8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 29, 2009

SELECT COMFORT CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota

(State or other jurisdiction of incorporation or organization)

0-25121	41-1597886
(Commission File No.)	(IRS Employer Identification No.)

9800 59^th Avenue North, Minneapolis, Minnesota 55442

(Address of principal executive offices)   (Zip Code)

(763) 551-7000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On April 29, 2009, Select Comfort Corporation issued a press release announcing results for the fiscal first quarter ended April 4, 2009. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.

ITEM 9.01.FINANCIAL STATEMENTS AND EXHIBITS

(c) Exhibits.

Exhibit 99.1   Press Release, dated April 29, 2009

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SELECT COMFORT CORPORATION
	(Registrant)
Dated: April 29, 2009	By:	/s/ Mark A. Kimball
		Mark A. Kimball
	Title:	Senior Vice President

INDEX TO EXHIBITS

The exhibits listed in this index are being furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any document filed under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except as otherwise expressly stated in any such filing.

Exhibit No. Description of Exhibit

99.1 Press Release, dated April 29, 2009

2

EX-99.1

Exhibit 99.1

 

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

SELECT COMFORT ANNOUNCES FIRST QUARTER 2009 RESULTS

Company Reports Positive Operating Income and Cash Flow for the Quarter

MINNEAPOLIS – (April 29, 2009) – Select Comfort Corporation (NASDAQ: SCSS), the nation’s leading bed retailer and creator of the SLEEP NUMBER^® bed, today announced results for the fiscal 2009 first quarter ended April 4, 2009. Net sales for the quarter totaled $139.6 million, a decrease of 17 percent compared to $168.2 million in the first quarter of 2008. The company reported first quarter operating income of $0.3 million, an $11.3 million improvement compared to the first quarter of 2008. First quarter net loss was $2.7 million, or $0.06 per diluted share, compared to a net loss of $7.1 million, or $0.16 per diluted share, in the first quarter of 2008.

“During the quarter, we achieved our goals of significantly improving operating performance and generating positive cash flow, despite continued difficult economic conditions and a weak sales environment,” said Bill McLaughlin, president and CEO, Select Comfort Corporation. “Our year-over-year improvement reflects the first steps of successfully implementing our key priorities, which include more closely aligning costs with anticipated sales, re-igniting the Sleep Number brand and preserving cash.”

McLaughlin noted that during the quarter, the company continued to take significant actions with respect to its stated priorities, including:

-more-

Select Comfort Announces First Quarter 2009 Results – Page 2 of 10

Cost Reduction

• Reduced general and administrative expenses in the quarter by $2.8 million on a year-over-year basis, and reported G&A expenses as a percent of net sales of 9.6 percent, flat with the prior year;

• Closed 30 stores during the quarter, with plans to close another 25 stores by the end of 2009. These actions, cumulatively, are expected to reduce fixed store costs by approximately $10.0 million in 2009;

• Made significant progress on 2009 supply-chain restructuring initiatives that drive savings of more than $6.0 million in 2009, including logistics resizing and closing the company’s Omaha, Neb., facility; and

• Reduced first quarter marketing expense as a percent of net sales from 24.6 percent in 2008 to 17.8 percent in 2009, a 6.8 percentage point improvement.

Reigniting the Sleep Number Brand

• Re-launched the entire Sleep Number bed line, which contributes to an annual product cost reduction of $10.0 million, improves product quality, and focuses on price points below $1,500 to provide a broader entry-level selection of products and a clear step-up strategy for consumers;

• Realized positive return on investment from the test of a new local radio campaign, which highlights the differentiated benefits of the Sleep Number bed and the location of the company’s retail stores; and

• Demonstrated the continued strength of the Sleep Number brand and value proposition through an extremely successful sales performance on a one-day QVC “Today’s Special Value” promotion.

Preserving Cash

• Significantly reduced capital expenditures in the quarter by suspending store openings and discontinuing major IT projects. Capital expenditures in the first quarter of 2009 were $1.2 million compared with $10.3 million in the prior-year period.

-more-

Select Comfort Announces First Quarter 2009 Results – Page 3 of 10

“Our progress during the first quarter affirms that we have the right strategies in place for 2009,” McLaughlin continued. “While we have accomplished a great deal during the past several months, the Select Comfort team continues to pursue incremental ways to reduce costs, sustain and build our brand, and preserve cash. We believe these efforts also will significantly strengthen the company’s prospects for future success when an economic recovery ultimately takes hold.”

