MINNEAPOLIS--(BUSINESS WIRE)--Select Comfort Corporation (NASDAQ: SCSS) today reported first-quarter 2014 results for the period ended March 29, 2014.
First-quarter Financial Summary
- Net sales increased 7% to $276 million, compared to $258 million in the first quarter of 2013, including comparable sales growth of 2%.
- Operating income decreased to $25.8 million, compared with operating income of $35.2 million in the first quarter of 2013.
- Earnings per diluted share were $0.31, compared with $0.41 in the first quarter of 2013 on an as-adjusted basis (excluding CEO transition benefit).
“We are pleased with our results, which were in line with internal expectations. We continue to make progress and are on track with our three important growth strategies: product innovation, marketing effectiveness and local market development. During the quarter, we introduced the most significant product innovations and marketing advancements in our company’s history. Customer reaction has been strong and we remain cautiously optimistic in an ongoing challenging consumer environment,” said Shelly Ibach, president and CEO, Select Comfort.
Cash flows from operating activities were $39 million in the first quarter, compared with $45 million in the prior year’s first quarter. Capital expenditures increased to $16.7 million as compared to $14.3 million in 2013. During the first quarter, the company repurchased 0.6 million shares of its common stock for a total cost of $10 million. As of the end of the quarter, cash, cash equivalents and marketable-debt securities totaled $143 million, and the company had no borrowings under its revolving credit facility.
Financial Outlook
As previously communicated, the company
expects full-year 2014 earnings per diluted share to approximate
full-year 2013 adjusted earnings per diluted share of $1.07. This
outlook assumes mid- to high-single-digit total revenue growth and the
addition of 20 to 30 net new stores during the year.
The company currently anticipates that 2014 capital expenditures will be $70-$80 million, including investments in systems infrastructure; new, relocated and remodeled stores; and in support of product innovations.
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
Select Comfort Corporation
is leading the industry in delivering an unparalleled sleep experience
by offering consumers high-quality, innovative and individualized sleep
solutions and services, which include a complete line of SLEEP NUMBER®
beds and bedding. The company is the exclusive manufacturer, marketer,
retailer and servicer of the revolutionary Sleep Number bed, which
allows individuals to adjust the firmness and support of each side at
the touch of a button. The company offers further individualization
through its solutions-focused line of Sleep Number pillows, sheets and
other bedding products. As the only national specialty-mattress
retailer, consumers can take advantage of an enhanced mattress-buying
experience at one of the more than 440 SLEEP NUMBER® stores
across the country, online at SleepNumber.com,
or via phone at (800) Sleep Number or (800) 753-3768.
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 the
company’s marketing messages; the efficiency of its advertising and
promotional efforts; consumer acceptance of its products, product
quality, innovation and brand image; availability of attractive and
cost-effective consumer credit options; execution of the company’s
retail store distribution strategy; the company’s dependence on
significant suppliers, and its 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; the
company’s ability to continue to improve its 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 the
company’s management information systems to meet the evolving needs of
its business and evolving regulatory standards applicable to data
privacy and security; the company’s 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 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.
