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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 third quarter 2017 results for the period ended September 30, 2017.
“Strong demand in the quarter for our revolutionary Sleep Number 360™ smart beds, higher than expected gross margins, and disciplined expense controls partially offset unexpected hurricane impacts,” said Shelly Ibach, president and chief executive officer of Select Comfort. “We are excited with how the consumer continues to respond to our innovations focused on quality sleep and wellness. With cash flow generation at record levels and the underlying strength of our business, we are increasing our share repurchase authorization to $500 million and are reaffirming the midpoint of our 2017 EPS guidance.”
The company also announced that effective November 1st, it will officially change the corporate name to Sleep Number Corporation and will also change the Nasdaq ticker symbol from SCSS to SNBR.
Third Quarter Review
Cash Flows and Balance Sheet Review
Share Repurchase AuthorizationThe company also announced an increase in the outstanding share repurchase authorization to $500 million, effective at the beginning of the fiscal fourth quarter. The company is committed to delivering superior shareholder returns, including returning cash to shareholders through share repurchases. Since the beginning of 2012, Select Comfort has invested $465 million in capital spending and acquisitions, while also returning $453 million in cash to shareholders through share repurchases.
Financial OutlookThe company updated its outlook for 2017 earnings per diluted share to a range of $1.30 to $1.45 per share. The outlook includes an estimated $0.18 EPS impact from incremental costs related to the launch of the Sleep Number 360™ smart bed line and the evolution of our supply chain. The outlook assumes high single-digit sales growth, including 5 to 6 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 4,000 employees are improving lives with innovative sleep solutions. To find better quality sleep visit one of the more than 550 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, including the potential for shortages in supply of key components; 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 September 30, % of October 1, % of 2017 Net Sales 2016 Net Sales Net sales $ 402,646 100.0 % $ 367,988 100.0 % Cost of sales 149,181 37.1 % 135,645 36.9 % Gross profit 253,465 62.9 % 232,343 63.1 % Operating expenses: Sales and marketing 174,800 43.4 % 158,024 42.9 % General and administrative 32,645 8.1 % 28,278 7.7 % Research and development 6,991 1.7 % 6,997 1.9 % Total operating expenses 214,436 53.3 % 193,299 52.5 % Operating income 39,029 9.7 % 39,044 10.6 % Other expense, net (248 ) (0.1 %) (255 ) (0.1 %) Income before income taxes 38,781 9.6 % 38,789 10.5 % Income tax expense 13,178 3.3 % 13,044 3.5 % Net income $ 25,603 6.4 % $ 25,745 7.0 % Net income per share – basic $ 0.63 $ 0.56 Net income per share – diluted $ 0.62 $ 0.56Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding 40,755 45,621 Dilutive effect of stock-based awards 760 729 Diluted weighted-average shares outstanding 41,515 46,350 SELECT COMFORT CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (unaudited – in thousands, except per share amounts) Nine Months Ended September 30, % of October 1, % of 2017 Net Sales 2016 Net Sales Net sales $ 1,081,218 100.0 % $ 997,846 100.0 % Cost of sales 404,675 37.4 % 385,168 38.6 % Gross profit 676,543 62.6 % 612,678 61.4 % Operating expenses: Sales and marketing 488,564 45.2 % 443,477 44.4 % General and administrative 95,233 8.8 % 86,202 8.6 % Research and development 20,950 1.9 % 21,661 2.2 % Total operating expenses 604,747 55.9 % 551,340 55.3 % Operating income 71,796 6.6 % 61,338 6.1 % Other expense, net (668 ) (0.1 %) (581 ) (0.1 %) Income before income taxes 71,128 6.6 % 60,757 6.1 % Income tax expense 21,842 2.0 % 20,627 2.1 % Net income $ 49,286 4.6 % $ 40,130 4.0 % Net income per share – basic $ 1.18 $ 0.86 Net income per share – diluted $ 1.16 $ 0.85Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding 41,740 46,705 Dilutive effect of stock-based awards 819 708 Diluted weighted-average shares outstanding 42,559 47,413 SELECT COMFORT CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (unaudited – in thousands, except per share amounts) subject to reclassification September 30, December 31, 2017 2016 Assets Current assets: Cash and cash equivalents $ 29,914 $ 11,609Accounts receivable, net of allowance for doubtful accounts of $694 and $884, respectively
21,107 19,705 Inventories 79,217 75,026 Prepaid expenses 10,208 8,705 Other current assets 23,803 23,282 Total current assets 164,249 138,327 Non-current assets: Property and equipment, net 206,690 208,367 Goodwill and intangible assets, net 78,133 80,817 Deferred income taxes 938 4,667 Other non-current assets 28,898 24,988 Total assets $ 478,908 $ 457,166 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 136,628 $ 105,375 Customer prepayments 39,929 26,207 Accrued sales returns 18,448 15,222 Compensation and benefits 34,683 19,455 Taxes and withholding 24,041 23,430 Other current liabilities 44,708 35,628 Total current liabilities 298,437 225,317 Non-current liabilities: Other non-current liabilities 76,174 71,529 Total liabilities 374,611 296,846 Shareholders’ equity:Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding
