Minnesota
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41-1597886
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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9800 59th Avenue North
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Minneapolis, Minnesota
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55442
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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x
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Accelerated filer o
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Non-accelerated filer
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o
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(Do not check if a smaller reporting company)
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Smaller reporting company o
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Page
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PART I: FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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3
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4
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5
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6
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7
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8
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Item 2.
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14
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Item 3.
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23
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Item 4.
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23
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23
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Item 1.
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23
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Item 1A.
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24
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Item 2.
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24
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Item 3.
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24
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Item 4.
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24
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Item 5.
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24
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Item 6.
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25
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26
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ITEM 1.
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FINANCIAL STATEMENTS
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(unaudited)
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||||||
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June 30,
2012
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December 31,
2011
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||||||
Assets
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||||||
Current assets:
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||||||
Cash and cash equivalents
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$ | 90,324 | $ | 116,255 | ||||
Marketable debt securities – current
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32,772 | 20,020 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $391 and $397, respectively
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10,908 | 13,844 | ||||||
Inventories
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27,301 | 24,851 | ||||||
Prepaid expenses
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6,905 | 5,778 | ||||||
Deferred income taxes
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4,489 | 4,443 | ||||||
Other current assets
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7,008 | 6,004 | ||||||
Total current assets
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179,707 | 191,195 | ||||||
Noncurrent assets:
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||||||||
Marketable debt securities – non-current
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32,367 | 10,042 | ||||||
Property and equipment, net
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60,311 | 43,850 | ||||||
Deferred income taxes
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15,373 | 12,964 | ||||||
Other assets
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4,583 | 4,606 | ||||||
Total assets
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$ | 292,341 | $ | 262,657 | ||||
Liabilities and Shareholders’ Equity
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||||||||
Current liabilities:
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||||||||
Accounts payable
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$ | 49,644 | $ | 50,141 | ||||
Customer prepayments
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11,637 | 13,529 | ||||||
Compensation and benefits
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20,470 | 29,806 | ||||||
Taxes and withholding
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8,596 | 9,883 | ||||||
Other current liabilities
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18,315 | 15,691 | ||||||
Total current liabilities
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108,662 | 119,050 | ||||||
Non-current liabilities:
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||||||||
Warranty liabilities
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2,343 | 2,714 | ||||||
Other long-term liabilities
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12,328 | 11,502 | ||||||
Total liabilities
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123,333 | 133,266 | ||||||
Shareholders’ equity:
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||||||||
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding
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— | — | ||||||
Common stock, $0.01 par value; 142,500 shares authorized, 56,263 and 56,397 shares issued and outstanding, respectively
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563 | 564 | ||||||
Additional paid-in capital
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47,967 | 47,701 | ||||||
Retained earnings
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120,491 | 81,101 | ||||||
Accumulated other comprehensive (loss) income
