Attached files
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| 8-K - SELECT COMFORT CORP 8-K 4-18-2012 - Sleep Number Corp | form8k.htm |
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
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Media Contact:
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Investor Contact:
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Gabby Nelson
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Edwin Boon
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(763) 551-7460
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(763) 551-7498
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gabby.nelson@selectcomfort.com
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investorrelations@selectcomfort.com
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SELECT COMFORT ANNOUNCES FIRST-QUARTER 2012 RESULTS
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·
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Reports Record Comparable-sales Growth of 34 Percent and Record Net Sales of $262 Million
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·
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Achieves 13th Consecutive Quarter of Double-digit Year-over-year Operating Income Growth
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·
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Reports First-quarter Earnings per Diluted Share of $0.39 on a GAAP Basis – $0.45 on an Adjusted Basis, a 50 Percent Year-over-year Increase
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MINNEAPOLIS – (April 18, 2012) – Select Comfort Corporation (NASDAQ: SCSS) today reported first-quarter results for the period ended March 31, 2012. Net sales for the quarter increased 36 percent to $262 million, compared to $193 million in the first quarter of 2011, driven by company-controlled comparable sales growth of 34 percent – a quarterly record. The company reported first-quarter GAAP earnings per diluted share of $0.39. Excluding a $5.6 million non-recurring, non-cash charge associated with the June 1, 2012 chief executive officer (CEO) transition, first-quarter adjusted earnings per diluted share was $0.45, a 50 percent increase versus $0.30 per diluted share in the first quarter of 2011.
“We’re extremely pleased with our first-quarter performance because it demonstrates the continued success of our strategy as we build on strong results from the prior year,” said Bill McLaughlin, president and CEO, Select Comfort. “And the critical elements are in place for future success, including a proven growth formula, resources for sustained investment, and an experienced, talented leadership team that will enable the company to achieve its full potential.”
Shelly Ibach, chief operating officer and incoming president and CEO, Select Comfort, stated, “Our record comparable-sales increase in the quarter reflects the strength of our customer-focused growth strategy. We continue to invest in broadening awareness for the differentiated Sleep Number brand and leveraging our position as a national retailer with exclusive, company-controlled distribution. As we look ahead, we are confident in our ability to continue generating earnings-per-share growth of at least 20 percent per year for the foreseeable future.”
Select Comfort Announces First-quarter 2012 Results – Page 2 of 10
First-quarter Summary
In the first quarter, net sales increased by 36 percent as compared to the prior-year period. The increase in sales was driven by company-controlled comparable sales growth of 34 percent, with average retail sales-per-store during the past 12 months reaching a record $1.9 million.
Operating income for the first quarter was $34.3 million. Excluding the $5.6 million non-recurring charge, adjusted operating income was $39.9 million, and adjusted operating margin during the quarter improved 150 basis points from 13.7 percent in 2011 to 15.2 percent in 2012. This operating margin growth on an adjusted basis was driven by a 280 basis-point improvement in selling expenses and a 160 basis-point improvement in general and administrative expenses, partially offset by planned deleverage of marketing expenses of 170 basis points and a 120 basis-point decrease in gross-profit margin.
Gross-profit margin in the first quarter of 2012 was 62.6 percent of net sales, compared with 63.8 percent in the prior-year period. The decrease reflects the strength of consumer response during key promotional events and changes in product mix, partially offset by pricing increases taken during the past year.
Sales and marketing costs were $106.2 million in the first quarter, or 40.5 percent of net sales. This compares to $80.3 million, or 41.6 percent of net sales in the prior-year period, reflecting continued leverage from the company’s sales growth. Media spending during the quarter was $35 million, a 48 percent increase versus the prior-year period.
General and administrative expenses were $16.9 million in the first quarter, or 6.5 percent of net sales. This compares to $15.6 million, or 8.1 percent of net sales, during the same period last year, again reflecting continued leverage of the company’s fixed-cost base.
Cash flows from operating activities were $45 million in the first quarter compared to $32 million in the prior year. Capital expenditures increased to $9.3 million as compared to $2.7 million in 2011, driven by increased investment in stores and information systems. As of the end of the quarter, cash, cash equivalents and marketable-debt securities totaled $181 million, and the company had no borrowings under its revolving credit agreement.
Select Comfort Announces First-quarter 2012 Results – Page 3 of 10
Fiscal 2012 Outlook
The company anticipates 2012 GAAP earnings per diluted share, including the $5.6 million non-recurring charge, to be within the previously communicated range of between $1.32 and $1.40, a 23 to 31 percent increase versus prior year. Excluding the charge, this represents an increase in non-GAAP guidance to between $1.38 and $1.46, a 29 to 36 percent increase versus prior year. This outlook continues to assume company-controlled comparable sales growth of at least 15 percent and a net increase in store count from 381 at year-end 2011 to between 400 and 410 by year-end 2012. It also continues to assume a year-over-year increase in operating margin of at least 100 basis points.