First Quarter Summary

During the first quarter, retail sales declined 17 percent, with same-store sales declining 14 percent. First quarter e-commerce and direct-marketing sales each decreased 34 percent. Wholesale sales increased 14 percent in the period, driven by significantly higher sales through QVC.

First quarter gross profit margin was 58.6 percent, up 1.0 percentage point from 57.6 percent in the prior-year period and 2.7 percentage points on a sequential basis from 55.9 percent in the fourth quarter. The year-over-year improvement reflects improved efficiencies in manufacturing, offset by a more aggressive promotion strategy to generate store traffic and drive sales.

Sales and marketing costs in the first quarter of 2009 decreased by 26 percent to $67.3 million or 48.2 percent of net sales. This compares to $90.6 million, or 53.9 percent of net sales in the prior-year period. General and administrative expenses were $13.3 million in the first quarter, or 9.6 percent of net sales. This compares to $16.2 million, or 9.6 percent of net sales, in the first quarter of 2008.

Cash flows from operating activities were $24.1 million in the first quarter of 2009, which included a $23.0 million tax refund associated with prior-year losses. This compares to operating cash flow in the first quarter of 2008 of $14.6 million. The company reduced capital expenditures to $1.2 million in the first quarter of 2009, compared to $10.3 million in the first quarter of 2008. As of April 4, 2009, cash and cash equivalents totaled $3.1 million, cash restricted under debt agreements totaled $23.0 million, and outstanding borrowings under the company’s revolving credit facility totaled $74.3 million. Subsequent to the end of the first quarter, the $23.0 million tax refund that previously had been restricted was used to pay down debt, and current availability of debt under the company’s credit facility was reduced by $18 million.

-more-

Select Comfort Announces First Quarter 2009 Results – Page 4 of 10

Outlook

“We expect the economy and consumer confidence to remain weak for the balance of the year,” said Jim Raabe, senior vice president and CFO, Select Comfort Corporation. “Historically, the second quarter is the seasonal low point for sales, and we believe that our 2009 second quarter will be consistent with that trend. This will pressure operating income, and we expect a net loss in the second quarter that will exceed the net loss we experienced during the first quarter. We also expect negative cash flow performance during the second quarter. For the full year 2009, we continue to anticipate positive free cash flow and moderately improved bottom-line results compared with 2008, excluding the $61.4 million of deferred tax valuation allowance and asset impairments incurred in 2008.”

Financial Position

The company continues to operate under and rely on short-term waivers to comply with certain ongoing bank covenants. During the fourth quarter of 2008 and first quarter of 2009, it entered into amendments to its existing credit agreement and has continued to operate under its borrowing limits as a result of modifications to that agreement. The current amendment under which the company is operating remains in effect through May 8, 2009.

As previously stated, the seasonally low second quarter is expected to increase cash requirements, which will require continued support and future accommodations from the company’s bank syndicate. The company has worked closely and cooperatively with its bank syndicate over the past several quarters and expects to continue to do so during the coming months. The company also continues to pursue a range of strategic and financing alternatives to enhance both its short-term and long-term financial flexibility. While the company cannot provide assurance that it will be successful in these pursuits, any strategic or financing alternative has the potential to increase the company’s cost of capital and/or be dilutive to existing shareholders.

-more-

Select Comfort Announces First Quarter 2009 Results – Page 5 of 10

Conference Call

Management will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. Eastern Time (4 p.m. Central; 2 p.m. Pacific) April 29, 2009. To listen to the call, please dial (888) 972-6711 (international participants dial (210) 234-0123) and reference the passcode “Sleep.” To access the Webcast, please visit the investor relations area of the Select Comfort Web site.

A replay will remain available until midnight Eastern Time, May 8, 2009, by dialing (402) 280-1657. The Webcast replay will remain available in the investor relations area of the company’s Web site for approximately 60 days.

About Select Comfort Corporation

Founded more than 20 years ago, Select Comfort Corporation is the nation’s leading bed retailer⁽¹⁾. Based in Minneapolis, the company designs, manufactures, markets and supports a line of adjustable-firmness mattresses featuring air-chamber technology, branded the Sleep Number^® bed, as well as foundations and bedding accessories. SELECT COMFORT^® products are sold through its approximately 440 company-owned stores located across the United States; select bedding retailers; direct marketing operations; and online at www.sleepnumber.com.