| SELECT COMFORT CORPORATION | ||||||||||||||
| AND SUBSIDIARIES | ||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||
| (unaudited - in thousands, except per share amounts) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| March 29, | % of | March 30, | % of | |||||||||||
| 2014 | Net Sales | 2013 | Net Sales | |||||||||||
| Net sales | $ | 276,412 | 100.0 | % | $ | 258,237 | 100.0 | % | ||||||
| Cost of sales | 105,029 | 38.0 | % | 94,821 | 36.7 | % | ||||||||
| Gross profit | 171,383 | 62.0 | % | 163,416 | 63.3 | % | ||||||||
| Operating expenses: | ||||||||||||||
| Sales and marketing | 125,022 | 45.2 | % | 109,813 | 42.5 | % | ||||||||
| General and administrative | 18,896 | 6.8 | % | 15,820 | 6.1 | % | ||||||||
| Research and development | 1,663 | 0.6 | % | 2,556 | 1.0 | % | ||||||||
| Total operating expenses | 145,581 | 52.7 | % | 128,189 | 49.6 | % | ||||||||
| Operating income | 25,802 | 9.3 | % | 35,227 | 13.6 | % | ||||||||
| Other income, net | 102 | 0.0 | % | 91 | 0.0 | % | ||||||||
| Income before income taxes | 25,904 | 9.4 | % | 35,318 | 13.7 | % | ||||||||
| Income tax expense | 8,912 | 3.2 | % | 11,847 | 4.6 | % | ||||||||
| Net income | $ | 16,992 | 6.1 | % | $ | 23,471 | 9.1 | % | ||||||
| Net income per share – basic | $ | 0.31 | $ | 0.43 | ||||||||||
| Net income per share – diluted | $ | 0.31 | $ | 0.42 | ||||||||||
|
Reconciliation of weighted-average shares outstanding: |
||||||||||||||
| Basic weighted-average shares outstanding | 54,113 | 55,095 | ||||||||||||
| Effect of dilutive securities: | ||||||||||||||
| Options | 353 | 690 | ||||||||||||
| Restricted shares | 378 | 466 | ||||||||||||
| Diluted weighted-average shares outstanding | 54,844 | 56,251 | ||||||||||||
| SELECT COMFORT CORPORATION | ||||||||
| AND SUBSIDIARIES | ||||||||
| Consolidated Balance Sheets | ||||||||
| (in thousands, except per share amounts) | ||||||||
| subject to reclassification | ||||||||
| (unaudited) | ||||||||
| March 29, | December 28, | |||||||
| 2014 | 2013 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 60,409 | $ | 58,223 | ||||
| Marketable debt securities – current | 52,147 | 52,159 | ||||||
|
Accounts receivable, net of allowance for doubtful accounts of $418 and $425, respectively |
15,579 | 14,979 | ||||||
| Inventories | 44,590 | 40,152 | ||||||
| Prepaid expenses | 7,923 | 9,216 | ||||||
| Deferred income taxes | 6,926 | 6,936 | ||||||
| Other current assets | 8,613 | 7,874 | ||||||
| Total current assets | 196,187 | 189,539 | ||||||
| Non-current assets: | ||||||||
| Marketable debt securities – non-current | 30,469 | 34,632 | ||||||
| Property and equipment, net | 137,567 | 129,542 | ||||||
| Goodwill and intangible assets, net | 16,613 | 16,823 | ||||||
| Deferred income taxes | 6,396 | 4,943 | ||||||
| Other assets | 6,229 | 6,286 | ||||||
| Total assets | $ | 393,461 | $ | 381,765 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 63,385 | $ | 73,391 | ||||
| Customer prepayments | 20,177 | 15,392 | ||||||
| Accrued sales returns | 10,737 | 9,433 | ||||||
| Compensation and benefits | 19,493 | 15,242 | ||||||
| Taxes and withholding | 16,514 | 12,517 | ||||||
| Other current liabilities | 10,410 | 11,207 | ||||||
| Total current liabilities | 140,716 | 137,182 | ||||||
| Non-current liabilities: | ||||||||
| Warranty liabilities | 1,897 | 1,567 | ||||||
| Other long-term liabilities | 18,725 | 17,796 | ||||||
| Total non-current liabilities | 20,622 | 19,363 | ||||||
| Total liabilities | 161,338 | 156,545 | ||||||
| Shareholders’ equity: | ||||||||
|
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding |
- | - | ||||||
|
Common stock, $0.01 par value; 142,500 shares authorized, 54,273 and 54,901 shares issued and outstanding, respectively |
