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Sleep Number Corp (SNBR) SEC Filing 8-K Material Event for the period ending Wednesday, February 23, 2022

Sleep Number Corp

CIK: 827187 Ticker: SNBR
Exhibit 99.1
snbrlogojpga.jpg
FOR IMMEDIATE RELEASE

SLEEP NUMBER ANNOUNCES FOURTH-QUARTER AND FULL-YEAR 2021 RESULTS

Fourth-quarter demand increased high-single digits over prior-year demand (adjusted for extra fiscal week last year); a late receipt of semiconductor components from a large global supplier delayed more than $125 million of delivered net sales
Full-year net sales grew to a record $2.18 billion with full-year diluted earnings per share (EPS) of $6.16
Generated record operating cash flows of $300 million for the year and full-year ROIC of 27.6%
Provides 2022 outlook for a 10-15% increase in diluted EPS versus 2021, including constrained first quarter

MINNEAPOLIS
– (February 23, 2022) – Sleep Number Corporation (Nasdaq: SNBR) today reported results for the year ended January 1, 2022.

“Strong demand for Sleep Number’s 360 smart beds again drove record earnings in 2021, even with pandemic-induced global supply chain disruptions,” said Shelly Ibach, President and CEO. “The fourth quarter proved to be the most challenging as we received semiconductor components too late in December to fulfill our planned deliveries. Global electronics supplies remain constrained in the near-term, while demand for our 360 smart beds remains strong, reflecting increased consumer engagement and referrals from more than two million connected smart sleepers. We continue to focus on delivering long-term stakeholder value to build upon our 5-year EPS CAGR of 41% through 2021.”

Fourth Quarter Overview
Net sales decreased 13% to $492 million (-7% adjusted); with a late December receipt of semiconductor components constraining delivered net sales by more than $125 million (about two and half weeks of deliveries)
Diluted EPS of $0.47 for the fourth quarter, compared to $2.19 for the same period last year, or $1.89 excluding the 53rd week
Fiscal 2020 included a 53rd week in the fourth quarter, which we estimate added approximately $41 million in net sales, $11.2 million in operating income and $0.30 of diluted EPS

Full Year Overview
Net sales increased 18% (+20% adjusted) to $2.18 billion in 2021, including a 17% comparable sales gain; up 29% compared to 2019
Gross profit increased 14% (+17% adjusted) to $1.32 billion, or 60.4% of net sales, while offsetting significant input cost increases with pricing actions and efficiency gains; up 25% compared to 2019
Operating income increased 5% (+11% adjusted) to $194 million; up 73% compared to 2019
Diluted EPS increased 26% (+34% adjusted) to a record $6.16; up 128% compared to 2019

Cash Flows and Liquidity Review
Generated $300 million in net cash from operating activities, up 7% versus last year and 59% higher than 2019
Invested $67 million in capital expenditures and repurchased $364 million of Sleep Number stock during 2021
Leverage ratio of 2.6x EBITDAR at the end of 2021
Return on invested capital (ROIC) of 27.6% for the year, up 260 bp versus prior year and nearly four times our weighted-average cost of capital

Financial Outlook
The company expects full-year 2022 diluted EPS to increase 10 to 15% versus 2021. The outlook for 2022 assumes continued global electronics supply constraints with the greatest impact expected in the first quarter. Accordingly, the 2022 outlook assumes first quarter EPS of 30 to 40 cents with EPS growth of approximately 80% expected for the last nine months of the year. The company anticipates 2022 capital expenditures of $70 million to $80 million.


Sleep Number Announces Fourth-quarter and Full-year 2021 Results - Page 2 of 9
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 access the webcast, please visit the investor relations area of the Sleep Number website at https://ir.sleepnumber.com. The webcast replay will remain available for approximately 60 days.

About Sleep Number Corporation

Individuality is the foundation of Sleep Number. Our purpose driven company is comprised of over 5,000 passionate team members who are dedicated to our mission of improving lives by individualizing sleep experiences. We have improved nearly 14 million lives and are positively impacting society’s wellbeing through higher-quality sleep.

Our award-winning 360® smart beds are informed by science. They learn from over one billion sleep sessions of highly-accurate, real-world sleep data – the cumulation of almost 14 billion hours’ worth - to automatically adjust to each sleeper and provide effortless comfort and proven quality sleep. Our 360 smart beds deliver individualized sleep health reports and insights, including a daily SleepIQ® score, and are helping to advance meaningful sleep health solutions by applying sleep science and research.

For life-changing sleep, visit SleepNumber.com or one of our 650 Sleep Number® stores. More information is available on our newsroom and investor relations sites.