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(13 | ) | 25 | |||||
Total shareholders’ equity
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169,008 | 129,391 | ||||||
Total liabilities and shareholders’ equity
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$ | 292,341 | $ | 262,657 |
Three Months Ended
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Six Months Ended
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|||||||||||||||
June 30,
2012
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July 2,
2011
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June 30,
2012
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July 2,
2011
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|||||||||||||
Net sales
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$ | 205,219 | $ | 161,462 | $ | 467,602 | $ | 354,530 | ||||||||
Cost of sales
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73,648 | 58,958 | 171,732 | 128,925 | ||||||||||||
Gross profit
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131,571 | 102,504 | 295,870 | 225,605 | ||||||||||||
Operating expenses:
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||||||||||||||||
Sales and marketing
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88,240 | 70,517 | 194,425 | 150,788 | ||||||||||||
General and administrative
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16,220 | 13,120 | 33,149 | 28,743 | ||||||||||||
Research and development
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1,256 | 1,223 | 2,546 | 1,954 | ||||||||||||
Asset impairment charges
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3 | 18 | 7 | 96 | ||||||||||||
CEO transition costs
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— | — | 5,595 | — | ||||||||||||
Total operating expenses
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105,719 | 84,878 | 235,722 | 181,581 | ||||||||||||
Operating income
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25,852 | 17,626 | 60,148 | 44,024 | ||||||||||||
Other income (expense), net
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48 | (30 | ) | 55 | (60 | ) | ||||||||||
Income before income taxes
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25,900 | 17,596 | 60,203 | 43,964 | ||||||||||||
Income tax expense
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8,927 | 6,307 | 20,813 | 16,092 | ||||||||||||
Net income
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$ | 16,973 | $ | 11,289 | $ | 39,390 | $ | 27,872 | ||||||||
Basic net income per share:
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||||||||||||||||
Net income per share – basic
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$ | 0.30 | $ | 0.21 | $ | 0.71 | $ | 0.51 | ||||||||
Weighted-average shares – basic
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55,719 | 54,958 | 55,680 | 54,842 | ||||||||||||
Diluted net income per share:
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||||||||||||||||
Net income per share – diluted
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$ | 0.30 | $ | 0.20 | $ | 0.69 | $ | 0.50 | ||||||||
Weighted-average shares – diluted
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57,394 | 56,407 | 57,367 | 56,157 |
Three Months Ended
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Six Months Ended
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|||||||||||||||
June 30,
2012
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July 2,
2011
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June 30,
2012
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July 2,
2011
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|||||||||||||
Net income
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$ | 16,973 | $ | 11,289 | $ | 39,390 | $ | 27,872 | ||||||||
Other comprehensive loss – unrealized loss on available-for-sale marketable debt securities, net of tax
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(26 | ) | (27 | ) | (38 | ) | (27 | ) | ||||||||
Comprehensive income
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$ | 16,947 | $ | 11,262 | $ | 39,352 | $ | 27,845 |
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Common Stock
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Additional
Paid-in
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Retained
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Accumulated
Other
Comprehensive
Income
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|||||||||
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Shares
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Amount
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Capital
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Earnings
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(Loss)
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Total
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||||||
Balance at December 31, 2011
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56,397
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$
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564
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$
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47,701
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$
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81,101
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$
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25
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$
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129,391
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Comprehensive income:
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Net income
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—
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|
|
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—
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—
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39,390
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—
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39,390
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Unrealized loss on available-for-sale marketable debt securities
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—
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—
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—
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—
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(38
