Exhibit 99.1
 

Media Contact:
Gabby Nelson
(763) 551-7460
gabby.nelson@selectcomfort.com
Investor Contact:
Edwin Boon
(763) 551-7498
investorrelations@selectcomfort.com
 

SELECT COMFORT ANNOUNCES FOURTH-QUARTER
AND FULL-YEAR 2011 RESULTS
 
 
·
Reports Fourth-quarter Earnings per Diluted Share of $0.27
 
·
Achieves Fourth-quarter Comparable Sales Growth of 31 Percent
 
·
Reports 12th Consecutive Quarter of Double-digit Year-over-year Operating Income Growth
 
·
Provides 2012 Earnings Guidance

MINNEAPOLIS – (Feb. 8, 2012) – Select Comfort Corporation (NASDAQ: SCSS) today reported fourth-quarter and fiscal 2011 results for the period ended Dec. 31, 2011. Net sales for the quarter increased 27 percent to $189 million, compared to $149 million in the fourth quarter of 2010, driven by company-controlled comparable sales growth of 31 percent. The company reported fourth-quarter earnings per diluted share of $0.27, a 108 percent increase versus $0.13 per diluted share in the fourth quarter of 2010. Fourth-quarter 2011 results included a $1.9 million, or $0.03 per diluted share, non-recurring net decrease to income-tax expense related to the favorable resolution of prior-years’ tax matters.

Net sales for the full-year 2011 increased 23 percent to $743 million, compared to $606 million in 2010, driven by company-controlled comparable sales growth of 26 percent. The company reported earnings per diluted share of $1.07 in 2011, an 88 percent increase versus $0.57 per diluted share in 2010. Full-year 2011 results included a $1.5 million, or $0.03 per diluted share, non-recurring net decrease to income-tax expense related to the favorable resolution of prior-years’ tax matters.

“Our outstanding financial results in 2011 mark a year of significant progress for our company as we refined our top-line growth formula and achieved record bottom-line leverage and profitability,” said Bill McLaughlin, president and CEO, Select Comfort Corporation. “Building on a strong 2010, we continued to attain top-tier comparable sales increases through our integrated and customer-focused approach to marketing, distribution and product innovation.”
 
 
 

 
 
Select Comfort Announces Fourth-quarter and Full-year 2011 Results – Page 2 of 10

McLaughlin added, “Our team enters 2012 with confidence in our proven growth drivers as we continue to broaden our target consumer, increase brand awareness and develop our under-penetrated major markets. We remain focused on delivering sustained growth in market share and earnings for our shareholders, while also maintaining flexibility to effectively manage through continued market uncertainty.”

Fourth-quarter and Full-year Summary
In the fourth quarter, net sales increased by 27 percent as compared to the prior-year period. The increase in sales was driven by company-controlled comparable sales growth of 31 percent, with average retail sales-per-store during the past 12 months reaching a record $1.7 million, a 33 percent improvement over the prior-year period.

Gross-profit margin in the fourth quarter of 2011 was 62.9 percent of net sales, compared with 63.0 percent in the prior-year period. On a full-year basis, gross-profit margin improved 80 basis points from 62.5 percent in 2010 to 63.3 percent in 2011, driven by favorable product mix, pricing actions and manufacturing efficiencies.

Sales and marketing costs were $82.8 million in the fourth quarter, or 43.8 percent of net sales. This compares to $68.6 million, or 46.1 percent of net sales in the prior-year period, reflecting continued leverage from our sales growth. Media investments in the fourth quarter totaled $24 million, 29 percent higher than a year ago.

General and administrative expenses were $15.0 million in the fourth quarter, or 8.0 percent of net sales. This compares to $13.2 million, or 8.9 percent of net sales during the same period last year, again reflecting continued leverage of the company’s fixed-cost base.

Operating income was $20.0 million during the fourth quarter, and operating margin during the quarter improved 290 basis points from 7.7 percent in 2010 to 10.6 percent in 2011. This operating performance resulted in earnings per diluted share of $0.27, a 108 percent year-over-year improvement, which included a $1.9 million non-recurring net decrease to income-tax expense related to the favorable resolution of prior-years’ tax matters.

