- Fourth-quarter net sales growth accelerated to 29% versus
last year; full-year net sales increased 9% to $1.86
billion
- Full-year diluted EPS increased 81% versus the prior year to
$4.90
- Generated a 48% increase in operating cash flows, and a
trailing twelve-month ROIC of 25%
- Provides 2021 earnings outlook of at least $6.00 per diluted
share, more than doubling EPS in two years
Sleep Number Corporation (Nasdaq: SNBR) today reported results
for the year ended January 2, 2021.
“In a year of challenge and change, our mission-driven team
delivered exceptional results by leveraging the power of vertical
integration, digitization and focusing on what matters most to our
stakeholders,” said Shelly Ibach, President and Chief Executive
Officer. “We broadened our sleep leadership and brand relevance
with our revolutionary 360® smart beds as consumers’ increased
their understanding of the link between proven quality sleep and
wellbeing. With strong momentum in the first quarter and ongoing
investments in sleep science-based innovations and digital
technologies, we are well-positioned to generate sustainable
profitable growth for years to come.”
Full Year Overview
- Net sales increased 9% to $1.86 billion in 2020,
including a 6% comparable sales gain, 1.5 percentage points (ppt.)
of growth from new stores and 2.5 ppt. of growth from the extra
week
- Gross profit rate increased 40 basis points (bp) to
62.3% of net sales, despite significant disruption from COVID-19 in
the second quarter
- Operating income increased 65% to $185 million, or 10.0%
of net sales; increased 55% excluding the 53rd week
- Earnings per diluted share increased 81% to $4.90;
increased 70% excluding the 53rd week
- Fiscal 2020 included a 53rd week, which we estimate added
approximately $41 million in sales, $11.2 million in operating
income and $0.30 of diluted earnings per share
Fourth Quarter Overview
- Net sales increased 29% to $568 million, including a 19%
comparable sales gain, one ppt. of growth from new stores and 9
ppt. of growth from the additional week in the fourth quarter
- Operating income increased 126% to $75 million;
increased 92% excluding the 53rd week
- Earnings per diluted share increased 167% to $2.19;
increased 129% excluding the 53rd week
Cash Flows and Liquidity Review
- Generated a record $280 million in net cash from operating
activities, up 48% versus last year, with operating free cash flows
of $243 million, up 87% versus prior year
- Invested $37 million in capital expenditures and $228 million
in SNBR share repurchases in 2020, including $190 million in the
fourth quarter; more than $1 billion cash returned to shareholders
over the past six years; $247 million remains under our share
repurchase authorization
- Return on invested capital (ROIC) of 25% for the year, up 720
bp versus 2019 and more than three times our weighted average cost
of capital
- Leverage ratio of 2.2x EBITDAR at the end of 2020, compared
with 2.7x at the end of 2019; continue to operate with a targeted
range of 2.5x to 3.0x EBITDAR
Financial Outlook
The company expects to generate full-year 2021 earnings per
diluted share of at least $6.00, which is 30% higher than 2020
full-year results excluding the impact of the 53rd week. The
outlook assumes an estimated effective income tax rate of
approximately 23% (including an estimated $5 million of excess tax
benefits related to stock-based compensation largely in Q1),
compared to an effective tax rate of 20.9% for 2020. The company
anticipates 2021 capital expenditures of $70 million to $75
million.
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 our foundation at Sleep Number. Our purpose
driven company is comprised of over 4,800 passionate team members
who are dedicated to our mission of improving lives by
individualizing sleep experiences. Our 360® smart beds provide each
sleeper with adjustable, personalized comfort for proven quality
sleep. We have improved over 13 million lives as we strive to
improve society’s wellbeing through higher quality sleep.
Sleep science and data are the core of our innovations. Our
award-winning 360 smart beds benefit from our proprietary SleepIQ®
technology - learning from over 9 billion hours of highly accurate
sleep data - to provide effortless comfort and individualized sleep
health insights, including your daily SleepIQ® score.
