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

2016 net sales grew 8% to a record $1.3 billion

Reported 2016 EPS growth of 13% to $1.10, including fourth-quarter EPS of $0.25

Generated 40% increase in cash from operations in 2016 to $152 million

Provides 2017 earnings outlook of $1.20 to $1.40 per diluted share

MINNEAPOLIS

- (February 8, 2017) - Select Comfort Corporation (NASDAQ: SCSS) today reported fourth quarter and full-year 2016 results for the period ended December 31, 2016.

“While our fourth quarter sales and earnings were below our expectations, we begin 2017 well positioned to accelerate earnings growth, cas h generation and returns to shareholders. Thus far in 2017 traffic and sales are on target, which we attribute to a steadier consumer environment and improved marketing effectiveness,” said Shelly Ibach, president and chief executive officer of Select Comfort. “All of the investments we have made over the past five years are coming together with the roll out of our revolutionary new Sleep Number 360™ smart beds, which will enable both continued market share growth and greater business leverage.”

Fourth Quarter Statement of Operations Review

Net sales

increased 46% to $313 million, including a comparable sales increase of 34% and 12 percentage points (ppt) of growth from net new stores; Q4 of 2015 was impacted by our ERP system implementation

Earnings per diluted share

were $0.25, compared with a loss per diluted share of $0.42 for the prior year’s fourth quarter

Full-year Statement of Operations Review

increased 8% to $1.31 billion in 2016, including a 1% comparable sales gain and 7 ppt of growth from new stores

Gross margin

increased 80 basis points to 61.8% through manufacturing and logistics efficiencies

increased 13% to $1.10, compared to $0.97 in 2015

Cash Flows and Balance Sheet Review

Generated a record $152 million in operating cash flows in 2016 compared with $108 million in 2015

Invested $58 million in capital expenditures, down 32% from 2015, bringing the total transformative investments in the business over the last five years to $427 million

Increased share repurchases 27% to $125 million in 2016, bringing total returns to shareholders to $338 million over the past five years; $245 million remains under our current share repurchase authorization

Delivered a 12.2% ROIC for the year, 54% above our 2016 weighted average cost of capital of 7.9%

Financial Outlook

The company expects to generate full-year 2017 earnings per diluted share of between $1.20 and $1.40, including $0.15 to $0.22 of incremental costs related to the launch of our new Sleep Number 360 smart bed line and the redesign of our logistics network. The outlook assumes mid- to high-single digit sales growth for the full year and a 3% to 4% increase in store count in 2017, building on 11% store count growth in 2016. The company anticipates 2016 capital expenditures to be approximately $50 to $55 million. The 2017 outlook does not contemplate a further worsening of the consumer spending environment.

Select Comfort Announces Fourth-quarter and Full-year 2016 Results – Page

Conference Call Information

Management will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. EST (4 p.m. CST; 2 p.m. PST) 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 Corporation

Thirty 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 3,700 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 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 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.

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

December 31,

Net Sales

January 2,

313,445

214,682

Cost of sales

115,963

93,939

Gross profit

197,482

120,743

Operating expenses:

Sales and marketing

152,368

126,446

General and administrative

23,472

19,258

Research and development

Total operating expenses

182,170

151,400

Operating income (loss)

15,312

(30,657

Other expense, net

Income (loss) before income taxes

15,176

(30,687

Income tax expense (benefit)

(9,515

Net income (loss)

11,287

(21,172

Net income (loss) per share – basic

Net income (loss) per share – diluted

Reconciliation of weighted-average shares outstanding:

Basic weighted-average shares outstanding

44,501

50,045

Dilutive effect of stock-based awards

Diluted weighted-average shares outstanding

45,370

For the three months ended January 2, 2016, potentially dilutive stock-based awards have been excluded from the calculation of diluted weighted-average shares outstanding, as their inclusion would have had an anti-dilutive effect on our net loss per diluted share.

