-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CVMq68EusdyGN6bV9tZA5eOOoiW1cBFB42s8XokDiQ8R4lejLF9ZMXGdaAxaUW+q mWxH31xVdbddPPUoxdBLMw== 0000902664-08-002275.txt : 20080623 0000902664-08-002275.hdr.sgml : 20080623 20080623165452 ACCESSION NUMBER: 0000902664-08-002275 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20080623 DATE AS OF CHANGE: 20080623 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SELECT COMFORT CORP CENTRAL INDEX KEY: 0000827187 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD FURNITURE [2510] IRS NUMBER: 411597886 FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-55269 FILM NUMBER: 08912546 BUSINESS ADDRESS: STREET 1: 9800 59TH AVENUE NORTH CITY: MINNEAPOLIS STATE: MN ZIP: 55442 BUSINESS PHONE: 7635517000 MAIL ADDRESS: STREET 1: 9800 59TH AVENUE NORTH CITY: MINNEAPOLIS STATE: MN ZIP: 55442 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CLINTON GROUP INC CENTRAL INDEX KEY: 0001134119 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 32 OLD SLIP 5TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2128250400 SC 13D/A 1 p08-1109sc13da.txt SELECT COMFORT CORPORATION SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) Under the Securities Exchange Act of 1934 (Amendment No. 3)* Select Comfort Corporation - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, Par Value $0.01 Per Share - -------------------------------------------------------------------------------- (Title of Class of Securities) 81616X103 - -------------------------------------------------------------------------------- (CUSIP Number) Marc Weingarten, Esq. David Rosewater, Esq. Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 (212) 756-2000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 23, 2008 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 7 Pages) - -------------------------- * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - ------------------------------ --------------------- CUSIP NO. 81616X103 SCHEDULE 13D/A PAGE 2 OF 7 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) CLINTON GROUP, INC. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 3,379,647 OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 3,379,647 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 3,379,647 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.52% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IA; CO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 81616X103 SCHEDULE 13D/A PAGE 3 OF 7 PAGES - ------------------------------ --------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) CLINTON MAGNOLIA MASTER FUND, LTD. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER -0- ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 3,379,647 OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH -0- ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 3,379,647 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 3,379,647 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.52% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 81616X103 SCHEDULE 13D/A PAGE 4 OF 7 PAGES - ------------------------------ --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) GEORGE HALL - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 90,000 ---------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 3,379,647 OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 90,000 ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 3,379,647 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 3,469,647 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.73% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS - ------------------------------ --------------------- CUSIP NO. 81616X103 SCHEDULE 13D/A PAGE 5 OF 7 PAGES - ------------------------------ --------------------- ITEM 1. SECURITY AND ISSUER. This Amendment No. 3 is filed with respect to the shares of the common stock, par value $0.01 per share (the "Shares"), of Select Comfort Corporation, a Minnesota corporation (the "Issuer"), beneficially owned by the Reporting Persons (as defined below) as of June 20, 2008 and amends and supplements the Schedule 13D originally filed with the Securities and Exchange Commission (the "SEC") on March 10, 2008, as previously amended (the "Original Schedule 13D" and together with this Amendment, the "Schedule 13D"). Except as set forth herein, the Schedule 13D is unmodified. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Item 3 is hereby amended and restated in the entirety as follows: Funds for the purchase of the Shares reported herein were derived from CMAG's available capital. A total of approximately $11,381,000 was paid to acquire such Shares. ITEM 4. PURPOSE OF TRANSACTION. Item 4 is hereby amended and supplemented as follows: On June 23, 2008, the Reporting Persons sent a letter to the Issuer's Board of Directors (the "Board") regarding certain strategic and operational changes the Reporting Persons believe the Issuer should undertake promptly. Such changes include, but are not limited to, the replacing of the Chief Executive Officer and the revision of the Issuer's marketing strategy. In addition, in the letter, the Reporting Persons also expressed disappointment that the Issuer did not agree to provide the Reporting Persons with Board Representation. A copy of the June 23, 2008 letter is attached as Exhibit C hereto and is incorporated by reference. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. Item 5 is hereby amended and supplemented as follows: (a) As of the close of business on June 20, 2008, the Reporting Persons may be deemed the beneficial owners of an aggregate of 3,356,347 Shares, inclusive of 684,200 long calls, constituting approximately 7.52% of the Shares outstanding. The aggregate percentage of Shares beneficially owned by the Reporting Persons is based upon 44,894,600 Shares outstanding, which is the total number of Shares outstanding as of April 25, 2008 as reported in the Issuer's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 8, 2008 for the period ended March 29, 2008. (b) By virtue of an investment management agreement with CMAG, CGI has the power to vote or direct the voting, and to dispose or direct the disposition, of all of the 3,379,647 Shares held by CMAG. By virtue of his direct and indirect control of CGI, George Hall is deemed to have shared voting power and shared dispositive power with respect to all Shares as to which CGI has voting power or dispositive power, and he individually holds an additional 90,000 Shares. Accordingly, CGI and George Hall are deemed to have shared voting and shared dispositive power with respect to an aggregate of 3,379,647 Shares, and George Hall has sole voting and dispositive power with respect to an additional 90,000 Shares. (c) Information concerning transactions in the Shares effected by the Reporting Persons since filing Amendment No. 2 to the Schedule 13D with the SEC on May 15, 2008 is set forth in Schedule A hereto and is incorporated herein by reference. Unless otherwise indicated, all of such transactions were effected in the open market. - ------------------------------ --------------------- CUSIP NO. 81616X103 SCHEDULE 13D/A PAGE 6 OF 7 PAGES - ------------------------------ --------------------- (d) No person other than the Reporting Persons is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Item 6 is hereby amended and restated in the entirety as follows: Certain of the Reporting Persons are parties to certain option agreements (the "Option Contracts"), the counterparty to each of which is Future Trade, representing 684,200 shares of the Issuer at prices ranging from $2.50 to $7.50. The option contracts can be exercised at anytime prior to the expiration dates ranging between September 20, 2008 and December 20, 2008. Such exposure constitutes 1.52% of the Issuer's outstanding shares. Except as otherwise set forth herein, the Reporting Persons do not have any contract, arrangement, understanding or relationship with any person with respect to the securities of the Issuer. ITEM 7. MATERIALS TO BE FILED AS EXHIBITS Item 7 is hereby amended and supplemented as follows: Exhibit C - Letter to the Issuer's Board of Directors dated June 23, 2008 - --------------------------- ------------------- CUSIP NO. 81616X103 SCHEDULE 13D/A PAGE 7 OF 7 PAGES - --------------------------- ------------------- SIGNATURES After reasonable inquiry and to the best of his or its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: June 23, 2008 CLINTON GROUP, INC. By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Chief Financial Officer CLINTON MAGNOLIA MASTER FUND, LTD. By: Clinton Group, Inc. its investment manager By: /s/ Francis Ruchalski --------------------------- Name: Francis Ruchalski Title: Chief Financial Officer /s/ George Hall ------------------------------- George Hall SCHEDULE A TRANSACTIONS IN THE SHARES BY THE REPORTING PERSONS SINCE MAY 15, 2008 Equity Activity for Clinton Magnolia Master Fund, Ltd. Trade Date Shares Purchased (Sold) Price Per Share ($) ---------- ----------------------- ------------------- 5/15/08 25,000 $ 2.92 5/15/08 22,000 $ 2.93 5/15/08 4,000 $ 2.94 5/16/08 50,000 $ 2.50 6/3/08 9,200 $ 3.02 6/20/08 25,000 $ 2.28 Option Activity for Clinton Magnolia Master Fund, Ltd. Trade Date Shares Purchased (Sold) Price Per Share ($) ---------- ----------------------- ------------------- 5/16/08 