Forward-looking Statements
Statements used in this news release relating to future plans, events, financial results or performance, such as the company’s expectations for full-year 2022 diluted EPS and capital expenditures, 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; risks inherent in outbreaks of pandemics or contagious disease, including the COVID-19 pandemic; risks inherent in global-sourcing activities, including tariffs, outbreaks of pandemics or contagious diseases, such as the COVID-19 pandemic, strikes and the potential for shortages in supply or disruption or delay of production and delivery of materials and products in our supply chain; risks of disruption in the operation of any of our main manufacturing, distribution, logistics, home delivery, product development, or customer service facilities or operations; our manufacturing processes with minimal levels of inventory, which may leave us vulnerable to shortages in supply; our dependence on significant suppliers and third parties and our ability to maintain relationships with key suppliers or third parties, including several sole-source suppliers or service providers; rising commodity costs and other inflationary pressures; the effectiveness of our marketing messages; the efficiency of our advertising and promotional efforts; our ability to execute our Total Retail 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, and 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; claims that our products, processes, advertising, or trademarks infringe the intellectual-property rights of others; availability of attractive and cost-effective consumer credit options; increasing government regulation; pending or unforeseen litigation and the potential for adverse publicity associated with litigation; the adequacy of our and third-party information systems to meet the evolving needs of our business and existing and evolving risks and regulatory standards applicable to data privacy and cybersecurity; the costs and potential disruptions to our business related to upgrading or maintaining our information systems; the vulnerability of our and third party information systems to attacks by hackers or other cyber threats that could compromise the security of our systems, result in a data breach or disrupt our business; environmental risks, including increasing environmental regulation and the broader impacts of climate change such as from weather-related events; and our ability to attract, retain and motivate qualified management, executive and other key team members, including qualified retail sales professionals and managers. 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: Julie Elepano; (414) 732-9840; julie.elepano@sleepnumber.com


Sleep Number Announces Fourth-quarter and Full-year 2021 Results - Page 3 of 9

SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited – in thousands, except per share amounts)
 
Thirteen
Weeks Ended
Fourteen
Weeks Ended
 January 1,
2022
% of
Net Sales
January 2,
2021
% of
Net Sales
Net sales$491,984 100.0 %$567,896 100.0 %
Cost of sales212,260 43.1 %211,997 37.3 %
Gross profit279,724 56.9 %355,899 62.7 %
Operating expenses:
Sales and marketing220,236 44.8 %221,712 39.0 %
General and administrative29,924 6.1 %47,084 8.3 %
Research and development14,907 3.0 %12,511 2.2 %
Total operating expenses265,067 53.9 %281,307 49.5 %
Operating income14,657 3.0 %74,592 13.1 %
Interest expense, net1,845 0.4 %813 0.1 %
Income before income taxes12,812 2.6 %73,779 13.0 %
Income tax expense1,671 0.3 %12,420 2.2 %
Net income$11,141 2.3 %$61,359 10.8 %
Net income per share – basic$0.49  $2.28  
Net income per share – diluted$0.47  $2.19  
Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding22,939  26,960  
Dilutive effect of stock-based awards877  1,100  
Diluted weighted-average shares outstanding23,816  28,060  






Sleep Number Announces Fourth-quarter and Full-year 2021 Results - Page 4 of 9

SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited – in thousands, except per share amounts)
 
Fifty-Two
Weeks Ended
Fifty-Three
Weeks Ended
January 1,
2022
% of
Net Sales
January 2,
2021
% of
Net Sales
Net sales$2,184,949 100.0 %$1,856,555 100.0 %
Cost of sales866,102 39.6 %700,555 37.7 %
Gross profit1,318,847 60.4 %1,156,000 62.3 %
Operating expenses:
Sales and marketing905,359 41.4 %771,195 41.5 %
General and administrative161,412 7.4 %158,999 8.6 %
Research and development58,540 2.7 %40,910 2.2 %
Total operating expenses1,125,311 51.5 %971,104 52.3 %
Operating income193,536 8.9 %184,896 10.0 %
Interest expense, net6,245 0.3 %8,924 0.5 %
Income before income taxes187,291 8.6 %175,972 9.5 %
Income tax expense33,545 1.5 %36,783 2.0 %
Net income$153,746 7.0 %$139,189 7.5 %
Net income per share – basic$6.40  $5.03  
Net income per share – diluted$6.16  $4.90  
Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding24,038  27,665  
Dilutive effect of stock-based awards909  763  
Diluted weighted-average shares outstanding24,947  28,428  



Sleep Number Announces Fourth-quarter and Full-year 2021 Results - Page 5 of 9
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited - in thousands, except per share amounts)
subject to reclassification
  
