The following excerpt is from the company's SEC filing.
Reported net sales of $368 million and EPS of $0.56
Reported record year-to-date operating cash flows of $145 million
Updated 2016 EPS outlook to $1.15 to $1.25 per share
- (October 19, 2016) - Select Comfort Corporation (NASDAQ: SCSS) today reported third quarter 2016 results for the period ended October 1, 2016.
“We delivered record operating cash flows for the first nine months of the year as our operational improvements exceeded our expectations and offset the effects of a worsening consumer environment,” said Shelly Ibach, president and chief executive officer o f Select Comfort. “Our investments have strengthened our direct-to-consumer business model and we are making significant progress toward delivering a more convenient customer experience. We expect the digital capabilities we’re developing to succeed in the hyper-competitive digital marketplace.”
Third Quarter Review
were $368 million, including 7 percentage points of growth from stores opened in the last twelve months, offset by an 8% comparable sales decline
Gross profit rate
increased by 60 basis points to 63.1% of net sales
Earnings per diluted share
were $0.56, compared with $0.62 in the prior year’s quarter
Cash Flows and Balance Sheet Review
Generated $145 million in net cash from operating activities for the first nine months of 2016, compared with $132 million for the same period last year
Invested $39 million in capital expenditures and returned $95 million of cash to shareholders during the first nine months of 2016 compared with $61 million and $69 million, respectively, for the same period last year
Ended the quarter with $51 million of cash and securities and no borrowings under our revolving credit facility
The company updated its outlook for 2016 earnings per diluted share to $1.15 to $1.25 per share, compared with full-year 2015 earnings per diluted share of $0.97. The outlook assumes high single-digit sales growth for the full year. The outlook also assumes an 11% increase in store count in 2016 and capital expenditures of $65 million, compared with $86 million in 2015. Our outlook does not contemplate a further deterioration of the 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
. The webcast replay will remain available for approximately 60 days.
Select Comfort Announces Third-quarter 2016 Results – Page
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 500 U.S. Sleep Number
stores or SleepNumber.com.
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 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.
Dave Schwantes; (763) 551-7498;
Susan Eich; (763) 551-6934;
SELECT COMFORT CORPORATION
Consolidated Statements of Operations
(unaudited – in thousands, except per share amounts)
Three Months Ended
Cost of sales
Sales and marketing
General and administrative
Research and development
Total operating expenses
Other (expense) income, net
Income before income taxes
Income tax expense
Net income per share – basic
Net income per share – diluted
Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding
Dilutive effect of stock-based awards
Diluted weighted-average shares outstanding
Nine Months Ended
Consolidated Balance Sheets
(unaudited - in thousands, except per share amounts)
subject to reclassification
Cash and cash equivalents
Marketable debt securities – current
Accounts receivable, net of allowance for doubtful accounts of $1,276 and $1,039, respectively
Income taxes receivable
Deferred income taxes
Other current assets
Total current assets
Marketable debt securities – non-current
Property and equipment, net
Goodwill and intangible assets, net
Liabilities and Shareholders’ Equity
Accrued sales returns
Compensation and benefits
Taxes and withholding
Other current liabilities
Total current liabilities
Other long-term liabilities
Total non-current liabilities
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding
Common stock, $0.01 par value; 142,500 shares authorized, 44,941 and 49,402 shares issued and outstanding, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
Consolidated Statements of Cash Flows
(unaudited – in thousands)
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Net loss on disposals and impairments of assets
Excess tax benefits from stock-based compensation
Gain on sale of non-marketable equity securities
Changes in operating assets and liabilities, net of effect of acquisition:
Prepaid expenses and other assets
Accrued compensation and benefits
Other taxes and withholding
Other accruals and liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Proceeds from sales of property and equipment
Investments in marketable debt securities
Proceeds from marketable debt securities
Acquisition of business
Proceeds from non-marketable equity securities
Net cash used in investing activities
Cash flows from financing activities:
Net increase in short-term borrowings
Repurchases of common stock
Proceeds from issuance of common stock
Debt issuance costs
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, at beginning of period
Cash and cash equivalents, at end of period
Supplemental Financial Information
Percent of sales:
Direct and E-Commerce
Sales change rates:
Retail comparable-store sales
Company-Controlled comparable sales change
Net opened/closed stores
Total Company-Controlled Channel
Beginning of period
End of period
Average sales per store ($ 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)
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
Free Cash Flow
Subtract: Purchases of property and equipment
Free cash flow
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)
Add: Rent expense
Add: Interest income
Less: Depreciation on capitalized operating leases
Less: Income taxes
Average invested capital
Less: Cash greater than target
Add: Long-term debt
Add: Capitalized operating lease obligations
Total invested capital at end of period
Average invested capital
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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