Exhibit 99.1

snbrlogoa01.jpg
FOR IMMEDIATE RELEASE

SLEEP NUMBER ANNOUNCES FIRST QUARTER 2018 RESULTS

Reported net sales of $389 million and first quarter EPS of $0.52
Generated operating free cash flow of $40 million and repurchased $75 million of the company's common stock
Reiterates full-year 2018 earnings outlook of $1.70 to $2.00 per diluted share

MINNEAPOLIS - (April 18, 2018) - Sleep Number Corporation (NASDAQ: SNBR) today reported first quarter 2018 results for the period ended March 31, 2018.

“We are on track to complete the transition to our revolutionary Sleep Number 360® smart beds
by mid-year. Our smart beds differentiate and strengthen our competitive position through measurably better sleep,” said Shelly Ibach, President and CEO of Sleep Number. “We expect to benefit from the related growing enthusiasm for our brand and operating efficiencies as we progress our initiatives this year.”
  
First Quarter Overview
Net sales were $389 million, down 1% versus 12% growth for the prior year
Gross profit rate of 61.1% versus 62.6% for the same period last year, primarily due to inefficiencies of operating two supply chains as we transition to 360 smart beds
Earnings per diluted share were $0.52, compared with $0.56 the prior year

Cash Flows and Balance Sheet Review
Cash provided by operations was $49 million for the first quarter
Invested $9 million in capital expenditures, compared with $13 million for the same period last year
Increased share repurchases 50% to $75 million for the first quarter, compared with $50 million last year
Return on invested capital (ROIC) was 14.1% for the trailing twelve-month period, well above our cost of capital

Financial Outlook
The company reiterates its outlook for 2018 earnings per diluted share of $1.70 to $2.00. The outlook assumes mid- to high-single digit sales growth for 2018. The 2018 outlook assumes an estimated effective income tax rate of 25%. The company anticipates 2018 capital expenditures to be approximately $50 million. The outlook contemplates a slow growth economy.

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 Sleep Number Corporation
As the leader in sleep innovation, Sleep Number Corporation delivers the best quality sleep through effortless, adjustable comfort and biometric sleep tracking. Sleep Number’s proprietary SleepIQ® technology platform -- one of the most comprehensive databases of biometric consumer sleep data - is proving the connection between sleep and wellbeing. With breakthrough innovations such as the revolutionary Sleep Number 360® smart bed, Sleep Number is redefining the future of sleep and shaping the future of health and wellness. To experience better quality sleep, visit one of the over 550 Sleep Number® stores located in all 50 states or SleepNumber.com. For additional information, visit our newsroom and investor relations site.




Sleep Number Announces First-quarter 2018 Results – Page 2 of 8


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 current and future general and industry economic trends and consumer confidence; the effectiveness of our marketing messages; the efficiency of our advertising and promotional efforts; our ability to execute our company-controlled distribution strategy; our ability to achieve and maintain acceptable levels of product and service quality, and acceptable product return and warranty claims rates; our ability to continue to improve and expand our product line; consumer acceptance of our products, product quality, innovation and brand image; industry competition, the emergence of additional competitive products, and the adequacy of our intellectual property rights to protect our products and brand from competitive or infringing activities; availability of attractive and cost-effective consumer credit options; pending and unforeseen litigation and the potential for adverse publicity associated with litigation; our “just-in-time” manufacturing processes with minimal levels of inventory, which may leave us vulnerable to shortages in supply; 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; risks inherent in global sourcing activities; risks of disruption in the operation of either of our two primary manufacturing facilities; increasing government regulations, which have added or may 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 to protect sensitive data from potential cyber threats; the costs, distractions and potential disruptions to our business related to upgrading our management information systems; our ability to attract, retain and motivate qualified management, executive and other key employees, including qualified retail sales professionals and managers; and uncertainties arising from global events, such as terrorist attacks, political unrest 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.
# # #

Investor Contact: Dave Schwantes; (763) 551-7498; investorrelations@sleepnumber.com
Media Contact: Sarah Reckard; (763) 551-6076; sarah.reckard@sleepnumber.com







Sleep Number Announces First-quarter 2018 Results – Page 3 of 8

SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited – in thousands, except per share amounts)

 
Three Months Ended
 
March 31,
2018
 
% of
Net Sales
 
April 1,
2017
 
% of
Net Sales
 
 
 
 
 
 
 
 
Net sales
$
388,633

 
100.0
%
 
$
393,899

 
100.0
%
Cost of sales
151,156

 
38.9
%
 
147,440

 
37.4
%
Gross profit
237,477

 
61.1
%
 
246,459

 
62.6
%
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 

 
 
