News Column

Select Comfort Reports Fourth-Quarter and Full-Year 2013 Results

February 5, 2014

Generates Fourth-quarter Net Sales of $231 Million , a 5% Year-over-year increase Reports Fourth-quarter EPS of $0.12 and Full-year EPS of $1.08 on a GAAP basis Provides 2014 outlook MINNEAPOLIS --(BUSINESS WIRE)-- Select Comfort Corporation (NASDAQ:SCSS) today reported fourth-quarter and full-year 2013 results for the period ended Dec. 28, 2013 . Fourth-quarter Financial Summary Net sales increased 5% to $231 million , compared to $221 million in the fourth quarter of 2012. Company-controlled comparable sales were flat year-over-year. Operating income was $9.7 million , compared with $19.4 million in the fourth quarter of 2012. Earnings per diluted share were $0.12 , compared with $0.22 in the prior year. During the quarter, the company opened 28 new stores and closed 11. Full-year 2013 Financial Summary Net sales increased 3% to $960 million , up from $935 million in 2012. Company-controlled comparable sales declined 4% year-over-year. Earnings per diluted share on a GAAP basis were $1.08 , compared to $1.37 per diluted share in 2012. Adjusted earnings per diluted share (excluding CEO transition benefit/costs) were $1.07 compared with $1.43 for the prior year. The company opened 71 new stores and closed 41 in 2013, ending the year at 440 stores, a 7% increase versus year-end 2012. “While we made important progress on strengthening our strategic differentiators and delivered five percent year-over-year sales growth, our financial performance in the fourth quarter did not meet our expectations,” said Shelly Ibach , president and CEO, Select Comfort. “As we look to 2014, we are cautiously optimistic about the combined impact of what we believe are fundamental product innovations and the most-tested, new advertising campaign in our history.” Cash from operating activities was $88 million for full-year 2013 compared to $101 million in 2012. Capital expenditures for full-year 2013 increased to $77 million as compared to $52 million in 2012, driven by increased investment in stores and information systems. During the fourth quarter, the company returned $10 million to shareholders through the repurchase of 0.5 million shares of its common stock, bringing full-year share repurchases to $40 million , or 1.8 million shares. As of the end of the quarter, cash, cash equivalents and marketable-debt securities totaled $145 million , and the company had no borrowings under its revolving credit facility. Financial Outlook 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 new, relocated and remodeled stores, as well as information technology. 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 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 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 December 28 , % of December 29 , % of 2013 Net Sales 2012 Net Sales Net sales $ 230,854 100.0 % $ 220,559 100.0 % Cost of sales 90,333 39.1 % 80,612 36.5 % Gross profit 140,521 60.9 % 139,947 63.5 % Operating expenses: Sales and marketing 112,679 48.8 % 102,062 46.3 % General and administrative 16,150 7.0 % 16,532 7.5 % Research and development 2,003 0.9 % 1,906 0.9 % Asset impairment charges 34 0.0 % 33 0.0 % Total operating expenses 130,866 56.7 % 120,533 54.6 % Operating income 9,655 4.2 % 19,414 8.8 % Other income, net 80 0.0 % 90 0.0 % Income before income taxes 9,735 4.2 % 19,504 8.8 % Income tax expense 3,310 1.4 % 7,009 3.2 % Net income $ 6,425 2.8 % $ 12,495 5.7 % Net income per share – basic $ 0.12 $ 0.23 Net income per share – diluted $ 0.12 $ 0.22 Reconciliation of weighted-average shares outstanding: Basic weighted-average shares outstanding 54,497 55,261 Effect of dilutive securities: Options 452 1,050 Restricted shares 371 449 Diluted weighted-average shares outstanding 55,320 56,760 SELECT COMFORT CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (in thousands, except per share amounts) Twelve Months Ended December 28 , % of December 29 , % of 