543 | 549 | ||||||
| Additional paid-in capital | - | 5,382 | ||||||
| Retained earnings | 231,557 | 219,276 | ||||||
| Accumulated other comprehensive income | 23 | 13 | ||||||
| Total shareholders’ equity | 232,123 | 225,220 | ||||||
| Total liabilities and shareholders’ equity | $ | 393,461 | $ | 381,765 | ||||
| SELECT COMFORT CORPORATION | ||||||||||||
| AND SUBSIDIARIES | ||||||||||||
| Consolidated Statements of Cash Flows | ||||||||||||
| (unaudited - in thousands) | ||||||||||||
| subject to reclassification | ||||||||||||
| Three Months Ended | ||||||||||||
| March 29, | March 30, | |||||||||||
| 2014 | 2013 | |||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 16,992 | $ | 23,471 | ||||||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
| Depreciation and amortization | 9,176 | 6,661 | ||||||||||
| Stock-based compensation | (108 | ) | 432 | |||||||||
| Net (gain) loss on disposals and impairments of assets | (2 | ) | 27 | |||||||||
| Excess tax benefits from stock-based compensation | (19 | ) | (2,401 | ) | ||||||||
| Deferred income taxes | (1,450 | ) | 585 | |||||||||
| Changes in operating assets and liabilities, net of effect of acquisition: | ||||||||||||
| Accounts receivable | (552 | ) | 2,454 | |||||||||
| Inventories | (4,438 | ) | 5,269 | |||||||||
| Income taxes | 3,795 | 7,534 | ||||||||||
| Prepaid expenses and other assets | 1,030 | (889 | ) | |||||||||
| Accounts payable | 3,600 | 12,955 | ||||||||||
| Customer prepayments | 4,785 | 2,302 | ||||||||||
| Accrued compensation and benefits | 4,080 | (9,165 | ) | |||||||||
| Other taxes and withholding | 36 | (1,443 | ) | |||||||||
| Warranty liabilities | 185 | (239 | ) | |||||||||
| Other accruals and liabilities | 1,754 | (2,531 | ) | |||||||||
| Net cash provided by operating activities | 38,864 | 45,022 | ||||||||||
| Cash flows from investing activities: | ||||||||||||
| Purchases of property and equipment | (16,660 | ) | (14,309 | ) | ||||||||
| Proceeds from sales of property and equipment | 5 | 3 | ||||||||||
| Investments in marketable debt securities | (13,623 | ) | (12,883 | ) | ||||||||
| Proceeds from maturities of marketable debt securities | 10,000 | 5,898 | ||||||||||
| Acquisition of business | - | (15,500 | ) | |||||||||
| Investment in non-marketable equity securities | - | (1,500 | ) | |||||||||
| Increase in restricted cash | (500 | ) | - | |||||||||
| Net cash used in investing activities | (20,778 | ) | (38,291 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Net decrease in short-term borrowings | (6,094 | ) | (4,370 | ) | ||||||||
| Repurchases of common stock | (10,236 | ) | (10,144 | ) | ||||||||
| Proceeds from issuance of common stock | 411 | 2,282 | ||||||||||
| Excess tax benefits from stock-based compensation | 19 | 2,401 | ||||||||||
| Net cash used in financing activities | (15,900 | ) | (9,831 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | 2,186 | (3,100 | ) | |||||||||
| Cash and cash equivalents, at beginning of period | 58,223 | 87,915 | ||||||||||
| Cash and cash equivalents, at end of period | $ | 60,409 | $ | 84,815 | ||||||||
| SELECT COMFORT CORPORATION | ||||||||||
| AND SUBSIDIARIES | ||||||||||
| Supplemental Financial Information | ||||||||||
| (unaudited) | ||||||||||
| Three Months Ended | ||||||||||
| March 29, | March 30, | |||||||||
| 2014 | 2013 | |||||||||
| Percent of sales: | ||||||||||
| Retail | 89.7 | % | 88.1 | % | ||||||
| Direct and E-Commerce | 6.4 | % | 6.7 | % | ||||||
| Wholesale/other | 3.9 | % | 5.2 | % | ||||||
| Total | 100.0 | % | 100.0 | % | ||||||
| Sales change rates: | ||||||||||
| Retail comparable-store sales | 2 | % | (8 | %) | ||||||
| Direct and E-Commerce | 2 | % | (18 | %) | ||||||