Sales and marketing
171,917

 
44.2
%
 
169,266

 
43.0
%
General and administrative
31,734

 
8.2
%
 
33,769

 
8.6
%
Research and development
6,925

 
1.8
%
 
7,596

 
1.9
%
Total operating expenses
210,576

 
54.2
%
 
210,631

 
53.5
%
Operating income
26,901

 
6.9
%
 
35,828

 
9.1
%
Other expense, net
(525
)
 
(0.1
%)
 
(138
)
 
0.0
%
Income before income taxes
26,376

 
6.8
%
 
35,690

 
9.1
%
Income tax expense
5,828

 
1.5
%
 
11,229

 
2.9
%
Net income
$
20,548

 
5.3
%
 
$
24,461

 
6.2
%
 
 
 
 
 
 
 
 
Net income per share – basic
$
0.54

 
 
 
$
0.57

 
 
 
 
 
 
 
 
 
 
Net income per share – diluted
$
0.52

 
 
 
$
0.56

 
 
 
 
 
 
 
 
 
 
Reconciliation of weighted-average shares outstanding:
 
 
 
 
 
 
 
Basic weighted-average shares outstanding
38,244

 
 
 
42,750

 
 
Dilutive effect of stock-based awards
1,103

 
 
 
962

 
 
Diluted weighted-average shares outstanding
39,347

 
 
 
43,712

 
 







Sleep Number Announces First-quarter 2018 Results – Page 4 of 8

SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited - in thousands, except per share amounts)
subject to reclassification
 
March 31,
2018
 
December 30,
2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
2,335

 
$
3,651

Accounts receivable, net of allowance for doubtful accounts of $548 and $714, respectively
21,798

 
19,312

Inventories
86,783

 
84,298

Prepaid expenses
9,339

 
17,565

Other current assets
22,126

 
27,665

Total current assets
142,381

 
152,491

 
 
 
 
Non-current assets:
 

 
 
Property and equipment, net
204,331

 
208,646

Goodwill and intangible assets, net
77,042

 
77,588

Deferred income taxes
1,441

 
2,625

Other non-current assets
33,506

 
30,484

Total assets
$
458,701

 
$
471,834

 
 
 
 
Liabilities and Shareholders’ Equity
 

 
 
Current liabilities:
 

 
 
Borrowings under revolving credit facility
$
75,800

 
$
24,500

Accounts payable
116,142

 
129,194

Customer prepayments
30,179

 
27,767

Accrued sales returns
19,016

 
19,270

Compensation and benefits
27,307

 
34,602

Taxes and withholding
30,658

 
24,234

Other current liabilities
46,566

 
46,822

Total current liabilities
345,668

 
306,389

 
 
 
 
Non-current liabilities:
 

 
 
Other non-current liabilities
77,036

 
76,289

Total liabilities
422,704

 
382,678

 
 
 
 
Shareholders’ equity:
 

 
 
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding

 

Common stock, $0.01 par value; 142,500 shares authorized, 36,943 and 38,813 shares issued and outstanding, respectively
369

 
388

Additional paid-in capital

 

Retained earnings
35,628

 
88,768

Total shareholders’ equity
35,997

 
89,156

Total liabilities and shareholders’ equity
$
458,701

 
$
471,834






Sleep Number Announces First-quarter 2018 Results – Page 5 of 8

SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited – in thousands)
subject to reclassification
 
Three Months Ended
 
March 31,
2018
 
April 1,
2017
Cash flows from operating activities:
 
 
 
Net income
$
20,548

 
$
24,461

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
15,680

 
16,205

Stock-based compensation
3,084

 
3,704

Net gain on disposals and impairments of assets
(70
)
 

Deferred income taxes
1,184

 
5,663

Changes in operating assets and liabilities:

 


Accounts receivable
(2,486
)
 
1,478

Inventories
(2,485
)
 
8,168

Income taxes
4,762

 
5,541

Prepaid expenses and other assets
13,894

 
2,880

Accounts payable
123

 
(1,394
)
Customer prepayments
2,412

 
4,443

Accrued compensation and benefits
(7,567
)
 
11,693

Other taxes and withholding
1,662

 
(903
)
Other accruals and liabilities
(1,485
)
 
4,930

Net cash provided by operating activities
49,256

 
86,869

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(8,805
)
 
(13,211
)
Proceeds from sales of property and equipment
70

 

Net cash used in investing activities
(8,735
)
 
(13,211
)
 
 
 
 
Cash flows from financing activities:
 

 
 

Net increase in short-term borrowings
35,963

 
2,369

Repurchases of common stock
(77,648
)
 
(54,794
)
Proceeds from issuance of common stock
857

 
460

Debt issuance costs
(1,009
)
 

Net cash used in financing activities
(41,837
)
 
(51,965
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(1,316
)
 
21,693

Cash, cash equivalents and restricted cash, at beginning of period
3,651

 
14,759

Cash, cash equivalents and restricted cash, at end of period
$
2,335

 
$
36,452


Note - Effective December 31, 2018, we adopted the provisions of Accounting Standards Update No. 2016-18, Restricted Cash, on a retrospective basis. Amounts for prior periods have been retrospectively adjusted to conform to the current period presentation.