Cash flows from operating activities were $91 million for full-year 2011 compared to $71 million in the prior year. Capital expenditures for full-year 2011 increased to $23.5 million as compared to $7.3 million in 2010, driven by increased investment in stores and information systems. As of year-end 2011,
 
 

 
 
Select Comfort Announces Fourth-quarter and Full-year 2011 Results – Page 3 of 10
 
cash, cash equivalents and marketable-debt securities totaled $146 million, and the company had no borrowings under its revolving credit agreement.
 
Fiscal 2012 Outlook
The company expects to increase earnings per diluted share by 23 to 31 percent in 2012 to between $1.32 and $1.40. This outlook assumes company-controlled comparable sales growth of at least 15 percent and a net increase in store count from 381 at year-end 2011 to between 400 and 410 by year-end 2012. It also assumes a year-over-year increase in operating margin of at least 100 basis points.

The company currently anticipates that 2012 capital expenditures will be approximately $50 million, reflecting new stores, repositioned stores and remodels, along with continued investment in customer-management systems. The company also announced today that while its first priority for capital deployment is to invest in continued profitable growth, it currently plans to reinitiate a modest share repurchase in 2012 under a previously approved repurchase program, with the objective to maintain share count at current levels.

“The success and predictability of our profitable growth formula in 2011 gives us confidence as we enter 2012,” said Wendy Schoppert, executive vice president and CFO, Select Comfort Corporation. “We expect sustained revenue growth to come from a combination of new stores and higher average sales per store, while we continue to achieve growth in both operating margins and operating cash flow.”
 
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 Sleep Number website at http://www.sleepnumber.com/eng/aboutus/InvestorRelations.cfm. The webcast replay will remain available in the investor relations area of the company’s website for approximately 60 days.

About Select Comfort Corporation
Select Comfort Corporation (NASDAQ: SCSS) is leading the industry in setting a new standard in sleep by offering consumers high-quality, innovative and individualized sleep solutions, which includes a complete line of SLEEP NUMBER® beds and bedding. The company is the exclusive manufacturer, 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
 
 

 
 
Select Comfort Announces Fourth-quarter and Full-year 2011 Results – Page 4 of 10 
  
personalization 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 the approximately 380 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 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; 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.

# # #
 
 
 

 
 
Select Comfort Announces Fourth-quarter and Full-year 2011 Results  – Page 5 of 10
 
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited – in thousands, except per share amounts)
 
   
Three Months Ended
 
   
December 31,
   
% of
   
January 1,
   
% of
 
   
2011
   
Net Sales
   
2011
   
Net Sales
 
                         
Net sales
  $ 189,073       100.0 %   $ 148,668       100.0 %
Cost of sales
    70,095       37.1 %     54,943       37.0 %
Gross profit
    118,978       62.9 %     93,725       63.0 %
Operating expenses:
                               
Sales and marketing
    82,778       43.8 %     68,576       46.1 %
General and administrative
    15,032       8.0 %     13,203       8.9 %
Research and development
    1,192       0.6 %     426       0.3 %
Asset impairment charges
    6       0.0 %     43       0.0 %
Total operating expenses
    99,008       52.4 %     82,248       55.3 %
Operating income
    19,970       10.6 %     11,477       7.7 %
Other income (expense), net
    4       0.0 %     (67 )     0.0 %
Income before income taxes
    19,974       10.6 %     11,410       7.7 %
Income tax expense
    4,604       2.4 %     4,292       2.9 %
Net income
  $ 15,370       8.1 %   $ 7,118       4.8 %
                                 
Net income per share – basic
  $ 0.28             $ 0.13          
                                 
Net income per share – diluted
  $ 0.27             $ 0.13          
                                 
Reconciliation of weighted-average shares outstanding:
                               
Basic weighted-average shares outstanding
    55,424               54,367          
Effect of dilutive securities:
                               
Options
    873               656          
Restricted shares
    566               465          
Diluted weighted-average shares outstanding
    56,863               55,488          
 
 
 

 
 
Select Comfort Announces Fourth-quarter and Full-year 2011 Results  – Page 6 of 10
 
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share amounts)
 
