Exhibit 99.1
FOR IMMEDIATE RELEASE
Media Contact: | Investor Contact: |
Gabby Nelson | Hunter Saklad |
(763) 551-7460 | (763) 551-7498 |
gabby.nelson@selectcomfort.com | investorrelations@selectcomfort.com |
SELECT COMFORT ANNOUNCES FIRST QUARTER 2011 RESULTS
Reports Record First Quarter Net Income per Share of $0.30; Company-owned Comparable Sales Up 26 Percent; Increases 2011 Earnings Guidance to $0.85 to $0.93 per Share
MINNEAPOLIS – (April 20, 2011) – Select Comfort Corporation (NASDAQ: SCSS) today reported first-quarter results for the period ended April 2, 2011. Net sales for the quarter totaled $193 million, compared to $158 million in the first quarter of 2010, a year-over-year increase of 22 percent on company-owned comparable sales growth of 26 percent. The company reported first-quarter net income of $16.6 million, or $0.30 per diluted share, compared to net income of $7.8 million, or $0.14 per diluted share, in the prior-year period – representing a 114 percent year-over-year improvement in earnings per diluted share.
“Our first quarter performance demonstrates the earnings potential of our business when we achieve solid sales growth and increased market share,” said Bill McLaughlin, president and CEO, Select Comfort Corporation. “During the quarter, we remained focused on leveraging our core business, executing against our growth-driving programs and controlling costs, making solid progress against our goals of profitable growth and margin expansion.”
McLaughlin continued, “The momentum of the first quarter allowed us to advance initiatives designed to continue to broaden awareness and consideration for the Sleep Number brand and enhance customers’ store experience in order to drive long-term growth. We expect our efforts to generate strong earnings growth over the balance of the year as well as provide for continued investment in growth opportunities.”
Select Comfort Announces first Quarter 2011 Results - Page 2 of 9
First Quarter Summary
During the first quarter, net sales increased by 22 percent as compared to the year-ago period. The increase in sales was driven by a company-owned comparable sales growth of 26 percent, with the average sales-per-store over the past 12 months reaching $1.4 million, a 26 percent improvement over the prior-year period. Operating income improved by 86 percent to $26.4 million and operating margin improved 469 basis points to 13.7 percent.
Gross profit margins increased 166 basis points from 62.1 percent in the prior-year period to 63.8 percent in the first quarter of 2011. The increase reflects strong product mix offset somewhat by modest commodity-cost increases.
Sales and marketing costs in the first quarter of 2011 increased by 15 percent to $80.3 million, representing 41.6 percent of net sales. This compares to $70.1 million, or 44.4 percent of net sales in the prior-year period. Media investments in the first quarter totaled $23.7 million, 30 percent higher than a year ago.
General and administrative (G&A) expenses were $15.6 million in the first quarter, or 8.1 percent of net sales. This compares to $13.1 million, or 8.3 percent of net sales, in the year-ago period. In the quarter, G&A expenses included incentive compensation related to strong quarterly earnings performance.
Cash flows from operating activities were $32.2 million in the first quarter as compared to $30.4 million during the same period last year. Capital expenditures increased to $2.7 million, compared to $1.0 million in the year-ago period. As of the end of the quarter, cash and cash equivalents totaled $102 million and the company had no borrowings under its revolving credit agreement.
Fiscal 2011 Outlook
Based on continued solid performance, the company is increasing its fiscal 2011 outlook and now anticipates net income per share in 2011 of between $0.85 and $0.93 per diluted share. The revised outlook assumes stability in consumer-spending patterns, company-owned comparable sales growth in the mid-teens, and net-income growth of approximately 30 to 45 percent for the duration of the year. The company noted that increasing inflationary pressures could adversely impact consumer demand through the balance of the year. The company’s long-term expectation for net-income-per-share growth remains between 15 and 20 percent per year.
Select Comfort Announces first Quarter 2011 Results - Page 3 of 9
The company expects to end 2011 with approximately 380 stores after planned store openings and closings. The company anticipates that total 2011 capital expenditures will be approximately $25 million to $30 million, reflecting a total of 40 to 50 store actions (remodels and relocations), along with continued investments in marketing and information systems.
Conference Call
Management will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. Eastern Time (4 p.m. Central; 2 p.m. Pacific) 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 Select Comfort website.
A replay will remain available until midnight Central Time, April 29, 2011, by dialing (203) 369-3207. The webcast replay will remain available in the investor relations area of the company’s website for approximately 60 days.
About Select Comfort Corporation
Founded more than 20 years ago and based in Minneapolis, Select Comfort Corporation designs, manufactures, markets and supports a line of adjustable-firmness mattresses featuring air-chamber technology, branded the Sleep Number® bed, as well as foundations and bedding accessories. SELECT COMFORT® products are sold through its 375 company-owned stores located across the United States; select bedding retailers; direct-marketing operations; and online at www.sleepnumber.com.