For life-changing sleep, visit SleepNumber.com or one of our
more than 600 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 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 and related consequences such as supply
shortages, labor disruptions, and recommendations and/or mandates
from federal, state and local authorities to close certain
businesses or limit occupancy or operating hours; 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 or do not
comply with laws or regulations; availability of attractive and
cost-effective consumer credit options; our lean 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 providers of services; rising
commodity costs and other inflationary pressures; 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; risks of
disruption in the operation of any of our main manufacturing
facilities or assembly and distribution facilities; 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
enhancing, patching, upgrading 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 or accessibility of our systems, result in a data breach
or disrupt our business; 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.
SLEEP NUMBER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (unaudited – in
thousands, except per share amounts)
Fourteen
Thirteen
Weeks Ended
Weeks Ended
January 2,
% of
December 28,
% of
2021
Net Sales
2019
Net Sales
Net sales
$
567,896
100.0
%
$
441,166
100.0
%
Cost of sales
211,997
37.3
%
165,052
37.4
%
Gross profit
355,899
62.7
%
276,114
62.6
%
Operating expenses: Sales and marketing
221,712
39.0
%
198,123
44.9
%
General and administrative
47,084
8.3
%
35,490
8.0
%
Research and development
12,511
2.2
%
9,510
2.2
%
Total operating expenses
281,307
49.5
%
243,123
55.1
%
Operating income
74,592
13.1
%
32,991
7.5
%
Interest expense, net
813
0.1
%
2,619
0.6
%
Income before income taxes
73,779
13.0
%
30,372
6.9
%
Income tax expense
12,420
2.2
%
6,279
1.4
%
Net income
$
61,359
10.8
%
$
24,093
5.5
%
Net income per share – basic
$
2.28
$
0.85
Net income per share – diluted
$
2.19
$
0.82
Reconciliation of weighted-average shares
outstanding: Basic weighted-average shares outstanding
26,960
28,309
Dilutive effect of stock-based awards
1,100
1,047
Diluted weighted-average shares outstanding
28,060
29,356
SLEEP NUMBER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (unaudited – in
thousands, except per share amounts)
Fifty-Three
Fifty-Two
Weeks Ended
Weeks Ended
January 2,
% of
December 28,
% of
2021
Net Sales
2019
Net Sales
Net sales
$
1,856,555
100.0
%
$
1,698,352
100.0
%
Cost of sales
700,555
37.7
%
646,429
38.1
%
Gross profit
1,156,000
62.3
%
1,051,923
61.9
%
Operating expenses: Sales and marketing
771,195
41.5
%
766,922
45.2
%
General and administrative
158,999
8.6
%
137,956
8.1
%
Research and development
40,910
2.2
%
34,950
2.1
%
Total operating expenses
971,104
52.3
%
939,828
55.3
%
Operating income
184,896
10.0
%
112,095
6.6
%
Interest expense, net
8,924
0.5
%
11,587
0.7
%
Income before income taxes
175,972
9.5
%
100,508
5.9
%
Income tax expense
36,783
2.0
%
18,663
1.1
%
Net income
$
139,189
7.5
%
$
81,845
4.8
%
Net income per share – basic
$
5.03
$
2.78
Net income per share – diluted
$
4.90
$
2.70
Reconciliation of weighted-average shares
outstanding: Basic weighted-average shares outstanding
27,665
29,472
Dilutive effect of stock-based awards
763
883
Diluted weighted-average shares outstanding
28,428
30,355
SLEEP NUMBER CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited – in thousands,
except per share amounts) subject to reclassification
January 2,
December 28,
2021
2019
Assets Current assets: Cash and cash equivalents
$
4,243
$
1,593
Accounts receivable, net of allowance for doubtful accounts of
$1,046 and $898, respectively
31,871
19,978
Inventories
81,362
87,065
Prepaid expenses
20,839
15,335
Other current assets
43,489
36,397
Total current assets
181,804
160,368
Non-current assets: Property and equipment, net
175,223
197,421
Operating lease right-of-use assets
314,226
327,017
Goodwill and intangible assets, net
