations (see note 6) for the respective reporting periods with an assumed thirty-year useful life. This is subtracted from operating income to illustrate the impact of owning versus leasing the related assets.
3 Reflects annual effective income tax rates, before discrete adjustments, of 33.3% and 32.5% for 2017 and 2016, respectively.
4 Cash greater than target is defined as cash, cash equivalents and marketable debt securities less customer prepayments in excess of $100 million.
5 Long-term debt includes existing capital lease obligations, if applicable.
6 A multiple of eight times annual rent expense is used as an estimate of capitalizing our operating lease obligations. The methodology utilized aligns with the methodology of a nationally recognized credit rating agency.
7 Average invested capital represents the average of the last five fiscal quarters' ending invested capital balances.
8 ROIC equals NOPAT divided by average invested capital.
Note - Our ROIC calculation and data are considered non-GAAP financial measures and are not in accordance with, or preferable to, 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 in the U.S.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170419006427/en/
Select Comfort CorporationInvestor Contact:Dave Schwantes, 763-551-7498investorrelations@selectcomfort.comorMedia Contact:Susan Eich, 763-551-6934Susan.Eich@selectcomfort.com
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