Select Comfort Announces first Quarter 2011 Results - Page 4 of 9
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 our marketing messages; the efficiency of our advertising and promotional efforts; consumer acceptance of our products, product quality, innovation and brand image; availability of attractive and cost-effective consumer credit options; execution of our retail store distribution strategy, including our ability to cost-effectively close under-performing store locations; 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; industry competition; our ability to continue to improve our 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 our management information systems to meet the evolving needs of our business and evolving regulatory standards applicable to data privacy and security; our 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 our filings with the Securities and Exchange Commission (SEC), including our 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.
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Select Comfort Announces first Quarter 2011 Results - Page 5 of 9
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited – in thousands, except per share amounts)
Three Months Ended | ||||||||||||||||
April 2, | % of | April 3, | % of | |||||||||||||
2011 | Net Sales | 2010 | Net Sales | |||||||||||||
Net sales | $ | 193,068 | 100.0 | % | $ | 157,953 | 100.0 | % | ||||||||
Cost of sales | 69,967 | 36.2 | % | 59,869 | 37.9 | % | ||||||||||
Gross profit | 123,101 | 63.8 | % | 98,084 | 62.1 | % | ||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 80,271 | 41.6 | % | 70,092 | 44.4 | % | ||||||||||
General and administrative | 15,623 | 8.1 | % | 13,149 | 8.3 | % | ||||||||||
Research and development | 731 | 0.4 | % | 654 | 0.4 | % | ||||||||||
Asset impairment charges | 78 | 0.0 | % | - | 0.0 | % | ||||||||||
Total operating expenses | 96,703 | 50.1 | % | 83,895 | 53.1 | % | ||||||||||
Operating income | 26,398 | 13.7 | % | 14,189 | 9.0 | % | ||||||||||
Interest expense / other | (30 | ) | 0.0 | % | (1,720 | ) | (1.1 | %) | ||||||||
Income before income taxes | 26,368 | 13.7 | % | 12,469 | 7.9 | % | ||||||||||
Income tax expense | 9,785 | 5.1 | % | 4,709 | 3.0 | % | ||||||||||
Net income | $ | 16,583 | 8.6 | % | $ | 7,760 | 4.9 | % | ||||||||
Net income per share – basic | $ | 0.30 | $ | 0.14 | ||||||||||||
Net income per share – diluted | $ | 0.30 | $ | 0.14 | ||||||||||||
Reconciliation of weighted-average shares outstanding: | ||||||||||||||||
Basic weighted-average shares outstanding | 54,726 | 53,615 | ||||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Options | 714 | 996 | ||||||||||||||
Restricted shares | 537 | 470 | ||||||||||||||
Diluted weighted-average shares outstanding | 55,977 | 55,081 |
Select Comfort Announces first Quarter 2011 Results - Page 6 of 9
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share amounts)
subject to reclassification
(unaudited) | ||||||||
April 2, | January 1, | |||||||
2011 | 2011 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 101,882 | $ | 76,016 | ||||
Accounts receivable, net of allowance for doubtful accounts of $351 and $302, respectively | 8,750 | 9,909 | ||||||
Inventories | 18,533 | 19,647 | ||||||
Prepaid expenses | 7,386 | 6,388 | ||||||
Deferred income taxes | 4,162 | 4,297 | ||||||
Other current assets | 4,588 | 652 | ||||||
Total current assets | 145,301 | 116,909 | ||||||
Property and equipment, net | 35,899 | 32,953 | ||||||
Deferred income taxes | 14,108 | 15,965 | ||||||
Other assets | 4,287 | 4,130 | ||||||
Total assets | $ | 199,595 | $ | 169,957 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 48,508 | $ | 42,025 | ||||
Customer prepayments | 15,524 | 12,944 | ||||||
Compensation and benefits | 18,066 | 24,857 | ||||||
Taxes and withholding | 12,567 | 5,359 | ||||||
Other current liabilities | 13,747 | 11,671 | ||||||
Total current liabilities | 108,412 | 96,856 | ||||||
Non-current liabilities: | ||||||||
Warranty liabilities | 2,532 | 2,815 | ||||||
Other long-term liabilities | 13,019 | 12,309 | ||||||
Total non-current liabilities | 15,551 | 15,124 | ||||||
Total liabilities | 123,963 | 111,980 | ||||||
Shareholders’ equity: | ||||||||
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding | - | - | ||||||
Common stock, $0.01 par value; 142,500 shares authorized, 55,587 and 55,455 shares issued and outstanding, respectively | 556 | 555 | ||||||
Additional paid-in capital | 37,870 | 36,799 | ||||||
Retained earnings | 37,206 | 20,623 | ||||||
Total shareholders’ equity | 75,632 | 57,977 | ||||||
Total liabilities and shareholders’ equity | $ | 199,595 | $ | 169,957 |
NOTE: In the first quarter of fiscal 2011 we began reporting cash resulting from credit and debit card transactions when received, rather than on an in-transit basis. To maintain consistency and comparability, previously reported amounts have been reclassified to conform to the current-year presentation.