 January 1,
2022
January 2,
2021
Assets  
Current assets:  
Cash and cash equivalents$2,389 $4,243 
Accounts receivable, net of allowances of $924 and $1,046, respectively
25,718 31,871 
Inventories105,644 81,362 
Prepaid expenses18,953 20,839 
Other current assets54,917 43,489 
Total current assets207,621 181,804 
Non-current assets:  
Property and equipment, net195,128 175,223 
Operating lease right-of-use assets371,133 314,226 
Goodwill and intangible assets, net70,468 72,871 
Other non-current assets75,190 56,012 
Total assets$919,540 $800,136 
Liabilities and Shareholders’ Deficit  
Current liabilities:  
Borrowings under revolving credit facility$382,500 $244,200 
Accounts payable162,547 91,904 
Customer prepayments129,499 72,017 
Accrued sales returns22,368 24,765 
Compensation and benefits51,240 76,786 
Taxes and withholding22,087 23,339 
Operating lease liabilities72,360 62,077 
Other current liabilities64,177 60,856 
Total current liabilities906,778 655,944 
Non-current liabilities:
Deferred income taxes688 242 
Operating lease liabilities336,192 283,084 
Other non-current liabilities100,835 84,844 
Total non-current liabilities437,715 368,170 
Total liabilities1,344,493 1,024,114 
Shareholders’ deficit:
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding
— — 
Common stock, $0.01 par value; 142,500 shares authorized, 22,683 and 25,390 shares issued and outstanding, respectively
227 254 
Additional paid-in capital3,971 — 
Accumulated deficit(429,151)(224,232)
Total shareholders’ deficit(424,953)(223,978)
Total liabilities and shareholders’ deficit$919,540 $800,136 



Sleep Number Announces Fourth-quarter and Full-year 2021 Results - Page 6 of 9
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited – in thousands)
subject to reclassification
 
Fifty-Two
Weeks Ended
Fifty-Three
Weeks Ended
 January 1,
2022
January 2,
2021
Cash flows from operating activities:  
Net income$153,746 $139,189 
Adjustments to reconcile net income to net cash provided by
   operating activities:
Depreciation and amortization60,394 61,563 
Stock-based compensation23,214 21,813 
Net loss on disposals and impairments of assets37 247 
Deferred income taxes446 (3,566)
Changes in operating assets and liabilities:
Accounts receivable6,153 (11,893)
Inventories(24,282)5,703 
Income taxes(3,066)1,057 
Prepaid expenses and other assets(13,836)(13,717)
Accounts payable54,405 (16,755)
Customer prepayments57,482 37,769 
Accrued compensation and benefits(24,790)36,825 
Other taxes and withholding1,814 111 
Other accruals and liabilities8,293 21,315 
Net cash provided by operating activities300,010 279,661 
Cash flows from investing activities:
Purchases of property and equipment(66,900)(37,100)
Proceeds from sales of property and equipment257 55 
Purchase of intangible assets— (1,973)
Net cash used in investing activities(66,643)(39,018)
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings145,473 (11,639)
Repurchases of common stock(382,376)(235,644)
Proceeds from issuance of common stock4,441 9,602 
Debt issuance costs(2,759)(312)
Net cash used in financing activities(235,221)(237,993)
Net (decrease) increase in cash and cash equivalents(1,854)2,650 
Cash and cash equivalents, at beginning of period4,243 1,593 
Cash and cash equivalents, at end of period$2,389 $4,243 



Sleep Number Announces Fourth-quarter and Full-year 2021 Results - Page 7 of 9
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Supplemental Financial Information
(unaudited)
 
Thirteen
Weeks Ended
Fourteen
Weeks Ended
Fifty-Two
Weeks Ended
Fifty-Three
Weeks Ended
 January 1,
2022
January 2,
2021
January 1,
2022
January 2,
2021
Percent of sales:    
Retail stores85.8 %85.3 %87.1 %85.2 %
Online, phone, chat and other14.2 %14.7 %12.9 %14.8 %
Total Company100.0 %100.0 %100.0 %100.0 %
Sales change rates:
Retail comparable-store sales 4
(11 %)12 %19 %(3 %)
Online, phone and chat 4
(11 %)93 %%104 %
Total Retail comparable sales change 4
(11 %)19 %17 %%
 Net opened/closed stores, other and 53rd week
(2 %)10 %%%
Total Company(13 %)29 %18 %%
Stores open:
Beginning of period632 596 602 611 
Opened22 10 77 30 
Closed(6)(4)(31)(39)
End of period648 602 648 602 
Other metrics:
Average sales per store ($ in 000's) 1, 4
$3,600 $3,052 
Average sales per square foot 1, 4
$1,212 $1,051 
Stores > $2 million net sales 2, 4
84 %67 %
Stores > $3 million net sales 2, 4
48 %29 %
Average revenue per smart bed unit 3
$5,309 $4,931 $5,102 $4,856 

1 Trailing twelve months Total Retail comparable sales per store open at least one year.
2 Trailing twelve months for stores open at least one year (excludes online, phone and chat sales).
3 Represents Total Retail (stores, online, phone and chat) net sales divided by Total Retail smart bed units.
4 Fiscal 2020 included 53 weeks, as compared to 52 weeks in fiscal 2021 and 2019. The additional week in 2020 was in the fiscal fourth quarter. Total Retail comparable sales have been adjusted to remove the estimated impact of the additional week on those metrics.