   
Twelve Months Ended
 
   
December 31,
   
% of
   
January 1,
   
% of
 
   
2011
   
Net Sales
   
2011
   
Net Sales
 
                         
Net sales
  $ 743,203       100.0 %   $ 605,676       100.0 %
Cost of sales
    272,858       36.7 %     227,413       37.5 %
Gross profit
    470,345       63.3 %     378,263       62.5 %
Operating expenses:
                               
Sales and marketing
    317,502       42.7 %     269,901       44.6 %
General and administrative
    58,106       7.8 %     53,572       8.8 %
Research and development
    4,175       0.6 %     2,147       0.4 %
Asset impairment charges
    109       0.0 %     260       0.0 %
Total operating expenses
    379,892       51.1 %     325,880       53.8 %
Operating income
    90,453       12.2 %     52,383       8.6 %
Other expense, net
    (33 )     0.0 %     (1,893 )     (0.3 %)
Income before income taxes
    90,420       12.2 %     50,490       8.3 %
Income tax expense
    29,942       4.0 %     18,922       3.1 %
Net income
  $ 60,478       8.1 %   $ 31,568       5.2 %
                                 
Net income per share – basic
  $ 1.10             $ 0.58          
                                 
Net income per share – diluted
  $ 1.07             $ 0.57          
                                 
Reconciliation of weighted-average shares outstanding:
                               
Basic weighted-average shares outstanding
    55,081               54,005          
Effect of dilutive securities:
                               
Options
    821               817          
Restricted shares
    530               442          
Diluted weighted-average shares outstanding
    56,432               55,264          

 
 

 
 
Select Comfort Announces Fourth-quarter and Full-year 2011 Results  – Page 7 of 10
 
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share amounts)
subject to reclassification
 
   
December 31,
   
January 1,
 
   
2011
   
2011
 
Assets
           
Current assets:
           
Cash and cash equivalents
  $ 116,255     $ 76,016  
Marketable debt securities – current
    20,020       -  
Accounts receivable, net of allowance for doubtful accounts of $397 and $302, respectively
    13,844       9,909  
Inventories
    24,851       19,647  
Prepaid expenses
    5,778       6,388  
Deferred income taxes
    4,443       4,297  
Other current assets
    6,004       652  
Total current assets
    191,195       116,909  
                 
Marketable debt securities – non-current
    10,042       -  
Property and equipment, net
    43,850       32,953  
Deferred income taxes
    12,964       15,965  
Other assets
    4,606       4,130  
Total assets
  $ 262,657     $ 169,957  
                 
Liabilities and Shareholders’ Equity
               
Current liabilities:
               
Accounts payable
  $ 50,141     $ 42,025  
Customer prepayments
    13,529       12,944  
Compensation and benefits
    29,806       24,857  
Taxes and withholding
    9,883       5,359  
Other current liabilities
    15,691       11,671  
Total current liabilities
    119,050       96,856  
                 
Non-current liabilities:
               
Warranty liabilities
    2,714       2,815  
Other long-term liabilities
    11,502       12,309  
Total non-current liabilities
    14,216       15,124  
Total liabilities
    133,266       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, 56,397 and 55,455 shares issued and outstanding, respectively
    564       555  
Additional paid-in capital
    47,701       36,799  
Retained earnings
    81,101       20,623  
Accumulated other comprehensive income
    25       -  
Total shareholders’ equity
    129,391       57,977  
Total liabilities and shareholders’ equity
  $ 262,657     $ 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 Fourth-quarter and Full-year 2011 Results  – Page 8 of 10
 
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
subject to reclassification
 
   
Twelve Months Ended
 
   
December 31,
   
January 1,
 
   
2011
   
2011
 
             
Cash flows from operating activities:
           
Net income
  $ 60,478     $ 31,568  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    13,543       14,626  
Stock-based compensation
    4,971       3,962  
Net disposals and impairments of assets
    98       251  
Excess tax benefits from stock-based compensation
    (2,190 )     (1,358 )
Deferred income taxes
    2,839       2,352  
Changes in operating assets and liabilities:
               
Accounts receivable
    (3,935 )     718  
Inventories
    (5,204 )     (4,001 )
Income taxes
    4,445       6,647  
Prepaid expenses and other assets
    (1,976 )     1,579  
Accounts payable
    6,913       3,995  
Customer prepayments
    585       1,707  
Accrued compensation and benefits
    5,167       11,471  
Other taxes and withholding
    1,944       53  
Warranty liabilities
    566       (1,398 )
Other accruals and liabilities
    2,802       (765 )
Net cash provided by operating activities
    91,046       71,407  
                 