72,871
73,226
Other non-current assets
56,012
48,011
Total assets
$
800,136
$
806,043
Liabilities and Shareholders’ Deficit Current
liabilities: Borrowings under credit facility
$
244,200
$
231,000
Accounts payable
91,904
134,594
Customer prepayments
72,017
34,248
Accrued sales returns
24,765
19,809
Compensation and benefits
76,786
40,321
Taxes and withholding
23,339
22,171
Operating lease liabilities
62,077
59,561
Other current liabilities
60,856
53,070
Total current liabilities
655,944
594,774
Non-current liabilities: Deferred income taxes
242
3,808
Operating lease liabilities
283,084
298,090
Other non-current liabilities
84,844
68,802
Total non-current liabilities
368,170
370,700
Total liabilities
1,024,114
965,474
Shareholders’ deficit: Undesignated preferred stock; 5,000
shares authorized, no shares issued and outstanding
-
-
Common stock, $0.01 par value; 142,500 shares authorized, 25,390
and 27,961 shares issued and outstanding, respectively
254
280
Additional paid-in capital
-
-
Accumulated deficit
(224,232
)
(159,711
)
Total shareholders’ deficit
(223,978
)
(159,431
)
Total liabilities and shareholders’ deficit
$
800,136
$
806,043
SLEEP NUMBER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited - in
thousands) subject to reclassification
Fifty-Three
Fifty-Two
Weeks Ended
Weeks Ended
January 2,
December 28,
2021
2019
Cash flows from operating activities: Net income
$
139,189
$
81,845
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
61,563
61,866
Stock-based compensation
21,813
16,657
Net loss (gain) on disposals and impairments of assets
247
(430
)
Deferred income taxes
(3,566
)
(1,014
)
Changes in operating assets and liabilities: Accounts receivable
(11,893
)
4,817
Inventories
5,703
(2,183
)
Income taxes
1,057
3,066
Prepaid expenses and other assets
(13,717
)
(13,959
)
Accounts payable
(16,755
)
10,661
Customer prepayments
37,769
7,182
Accrued compensation and benefits
36,825
12,920
Other taxes and withholding
111
725
Other accruals and liabilities
21,315
7,007
Net cash provided by operating activities
279,661
189,160
Cash flows from investing activities: Purchases of property
and equipment
(37,100
)
(59,239
)
Proceeds from sales of property and equipment
55
2,615
Purchase of intangible assets
(1,973
)
-
Net cash used in investing activities
(39,018
)
(56,624
)
Cash flows from financing activities: Net (decrease)
increase in short-term borrowings
(11,639
)
26,357
Repurchases of common stock
(235,644
)
(165,079
)
Proceeds from issuance of common stock
9,602
7,190
Debt issuance costs
(312
)
(1,023
)
Net cash used in financing activities
(237,993
)
(132,555
)
Net increase (decrease) in cash and cash equivalents
2,650
(19
)
Cash and cash equivalents, at beginning of period
1,593
1,612
Cash and cash equivalents, at end of period
$
4,243
$
1,593
SLEEP NUMBER CORPORATION AND SUBSIDIARIES
Supplemental Financial Information (unaudited)
Fourteen
Thirteen
Fifty-Three
Fifty-Two
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
January 2,
December 28,
January 2,
December 28,
2021
2019
2021
2019
Percent of sales: Retail
85.3
%
90.8
%
85.2
%
91.8
%
Online and phone
14.5
%
9.0
%
14.5
%
7.6
%
Wholesale/other
0.2
%
0.2
%
0.3
%
0.6
%
Total Company
100.0
%
100.0
%
100.0
%
100.0
%
Sales change rates: Retail comparable-store sales 4
12
%
1
%
(3
%)
6
%
Online and phone 4
93
%
16
%
104
%
12
%
Total Retail comparable sales change 4
19
%
2
%
6
%
6
%
Net opened/closed stores and 53rd week
10
%
5
%
4
%
5
%
Total Retail
29
%
7
%
10
%
11
%
Wholesale/other
25
%
(56
%)
(52
%)
(24
%)
Total Company
29
%
7
%
9
%
11
%
Stores open: Beginning of period
596
602
611
579
Opened
10
12
30
59
Closed
(4
)
(3
)
(39
)
(27
)
End of period
602
611
602
611
Other metrics: Average sales per store ($ in 000's)
1, 4
$
3,052
$
2,877
Average sales per square foot 1, 4
$
1,051
$
1,034
Stores > $2 million net sales 2, 4
67
%
70
%
Stores > $3 million net sales 2, 4
29
%
30
%
Average revenue per mattress unit 3
$
4,931
$
4,945
$
4,856
$
4,865
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 and phone sales).