| Company-Controlled comparable sales change | 2 | % | (9 | %) | ||||||
| Net open/closed stores | 7 | % | 6 | % | ||||||
| Total Company-Controlled Channel | 9 | % | (3 | %) | ||||||
| Wholesale/other | (21 | %) | 35 | % | ||||||
| Total | 7 | % | (2 | %) | ||||||
| Stores open: | ||||||||||
| Beginning of period | 440 | 410 | ||||||||
| Opened | 17 | 10 | ||||||||
| Closed | (14 | ) | (9 | ) | ||||||
| End of period | 443 | 411 | ||||||||
| Other metrics: | ||||||||||
| Average sales per store ($ in 000's) 1 | $ | 2,120 | $ | 2,118 | ||||||
| Average sales per square foot 1 | $ | 1,042 | $ | 1,256 | ||||||
| Stores > $1 million net sales 1 | 97 | % | 98 | % | ||||||
| Stores > $2 million net sales 1 | 47 | % | 46 | % | ||||||
| Average net sales per mattress unit - Company-Controlled Channel 2 | $ | 3,373 | $ | 3,132 | ||||||
|
1 Trailing twelve months for stores open at least one year. |
||||||||||
|
2 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:
| Three Months Ended | Trailing-Twelve Months Ended | ||||||||||||
| March 29, | March 30, | March 29, | March 30, | ||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||
| Net income | $ | 16,992 | $ | 23,471 | $ | 53,602 | $ | 79,148 | |||||
| Income tax expense | 8,912 | 11,847 | 27,995 | 41,872 | |||||||||
| Interest expense | 10 | 14 | 47 | 62 | |||||||||
| Depreciation and amortization | 8,885 | 6,333 | 32,151 | 21,838 | |||||||||
| Stock-based compensation | (108 | ) | 432 | 3,692 | 3,774 | ||||||||
| Asset impairments | 3 | 30 | 100 | 174 | |||||||||
| Adjusted EBITDA | $ | 34,694 | $ | 42,127 | $ | 117,587 | $ | 146,868 | |||||
| Note - | Our Adjusted 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 |
||
| SELECT COMFORT CORPORATION AND SUBSIDIARIES | |||||||||||||
| Reported to Adjusted Statements of Operations Data Reconciliation | |||||||||||||
| (in thousands, except per share amounts) | |||||||||||||
| Three Months Ended | |||||||||||||
| March 29, 2014 | March 30, 2013 | ||||||||||||
| CEO | |||||||||||||
| Transition | |||||||||||||
| As Reported | As Reported | Benefit(1) | As Adjusted | ||||||||||
| Operating income | $ | 25,802 | $ | 35,227 | $ | (391 | ) | $ | 34,836 | ||||
| Other income, net | 102 | 91 | - | 91 | |||||||||
| Income before income taxes | 25,904 | 35,318 | (391 | ) | 34,927 | ||||||||
| Income tax expense(2) | 8,912 | 11,847 | (134 | ) | 11,713 | ||||||||
| Net income | $ | 16,992 | $ | 23,471 | $ | (257 | ) | $ | 23,214 | ||||
| Net income per share – | |||||||||||||
| Basic | $ | 0.31 | $ | 0.43 | $ | 0.00 | $ | 0.42 | |||||
| Diluted | $ | 0.31 | $ | 0.42 | $ | 0.00 | $ | 0.41 | |||||
| Basic Shares | 54,113 | 55,095 | 55,095 | 55,095 | |||||||||
| Diluted Shares | 54,844 | 56,251 | 56,251 | 56,251 | |||||||||
| (1) | In February 2012, we announced that William R. McLaughlin, then President and CEO, would retire from the Company effective June 1, 2012. In recognition of Mr. McLaughlin’s contributions, the Compensation Committee approved the modification of Mr. McLaughlin’s currently unvested stock awards, including performance-based stock awards. The performance-based stock awards are subject to applicable adjustments through 2014 based on actual performance versus performance targets. In the first three months of 2013, we recorded a non-cash compensation benefit of $0.4 million resulting from performance-based stock award adjustments. | |
| (2) | Reflects effective income tax rate, before discrete adjustments of 34.3% for 2013. | |
| Note - | Our "as adjusted" data 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 year-over-year comparisons for investors and financial analysts. | |
|
GAAP - generally accepted accounting principles |
||