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)
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(38
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)
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Total comprehensive income
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39,352
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Exercise of common stock options
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257
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|
3
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1,934
|
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|
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—
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—
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|
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1,937
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|
||
Tax effect from stock-based compensation
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|
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—
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—
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3,981
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|
|
|
—
|
|
|
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—
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|
|
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3,981
|
|
Stock-based compensation
|
|
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166
|
|
|
|
2
|
|
|
|
8,368
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|
|
|
—
|
|
|
|
—
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|
|
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8,370
|
|
Repurchases of common stock
|
|
|
(557
|
)
|
|
|
(6
|
)
|
|
|
(14,017
|
)
|
|
|
—
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|
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—
|
|
|
|
(14,023
|
)
|
Balance at June 30, 2012
|
|
|
56,263
|
|
|
$
|
563
|
|
|
$
|
47,967
|
|
|
$
|
120,491
|
|
|
$
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(13
|
)
|
|
$
|
169,008
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|
|
|
Six Months Ended
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|
|||||
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June 30,
2012
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|
|
July 2,
2011
|
|
||
Cash flows from operating activities:
|
|
|
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|
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|
||
Net income
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|
$
|
39,390
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|
|
$
|
27,872
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
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|
|
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|
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Depreciation and amortization
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|
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9,049
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|
|
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6,386
|
|
Stock-based compensation
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|
|
8,370
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|
|
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2,256
|
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Net loss on disposals and impairments of assets
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|
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(12
|
)
|
|
|
89
|
|
Excess tax benefits from stock-based compensation
|
|
|
(4,120
|
)
|
|
|
(1,132
|
)
|
Deferred income taxes
|
|
|
(2,431
|
)
|
|
|
2,819
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
3,055
|
|
|
|
2,775
|
|
Inventories
|
|
|
(2,450
|
)
|
|
|
(932
|
)
|
Income taxes
|
|
|
3,614
|
|
|
|
1,181
|
|
Prepaid expenses and other assets
|
|
|
(2,474
|
)
|
|
|
(3,212
|
)
|
Accounts payable
|
|
|
202
|
|
|
|
(682
|
)
|
Customer prepayments
|
|
|
(1,892
|
)
|
|
|
(2,451
|
)
|
Accrued compensation and benefits
|
|
|
(9,085
|
)
|
|
|
(2,716
|
)
|
Other taxes and withholding
|
|
|
(920
|
)
|
|
|
(320
|
)
|
Warranty liabilities
|
|
|
(453
|
)
|
|
|
(314
|
)
|
Other accruals and liabilities
|
|
|
3,390
|
|
|
|
2,066
|
|
Net cash provided by operating activities
|
|
|
43,233
|
|
|
|
33,685
|
|
|
|
|
|
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Purchases of property and equipment
|
|
|
(22,499
|
)
|
|
|
(9,585
|
)
|
Investments in marketable debt securities
|
(45,351
|
)
|
(40,021
|
)
|
||||
Proceeds from maturities of marketable debt securities
|
10,018
|
—
|
||||||
Proceeds from sales of property and equipment
|
|
|
30
|
|
|
|
7
|
|
Increase in restricted cash
|
|
|
—
|
|
|
|
(2,650
|
)
|
Net cash used in investing activities
|
|
|
(57,802
|
)
|
|
|
(52,249
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchases of common stock
|
|
|
(14,023
|
)
|
|
|
(309
|
)
|
Excess tax benefits from stock-based compensation
|
|
|
4,120
|
|
|
|
1,132
|
|
Net decrease in short-term borrowings
|
|
|
(3,349
|
)
|
|
|
(1,500
|
)
|
Proceeds from issuance of common stock
|
|
|
1,937
|
|
|
|
870
|
|
Debt issuance costs
|
(47
|
)
|
—
|
|||||
Net cash (used in) provided by financing activities
|
|
|
(11,362
|
)
|
|
|
193
|
|
|
|
|
|
|
|
|||
Net decrease in cash and cash equivalents
|
|
|
(25,931
|
)
|
|
|
(18,371
|
)
|
Cash and cash equivalents, at beginning of period
|
|
|
116,255
|
|
|
|
76,016
|
|
Cash and cash equivalents, at end of period
|
|
$
|
90,324
|
|
|
$
|
57,645
|
|
—
|
Level 1 – observable inputs such as quoted prices in active markets;
|
—
|
Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
—
|
Level 3 – unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
June 30, 2012
|
||||||||||||||||
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|||||||||
Marketable debt securities – current
|
||||||||||||||||
U.S. Treasury securities
|
|
$
|
20,031
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20,031
|
|
Corporate bonds
|
|
|
—
|
|
|
|
7,711
|
|
|
|
—
|
|
|
|
7,711
|
|
U.S. Agency bonds
|
|
|
—
|
|
|
|
5,030
|
|
|
|
—
|
|
|
|
5,030
|
|
20,031
|
12,741
|
—
|
32,772
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Marketable debt securities – non-current
|
||||||||||||||||
U.S. Treasury securities
|
14,997
|
—
|
—
|
14,997
|
||||||||||||
Corporate bonds
|
—
|
10,250
|
—
|
10,250
|
||||||||||||
U.S. Agency bonds