3
Represents Total Retail net sales divided by Total Retail mattress
units.
4
Fiscal 2020 included 53 weeks, as compared to 52 weeks in fiscal
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 the three and twelve
months ended January 2, 2021.
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:
Fourteen
Thirteen
Fifty-Three
Fifty-Two
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
January 2,
December 28,
January 2,
December 28,
2021
2019
2021
2019
Net income
$
61,359
$
24,093
$
139,189
$
81,845
Income tax expense
12,420
6,279
36,783
18,663
Interest expense
813
2,621
9,021
11,591
Depreciation and amortization
15,194
15,482
60,783
61,410
Stock-based compensation
6,259
4,623
21,813
16,657
Asset impairments
42
16
302
185
Adjusted EBITDA
$
96,087
$
53,114
$
267,891
$
190,351
Free Cash Flow (in thousands)
Fourteen
Thirteen
Fifty-Three
Fifty-Two
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
January 2,
December 28,
January 2,
December 28,
2021
2019
2021
2019
Net cash (used in) provided by operating activities
$
(7,621
)
$
(672
)
$
279,661
$
189,160
Subtract: Purchases of property and equipment
9,026
12,482
37,100
59,239
Free cash flow
$
(16,647
)
$
(13,154
)
$
242,561
$
129,921
Calculation of Net Leverage Ratio under Credit
Facility (in thousands)
Fifty-Three
Fifty-Two
Weeks Ended
Weeks Ended
January 2,
December 28,
2021
2019
Borrowings under credit facility
$
244,200
$
231,000
Outstanding letters of credit
3,997
3,497
Finance lease obligations
650
756
Consolidated funded indebtedness
$
248,847
$
235,253
Capitalized operating lease obligations1
548,749
527,008
Total debt including capitalized operating lease obligations (a)
$
797,596
$
762,261
Adjusted EBITDA (see above)
$
267,891
$
190,351
Consolidated rent expense
91,458
87,835
Consolidated EBITDAR (b)
$
359,349
$
278,186
Net Leverage Ratio under credit facility (a divided by b)
2.2 to 1.0 2.7 to 1.0 1 A 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 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 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-Three Fifty-Two
Weeks Ended Weeks Ended January 2,2021
December 28,2019 Net operating profit
after taxes (NOPAT) Operating income
$
184,896
$
112,095
Add: Rent expense 1
91,458
87,835
Add: Interest income
97
3
Less: Depreciation on capitalized operating leases 2
(24,001
)
(22,358
)
Less: Income taxes 3
(59,387
)
(42,592
)
NOPAT
$
193,063
$
134,983
Average invested capital Total
deficit
$
(223,978
)
$
(159,431
)
Add: Long-term debt 4
244,849
231,756
Add: Capitalized operating lease obligations 5
731,664
702,680
Total invested capital at end of period
$
752,535
$
775,005
Average invested capital 6
$
773,413
$
757,361
Return on invested capital (ROIC) 7
25.0
%
17.8
%
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 23.5% and 24.0% for 2020 and 2019, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210217005889/en/
Investor Contact: Dave Schwantes; (763) 551-7498;
investorrelations@sleepnumber.com
Media Contact: Julie Elepano; (414) 732-9840;
julie.elepano@sleepnumber.com
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