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

Reported 12% net sales growth to a record $394 million and first quarter EPS of $0.56

Generated record operating free cash flow of $74 million and repurchased $50 million of the company's common stock

Increases full-year 2017 earnings outlook to a range of $1.25 to $1.50 per diluted share

MINNEAPOLIS

- (April 19, 2017) - Select Comfort Corporation (NASDAQ: SCSS) today reported first quarter 2017 results for the period ended April 1, 2017.

“Consumers are responding enthusiastically to our brand and differentiated products. Our investments over the past few years have made us a st ronger competitor and this is evident in our first quarter results,” said Shelly Ibach, President and CEO of Select Comfort. “In the second quarter, we will begin the phased introduction of the revolutionary Sleep Number 360 smart beds. This innovation will set a new standard for what people should expect from their bed.”

First Quarter Overview

Net sales

increased 12% to $394 million, including a 3% comparable sales increase

Earnings per diluted share

increased 107% to $0.56, compared with $0.27 in the prior year’s quarter

Operating income

increased 80% to $36 million, or 9.1% of net sales (up 350 basis points versus prior year), with our gross margin rate increasing 340 basis points to 62.6% of net sales

Cash provided by operations

was $87 million, up from $64 million in the prior year

Return on invested capital (ROIC)

was 13.9% for the trailing-twelve month period, well above our cost of capital

Financial Outlook

The company has increased its full-year 2017 earnings per diluted share outlook to $1.25 to $1.50, compared with the previous outlook of $1.20 to $1.40 per share. The outlook continues to include an estimated $0.15 to $0.22 EPS impact from incremental costs related to the launch of the Sleep Number 360™ smart bed line and the redesign of our logistics network. The outlook assumes high single-digit sales growth, including 4 to 5 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 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.

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 3,800 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

Select Comfort Announces First-quarter 2017 Results – Page

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; 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; 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

April 1,

Net Sales

April 2,

393,899

352,980

Cost of sales

147,440

143,906

Gross profit

246,459

209,074

Operating expenses:

Sales and marketing

169,266

150,668

General and administrative

33,769

30,906

Research and development

Total operating expenses

210,631

189,176

35,828

19,898

Other expense, net

Income before income taxes

35,690

19,801

Income tax expense

11,229

Net income

24,461

12,969

Net income per share – basic

Net income per share – diluted

Reconciliation of weighted-average shares outstanding:

Basic weighted-average shares outstanding

42,750

48,100

Dilutive effect of stock-based awards

Diluted weighted-average shares outstanding

43,712

48,845

Consolidated Balance Sheets

(unaudited - in thousands, except per share amounts)

subject to reclassification

December 31,

Assets

Current assets:

Cash and cash equivalents

36,452

11,609

Accounts receivable, net of allowance for doubtful accounts of $967 and $884, respectively

18,227

19,705

Inventories

66,858

75,026

Prepaid expenses

10,673

Other current assets

16,812

23,282

Total current assets

149,022

138,327

Non-current assets:

Property and equipment, net

207,192

208,367

Goodwill and intangible assets, net

79,223

80,817

Deferred income taxes

Other non-current assets

27,308

24,988

Total assets

462,745

457,166

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

106,661

105,375

Customer prepayments

30,650

26,207

Accrued sales returns

18,201

15,222

Compensation and benefits

31,058

19,455

Taxes and withholding

28,068

23,430

Other current liabilities

37,551

35,628

Total current liabilities

252,189

225,317

Non-current liabilities:

Other non-current liabilities

75,409

71,529

Total liabilities

328,594

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, 41,676 and 43,569 shares issued and outstanding, respectively

Additional paid-in capital

Retained earnings

133,734

159,884

Total shareholders’ equity

134,151

160,320

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

16,205

13,854

Stock-based compensation

Net loss on disposals and impairments of assets

Excess tax benefits from stock-based compensation

Changes in operating assets and liabilities:

Income taxes

16,558

Prepaid expenses and other assets

(1,272

(1,394

(20,537

Accrued compensation and benefits

11,693

10,677

Other taxes and withholding

Other accruals and liabilities

Net cash provided by operating activities

86,869

63,981

Cash flows from investing activities:

Purchases of property and equipment

(13,211

(12,289

Proceeds from sales of property and equipment

Proceeds from marketable debt securities

15,090

Decrease in restricted cash

Net cash (used in) provided by investing activities

(10,061

Cash flows from financing activities:

Net increase (decrease) in short-term borrowings

(6,661

Repurchases of common stock

(54,794

(51,240

Proceeds from issuance of common stock

Debt issuance costs

Net cash used in financing activities

(51,965

(58,270

Net increase in cash and cash equivalents

24,843

Cash and cash equivalents, at beginning of period

20,994

Cash and cash equivalents, at end of period

29,520

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

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.

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

62,909

34,689

28,913

16,664

Interest expense

16,152

13,757

59,305

50,129

11,899

11,274

Asset impairments

55,728

37,445

163,972

113,079

Free Cash Flow

174,527

123,059

Subtract: Purchases of property and equipment

58,768

80,079

Free cash flow

73,658

51,692

115,759

42,980

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)

92,580

51,270

Add: Rent expense

69,217

63,204

Add: Interest income

Less: Depreciation on capitalized operating leases

(17,550

(16,501

Less: Income taxes

(48,050

(31,992

96,325

66,321

Average invested capital

Total equity

187,184

Less: Cash greater than target

Add: Long-term debt

Add: Capitalized operating lease obligations

553,736

505,632

Total invested capital at end of period

687,887

692,816

Average invested capital

692,896

729,234

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 2017 and 2016, 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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