Select Comfort Announces Second-quarter 2013 Results

Select Comfort Announces Second-quarter 2013 Results

  • Generates Net Sales of $207 Million, a 1% Year-over-year Increase
  • Reports Second-quarter EPS of $0.18
  • Reaffirms Full-year 2013 Outlook

MINNEAPOLIS--(BUSINESS WIRE)-- Select Comfort Corporation (NAS: SCSS) today reported second-quarter 2013 results for the period ended June 29, 2013.

Second-quarter Financial Summary

  • Net sales increased 1% to $207 million, compared to $205 million in the second quarter of 2012.
  • Company-controlled comparable sales declined 6% year-over-year.
  • Operating income was $15.1 million, compared with $25.9 million in the second quarter of 2012. As a percentage of net sales, operating income was 7.3% compared to 12.6% in the second quarter of 2012.
  • Earnings per diluted share were $0.18, compared to $0.30 in the second quarter of 2012.
  • During the quarter, the company opened 17 stores and closed 15, ending the quarter with 413 stores.

"During the quarter, we experienced sequential monthly sales improvement and strengthened performance as we re-established our proven media-buying formula," said Shelly Ibach, president and CEO, Select Comfort. "We also made progress on our top priorities, product innovation and local-market development, as we position the company for short- and long-term growth."

Ibach continued, "Specifically in June, we launched the Sleep Number DualTemp layer, which solves temperature balancing - one of consumers' most common sleep issues. This product can be used with any mattress brand, which is bringing new customers into our Sleep Number stores."

Cash flows from operating activities were $36 million for the first six months of 2013, compared with $43 million in the prior year. Capital expenditures for the first six months of 2013 increased to $37.1 million as compared to $22.5 million in 2012, driven by increased investment in stores, technology and product innovation. During the second quarter, the company repurchased 0.5 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 $140 million, and the company had no borrowings under its revolving credit facility.

Financial Outlook
The company is maintaining its outlook for full-year 2013 GAAP earnings per diluted share of between $1.30 and $1.45. This outlook assumes high-teens growth in total net sales for the remainder of the year, with a net increase in store count from 410 at year-end 2012 to between 435 and 445 by year-end 2013.

The company currently anticipates that 2013 capital expenditures will be $70-$80 million, reflecting continued investment in stores, technology and product innovation. While its first priority for capital deployment is investment in its high-return growth programs, the company currently plans to continue repurchasing shares in 2013 with the objective of maintaining share count at or below current levels.

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. And as the only national specialty-mattress retailer, consumers can take advantage of an enhanced mattress-buying experience at one of more than 400 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
June 29,% ofJune 30,% of
2013Net Sales2012Net Sales
 
Net sales$207,391100.0%$205,219100.0%
Cost of sales 75,99336.6% 73,64835.9%
Gross profit 131,39863.4% 131,57164.1%
Operating expenses:
Sales and marketing98,35747.4%88,24043.0%
General and administrative15,3597.4%16,2207.9%
Research and development2,5601.2%1,2560.6%
Asset impairment charges 150.0% 30.0%
Total operating expenses 116,29156.1% 105,71951.5%
Operating income15,1077.3%25,85212.6%
Other income, net 780.0% 480.0%
Income before income taxes15,1857.3%25,90012.6%
Income tax expense 5,2592.5% 8,9274.3%
Net income$9,9264.8%$16,9738.3%
 
Net income per share - basic$0.18$0.30
 
Net income per share - diluted$0.18$0.30
 
 
Reconciliation of weighted-average
shares outstanding:
Basic weighted-average shares outstanding55,02955,719
Effect of dilutive securities:
Options5391,129
Restricted shares 419 546
Diluted weighted-average shares outstanding 55,987 57,394
 
 
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited - in thousands, except per share amounts)
        
Six Months Ended
June 29,% ofJune 30,% of
2013Net Sales2012Net Sales
 
Net sales$465,628100.0%$467,602100.0%
Cost of sales 170,814 36.7% 171,73236.7%
Gross profit 294,814 63.3% 295,87063.3%
Operating expenses:
Sales and marketing208,17044.7%194,42541.6%
General and administrative31,5406.8%33,1497.1%
Research and development5,1161.1%2,5460.5%
CEO transition (benefit) costs(391)(0.1%)5,5951.2%
Asset impairment charges 45 0.0% 70.0%
Total operating expenses 244,480 52.5% 235,72250.4%
Operating income50,33410.8%60,14812.9%
Other income, net 169 0.0% 550.0%
Income before income taxes50,50310.8%60,20312.9%
Income tax expense 17,106 3.7% 20,8134.5%
Net income$33,397 7.2%$39,3908.4%
 
Net income per share - basic$0.61 $0.71
 
Net income per share - diluted$0.60 $0.69
 
 
Reconciliation of weighted-average
shares outstanding:
Basic weighted-average shares outstanding55,06255,680
Effect of dilutive securities:
Options6131,099
Restricted shares 426  588
Diluted weighted-average shares outstanding 56,101  57,367
 
 
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share amounts)
subject to reclassification
    
(unaudited)
June 29,December 29,
20132012
Assets
Current assets:
Cash and cash equivalents$58,189$87,915
Marketable debt securities - current53,78751,264

Accounts receivable, net of allowance for doubtful accounts of $459 and $348, respectively

14,38516,613
Inventories34,47335,564
Prepaid expenses9,0524,299
Deferred income taxes5,3985,401
Other current assets 10,904  9,522
Total current assets186,188210,578
 
Non-current assets:
Marketable debt securities - non-current28,50238,642
Property and equipment, net105,53979,356
Goodwill and intangible assets, net17,2882,881
Deferred income taxes4,4708,511
Other assets 4,573  2,053
Total assets$346,560 $342,021
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