|
|
|
—
|
|
|
|
5,006
|
|
|
|
—
|
|
|
|
5,006
|
|
Municipal bonds
|
|
|
—
|
|
|
|
2,114
|
|
|
|
—
|
|
|
|
2,114
|
|
14,997
|
17,370
|
—
|
32,367
|
|||||||||||||
|
$
|
35,028
|
|
|
$
|
30,111
|
|
|
$
|
—
|
|
|
$
|
65,139
|
|
December 31, 2011
|
||||||||||||||||
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|||||||||
Marketable Debt Securities – current
|
||||||||||||||||
U.S. Treasury securities
|
|
$
|
20,020
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Marketable Debt Securities – non-current
|
||||||||||||||||
U.S. Treasury securities
|
10,042
|
—
|
—
|
10,042
|
||||||||||||
|
$
|
30,062
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,062
|
|
|
|
June 30,
2012
|
|
|
December 31,
2011
|
|
||
Raw materials
|
|
$
|
3,453
|
|
|
$
|
4,834
|
|
Work in progress
|
|
|
158
|
|
|
|
96
|
|
Finished goods
|
|
|
23,690
|
|
|
|
19,921
|
|
|
|
$
|
27,301
|
|
|
$
|
24,851
|
|
June 30, 2012
|
||||||||||||||||
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value(1)
|
|||||||||||||
U.S. Treasury securities
|
$ | 35,024 | $ | 15 | $ | (11 | ) | $ | 35,028 | |||||||
Corporate bonds
|
17,986 | — | (25 | ) | 17,961 | |||||||||||
U.S. Agency bonds
|
10,035 | 3 | (2 | ) | 10,036 | |||||||||||
Municipal bonds
|
2,114 | — | — | 2,114 | ||||||||||||
$ | 65,159 | $ | 18 | $ | (38 | ) | $ | 65,139 |
December 31, 2011
|
||||||||||||||||
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value(1)
|
|||||||||||||
U.S. Treasury securities
|
$ | 30,021 | $ | 41 | $ | — | $ | 30,062 |
June 30, 2012
|
December 31, 2011
|
|||||||||||||||
Amortized
Cost
|
Fair
Value(1)
|
Amortized
Cost
|
Fair
Value(1)
|
|||||||||||||
Marketable debt securities – current (due in less than one year)
|
$ | 32,764 | $ | 32,772 | 20,004 | $ | 20,020 | |||||||||
Marketable debt securities – non-current (due in one to two years)
|
32,395 | 32,367 | 10,017 | 10,042 | ||||||||||||
$ | 65,159 | $ | 65,139 | $ | 30,021 | $ | 30,062 |
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
||||
Interest expense
|
|
$
|
(20
|
)
|
|
$
|
(64
|
)
|
|
$
|
(62
|
)
|
|
$
|
(121
|
)
|
Interest income
|
|
|
68
|
|
|
34
|
|
|
117
|
|
|
61
|
||||
Other income (expense), net
|
|
$
|
48
|
|
|
$
|
(30
|
)
|
|
$
|
55
|
|
|
$
|
(60
|
)
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
||||
Net income
|
|
$
|
16,973
|
|
|
$
|
11,289
|
|
|
$
|
39,390
|
|
|
$
|
27,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Reconciliation of weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Basic weighted-average shares outstanding
|
|
|
55,719
|
|
|
|
54,958
|
|
|
|
55,680
|
|
|
|
54,842
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Options
|
|
|
1,129
|
|
|
|
911
|
|
|
|
1,099
|
|
|
|
762
|
|
Restricted shares
|
|
|
546
|
|
|
|
538
|
|
|
|
588
|
|
|
|
553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Diluted weighted-average shares outstanding
|
|
|
57,394
|
|
|
|
56,407
|
|
|
|
57,367
|
|
|
|
56,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net income per share – basic
|
|
$
|
0.30
|
|
|
$
|
0.21
|
|
|
$
|
0.71
|
|
|
$
|
0.51
|
|
Net income per share – diluted
|
|
$
|
0.30
|
|
|
$
|
0.20
|
|
|
$
|
0.69
|
|
|
$
|
0.50
|
|
|
|
Six Months Ended
|
|
|||||
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
||
Balance at beginning of year
|
|
$
|
4,402
|
|
|
$
|
2,944
|
|
Additions that reduce net sales
|
|
|
22,480
|
|
|
|
19,015
|
|
Deductions from reserves
|
|
|
(21,765
|
)
|
|
|
(18,395
|
)
|
Balance at end of period
|
|
$
|
5,117
|
|
|
$
|
3,564
|
|
|
|
Six Months Ended
|
|
|||||
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
||
Balance at beginning of year
|
|
$
|
6,310
|
|
|
$
|
5,744
|
|
Additions charged to costs and expenses for current-year sales
|
|
|
1,832
|
|
|
|
2,137
|
|
Deductions from reserves
|
|
|
(2,435
|
)
|
|
|
(2,217
|
)
|
Changes in liability for pre-existing warranties during the current year, including expirations
|
|
|
151
|
|
|
|
(233
|
)
|
Balance at end of period
|
|
$
|
5,858
|
|
|
$
|
5,431
|
|
|
●
|
Risk Factors
|
|
●
|
Overview
|
|
●
|
Results of Operations
|
|
●
|
Liquidity and Capital Resources
|
|
●
|
Non-GAAP Data Reconciliations
|
|
●
|
Off-Balance-Sheet Arrangements and Contractual Obligations
|
|
●
|
Critical Accounting Policies
|
●
|
Current and future general and industry economic trends and consumer confidence;
|
●
|
The effectiveness of our marketing messages;
|
●
|
The efficiency of our advertising and promotional efforts;
|
●
|
Availability of attractive and cost-effective consumer credit options, including the impact of recent changes in federal law that restricts various forms of consumer credit promotional offerings;
|
●
|
Our ability to execute our retail distribution strategy;
|
●
|
Our ability to continue to improve our product line and service levels, and consumer acceptance of our products, product quality, innovation and brand image;
|
●
|
Our ability to achieve and maintain acceptable levels of product quality and acceptable product return and warranty claims rates;
|
●
|
Pending and unforeseen litigation and the potential for adverse publicity associated with litigation;
|
●
|
Industry competition and the adequacy of our intellectual property rights to protect our products and brand from competitive or infringing activities;
|
●
|
Our “just-in-time” manufacturing processes with minimal levels of inventory, which may leave us vulnerable to shortages in supply;
|
●
|
Our dependence on significant suppliers and our ability to maintain relationships with key suppliers, including several sole-source suppliers;
|
●
|
Rising commodity costs and other inflationary pressures;
|
●
|
Risks inherent in global sourcing activities;
|
●
|
Risks of disruption in the operation of either of our two manufacturing facilities;
|
●
|
Increasing government regulation;
|
●
|
The adequacy of our management information systems to meet the evolving needs of our business and existing 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.
|
|
●
|
Everyone will know Sleep Number and how it will improve their life;
|
|
●
|
Innovative Sleep Number products will move society forward with meaningful consumer benefits;
|
|
●
|
Sleep Number will be easy to find and customers will interact with us when and how they want;
|
|
●
|
Customers will love their Sleep Number experience and enthusiastically recommend Sleep Number to their family and friends; and
|
|
●
|
Leveraging our unique business model to fund innovation and growth will benefit our customers, employees and shareholders.