Cash flows from investing activities:
               
Purchases of property and equipment
    (23,527 )     (7,349 )
Proceeds from sales of property and equipment
    11       10  
Investments in marketable debt securities
    (40,021 )     -  
Proceeds from sales and maturity of marketable debt securities
    10,000       -  
Increase in restricted cash
    (2,650 )     -  
Net cash used in investing activities
    (56,187 )     (7,339 )
                 
Cash flows from financing activities:
               
Net decrease in short-term borrowings
    (795 )     (1,074 )
Repurchases of common stock
    (371 )     (1,391 )
Proceeds from issuance of common stock
    4,356       1,014  
Excess tax benefits from stock-based compensation
    2,190       1,358  
Debt issuance costs
    -       (143 )
Net cash provided by (used in) financing activities
    5,380       (236 )
                 
Net increase in cash and cash equivalents
    40,239       63,832  
Cash and cash equivalents, at beginning of period
    76,016       12,184  
Cash and cash equivalents, at end of period
  $ 116,255     $ 76,016  
 
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 7.
 
 

 
 
Select Comfort Announces Fourth-quarter and Full-year 2011 Results  – Page 9 of 10
 
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Supplemental Financial Information
(unaudited)
 
   
Three Months Ended
   
Twelve Months Ended
 
   
December 31,
   
January 1,
   
December 31,
   
January 1,
 
   
2011
   
2011
   
2011
   
2011
 
                         
Percent of sales:
                       
Retail
    87.1 %     83.7 %     87.5 %     84.0 %
Direct and E-Commerce
    9.3 %     10.3 %     8.7 %     10.8 %
Wholesale
    3.6 %     6.0 %     3.8 %     5.2 %
Total
    100.0 %     100.0 %     100.0 %     100.0 %
                                 
Sales growth rates:
                               
Retail comparable-store sales
    33 %     12 %     29 %     21 %
Direct and E-Commerce
    14 %     (6 %)     (1 %)     5 %
Company-Controlled comparable sales change
    31 %     10 %     26 %     19 %
Net closed stores/other
    (1 %)     (2 %)     (1 %)     (5 %)
Total Company-Controlled Channels
    30 %     8 %     25 %     14 %
Wholesale
    (24 %)     32 %     (11 %)     (21 %)
Total
    27 %     9 %     23 %     11 %
                                 
Stores open:
                               
Beginning of period
    374       392       386       403  
Opened
    10       5       19       7  
Closed
    (3 )     (11 )     (24 )     (24 )
End of period
    381       386       381       386  
                                 
Other metrics:
                               
Average sales per store ($ in 000's)1
  $ 1,721     $ 1,295                  
Average sales per square foot1
  $ 1,135     $ 873                  
Stores > $1 million net sales1
    93 %     70 %                
Stores > $2 million net sales1
    24 %     7 %                
Average mattress sales per mattress unit - Company-Controlled Channels2
  $ 2,262     $ 2,035     $ 2,208     $ 2,010  
 
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 prior definition excluded revenue from adjustable foundations. Previously reported amounts have been reclassified to conform to the current-year presentation.
 
 
 

 
 
Select Comfort Announces Fourth-quarter and Full-year 2011 Results  – Page 10 of 10
 
SELECT COMFORT CORPORATION AND SUBSIDIARIES
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, 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  
   
December 31,
   
January 1,
   
December 31,
   
January 1,
 
   
2011
   
2011
   
2011
   
2011
 
                         
Net income
  $ 15,370     $ 7,118     $ 60,478     $ 31,568  
Income tax expense
    4,604       4,292       29,942       18,922  
Interest expense
    43       87       187       1,951  
Depreciation and amortization
    3,744       3,295       13,493       13,012  
Stock-based compensation
    1,297       1,201       4,971       3,962  
Asset impairments
    6       43       109       260  
EBITDA
  $ 25,064     $ 16,036     $ 109,180     $ 69,675  
 
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
 
 


The following information was filed by Select Comfort Corp (SCSS) on Wednesday, February 8, 2012 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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