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 our ability to fund our operations through cash flow from operations or availability under our bank line of credit or other sources, and the cost of credit or other capital resources necessary to finance operations; the risk of non-compliance with financial covenants under

our bank line of credit and the risk that we may not be successful in obtaining continuing waivers or other financial accommodations from our lenders; the potential need to obtain additional capital through the issuance of debt or equity securities, which may significantly increase our costs or dilute our existing shareholders, and the risk that we may not be successful in obtaining additional capital that may be needed; current general and industry economic trends; consumer confidence; the effectiveness of our marketing messages; the efficiency of our advertising and promotional efforts;

-more-

Select Comfort Announces First Quarter 2009 Results – Page 6 of 10

consumer acceptance of our products, product quality, innovation and brand image; availability of attractive and cost-effective consumer credit options; execution of our retail store distribution strategy, including our ability to cost-effectively close under-performing store locations; our dependence on significant suppliers, and our ability to maintain relationships with key suppliers, including several sole source suppliers; the vulnerability of key suppliers to recessionary pressures, labor negotiations, liquidity concerns or other factors; rising commodity costs and other inflationary pressures; industry competition; our ability to continue to improve our product line; warranty expenses; risks of pending and potentially unforeseen litigation; increasing government regulations, including new flammability standards for the bedding industry and new safety standards for consumer products, which have or will add product cost pressures and have or will require implementation of systems and manufacturing process changes to ensure compliance; the adequacy of our management information systems to meet the evolving needs of our business and evolving regulatory standards applicable to data privacy and security; our ability to attract and retain senior leadership and other key employees, including qualified sales professionals; and uncertainties arising from global events, such as terrorist attacks or a pandemic outbreak, or the threat of such events. Additional information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, and other periodic reports filed with the SEC. The company has no obligation to publicly update or revise any of the forward-looking statements in this news release.

# # #

 

⁽¹⁾ Top 25 Bedding Retailers, Furniture/Today, August 2008.

Select Comfort Announces First Quarter 2009 Results – Page 7 of 10

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited – in thousands, except per share amounts)

	Three Months Ended
	April 4, 2009			% of Net Sales		March 29, 2008			% of Net Sales
Net sales	$	139,614		100.0	%	$	168,165		100.0	%
Cost of sales		57,830		41.4	%		71,239		42.4	%
Gross profit		81,784		58.6	%		96,926		57.6	%
Operating expenses:
Sales and marketing		67,313		48.2	%		90,600		53.9	%
General and administrative		13,345		9.6	%		16,161		9.6	%
Research and development		486		0.3	%		874		0.5	%
Asset impairment charges		378		0.3	%		333		0.2	%
Total operating expenses		81,522		58.4	%		107,968		64.2	%
Operating income (loss)		262		0.2	%		(11,042	)	(6.6	%)
Interest expense / other		(1,770	)	(1.3	%)		(246	)	(0.1	%)
Loss before income taxes		(1,508	)	(1.1	%)		(11,288	)	(6.7	%)
Income tax expense (benefit)		1,187		0.9	%		(4,155	)	(2.5	%)
Net loss	$	(2,695	)	(1.9	%)	$	(7,133	)	(4.2	%)
Net loss per share – basic	$	(0.06	)			$	(0.16	)
Net loss per share – diluted	$	(0.06	)			$	(0.16	)
Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding		44,692					44,058
Effect of dilutive securities:
Options		—					—
Restricted shares		—					—
Diluted weighted-average shares outstanding1		44,692					44,058

¹For the three months ended April 4, 2009 and March 29, 2008, potentially dilutive securities have been excluded from the calculation of diluted weighted average shares outstanding, as their inclusion would have had an anti-dilutive effect on our net loss per diluted share.