|
|
●
|
Net income increased 50% to $17.0 million, or $0.30 per diluted share, compared with net income of $11.3 million, or $0.20 per diluted share, for the same period one year ago.
|
|
●
|
Net sales increased 27% to $205.2 million, compared with $161.5 million for the same period one year ago, primarily due to a 25% comparable sales increase in our Company-Controlled channel.
|
|
●
|
Operating income improved to $25.9 million, or 12.6% of net sales, for the three months ended June 30, 2012, compared with $17.6 million, or 10.9% of net sales, for the same period one year ago. The operating income improvement was driven by strong comparable sales growth and continued efficiency enhancements. Retail sales-per-store (for stores open at least one year), on a trailing twelve-month basis, increased by 35% from one year ago to $2.0 million.
|
|
●
|
Cash provided by operating activities totaled $43.2 million for the six months ended June 30, 2012, compared with $33.7 million for the same period one year ago.
|
|
●
|
As of June 30, 2012, cash, cash equivalents and marketable debt securities totaled $155.5 million compared with $146.3 million at December 31, 2011, and we had no borrowings under our revolving credit facility. In the second quarter of 2012, we repurchased 409,770 shares of our common stock under our Board approved share repurchase program at a cost of $10.0 million ($24.42 per share).
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||||||||||||||||||
|
|
June 30, 2012
|
|
|
July 2, 2011
|
|
|
June 30, 2012
|
|
|
July 2, 2011
|
|
||||||||||||||||||||
Net sales
|
|
$
|
205.2
|
|
|
|
100.0
|
%
|
|
$
|
161.5
|
|
|
|
100.0
|
%
|
|
$
|
467.6
|
|
|
|
100.0
|
%
|
|
$
|
354.5
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
73.6
|
|
|
|
35.9
|
%
|
|
|
59.0
|
|
|
|
36.5
|
%
|
|
|
171.7
|
|
|
|
36.7
|
%
|
|
|
128.9
|
|
|
|
36.4
|
%
|
Gross profit
|
|
|
131.6
|
|
|
|
64.1
|
%
|
|
|
102.5
|
|
|
|
63.5
|
%
|
|
|
295.9
|
|
|
|
63.3
|
%
|
|
|
225.6
|
|
|
|
63.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing
|
|
|
88.2
|
|
|
|
43.0
|
%
|
|
|
70.5
|
|
|
|
43.7
|
%
|
|
|
194.4
|
|
|
|
41.6
|
%
|
|
|
150.8
|
|
|
|
42.5
|
%
|
General and administrative
|
|
|
16.2
|
|
|
|
7.9
|
%
|
|
|
13.1
|
|
|
|
8.1
|
%
|
|
|
33.1
|
|
|
|
7.1
|
%
|
|
|
28.7
|
|
|
|
8.1
|
%
|
Research and development
|
|
|
1.3
|
|
|
|
0.6
|
%
|
|
|
1.2
|
|
|
|
0.8
|
%
|
|
|
2.5
|
|
|
|
0.5
|
%
|
|
|
2.0
|
|
|
|
0.6
|
%
|
Asset impairment charges
|
|
|
—
|
|
|
|
0.0
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
|
|
0.1
|
|
|
|
0.0
|
%
|
CEO transition costs
|
—
|
0.0
|
%
|
—
|
0.0
|
%
|
5.6
|
1.2
|
%
|
—
|
0.0
|
%
|
||||||||||||||||||||
Total operating expenses
|
|
|
105.7
|
|
|
|
51.5
|
%
|
|
|
84.9
|
|
|
|
52.6
|
%
|
|
|
235.7
|
|
|
|
50.4
|
%
|
|
|
181.6
|
|
|
|
51.2
|
%
|
Operating income
|
|
|
25.9
|
|
|
|
12.6
|
%
|
|
|
17.6
|
|
|
|
10.9
|
%
|
|
|
60.1
|
|
|
|
12.9
|
%
|
|
|
44.0
|
|
|
|
12.4
|
%
|
Operating income – as adjusted(1)
|
25.9
|
12.6
|
%
|
17.6
|
10.9
|
%
|
65.8
|
14.1
|
%
|
44.0
|
12.4
|
%
|
||||||||||||||||||||
Other income (expense), net
|
|
|
—
|
|
|
|
0.0
|
%
|
|
|
—