10,000 $ 0.80 5/16/08 10,000 $ 1.00 5/19/08 10,000 $ 0.95 5/23/08 1,000 $ 0.80 5/28/08 (10,000) $ 0.25 5/29/08 (10,000) $ 0.30 6/9/08 1,800 $ 0.25 6/13/08 62,000 $ 0.63 6/20/08 (245,000) $ - 6/20/08 (155,000) $ - 6/20/08 18,200 $ - 6/20/08 110,000 $ 0.60 6/20/08 30,000 $ 0.15 EX-99 2 p08-1109exhibit_99.txt SELECT COMFORT LETTER CLINTON GROUP 9 West 57th Street New York, NY 10019 Tel: 212.825.0400 Fax: 212.825.0079 June 23, 2008 Select Comfort Corporation 9800 59th Avenue North Minneapolis, MN 55442 Attention: Board of Directors: Ervin R. Shames William R. McLaughlin Thomas J. Albani Christine M. Day Stephen L. Gulis, Jr. Christopher P. Kirchen David T. Kollat Brenda J. Lauderback Kristen L. Manos Michael A. Peel Jean-Michel Valette Dear Board Members: The Clinton Group, Inc. the ("Clinton Group") is writing in response to a meeting with Select Comfort Corporation's ("Select Comfort") Chief Executive Officer on June 16, 2008 and the covenant in Select Comfort's third amendment to its credit agreement(1) that requires Select Comfort to engage AlixPartners (or a similar firm acceptable to Select Comfort's lenders) to provide recommendations on the operational and capital strategies of Select Comfort. We hold AlixPartners in high regard, and believe that they will provide insightful and useful recommendations. However, Select Comfort's Board of Directors (the "Board") and Select Comfort's management should have never let the performance of Select Comfort deteriorate to the point where Select Comfort's lenders are requiring the engagement of a turnaround firm. The Board and management should have recognized the missteps in Select Comfort's strategies and operations and should have taken corrective action much earlier. These missteps have negatively impacted the operating performance of Select Comfort well beyond the impact the economy has had on Select Comfort. In addition to the strategic and ______________________ 1 We were surprised that something as important as the engagement of AlixPartners was not disclosed to the shareholders in the 8-K filing, but rather was left buried on page 20 of the exhibit. Select Comfort Corporation June 19, 2008 Page 2 of 4 operational changes we previously outlined to the Board in our letter dated March 6, 2008, the Board must make immediate changes in management. As we have stated in our previous letter, we believe that Select Comfort needs to make a number of strategic and operational changes to improve performance. These steps include: 1. Revise marketing strategy to refocus on direct marketing. 2. Disband the "Quality of Life Advisory Board" as a wasteful use of company resources. 3. Review its store portfolio to eliminate underperforming stores. 4. Immediately cease all new store openings and spending on unnecessary capital expenditures until sales results improve. 5. Eliminate stores in regions where the Company does not have the critical mass to justify its advertising and the overhead for that region, and then eliminate the excess regional and corporate overhead. 6. Freeze spending on the SAP system installation until it is evaluated by an independent consultant. 7. Consider subleasing or disposing of the costly new corporate headquarters and conduct a study on the future needs of the Company in light of its anticipated growth. 8. Consider outsourcing its call center operations.(2) While Select Comfort has taken some limited actions to address certain of these recommendations, they are not nearly substantial enough to turn around Select Comfort, and nothing we learned at the meeting on June 16 changes our views on the changes needed at Select Comfort. In fact, the meeting on June 16 strengthens our view that aggressive action on our proposed changes should be taken as soon as possible. In particular, Select Comfort's new marketing campaign is ineffective needs to be changed, a fact that Select Comfort management acknowledged on my June 16 visit to Select Comfort. Yet, instead of immediately revising the advertising campaign and spending to address its deficiencies, Select Comfort's management, in particular its Chief Executive Officer and Chief Marketing Officer, show no sense of urgency and are not contemplating making any meaningful changes for several months--essentially wasting resources while Select Comfort's financial performance continues to deteriorate. Because of the nature of its products, Select Comfort's marketing and advertising must be heavily weighted to direct marketing. This type of advertising informs the consumer on the qualities, benefits and value of Select Comfort's products, something that the Clinton Group has been advocating for months. Unfortunately, instead