Sleep Number Announces First-quarter 2018 Results – Page 6 of 8

SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Supplemental Financial Information
(unaudited)

 
Three Months Ended
 
March 31,
2018
 
April 1,
2017
Percent of sales:
 
 
 
Retail
91.6
%
 
91.5
%
Online and phone
7.2
%
 
6.7
%
Wholesale/other
1.2
%
 
1.8
%
Total
100.0
%
 
100.0
%
 
 
 
 
Sales change rates:
 
 
 
Retail comparable-store sales
(4
%)
 
2
%
Online and phone
7
%
 
18
%
Company-Controlled comparable sales change
(3
%)
 
3
%
Net opened/closed stores
2
%
 
10
%
Total Company-Controlled Channel
(1
%)
 
13
%
Wholesale/other
(37
%)
 
(23
%)
Total
(1
%)
 
12
%
 
 
 
 
Stores open:
 
 
 
Beginning of period
556

 
540

Opened
13

 
16

Closed
(11
)
 
(10
)
End of period
558

 
546

 
 
 
 
Other metrics:
 
 
 
Average sales per store ($ in 000's) 1
$
2,399

 
$
2,365

Average sales per square foot 1
$
899

 
$
926

Stores > $1 million net sales 1
98
%
 
97
%
Stores > $2 million net sales 1
60
%
 
59
%
Average revenue per mattress unit 2
$
4,421

 
$
4,053

 
 
 
 
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.





Sleep Number Announces First-quarter 2018 Results – Page 7 of 8

SLEEP NUMBER 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 31,
2018
 
April 1,
2017
 
March 31,
2018
 
April 1,
2017
Net income
$
20,548

 
$
24,461

 
$
61,164

 
$
62,909

Income tax expense
5,828

 
11,229

 
20,560

 
28,913

Interest expense
527

 
182

 
1,320

 
887

Depreciation and amortization
15,612

 
16,152

 
60,537

 
59,305

Stock-based compensation
3,084

 
3,704

 
15,143

 
11,899

Asset impairments

 

 
244

 
59

Adjusted EBITDA
$
45,599

 
$
55,728

 
$
158,968

 
$
163,972




Free Cash Flow
(in thousands)
 
Three Months Ended
 
Trailing-Twelve Months Ended
 
March 31,
2018
 
April 1,
2017
 
March 31,
2018
 
April 1,
2017
Net cash provided by operating activities
$
49,256

 
$
86,869

 
$
134,994

 
$
174,533

Subtract: Purchases of property and equipment
8,805

 
13,211

 
55,423

 
58,774

Free cash flow
$
40,451

 
$
73,658

 
$
79,571

 
$
115,759



Note - Our Adjusted EBITDA calculation and our "free cash flow" data are considered non-GAAP financial measures and are 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 in the U.S.





Sleep Number Announces First-quarter 2018 Results – Page 8 of 8

SLEEP NUMBER CORPORATION AND SUBSIDIARIES
Calculation of Return on Invested Capital (ROIC)
(in thousands)

ROIC is a financial measure we use to determine how efficiently we deploy our capital. It quantifies the return we earn on our invested capital. Management believes ROIC is also a useful metric for investors and financial analysts. We compute ROIC as outlined below. Our definition and calculation of ROIC may not be comparable to similarly titled definitions and calculations used by other companies. The tables below reconcile net operating profit after taxes (NOPAT) and total invested capital, which are non-GAAP financial measures, to the comparable GAAP financial measures:

 
 
Trailing-Twelve Months Ended
 
 
March 31,
2018
 
April 1,
2017
Net operating profit after taxes (NOPAT)
 
 
 
 
Operating income
 
$
82,987

 
$
92,580

Add: Rent expense 1
 
74,933

 
69,217

Add: Interest income
 
56

 
128

Less: Depreciation on capitalized operating leases 2
 
(19,266
)
 
(17,550
)
Less: Income taxes 3
 
(41,486
)
 
(48,050
)
NOPAT
 
$
97,224

 
$
96,325

 
 
 
 
 
Average invested capital
 
 
 
 
Total equity
 
$
35,997

 
$
134,151

Less: Cash greater than target 4
 

 

Add: Long-term debt 5
 
75,800

 

Add: Capitalized operating lease obligations 6
 
599,464

 
553,736

Total invested capital at end of period
 
$
711,261

 
$
687,887

Average invested capital 7
 
$
688,758

 
$
692,896

Return on invested capital (ROIC) 8
 
14.1
%
 
13.9
%

1 Rent expense is added back to operating income to show the impact of owning versus leasing the related assets.

2 Depreciation is based on the average of the last five fiscal quarters' ending capitalized operating lease obligations (see note 6) for the respective reporting periods with an assumed thirty-year useful life. This is subtracted from operating income to illustrate the impact of owning versus leasing the related assets.