2013 Net Sales 2012 Net Sales Net sales $ 960,171 100.0 % $ 934,978 100.0 % Cost of sales 358,416 37.3 % 338,432 36.2 % Gross profit 601,755 62.7 % 596,546 63.8 % Operating expenses: Sales and marketing 439,156 45.7 % 398,205 42.6 % General and administrative 62,840 6.5 % 66,617 7.1 % Research and development 9,478 1.0 % 6,194 0.7 % CEO transition (benefit) costs (534 ) (0.1 %) 5,595 0.6 % Asset impairment charges 127 0.0 % 148 0.0 % Total operating expenses 511,067 53.2 % 476,759 51.0 % Operating income 90,688 9.4 % 119,787 12.8 % Other income, net 323 0.0 % 218 0.0 % Income before income taxes 91,011 9.5 % 120,005 12.8 % Income tax expense 30,930 3.2 % 41,911 4.5 % Net income $ 60,081 6.3 % $ 78,094 8.4 % Net income per share – basic $ 1.10 $ 1.41 Net income per share – diluted $ 1.08 $ 1.37 Reconciliation of weighted-average shares outstanding: Basic weighted-average shares outstanding 54,866 55,516 Effect of dilutive securities: Options 554 1,059 Restricted shares 383 501 Diluted weighted-average shares outstanding 55,803 57,076 SELECT COMFORT CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (in thousands, except per share amounts) subject to reclassification December 28 , December 29 , 2013 2012 Assets Current assets: Cash and cash equivalents $ 58,223 $ 87,915 Marketable debt securities – current 52,159 51,264 Accounts receivable, net of allowance for doubtful accounts of $425 and $348 , respectively 14,979 16,613 Inventories 40,152 35,564 Prepaid expenses 9,216 4,299 Deferred income taxes 6,936 5,401 Other current assets 7,874 9,522 Total current assets 189,539 210,578 Non-current assets: Marketable debt securities – non-current 34,632 38,642 Property and equipment, net 129,542 79,356 Goodwill and intangible assets, net 16,823 2,881 Deferred income taxes 4,943 8,511 Other assets 6,286 2,053 Total assets $ 381,765 $ 342,021 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 73,391 $ 67,703 Customer prepayments 15,392 15,194 Accrued sales returns 9,433 5,330 Compensation and benefits 15,242 21,597 Taxes and withholding 12,517 9,282 Other current liabilities 11,207 13,955 Total current liabilities 137,182 133,061 Non-current liabilities: Warranty liabilities 1,567 1,457 Other long-term liabilities 17,796 13,806 Total non-current liabilities 19,363 15,263 Total liabilities 156,545 148,324 Shareholders’ equity: Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding - - Common stock, $0.01 par value; 142,500 shares authorized, 54,901 and 55,903 shares issued and outstanding, respectively 549 559 Additional paid-in capital 5,382 33,923 Retained earnings 219,276 159,195 Accumulated other comprehensive income 13 20 Total shareholders’ equity 225,220 193,697 Total liabilities and shareholders’ equity $ 381,765 $ 342,021 SELECT COMFORT CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands) subject to reclassification Twelve Months Ended December 28 , December 29 , 2013 2012 Cash flows from operating activities: Net income $ 60,081 $ 78,094 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 30,811 20,401 Stock-based compensation 4,232 10,306 Net loss on disposals and impairments of assets 24 115 Excess tax benefits from stock-based compensation (3,831 ) (6,446 ) Deferred income taxes 2,037 3,499 Changes in operating assets and liabilities, net of effect of acquisition: Accounts receivable 1,993 (2,705 ) Inventories (3,910 ) (10,713 ) Income taxes 4,395 4,299 Prepaid expenses and other assets (3,169 ) (2,382 ) Accounts payable (3,477 ) 7,114 Customer prepayments 198 1,665 Accrued compensation and benefits (5,202 ) (8,108 ) Other taxes and withholding (153 ) 765 Warranty liabilities (1,236 ) (1,454 ) Other accruals and liabilities 5,312 6,176 Net cash provided by operating activities 88,105 100,626 Cash flows from investing activities: Purchases of property and equipment (76,811 ) (51,593 ) Proceeds from sales of property and equipment 117 45 Investments in marketable debt securities (44,170 ) (86,803 ) Proceeds from maturities of