Select Comfort Announces First Quarter 2009 Results – Page 8 of 10

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except per share amounts)

subject to reclassification

	(unaudited) April 4, 2009			January 3, 2009
Assets
Current assets:
Cash and cash equivalents	$	3,121		$	13,057
Restricted cash		23,043			—
Accounts receivable, net of allowance for doubtful accounts of $590 and $713, respectively		7,336			4,939
Inventories		17,072			18,675
Income taxes receivable		3,834			25,900
Prepaid expenses		6,965			4,109
Deferred income taxes		1,155			1,323
Other current assets		647			1,150
Total current assets		63,173			69,153
Property and equipment, net		48,823			53,274
Deferred income taxes		4,418			5,941
Other assets		7,107			7,045
Total assets	$	123,521		$	135,413
Liabilities and Shareholders’ Deficit
Current liabilities:
Borrowings under revolving credit facility	$	74,300		$	79,150
Accounts payable		36,812			40,274
Customer prepayments		9,441			11,480
Accruals:
Sales returns		4,200			2,744
Compensation and benefits		13,859			14,575
Taxes and withholding		3,705			2,938
Other current liabilities		7,014			8,526
Total current liabilities		149,331			159,687
Non-current liabilities:
Warranty liabilities		5,819			5,956
Capital lease obligations		479			621
Other long-term liabilities		11,105			10,779
Total non-current liabilities		17,403			17,356
Total liabilities		166,734			177,043
Shareholders’ deficit:
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $0.01 par value; 142,500 shares authorized, 45,240 and 44,962 shares issued and outstanding, respectively		452			450
Additional paid-in capital		5,527			4,417
Accumulated deficit		(49,192	)		(46,497	)
Total shareholders’ deficit		(43,213	)		(41,630	)
Total liabilities and shareholders’ deficit	$	123,521		$	135,413

Select Comfort Announces First Quarter 2009 Results – Page 9 of 10

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited – in thousands)

subject to reclassification

	Three Months Ended
	April 4, 2009			March 29, 2008
Cash flows from operating activities:
Net loss	$	(2,695	)	$	(7,133	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		4,824			5,858
Stock-based compensation		1,020			813
Disposals and impairments of assets		378			339
Excess tax benefits from stock-based compensation		—			(2	)
Changes in deferred income taxes		1,691			(1,658	)
Change in operating assets and liabilities:
Accounts receivable		(2,397	)		11,414
Inventories		1,603			6,862
Income taxes receivable		22,066			(1,927	)
Prepaid expenses and other assets		(2,634	)		3,279
Accounts payable		2,170			(4,777	)
Customer prepayments		(2,039	)		972
Accrued sales returns		1,456			(295	)
Accrued compensation and benefits		(716	)		2,607
Accrued taxes and withholding		767			(888	)
Warranty liabilities		(186	)		(59	)
Other accruals and liabilities		(1,205	)		(796	)
Net cash provided by operating activities		24,103			14,609
Cash flows from investing activities:
Purchases of property and equipment		(1,239	)		(10,274	)
Investments in restricted cash		(23,043	)		—
Net cash used in investing activities		(24,282	)		(10,274	)
Cash flows from financing activities:
Net decrease in short-term borrowings		(9,849	)		(5,591	)
Proceeds from issuance of common stock		92			178
Excess tax benefits from stock-based compensation		—			2
Net cash used in financing activities		(9,757	)		(5,411	)
Decrease in cash and cash equivalents		(9,936	)		(1,076	)
Cash and cash equivalents, at beginning of period		13,057			7,279
Cash and cash equivalents, at end of period	$	3,121		$	6,203

Select Comfort Announces First Quarter 2009 Results – Page 10 of 10

SELECT COMFORT CORPORATION
AND SUBSIDIARIES

Supplemental Financial Information

(unaudited)

	Three Months Ended
	April 4, 2009			March 29, 2008
Percent of sales:
Retail		79.1%			78.7%
Direct		6.0%			7.5%
E-Commerce		5.5%			6.9%
Wholesale		9.4%			6.9%
Total		100.0%			100.0%
Sales growth rates:
Comparable-store sales1		(14%	)		(25%	)
Net closed stores/other		(3%	)		5%
Retail total		(17%	)		(20%	)
Direct		(34%	)		(32%	)
E-Commerce		(34%	)		(19%	)
Wholesale		14%			(37%	)
Total		(17%	)		(22%	)
Stores open:
Beginning of period		471			478
Opened		0			7
Closed		(30	)		(4	)
End of period		441			481
Retail partner doors		838			774
Other metrics:
Average sales per store ($ in 000’s)1	$	965		$	1,228
Average sales per square foot ($s)1	$	671		$	942
Stores > $1 million net sales1		44%			67%
Average mattress sales per mattress unit (Q1 Company-owned channels; $s)	$	1,666		$	1,630

¹Trailing twelve months for stores open at least one year.