|
|
|
|
0.0
|
%
|
|
|
0.1
|
|
|
|
0.0
|
%
|
|
|
(0.1
|
)
|
|
|
0.0
|
%
|
Income before income taxes
|
|
|
25.9
|
|
|
|
12.6
|
%
|
|
|
17.6
|
|
|
|
10.9
|
%
|
|
|
60.2
|
|
|
|
12.9
|
%
|
|
|
44.0
|
|
|
|
12.4
|
%
|
Income tax expense
|
|
|
8.9
|
|
|
|
4.3
|
%
|
|
|
6.3
|
|
|
|
3.9
|
%
|
|
|
20.8
|
|
|
|
4.5
|
%
|
|
|
16.1
|
|
|
|
4.5
|
%
|
Net income
|
|
$
|
17.0
|
|
|
|
8.3
|
%
|
|
$
|
11.3
|
|
|
|
7.0
|
%
|
|
$
|
39.4
|
|
|
|
8.4
|
%
|
|
$
|
27.9
|
|
|
|
7.9
|
%
|
Net income – as adjusted(1)
|
$
|
17.0
|
8.3
|
%
|
$
|
11.3
|
7.0
|
%
|
$
|
43.1
|
9.2
|
%
|
$
|
27.9
|
7.9
|
%
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.30
|
|
|
|
|
|
|
$
|
0.21
|
|
|
|
|
|
|
$
|
0.71
|
|
|
|
|
|
|
$
|
0.51
|
|
|
|
|
|
Diluted
|
|
$
|
0.30
|
|
|
|
|
|
|
$
|
0.20
|
|
|
|
|
|
|
$
|
0.69
|
|
|
|
|
|
|
$
|
0.50
|
|
|
|
|
|
Diluted – as adjusted(1)
|
$
|
0.30
|
$
|
0.20
|
$
|
0.75
|
$
|
0.50
|
||||||||||||||||||||||||
Weighted-average number of common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Basic
|
|
|
55.7
|
|
|
|
|
|
|
|
55.0
|
|
|
|
|
|
|
|
55.7
|
|
|
|
|
|
|
|
54.8
|
|
|
|
|
|
Diluted
|
|
|
57.4
|
|
|
|
|
|
|
|
56.4
|
|
|
|
|
|
|
|
57.4
|
|
|
|
|
|
|
|
56.2
|
|
|
|
|
|
(1)
|
This non-GAAP measure is not in accordance with, or preferable to, GAAP financial data. However, we are providing this information as we believe it facilitates annual and year-over-year comparisons for investors and financial analysts. See page 21 for a reconciliation of this non-GAAP measure to the appropriate GAAP measure.
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
||||
Percent of net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Company-Controlled
|
|
|
96.4
|
%
|
|
|
95.8
|
%
|
|
|
96.3
|
%
|
|
|
95.9
|
%
|
Wholesale
|
|
|
3.6
|
%
|
|
|
4.2
|
%
|
|
|
3.7
|
%
|
|
|
4.1
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
||||
Sales growth rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retail comparable-store sales
|
|
|
27
|
%
|
|
|
25
|
%
|
|
|
32
|
%
|
|
|
28
|
%
|
Direct and E-Commerce
|
|
|
8
|
%
|
|
|
(13
|
%)
|
|
|
13
|
%
|
|
|
(8
|
%)
|
Company-Controlled comparable sales growth
|
|
|
25
|
%
|
|
|
20
|
%
|
|
|
30
|
%
|
|
|
23
|
%
|
Net store openings/closings
|
|
|
3
|
%
|
|
|
(2
|
%)
|
|
|
2
|
%
|
|
|
(2
|
%)
|
Total Company-Controlled channel
|
|
|
28
|
%
|
|
|
18
|
%
|
|
|
32
|
%
|
|
|
21
|
%
|
Wholesale
|
|
|
11
|
%
|
|
|
(19
|
%)
|
|
|
19
|
%
|
|
|
(8
|
%)
|
Total sales growth
|
|
|
27
|
%
|
|
|
16
|
%
|
|
|
32
|
%
|
|
|
19
|
%
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
||||
Company-Controlled retail stores:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Average sales per store(1) ($ in thousands)
|
$
|
2,012
|
$
|
1,492
|
||||||||||||
Average sales per square foot(1)
|
$
|
1,281
|
$
|
998
|
||||||||||||
Stores > $1 million in net sales(1)
|
|
|
98
|
%
|
85
|
%
|
||||||||||
Stores > $2 million in net sales(1)
|
|
|
42
|
%
|
13
|
%
|
||||||||||
Average mattress sales per mattress unit – Company-Controlled channel
|
|
$
|
2,540
|
|
|
$
|
2,223
|
|
|
$
|
2,397
|
|
|
$
|
2,157
|
|
(1)
|
Trailing twelve months for stores open at least one year.