3 Reflects annual effective income tax rates, before discrete adjustments, of 29.9% and 33.3% for 2018 and 2017, respectively.

4 Cash greater than target is defined as cash, cash equivalents and marketable debt securities less customer prepayments in excess of $100 million.

5 Long-term debt includes existing capital lease obligations, if applicable. In conjunction with increasing our revolving credit facility to $300 million in the first quarter of 2018, we include borrowing under that agreement, including borrowings classified as short term.

6 A multiple of eight times annual rent expense is used as an estimate for capitalizing our operating lease obligations. The methodology utilized aligns with the methodology of a nationally recognized credit rating agency.

7 Average invested capital represents the average of the last five fiscal quarters' ending invested capital balances.

8 ROIC equals NOPAT divided by average invested capital.

Note - Our ROIC calculation and data are considered non-GAAP financial measures and are not in accordance with, or preferable to, 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 in the U.S.


View differences made from one to another to evaluate Sleep Number Corp's financial trajectory

Compare SEC Filings Year-over-Year (YoY) and Quarter-over-Quarter (QoQ)
Sample 10-K Year-over-Year (YoY) Comparison

Compare this 8-K Corporate News to its predecessor by reading our highlights to see what text and tables were  removed  ,   added    and   changed   by Sleep Number Corp.

Continue

Never Miss A New SEC Filing Again


Real-Time SEC Filing Notifications
Screenshot taken from Gmail for a new 10-K Annual Report
Last10K.com Member Feature

Receive an e-mail as soon as a company files an Annual Report, Quarterly Report or has new 8-K corporate news.

Continue

We Highlighted This SEC Filing For You


SEC Filing Sentiment Analysis - Bullish, Bearish, Neutral
Screenshot taken from Wynn's 2018 10-K Annual Report
Last10K.com Member Feature

Read positive and negative remarks made by management in their entirety without having to find them in a 10-K/Q.

Continue

Widen Your SEC Filing Reading Experience


Increased Reading Area for SEC Filings
Screenshot taken from Adobe Inc.'s 10-Q Quarterly Report
Last10K.com Member Feature

Remove data columns and navigations in order to see much more filing content and tables in one view

Continue

Uncover Actionable Information Inside SEC Filings


SEC Filing Disclosures
Screenshot taken from Lumber Liquidators 10-K Annual Report
Last10K.com Member Feature

Read both hidden opportunities and early signs of potential problems without having to find them in a 10-K/Q

Continue

Adobe PDF, Microsoft Word and Excel Downloads


Download Annual and Quarterly Reports as PDF, Word and Excel Documents
Screenshots of actual 10-K and 10-Q SEC Filings in PDF, Word and Excel formats
Last10K.com Member Feature

Export Annual and Quarterly Reports to Adobe PDF, Microsoft Word and Excel for offline viewing, annotations and analysis

Continue

FREE Financial Statements


Download Annual and Quarterly Reports as PDF, Word and Excel Documents
Screenshot of actual balance sheet from company 10-K Annual Report
Last10K.com Member Feature

Get one-click access to balance sheets, income, operations and cash flow statements without having to find them in Annual and Quarterly Reports

Continue for FREE

Intrinsic Value Calculator


Intrinsic Value Calculator
Screenshot of intrinsic value for AT&T (2019)
Last10K.com Member Feature

Our Intrinsic Value calculator estimates what an entire company is worth using up to 10 years of financial ratios to determine if a stock is overvalued or not

Continue

Financial Stability Report


Financial Stability Report
Screenshot of financial stability report for Coco-Cola (2019)
Last10K.com Member Feature

Our Financial Stability reports uses up to 10 years of financial ratios to determine the health of a company's EPS, Dividends, Book Value, Return on Equity, Current Ratio and Debt-to-Equity

Continue

Get a Better Picture of a Company's Performance


Financial Ratios
Available Financial Ratios
Last10K.com Member Feature

See how over 70 Growth, Profitability and Financial Ratios perform over 10 Years

Continue

Log in with your credentials

or    

Forgot your details?

Create Account