The company continues to anticipate that 2012 capital expenditures will be approximately $50 million, reflecting new stores, repositioned stores and remodels, along with continued investment in customer-management systems. While the company had no share repurchases during the quarter, it reiterates its plans to initiate share repurchases in 2012, with the objective to maintain share count.
Conference Call
Management 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 in the investor relations area of the company’s website for approximately 60 days.
About Select Comfort Corporation
Select Comfort Corporation (NASDAQ: SCSS) is leading the industry in setting a new standard in sleep by offering consumers high-quality, innovative and individualized sleep solutions, which include a complete line of SLEEP NUMBER® beds and bedding. The company is the exclusive manufacturer, retailer 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 only national specialty-mattress retailer, consumers can take advantage of an enhanced mattress-buying experience at one of the approximately 380 Sleep Number stores across the country, online at sleepnumber.com or via phone at (800) Sleep Number or (800) 753-3768.
Select Comfort Announces First-quarter 2012 Results – Page 4 of 10
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 the company’s marketing messages; the efficiency of its advertising and promotional efforts; consumer acceptance of its products, product quality, innovation and brand image; availability of attractive and cost-effective consumer credit options; execution of the company’s retail store distribution strategy; the company’s dependence on significant suppliers, and its 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; the company’s ability to continue to improve its 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 the company’s management information systems to meet the evolving needs of its business and evolving regulatory standards applicable to data privacy and security; the company’s 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 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 Announces First-quarter 2012 Results – Page 5 of 10
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited – in thousands, except per share amounts)
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Three Months Ended
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||||||||||||||||
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March 31,
2012 |
% of
Net Sales |
April 2,
2011 |
% of
Net Sales |
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Net sales
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$ | 262,383 | 100.0 | % | $ | 193,068 | 100.0 | % | ||||||||
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Cost of sales
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98,084 | 37.4 | % | 69,967 | 36.2 | % | ||||||||||
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Gross profit
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164,299 | 62.6 | % | 123,101 | 63.8 | % | ||||||||||
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Operating expenses:
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||||||||||||||||
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Sales and marketing
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106,185 | 40.5 | % | 80,271 | 41.6 | % | ||||||||||
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General and administrative
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16,929 | 6.5 | % | 15,623 | 8.1 | % | ||||||||||
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Research and development
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1,290 | 0.5 | % | 731 | 0.4 | % | ||||||||||
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CEO transition costs
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5,595 | 2.1 | % | - | 0.0 | % | ||||||||||
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Asset impairment charges
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4 | 0.0 | % | 78 | 0.0 | % | ||||||||||
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Total operating expenses
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130,003 | 49.5 | % | 96,703 | 50.1 | % | ||||||||||
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Operating income
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34,296 | 13.1 | % | 26,398 | 13.7 | % | ||||||||||
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Other income (expense), net
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7 | 0.0 | % | (30 | ) | 0.0 | % | |||||||||
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Income before income taxes
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34,303 | 13.1 | % | 26,368 | 13.7 | % | ||||||||||
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Income tax expense
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11,886 | 4.5 | % | 9,785 | 5.1 | % | ||||||||||
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Net income
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$ | 22,417 | 8.5 | % | $ | 16,583 | 8.6 | % | ||||||||
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Net income per share – basic
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$ | 0.40 | $ | 0.30 | ||||||||||||
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Net income per share – diluted
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$ | 0.39 | $ | 0.30 | ||||||||||||
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Reconciliation of weighted-average shares outstanding:
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||||||||||||||||
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Basic weighted-average shares outstanding
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55,640 | 54,726 | ||||||||||||||
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Effect of dilutive securities:
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Options
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1,156 | 714 | ||||||||||||||
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Restricted shares
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644 | 537 | ||||||||||||||
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Diluted weighted-average shares outstanding
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57,440 | 55,977 | ||||||||||||||
Select Comfort Announces First-quarter 2012 Results – Page 6 of 10
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share amounts)
subject to reclassification
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(unaudited)
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March 31,
2012 |
December 31,
2011 |
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Assets
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Current assets:
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Cash and cash equivalents
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$ | 150,943 | $ | 116,255 | ||||
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Marketable debt securities – current
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20,011 | 20,020 | ||||||
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Accounts receivable, net of allowance for doubtful accounts of $460 and $397, respectively
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12,454 | 13,844 | ||||||
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Inventories
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24,884 | 24,851 | ||||||
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Prepaid expenses
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5,079 | 5,778 | ||||||
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Deferred income taxes
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4,474 | 4,443 | ||||||
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Other current assets
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6,042 | 6,004 | ||||||
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Total current assets
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223,887 | 191,195 | ||||||
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Marketable debt securities – non-current
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10,029 | 10,042 | ||||||
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Property and equipment, net
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49,456 | 43,850 | ||||||
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Deferred income taxes
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15,551 | 12,964 | ||||||
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Other assets
