The following excerpt is from the company's SEC filing.

Reported net sales of $353 million and EPS of $0.27

Generated $52 million in operating free cash flow and repurchased $50 million of the company's common stock

Reiterates full-year 2016 EPS outlook of $1.25 to $1.45 per share

MINNEAPOLIS

- (April 28, 2016) - Select Comfort Corporation (NASDAQ: SCSS) today reported first quarter 2016 results for the period ended April 2, 2016.

“We are pleased with our first quarter results, which were on track with our expectations. We have completed our ERP system implementation - the last piece of our transformation - and have returned to normal ized customer service levels,” said Shelly Ibach, president and chief executive officer of Select Comfort. “The system is already improving our customer experience and we expect to realize operating efficiencies in the back half of this year.

Our competitive advantages are stronger than they have ever been and we are now well positioned for accelerated long-term earnings growth.”

First Quarter Overview

Net sales

increased 1% to $353 million, including a 4% comparable sales decline

Earnings per diluted share

were $0.27, compared with $0.54 in the prior year’s quarter, including an estimated $0.25 impact from lost sales and inefficiencies related to our ERP implementation

Cash provided by operations

of $64 million, up from $49 million in the prior year, funded the repurchase of $50 million of company stock (2.6 million shares) and $12 million of capital spending during the quarter

Financial Outlook

The company reiterates its outlook for 2016 earnings per diluted share of $1.25 to $1.45, compared with full-year 2015 earnings per diluted share of $0.97. The outlook assumes low-teen sales growth for the full year, with low single-digit growth in the first half of the year. Our 2016 outlook includes an estimated $0.30 earnings per share reduction related to the ERP transition (primarily in the first quarter), including $40 to $50 million of estimated sales impact. The outlook assumes a 10% increase in store count in 2016 and anticipates 2016 capital expenditures will be approximately $70 million. The outlook does not contemplate a worsening consumer spending environment.

Conference Call Information

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 for approximately 60 days.

Select Comfort Announces First-quarter 2016 Results – Page

Investor Presentation

The company has posted its updated Investor Presentation on the investor relations area of the Sleep Number website at

About Select Comfort Corporation

Nearly 30 years ago, Sleep Number transformed the mattress industry with the idea that ‘one size does

fit all’ when it comes to sleep. Today, the company is the leader in sleep innovation and ranked “Highest in Customer Satisfaction with Mattresses” in 2015 by J.D. Power. As the pioneer in biometric sleep monitoring and adjustability, Sleep Number is proving the connection between quality sleep and health and wellbeing. Dedicated to individualizing sleep experiences, the company’s more than 3,400 employees are improving lives with innovative sleep solutions. To find better quality sleep visit one of our more than 490 U.S. Sleep Number

stores or SleepNumber.com.

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 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; 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 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 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 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.

Investor Contact:

Dave Schwantes; (763) 551-7498;

investorrelations@selectcomfort.com

Media Contact:

Susan Eich; (763) 551-6934;

Susan.Eich@selectcomfort.com

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited – in thousands, except per share amounts)

Three Months Ended

April 2,

Net Sales

April 4,

352,980

349,809

Cost of sales

143,906

133,976

Gross profit

209,074

215,833

Operating expenses:

Sales and marketing

150,668

140,503

General and administrative

30,906

28,254

Research and development

Total operating expenses

189,176

172,108

Operating income

19,898

43,725

Other (expense) income, net

Income before income taxes

19,801

43,878

Income tax expense

15,079

Net income

12,969

28,799

Net income per share – basic

Net income per share – diluted

Reconciliation of weighted-average shares outstanding:

Basic weighted-average shares outstanding

48,100

52,346

Dilutive effect of stock-based awards

Diluted weighted-average shares outstanding

48,845

53,326

Consolidated Balance Sheets

(in thousands, except per share amounts)

subject to reclassification

(unaudited)

January 2,

Assets

Current assets:

Cash and cash equivalents

29,520

20,994

Marketable debt securities – current

Accounts receivable, net of allowance for doubtful accounts of $1,115 and $1,039, respectively

20,186

29,002

Inventories

80,967

86,600

Income taxes receivable

15,284

Prepaid expenses

12,019

10,207

Deferred income taxes

15,521

15,535

Other current assets

14,116

13,737

Total current assets

172,329

197,926

Non-current assets:

Marketable debt securities – non-current

Property and equipment, net

203,500

204,376

Goodwill and intangible assets, net

82,711

83,344

Other assets

22,463

19,197

Total assets

481,003

513,396

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

96,608

103,941

Customer prepayments

30,936

51,473

Accrued sales returns

22,910

20,562

Compensation and benefits

26,345

15,670

Taxes and withholding

19,294

Other current liabilities

24,124

23,447

Total current liabilities

220,217

224,949

Non-current liabilities:

Warranty liabilities

12,499

Other long-term liabilities

54,579

48,667

Total non-current liabilities

73,602

66,108

Total liabilities

293,819

291,057

Shareholders’ equity:

Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding

Common stock, $0.01 par value; 142,500 shares authorized, 46,686 and 49,402 shares issued and outstanding, respectively

Additional paid-in capital

Retained earnings

186,717

221,859

Accumulated other comprehensive loss

Total shareholders’ equity

187,184

222,339

Total liabilities and shareholders’ equity

Consolidated Statements of Cash Flows

(unaudited – in thousands)

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

13,854

10,783

Stock-based compensation

Net loss on disposals and impairments of assets

Excess tax benefits from stock-based compensation

(3,415

Changes in operating assets and liabilities:

(2,469

16,558

15,453

Prepaid expenses and other assets

(1,272

(1,661

(20,537

(2,591

Accrued compensation and benefits

10,677

(8,977

Other taxes and withholding

Other accruals and liabilities

Net cash provided by operating activities

63,981

48,864

Cash flows from investing activities:

Purchases of property and equipment

(12,289

(17,796

Proceeds from sales of property and equipment

Investments in marketable debt securities

(18,195

Proceeds from marketable debt securities

15,090

16,244

Net cash provided by (used in) investing activities

(19,714

Cash flows from financing activities:

Net decrease in short-term borrowings

(6,661

(16,530

Repurchases of common stock

(51,240

(20,475

Proceeds from issuance of common stock

Debt issuance costs

Net cash used in financing activities

(58,270

(34,794

Net increase (decrease) in cash and cash equivalents

(5,644

Cash and cash equivalents, at beginning of period

51,995

Cash and cash equivalents, at end of period

46,351

Supplemental Financial Information

Percent of sales:

Retail

Direct and E-Commerce

Wholesale/other

Sales change rates:

Retail comparable-store sales

Company-Controlled comparable sales change

Net opened/closed stores

Total Company-Controlled Channel

Stores open:

Beginning of period

Opened

Closed

End of period

Other metrics:

Average sales per store ($ in 000's)

Average sales per square foot

Stores > $1 million net sales

Stores > $2 million net sales

Average revenue per mattress unit

Trailing twelve months for stores open at least one year.

Represents Company-Controlled Channel total net sales divided by Company-Controlled Channel mattress units.

Fiscal 2014 included 53 weeks, as compared to 52 weeks in fiscal 2016 and 2015. The additional week in 2014 was in the fiscal fourth quarter. Company-Controlled comparable sales metrics have been adjusted to remove the estimated impact of the additional week on those metrics.

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:

Trailing-Twelve Months Ended

34,689

79,781

16,664

40,301

Interest expense

13,757

10,544

50,129

40,426

11,274

Asset impairments

37,445

57,423

113,079

170,952

Free Cash Flow

123,059

154,468

Subtract: Purchases of property and equipment

80,079

77,730

Free cash flow

51,692

31,068

42,980

76,738

Note - 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.

Calculation of Return on Invested Capital (ROIC)

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:

Net operating profit after taxes (NOPAT)

51,270

119,669

Add: Rent expense

63,204

59,592

Add: Interest income

Less: Depreciation on capitalized operating leases

(16,501

(14,761

Less: Income taxes

(31,992

(55,697

66,321

109,269

Average invested capital

Total equity

270,254

Less: Cash greater than target

(36,125

Add: Long-term debt

Add: Capitalized operating lease obligations

505,632

476,736

Total invested capital at end of period

692,816

710,865

Average invested capital

729,234

661,708

Return on invested capital (ROIC)

Rent expense is added back to operating income to show the impact of owning versus leasing the related assets.

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.

Reflects annual effective income tax rates, before discrete adjustments, of

for 2016 and 2015, respectively.

Cash greater than target is defined as cash, cash equivalents and marketable debt securities less customer prepayments in excess of $100 million.

Long-term debt includes existing capital lease obligations, if applicable.

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.

Average invested capital represents the average of the last five fiscal quarters' ending invested capital balances.

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.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

Select Comfort Corporation's SVP & Chief H.C. Officer just disposed of 8,560 shares - Nov. 20, 2017
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