- -Common stock, $0.01 par value; 142,500 shares authorized, 39,819 and 43,569 shares issued and outstanding, respectively
398 436 Additional paid-in capital - - Retained earnings 103,899 159,884 Total shareholders’ equity 104,297 160,320 Total liabilities and shareholders’ equity $ 478,908 $ 457,166 SELECT COMFORT CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (unaudited - in thousands) subject to reclassification Nine Months Ended September 30, October 1, 2017 2016 Cash flows from operating activities: Net income $ 49,286 $ 40,130Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 46,000 42,555 Stock-based compensation 11,809 9,272 Net loss on disposals and impairments of assets 229 9 Excess tax benefits from stock-based compensation - (516 ) Deferred income taxes 3,729 (673 ) Changes in operating assets and liabilities: Accounts receivable (1,402 ) 5,271 Inventories (4,191 ) 15,991 Income taxes (147 ) 30,386 Prepaid expenses and other assets (1,713 ) (3,458 ) Accounts payable 33,325 (1,043 ) Customer prepayments 13,722 (23,125 ) Accrued compensation and benefits 15,277 12,441 Other taxes and withholding 758 7,494 Other accruals and liabilities 9,372 10,527 Net cash provided by operating activities 176,054 145,261 Cash flows from investing activities: Purchases of property and equipment (37,613 ) (38,769 ) Proceeds from sales of property and equipment 36 67 Investments in marketable debt securities - (5,968 ) Proceeds from marketable debt securities - 15,090 Decrease in restricted cash 3,150 - Net cash used in investing activities (34,427 ) (29,580 ) Cash flows from financing activities: Net (decrease) increase in short-term borrowings (6,194 ) 3,062 Repurchases of common stock (120,158 ) (96,410 ) Proceeds from issuance of common stock 3,040 1,949 Excess tax benefits from stock-based compensation - 516 Debt issuance costs (10 ) (409 ) Net cash used in financing activities (123,322 ) (91,292 ) Net increase in cash and cash equivalents 18,305 24,389 Cash and cash equivalents, at beginning of period 11,609 20,994 Cash and cash equivalents, at end of period $ 29,914 $ 45,383 SELECT COMFORT CORPORATION AND SUBSIDIARIES Supplemental Financial Information (unaudited) Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, 2017 2016 2017 2016 Percent of sales: Retail 92.8 % 91.3 % 91.7 % 91.0 % Online and phone 6.5 % 6.5 % 6.8 % 6.3 % Wholesale/other 0.7 % 2.2 % 1.5 % 2.7 % Total 100.0 % 100.0 % 100.0 % 100.0 % Sales change rates: Retail comparable-store sales 5 % (10 %) 1 % (7 %) Online and phone 9 % 23 % 17 % 10 % Company-Controlled comparable sales change 5 % (8 %) 2 % (6 %) Net opened/closed stores 6 % 7 % 8 % 6 % Total Company-Controlled Channel 11 % (1 %) 10 % 0 % Wholesale/other (65 %) (19 %) (38 %) 3 % Total 9 % (2 %) 8 % 0 % Stores open: Beginning of period 549 506 540 488 Opened 6 24 30 57 Closed (2 ) (3 ) (17 ) (18 ) End of period 553 527 553 527 Other metrics: Average sales per store ($ in 000's) 1 $ 2,369 $ 2,248 Average sales per square foot 1 $ 909 $ 895 Stores > $1 million net sales 1 98 % 98 % Stores > $2 million net sales 1 59 % 54 % Average revenue per mattress unit 2 $ 4,385 $ 3,959 $ 4,239 $ 4,0311 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 SUBSIDIARIESEarnings 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 September 30, October 1, September 30, October 1, 2017 2016 2017 2016 Net income $ 25,603 $ 25,745 $ 60,573 $ 18,958 Income tax expense 13,178 13,044 25,731 11,112 Interest expense 278 267 935 721 Depreciation and amortization 14,770 14,536 60,404 56,154 Stock-based compensation 3,933 1,666 14,498 10,609 Asset impairments 222 2 267 51 Adjusted EBITDA $ 57,984 $ 55,260 $ 162,408 $ 97,605 Free Cash Flow (in thousands) Three Months Ended Trailing-Twelve Months Ended September 30, October 1, September 30, October 1, 2017 2016 2017 2016 Net cash provided by operating activities $ 87,247 $ 98,141 $ 182,438 $ 121,616 Subtract: Purchases of property and equipment 10,481 15,005 56,696 62,920 Free cash flow $ 76,766 $ 83,136 $ 125,742 $ 58,696Note - 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 SUBSIDIARIESCalculation 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 September 30, October 1, 2017 2016Net operating profit after taxes (NOPAT)
Operating income $ 87,108 $ 30,681 Add: Rent expense 1 72,260 64,994 Add: Interest income 129 109 Less: Depreciation on capitalized operating leases 2 (18,384 ) (16,953 ) Less: Income taxes 3 (46,004 ) (29,805 ) NOPAT $ 95,109 $ 49,026Average invested capital
Total equity $ 104,297 $ 176,512 Less: Cash greater than target 4 - - Add: Long-term debt 5 - - Add: Capitalized operating lease obligations 6 578,080 519,952 Total invested capital at end of period $ 682,377 $ 696,464 Average invested capital 7 $ 689,467 $ 714,956 Return on invested capital (ROIC) 8 13.8 % 6.9 % 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 32.6% and 37.8% 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/20171017006637/en/
Select Comfort CorporationInvestor Contact:Dave Schwantes, 763-551-7498investorrelations@selectcomfort.com
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1 Month Sleep Number Corporation Com USD0.01 Chart |
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