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4,958 | 4,606 | ||||||
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Total assets
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$ | 303,881 | $ | 262,657 | ||||
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Liabilities and Shareholders’ Equity
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Current liabilities:
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Accounts payable
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$ | 53,873 | $ | 50,141 | ||||
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Customer prepayments
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19,877 | 13,529 | ||||||
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Compensation and benefits
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17,379 | 29,806 | ||||||
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Taxes and withholding
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19,187 | 9,883 | ||||||
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Other current liabilities
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17,698 | 15,691 | ||||||
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Total current liabilities
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128,014 | 119,050 | ||||||
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Non-current liabilities:
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Warranty liabilities
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2,752 | 2,714 | ||||||
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Other long-term liabilities
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11,670 | 11,502 | ||||||
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Total non-current liabilities
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14,422 | 14,216 | ||||||
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Total liabilities
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142,436 | 133,266 | ||||||
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Shareholders’ equity:
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Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding
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- | - | ||||||
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Common stock, $0.01 par value; 142,500 shares authorized, 56,705 and 56,397 shares issued and outstanding, respectively
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567 | 564 | ||||||
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Additional paid-in capital
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57,347 | 47,701 | ||||||
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Retained earnings
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103,518 | 81,101 | ||||||
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Accumulated other comprehensive income
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13 | 25 | ||||||
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Total shareholders’ equity
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161,445 | 129,391 | ||||||
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Total liabilities and shareholders’ equity
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$ | 303,881 | $ | 262,657 | ||||
Select Comfort Announces First-quarter 2012 Results – Page 7 of 10
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited - in thousands)
subject to reclassification
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Three Months Ended
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March 31,
2012 |
April 2,
2011 |
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Cash flows from operating activities:
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Net income
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$ | 22,417 | $ | 16,583 | ||||
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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4,245 | 3,162 | ||||||
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Stock-based compensation
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6,964 | 1,134 | ||||||
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Net loss on disposals and impairments of assets
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4 | 78 | ||||||
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Excess tax benefits from stock-based compensation
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(2,372 | ) | (296 | ) | ||||
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Deferred income taxes
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(2,610 | ) | 1,442 | |||||
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Changes in operating assets and liabilities:
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Accounts receivable
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1,390 | 1,159 | ||||||
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Inventories
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(33 | ) | 1,114 | |||||
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Income taxes
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10,388 | 6,531 | ||||||
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Prepaid expenses and other assets
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186 | (2,533 | ) | |||||
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Accounts payable
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6,591 | 4,181 | ||||||
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Customer prepayments
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6,348 | 2,580 | ||||||
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Accrued compensation and benefits
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(12,449 | ) | (6,681 | ) | ||||
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Other taxes and withholding
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1,160 | 1,305 | ||||||
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Warranty liabilities
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569 | (119 | ) | |||||
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Other accruals and liabilities
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1,720 | 2,583 | ||||||
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Net cash provided by operating activities
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44,518 | 32,223 | ||||||
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Cash flows from investing activities:
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Purchases of property and equipment
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(9,281 | ) | (2,744 | ) | ||||
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Proceeds from sales of property and equipment
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9 | - | ||||||
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Increase in restricted cash
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- | (2,650 | ) | |||||
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Net cash used in investing activities
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(9,272 | ) | (5,394 | ) | ||||
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Cash flows from financing activities:
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||||||||
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Net decrease in short-term borrowings
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(3,371 | ) | (1,119 | ) | ||||
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Repurchases of common stock
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(1,214 | ) | (283 | ) | ||||
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Proceeds from issuance of common stock
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1,655 | 143 | ||||||
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Excess tax benefits from stock-based compensation
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2,372 | 296 | ||||||
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Net cash used in financing activities
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(558 | ) | (963 | ) | ||||
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Net increase in cash and cash equivalents
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34,688 | 25,866 | ||||||
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Cash and cash equivalents, at beginning of period
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116,255 | 76,016 | ||||||
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Cash and cash equivalents, at end of period