Twelve Months Ended

1,311,291

1,213,699

501,131

472,948

810,160

740,751

595,845

550,475

109,674

99,209

27,991

15,971

733,510

665,655

76,650

75,096

Other (expense) income, net

Income before income taxes

75,933

75,430

24,516

24,911

51,417

50,519

Net income per share – basic

Net income per share – diluted

46,154

51,252

46,902

52,101

Consolidated Balance Sheets

(unaudited - in thousands, except per share amounts)

subject to reclassification

Assets

Current assets:

Cash and cash equivalents

11,609

20,994

Marketable debt securities – current

Accounts receivable, net of allowance for doubtful accounts of $884 and $1,039, respectively

19,705

29,002

Inventories

75,026

86,600

Income taxes receivable

15,284

Prepaid expenses

10,207

Other current assets

23,282

13,737

Total current assets

138,327

182,391

Non-current assets:

Marketable debt securities – non-current

Property and equipment, net

208,367

204,376

Goodwill and intangible assets, net

80,817

83,344

Deferred income taxes

Other assets

24,988

19,197

Total assets

457,166

500,897

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

105,375

103,941

Customer prepayments

26,207

51,473

Accrued sales returns

15,222

20,562

Compensation and benefits

19,455

15,670

Taxes and withholding

23,430

Other current liabilities

35,628

23,447

Total current liabilities

225,317

224,949

Non-current liabilities:

Other long-term liabilities

71,529

53,609

Total liabilities

296,846

278,558

Shareholders’ equity:

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

Common stock, $0.01 par value; 142,500 shares authorized, 43,569 and 49,402 shares issued and outstanding, respectively

Additional paid-in capital

Retained earnings

159,884

221,859

Accumulated other comprehensive loss

Total shareholders’ equity

160,320

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

57,172

47,630

Stock-based compensation

11,961

10,290

Net loss on disposals and impairments of assets

Excess tax benefits from stock-based compensation

(2,182

(1,640

11,924

Gain on sale of non-marketable equity securities

(6,891

Changes in operating assets and liabilities, net of effect of acquisition:

(9,259

11,574

(33,065

25,119

(13,943

Prepaid expenses and other assets

(2,195

(4,965

19,130

(25,266

22,735

Accrued compensation and benefits

(17,493

Other taxes and withholding

Other accruals and liabilities

14,130

19,542

Net cash provided by operating activities

151,645

107,942

Cash flows from investing activities:

Purchases of property and equipment

(57,852

(85,586

Proceeds from sales of property and equipment

Investments in marketable debt securities

(5,968

(29,299

Proceeds from marketable debt securities

21,053

127,664

Acquisition of business

(70,018

Proceeds from non-marketable equity securities

12,891

Net cash used in investing activities

(42,675

(44,276

Cash flows from financing activities:

Net increase in short-term borrowings

Repurchases of common stock

(126,693

(100,201

Proceeds from issuance of common stock

Debt issuance costs

Net cash used in financing activities

(118,355

(94,667

Net decrease in cash and cash equivalents

(9,385

(31,001

Cash and cash equivalents, at beginning of period

51,995

Cash and cash equivalents, at end of period

Supplemental Financial Information

(unaudited)

Percent of sales:

Retail

Online and phone

Wholesale/other

Sales change rates:

Retail comparable-store sales

Online and phone

Company-Controlled comparable sales change

Net opened/closed stores and 53

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

Interest expense

14,564

13,808

56,910

46,916

Asset impairments

32,658

(15,426

145,689

133,057

Free Cash Flow

Net cash provided by (used in) operating activities

(23,645

Subtract: Purchases of property and equipment

19,083

24,151

Free cash flow

(12,699

(47,796

93,793

22,356

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

67,416

62,369

Add: Interest income

Less: Depreciation on capitalized operating leases

(17,185

(16,203

Less: Income taxes

(41,933

(40,384

85,042

81,372

Average invested capital

Total equity

Less: Cash greater than target

Add: Long-term debt

Add: Capitalized operating lease obligations

539,328

498,952

Total invested capital at end of period

699,648

721,291

Average invested capital

699,576

726,756

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
Select Comfort Corporation's SVP & Chief H.C. Officer just disposed of 1,000 shares - Nov. 3, 2017
Select Comfort Corporation's SVP Chief Legal & Risk Officer just disposed of 8,000 shares - Nov. 3, 2017
Select Comfort Changes Name To Sleep Number - Nov. 1, 2017
Select Comfort Corporation Just Filed Its Quarterly Report: Net Income per Commo... - Oct. 27, 2017

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