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
||||
Company-Controlled retail stores:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning of period
|
|
|
380
|
|
|
|
375
|
|
|
|
381
|
|
|
|
386
|
|
Opened
|
|
|
12
|
|
|
|
5
|
|
|
|
22
|
|
|
|
6
|
|
Closed
|
|
|
(11
|
)
|
|
|
(5
|
)
|
|
|
(22
|
)
|
|
|
(17
|
)
|
End of period
|
|
|
381
|
|
|
|
375
|
|
|
|
381
|
|
|
|
375
|
|
|
|
Six Months Ended
|
|
|||||
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
||
Total cash provided by (used in):
|
|
|
|
|
|
|
||
Operating activities
|
|
$
|
43.2
|
|
|
$
|
33.7
|
|
Investing activities
|
|
|
(57.8
|
)
|
|
|
(52.2
|
)
|
Financing activities
|
|
|
(11.4
|
)
|
|
|
0.2
|
|
Net decrease in cash and cash equivalents
|
|
$
|
(25.9
|
)
|
|
$
|
(18.4
|
)
|
|
Six Months Ended
|
||||||||||||||
|
June 30, 2012
|
|
|
July 2, 2011
|
|
||||||||||
|
As
Reported
|
|
|
CEO
Transition
Costs(1)
|
|
|
As
Adjusted
|
|
|
As
Reported
|
|
||||
Operating income
|
$
|
60,148
|
|
|
$
|
5,595
|
|
|
$
|
65,743
|
|
|
$
|
44,024
|
|
Other income (expense), net
|
|
55
|
|
|
|
—
|
|
|
|
55
|
|
|
|
(60
|
)
|
Income before income taxes
|
|
60,203
|
|
|
|
5,595
|
|
|
|
65,798
|
|
|
|
43,964
|
|
Income tax expense(2)
|
|
20,813
|
|
|
|
1,919
|
|
|
|
22,732
|
|
|
|
16,092
|
|
Net income
|
$
|
39,390
|
|
|
$
|
3,676
|
|
|
$
|
43,066
|
|
|
$
|
27,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Basic
|
$
|
0.71
|
|
|
$
|
0.07
|
|
|
$
|
0.77
|
|
|
$
|
0.51
|
|
Diluted
|
$
|
0.69
|
|
|
$
|
0.06
|
|
|
$
|
0.75
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic shares
|
|
55,680
|
|
|
|
55,680
|
|
|
|
55,680
|
|
|
|
54,842
|
|
Diluted shares
|
|
57,367
|
|
|
|
57,367
|
|
|
|
57,367
|
|
|
|
56,157
|
|
(1)
|
In February 2012, we announced that William R. McLaughlin, then President and Chief Executive Officer, would retire from the Company effective June 1, 2012. In recognition of Mr. McLaughlin’s contributions, the Company’s Compensation Committee approved the modification of Mr. McLaughlin’s unvested stock awards, including performance stock awards. The performance stock awards are subject to applicable performance adjustments based on free cash flows and actual market share growth versus performance targets. During the six months ended June 30, 2012, we incurred $5.6 million of non-recurring, non-cash expenses associated with these stock award modifications.
|
(2)
|
Reflects effective income tax rate, before discrete adjustments, of 34.3% for 2012.
|
|
|
Three Months Ended
|
|
|
Trailing-Twelve
Months Ended
|
|
||||||||||
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
||||
Net income
|
|
$
|
16,973
|
|
|
$
|
11,289
|
|
|
$
|
71,996
|
|
|
$
|
45,478
|
|
Income tax expense
|
|
|
8,927
|
|
|
|
6,307
|
|
|
|
34,663
|
|
|
|
26,625
|
|
Interest expense
|
|
|
20
|
|
|
|
64
|
|
|
|
130
|
|
|
|
279
|
|
Depreciation and amortization
|
|
|
4,726
|
|
|
|
3,210
|
|
|
|
16,090
|
|
|
|
12,815
|
|
Stock-based compensation
|
|
|
1,405
|
|
|
|
1,122
|
|
|
|
11,084
|
|
|
|
4,727
|
|
Asset impairments
|
|
|
3
|
|
|
|
18
|
|
|
|
19
|
|
|
|
356
|
|
EBITDA
|
|
$
|
32,054
|
|
|
$
|
22,010
|
|
|
$
|
133,982
|
|
|
$
|
90,280
|
|
|
|
Six Months Ended
|
|
|
Trailing-Twelve
Months Ended
|
|
||||||||||
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
|
June 30,
2012
|
|
|
July 2,
2011
|
|
||||
Net cash provided by operating activities
|
|
$
|
43,233
|
|
|
$
|
33,685
|
|
|
$
|
100,594
|
|
$
|
76,503
|
|
|
Subtract: Purchases of property and equipment
|
|
|
22,499
|
|
|
|
9,585
|
|
|
|
36,441
|
|
|
|
15,190
|
|
Free cash flows
|
|
$
|
20,734
|
|
|
$
|
24,100
|
|
|
$
|
64,153
|
|
$
|
61,313
|
|
ITEM 4.
|
ITEM 1.