marketable debt securities 53,565 26,249 Acquisition of business (15,500 ) - Investment in non-marketable equity securities (4,500 ) - Net cash used in investing activities (87,299 ) (112,102 ) Cash flows from financing activities: Net (decrease) increase in short-term borrowings (223 ) 6,494 Repurchases of common stock (42,072 ) (34,892 ) Proceeds from issuance of common stock 7,966 5,138 Excess tax benefits from stock-based compensation 3,831 6,446 Debt issuance costs - (50 ) Net cash used in financing activities (30,498 ) (16,864 ) Net decrease in cash and cash equivalents (29,692 ) (28,340 ) Cash and cash equivalents, at beginning of period 87,915 116,255 Cash and cash equivalents, at end of period $ 58,223 $ 87,915 SELECT COMFORT CORPORATION AND SUBSIDIARIES Supplemental Financial Information (unaudited) Three Months Ended Twelve Months Ended December 28 , December 29 , December 28 , December 29 , 2013 2012 2013 2012 Percent of sales: Retail 89.5 % 88.7 % 89.2 % 89.2 % Direct and E-Commerce 7.8 % 7.8 % 7.0 % 7.5 % Wholesale/other 2.7 % 3.5 % 3.8 % 3.3 % Total 100.0 % 100.0 % 100.0 % 100.0 % Sales growth rates: Retail comparable-store sales 0 % 12 % (4 %) 24 % Direct and E-Commerce 6 % (3 %) (5 %) 9 % Company-Controlled comparable sales change 0 % 11 % (4 %) 23 % Net open/closed stores 6 % 6 % 6 % 3 % Total Company-Controlled Channel 6 % 17 % 2 % 26 % Wholesale/other (20 %) 13 % 18 % 10 % Total 5 % 17 % 3 % 26 % Stores open: Beginning of period 423 394 410 381 Opened 28 20 71 57 Closed (11 ) (4 ) (41 ) (28 ) End of period 440 410 440 410 Other metrics: Average sales per store ($ in 000's) 1 $ 2,093 $ 2,164 Average sales per square foot 1 $ 1,077 $ 1,324 Stores > $1 million net sales 1 96 % 98 % Stores > $2 million net sales 1 46 % 49 % Average net sales per mattress unit - Company-Controlled Channel 2 $ 3,369 $ 3,249 $ 3,245 $ 3,050 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 December 28 , December 29 , December 28 , December 29 , 2013 2012 2013 2012 Net income $ 6,425 $ 12,495 $ 60,081 $ 78,094 Income tax expense 3,310 7,009 30,930 41,911 Interest expense 10 12 51 91 Depreciation and amortization 8,320 5,653 29,599 19,735 Stock-based compensation 1,173 737 4,232 10,306 Asset impairments 34 33 127 148 Adjusted EBITDA $ 19,272 $ 25,939 $ 125,020 $ 150,285 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) Twelve Months Ended December 28, 2013 December 29, 2012 CEO CEO Transition Transition As Reported Benefit (1) As Adjusted As Reported Costs (1) As Adjusted Operating income $ 90,688 $ (534 ) $ 90,154 $ 119,787 $ 5,595 $ 125,382 Other income, net 323 - 323 218 - 218 Income before income taxes 91,011 (534 ) 90,477 120,005 5,595 125,600 Income tax expense (2) 30,930 (183 ) 30,747 41,911 1,941 43,852 Net income $ 60,081 $ (351 ) $ 59,730 $ 78,094 $ 3,654 $ 81,748 Net income per share – Basic $ 1.10 $ (0.01 ) $ 1.09 $ 1.41 $ 0.07 $ 1.47 Diluted $ 1.08 $ (0.01 ) $ 1.07 $ 1.37 $ 0.06 $ 1.43 Basic Shares 54,866 54,866 54,866 55,516 55,516 55,516 Diluted Shares 55,803 55,803 55,803 57,076 57,076 57,076 (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. As a result of these modifications, we recorded incremental non-cash compensation of $5.6 million in fiscal year 2012. The performance-based stock awards are subject to applicable adjustments through 2014 based on actual performance versus performance targets. During the fiscal year ended December 28, 2013 , we recorded a non-cash compensation benefit of $0.5 million resulting from performance-based stock award adjustments. (2) Reflects effective income tax rate, before discrete adjustments, of 34.2% for 2013 and 34.7% for 2012. 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 Select Comfort Corporation Investor Contact: Dave Schwantes , 763-551-7498 investorrelations@selectcomfort.com or Media Contact: Becky Dvorak , 763-551-6862 publicrelations@selectcomfort.com Source: Select Comfort Corporation


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Business Wire


Story Tools