Select Comfort Announces first Quarter 2011 Results - Page 7 of 9
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited - in thousands)
subject to reclassification
Three Months Ended | ||||||||
April 2, | April 3, | |||||||
2011 | 2010 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 16,583 | $ | 7,760 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 3,162 | 4,898 | ||||||
Stock-based compensation | 1,134 | 762 | ||||||
Disposals and impairments of assets | 78 | - | ||||||
Excess tax benefits from stock-based compensation | (296 | ) | (659 | ) | ||||
Deferred income taxes | 1,442 | (606 | ) | |||||
Change in operating assets and liabilities: | ||||||||
Accounts receivable | 1,159 | 813 | ||||||
Inventories | 1,114 | 194 | ||||||
Income taxes | 6,531 | 4,941 | ||||||
Prepaid expenses and other assets | (2,533 | ) | 261 | |||||
Accounts payable | 4,181 | 2,321 | ||||||
Customer prepayments | 2,580 | 7,511 | ||||||
Accrued compensation and benefits | (6,681 | ) | 1,579 | |||||
Other taxes and withholding | 1,305 | 494 | ||||||
Warranty liabilities | (119 | ) | 19 | |||||
Other accruals and liabilities | 2,583 | 74 | ||||||
Net cash provided by operating activities | 32,223 | 30,362 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (2,744 | ) | (999 | ) | ||||
Investments in restricted cash | (2,650 | ) | (4,515 | ) | ||||
Net cash used in investing activities | (5,394 | ) | (5,514 | ) | ||||
Cash flows from financing activities: | ||||||||
Net decrease in short-term borrowings | (1,119 | ) | (1,486 | ) | ||||
Repurchases of common stock | (283 | ) | (1,335 | ) | ||||
Proceeds from issuance of common stock | 143 | 19 | ||||||
Excess tax benefits from stock-based compensation | 296 | 659 | ||||||
Debt issuance costs | - | (79 | ) | |||||
Net cash used in financing activities | (963 | ) | (2,222 | ) | ||||
Increase in cash and cash equivalents | 25,866 | 22,626 | ||||||
Cash and cash equivalents, at beginning of period | 76,016 | 12,184 | ||||||
Cash and cash equivalents, at end of period | $ | 101,882 | $ | 34,810 |
NOTE: To maintain consistency and comparability, certain amounts from previously reported financial statements have been reclassified to conform to the current-year presentation. See Note on page 6.
Select Comfort Announces first Quarter 2011 Results - Page 8 of 9
AND SUBSIDIARIES
Supplemental Financial Information
(unaudited)
Three Months Ended | ||||||||
April 2, | April 3, | |||||||
2011 | 2010 | |||||||
Percent of sales: | ||||||||
Retail | 86.6 | % | 83.4 | % | ||||
Direct and E-Commerce | 9.3 | % | 11.7 | % | ||||
Wholesale | 4.1 | % | 4.9 | % | ||||
Total | 100.0 | % | 100.0 | % | ||||
Sales growth rates: | ||||||||
Retail same-store sales | 30 | % | 29 | % | ||||
Direct and E-Commerce | (3 | %) | 16 | % | ||||
Company-Controlled comparable sales change | 26 | % | 27 | % | ||||
Net closed stores/other | (3 | %) | (9 | %) | ||||
Total Company-Controlled Channels | 23 | % | 19 | % | ||||
Wholesale | 4 | % | (42 | %) | ||||
Total | 22 | % | 13 | % | ||||
Stores open: | ||||||||
Beginning of period | 386 | 403 | ||||||
Opened | 1 | - | ||||||
Closed | (12 | ) | (4 | ) | ||||
End of period | 375 | 399 | ||||||
Other metrics: | ||||||||
Average sales per store ($ in 000's)1 | $ | 1,416 | $ | 1,123 | ||||
Average sales per square foot1 | $ | 951 | $ | 762 | ||||
Stores > $1 million net sales1 | 81 | % | 57 | % | ||||
Average mattress sales per mattress unit: | ||||||||
Company-Controlled Channels2 | $ | 2,107 | $ | 1,953 |
1Trailing twelve months for stores open at least one year.
2Includes revenue from adjustable foundations which has become a more significant part of the mattress mix. The new definition was adopted in the fourth quarter of fiscal 2010. The prior definition excluded revenue from adjustable foundations.
Select Comfor Announces first Quarter 2011 Results - Page 9 of 9
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 (benefit), interest expense, depreciation and amortization, stock-based compensation and asset impairments consistent with the definition used in our debt covenant calculations. 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 | |||||||||||||||
April 2, | April 3, | April 2, | April 3, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income | $ | 16,583 | $ | 7,760 | $ | 40,390 | $ | 46,008 | ||||||||
Income tax expense (benefit) | 9,785 | 4,709 | 23,998 | (17,341 | ) | |||||||||||
Interest expense | 57 | 1,724 | 284 | 5,937 | ||||||||||||
Depreciation and amortization | 3,149 | 3,327 | 12,834 | 16,395 | ||||||||||||
Stock-based compensation | 1,134 | 762 | 4,334 | 2,977 | ||||||||||||
Asset impairments | 78 | - | 338 | 308 | ||||||||||||
EBITDA | $ | 30,786 | $ | 18,282 | $ | 82,178 | $ | 54,284 |
Note - | 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. |
GAAP - | generally accepted accounting principles |