|
ITEM 1A.
|
(a) – (b)
|
Not applicable.
|
(c)
|
Issuer Purchases of Equity Securities
|
Fiscal Period
|
Total Number
of Shares
Purchased
|
Average
Price Paid
per Share
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs(1)
|
Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs
|
||||||||||||
April 1, 2012 through April 28, 2012
|
7,570 | $ | 29.33 | 7,570 | $ | 206,540,000 | ||||||||||
April 29, 2012 through May 26, 2012
|
161,150 | 27.60 | 161,150 | 202,092,000 | ||||||||||||
May 27, 2012 through June 30, 2012
|
241,050 | 22.14 | 241,050 | 196,755,000 | ||||||||||||
Total
|
409,770 | $ | 24.42 | 409,770 | $ | 196,755,000 |
(1)
|
During the second quarter of 2012, we reinitiated repurchasing our stock with the objective to maintain common shares outstanding at current levels. Under the current Board approved $290.0 million share repurchase program, we repurchased and retired 0.4 million shares at a cost of $10.0 million (based on trade dates), during the three months ended June 30, 2012. We did not repurchase any shares during the three or six months ended July 2, 2011. As of June 30, 2012, the remaining authorization under our Board approved share repurchase program was $196.8 million. There is no expiration date governing the period over which we can repurchase shares.
|
ITEM 3.
|
ITEM 4.
|
ITEM 5.
|
ITEM 6.
|
Exhibit
Number
|
|
Description
|
|
Method of Filing
|
|
|
|
|
|
10.1
|
|
Amendment to Credit Agreement, dated April 23, 2012, by and among Select Comfort Corporation and Wells Fargo Bank, National Association
|
|
Incorporated by reference to Exhibit 10.1 in Select Comfort’s Current Report on Form 8-K filed April 24, 2012 (File No. 0-25121)
|
|
|
|
|
|
10.2
|
Eleventh Amendment to Amended and Restated Private Label Consumer Credit Card Program Agreement dated June 18, 2012
|
Incorporated by reference to Exhibit 10.1 in Select Comfort’s Current Report on Form 8-K filed June 20, 2012 (File No. 0-25121)
|
||
31.1
|
|
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
|
|
|
|
|
31.2
|
|
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
|
|
|
|
|
32.1
|
|
Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|
|
Furnished herewith
|
|
|
|
|
|
32.2
|
|
Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|
|
Furnished herewith
|
|
|
|
|
|
101
|
|
The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, filed with the SEC on July 27, 2012, formatted in eXtensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012 and July 2, 2011, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2012 and July 2, 2011, (iv) Condensed Consolidated Statement of Shareholders’ Equity for the six months ended June 30, 2012, (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and July 2, 2011, and (vi) Notes to Condensed Consolidated Financial Statements.
|
|
Filed herewith(1)
|
(1)
|
Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
|
|
SELECT COMFORT CORPORATION
|
|
||
|
(Registrant)
|
|
||
|
|
|
||
Dated: July 27, 2012
|
By:
|
|
/s/ Shelly R. Ibach
|
|
|
|
|
Shelly R. Ibach
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
(principal executive officer)
|
|
|
|
|
|
|
|
By:
|
|
/s/ Robert J. Poirier
|
|
|
|
|
Robert J. Poirier
|
|
|
|
|
Chief Accounting Officer
|
|
|
|
|
(principal accounting officer)
|
|
Exhibit
Number
|
|
Description
|
|
Method of Filing
|
|
|
|
|
|
10.1
|
|
Amendment to Credit Agreement, dated April 23, 2012, by and among Select Comfort Corporation and Wells Fargo Bank, National Association
|
|
Incorporated by reference to Exhibit 10.1 in Select Comfort’s Current Report on Form 8-K filed April 24, 2012 (File No. 0-25121)
|
|
|
|
|
|
10.2
|
Eleventh Amendment to Amended and Restated Private Label Consumer Credit Card Program Agreement dated June 18, 2012
|
Incorporated by reference to Exhibit 10.1 in Select Comfort’s Current Report on Form 8-K filed June 20, 2012 (File No. 0-25121)
|
||
|
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
|
|
|
|
|
|
|
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
|
|
|
|
|
|
|
Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|
|
Furnished herewith
|
|
|
|
|
|
|
|
Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|
|
Furnished herewith
|
|
|
|
|
|
|
101
|
|
The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, filed with the SEC on July 27, 2012, formatted in eXtensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012 and July 2, 2011, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2012 and July 2, 2011, (iv) Condensed Consolidated Statement of Shareholders’ Equity for the six months ended June 30, 2012, (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and July 2, 2011, and (vi) Notes to Condensed Consolidated Financial Statements.
|
|
Filed herewith(1)
|
(1)
|
Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
|