of devoting the bulk of the spending on advertising that communicates these attributes, Select Comfort management is spending its advertising dollars on short form "brand building" advertisements that do not communicate any useful information to the consumer. Yet, even when it became clear to the Chief _________________ 2 In addition, the Clinton Group had previously proposed that Select Comfort revise the Chief Executive Officer performance metrics for him to earn his 2008 base salary to align these metrics with shareholders interests. However, given that we believe an immediate change in the Chief Executive Officer must be made, this proposal is no longer applicable. Select Comfort Corporation June 19, 2008 Page 3 of 4 Executive Officer and the Chief Marketing Officer that the short form "brand building" advertising was not working and that longer form, more product focused, marketing would be better (as we advocated last March) Select Comfort management plans on more ineffective short form (and thus wasteful) advertising and does not plan on making any significant change to Select Comfort's advertising until at least September. Further, it appears that management also has mismanaged the re-branding campaign. We believe that re-branding in the midst of a turnaround only serves to create consumer confusion about Select Comfort and its products and wastes advertising dollars. Our views have been confirmed after reviewing Select Comfort's television advertising, which according to management, comprises almost all of Select Comfort's advertising. Select Comfort's television campaign advertises "Sleep Number" as the brand, with essentially no reference to the "Select Comfort" brand. However, according to management, most of the stores are branded "Select Comfort", not "Sleep Number". As a result, any consumer who sees a television advertisement may not know to go to a Select Comfort store to purchase Sleep Number products. As proposed to management during our June 16 meeting, Select Comfort should at the very least co-brand, both in ads and at the store level, for a period of time to reduce consumer confusion as much as possible. In addition, Select Comfort's costs savings plan does not go far enough, particularly its headcount cost reductions. Select Comfort has stated that it is reducing its headcount by 170 positions, but is only incurring severance costs of $1.5 million for these reductions. Clearly the positions being eliminated are lower level positions that will not have a meaningful impact on overall selling, general and administrative expenses. Moreover, Select Comfort's plan to continue on with the SAP implementation, particularly using internal resources rather than qualified external consultants, is a waste of resources and puts the entire company's operations at risk from a poor implementation. Implementing an enterprise software system is challenging for any company, even when using qualified experienced outside consultants. Select Comfort's plan to continue with the implementation using internal resources that have at best limited experience implementing a new enterprise software system is indicative of extremely poor judgment by management. Select Comfort's management has never articulated why it needs to spend tens of millions of dollars on implementing an enterprise software system, and given Select Comfort's financial performance the implementation should cease immediately. We are also disappointed that the Board declined the Clinton Group's request for two Board seats, including one for Jerry W. Levin. As one of Select Comfort's largest shareholders, the Clinton Group believes that our Board representation would have been in the shareholders' interests and would have provided fresh perspectives and new ideas that we believe are much needed, given management's continued strategic and operational missteps. Given Select Comfort's requirement to engage AlixPartners and marketing and advertising missteps, we clearly are correct in our assessment. We also believe that declining Board representation to the Clinton Group is indicative of the Board entrenching itself. Select Comfort Corporation June 19, 2008 Page 4 of 4 As stated earlier in this letter, Select Comfort's Board and management should have recognized the missteps in Select Comfort's strategies and operations earlier. The Board must take immediate action now to correct these mistakes and replace the Chief Executive Officer. Please feel free to contact me at your convenience at (212) 377-4204 if you would like to discuss the forgoing. We look forward to hearing from you. Sincerely, Jerry W. Levin Vice Chairman -----END PRIVACY-ENHANCED MESSAGE-----