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$ | 150,943 | $ | 101,882 | ||||
Select Comfort Announces First-quarter 2012 Results – Page 8 of 10
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Supplemental Financial Information
(unaudited)
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Three Months Ended
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March 31,
2012 |
April 2,
2011 |
|||||||
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Percent of sales:
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Retail
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88.2 | % | 86.6 | % | ||||
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Direct and E-Commerce
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8.0 | % | 9.3 | % | ||||
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Wholesale
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3.8 | % | 4.1 | % | ||||
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Total
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100.0 | % | 100.0 | % | ||||
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Sales growth rates:
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Retail comparable-store sales
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36 | % | 30 | % | ||||
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Direct and E-Commerce
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17 | % | (3 | %) | ||||
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Company-Controlled comparable sales change
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34 | % | 26 | % | ||||
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Net new/(closed) stores
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2 | % | (3 | %) | ||||
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Total Company-Controlled Channels
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36 | % | 23 | % | ||||
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Wholesale
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26 | % | 4 | % | ||||
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Total
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36 | % | 22 | % | ||||
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Stores open:
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Beginning of period
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381 | 386 | ||||||
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Opened
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10 | 1 | ||||||
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Closed
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(11 | ) | (12 | ) | ||||
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End of period
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380 | 375 | ||||||
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Other metrics:
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Average sales per store ($ in 000's)1
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$ | 1,897 | $ | 1,416 | ||||
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Average sales per square foot1
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$ | 1,229 | $ | 951 | ||||
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Stores > $1 million net sales1
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97 | % | 81 | % | ||||
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Stores > $2 million net sales1
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36 | % | 10 | % | ||||
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Average mattress sales per mattress unit - Company Controlled Channels
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$ | 2,298 | $ | 2,107 | ||||
1Trailing twelve months for stores open at least one year.
Select Comfort Announces First-quarter 2012 Results – Page 9 of 10
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, interest expense, depreciation and amortization, stock-based compensation and asset impairments. 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 | |||||||||||||||
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March 31,
2012 |
April 2,
2011 |
March 31,
2012 |
April 2,
2011 |
|||||||||||||
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Net income
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$ | 22,417 | $ | 16,583 | $ | 66,312 | $ | 40,390 | ||||||||
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Income tax expense
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11,886 | 9,785 | 32,043 | 23,998 | ||||||||||||
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Interest expense
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43 | 57 | 173 | 284 | ||||||||||||
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Depreciation and amortization
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4,230 | 3,149 | 14,574 | 12,834 | ||||||||||||
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Stock-based compensation
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6,964 | 1,134 | 10,801 | 4,334 | ||||||||||||
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Asset impairments
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4 | 78 | 35 | 338 | ||||||||||||
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EBITDA
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$ | 45,544 | $ | 30,786 | $ | 123,938 | $ | 82,178 | ||||||||
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Note -
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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.
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GAAP - generally accepted accounting principles
Select Comfort Announces First-quarter 2012 Results – Page 10 of 10
SELECT COMFORT CORPORATION AND SUBSIDIARIES
Reported to Adjusted Statements of Operations Data Reconciliation
(in thousands, except per share amounts)
|
Three Months Ended
|
||||||||||||||||
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March 31, 2012
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April 2, 2011
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As Reported
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CEO
Transition Costs(1)
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As Adjusted
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As Reported
|
|||||||||||||
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Operating income
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$ | 34,296 | $ | 5,595 | $ | 39,891 | $ | 26,398 | ||||||||
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Other income (expense), net
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7 | - | 7 | (30 | ) | |||||||||||
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Income before income taxes
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34,303 | 5,595 | 39,898 | 26,368 | ||||||||||||
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Income tax expense(2)
|
11,886 | 1,941 | 13,827 | 9,785 | ||||||||||||
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Net income
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$ | 22,417 | $ | 3,654 | $ | 26,071 | $ | 16,583 | ||||||||
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Net income per share –
|
||||||||||||||||
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Basic
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$ | 0.40 | $ | 0.07 | $ | 0.47 | $ | 0.30 | ||||||||
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Diluted
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$ | 0.39 | $ | 0.06 | $ | 0.45 | $ | 0.30 | ||||||||
|
Basic Shares
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55,640 | 55,640 | 55,640 | 54,726 | ||||||||||||
|
Diluted Shares
|
57,440 | 57,440 | 57,440 | 55,977 | ||||||||||||
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(1)
|
In February 2012, we announced that William R. McLaughlin, President and CEO, would retire from the Company effective June 1, 2012. In recognition of Mr. McLaughlin’s contributions, the Compensation Committee approved the modification of Mr. McLaughlin’s currently unvested stock awards. As a result of these modifications, we recorded incremental non-cash compensation of $5.6 million.
|
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(2)
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Reflects effective income tax rate, before discrete adjustments, of 34.7% for 2012.
|
Note - Our "as adjusted" data 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 year-over-year comparisons for investors and financial analysts.
GAAP - generally accepted accounting principles