Sleep Number Announces Fourth-quarter and Full-year 2021 Results - Page 8 of 9
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:
Thirteen
Weeks Ended
Fourteen
Weeks Ended
Fifty-Two
Weeks Ended
Fifty-Three
Weeks Ended
 January 1,
2022
January 2,
2021
January 1,
2022
January 2,
2021
Net income$11,141 $61,359 $153,746 $139,189 
Income tax expense1,671 12,420 33,545 36,783 
Interest expense1,844 813 6,245 9,021 
Depreciation and amortization15,434 15,194 59,779 60,783 
Stock-based compensation3,512 6,259 23,214 21,813 
Asset impairments60 42 172 302 
Adjusted EBITDA$33,662 $96,087 $276,701 $267,891 
 
Free Cash Flow
(in thousands)
Thirteen
Weeks Ended
Fourteen
Weeks Ended
Fifty-Two
Weeks Ended
Fifty-Three
Weeks Ended
 January 1,
2022
January 2,
2021
January 1,
2022
January 2,
2021
Net cash provided by (used in) operating activities
$7,326 $(7,621)$300,010 $279,661 
Subtract: Purchases of property and equipment17,530 9,026 66,900 37,100 
Free cash flow$(10,204)$(16,647)$233,110 $242,561 
 
Calculation of Net Leverage Ratio under Revolving Credit Facility
(in thousands)
Fifty-Two
Weeks Ended
Fifty-Three
Weeks Ended
 January 1,
2022
January 2,
2021
Borrowings under revolving credit facility$382,500 $244,200 
Outstanding letters of credit3,997 3,997 
Finance lease obligations537 650 
Consolidated funded indebtedness$387,034 $248,847 
Capitalized operating lease obligations 1
610,072 548,749 
Total debt including capitalized operating lease obligations (a)$997,106 $797,596 
Adjusted EBITDA (see above)$276,701 $267,891 
Consolidated rent expense101,679 91,458 
Consolidated EBITDAR (b)$378,380 $359,349 
Net Leverage Ratio under revolving credit facility (a divided by b)2.6 to 1.02.2 to 1.0
1A multiple of six times annual rent expense is used as an estimate for capitalizing our operating lease obligations in accordance with our credit facility.

Note - Our Adjusted EBITDA and EBITDAR calculations, Free Cash Flow data and Calculation of Net Leverage Ratio under Revolving Credit Facility 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 Fourth-quarter and Full-year 2021 Results - Page 9 of 9
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:
Fifty-Two
Weeks Ended
Fifty-Three
Weeks Ended
 January 1,
2022
January 2,
2021
Net operating profit after taxes (NOPAT)  
Operating income$193,536 $184,896 
Add: Rent expense 1
101,679 91,458 
Add: Interest income
— 97 
Less: Depreciation on capitalized operating leases 2
(25,592)(24,001)
Less: Income taxes 3
(65,216)(59,387)
NOPAT$204,407 $193,063 
  
Average invested capital
Total deficit$(424,953)$(223,978)
Add: Long-term debt 4
383,037 244,849 
Add: Capitalized operating lease obligations 5
813,432 731,664 
Total invested capital at end of period$771,516 $752,535 
  
Average invested capital 6
$739,873 $773,413 
  
Return on invested capital (ROIC) 7
27.6 %25.0 %
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 5) for the respective reporting periods with an assumed thirty-year useful life. This life assumption is based on our long-term participation in given markets though specific retail location lease commitments are generally 5 to 10 years at inception. 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 24.2% and 23.5% for 2021 and 2020, respectively.
4
Long-term debt includes existing finance lease liabilities.
5
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.
6
Average invested capital represents the average of the last five fiscal quarters' ending invested capital balances.
7
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.


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Sleep Number Corp provided additional information to their SEC Filing as exhibits

Ticker: SNBR
CIK: 827187
Form Type: 8-K Corporate News
Accession Number: 0000827187-22-000006
Submitted to the SEC: Wed Feb 23 2022 4:11:50 PM EST
Accepted by the SEC: Wed Feb 23 2022
Period: Wednesday, February 23, 2022
Industry: Household Furniture
Events:
  1. Earnings Release
  2. Financial Exhibit

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