NASDAQ: SCSS
Statements used in this presentation that relate to future plans, events, financial results or performance are
forward-looking statements that are subject to certain risks and uncertainties including, among others, such
factors as general and industry economic trends; uncertainties arising from global events; the impact on
consumer confidence and consumer shopping patterns from factors such as consumer debt levels and
rising interest rates and energy prices; effectiveness of our advertising and promotional efforts; our ability
to secure suitable retail locations; our ability to attract and retain qualified sales professionals and other key
employees; our ability to successfully expand distribution through independent retailers; consumer
acceptance of our products, product quality, innovation and brand image; our ability to continue to expand
and improve our product line; industry competition; warranty expenses; risks of potential litigation; our
dependence on significant suppliers, and the vulnerability of any suppliers to commodity shortages,
inflationary pressures, labor negotiations, liquidity concerns or other factors; uncertainties related to the
supply of foam used to manufacture our products; rising commodity costs; and increasing government
regulations, including new flammability standards for the bedding industry. 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
that may be in this presentation.
factors as general and industry economic trends; uncertainties arising from global events; the impact on
consumer confidence and consumer shopping patterns from factors such as consumer debt levels and
rising interest rates and energy prices; effectiveness of our advertising and promotional efforts; our ability
to secure suitable retail locations; our ability to attract and retain qualified sales professionals and other key
employees; our ability to successfully expand distribution through independent retailers; consumer
acceptance of our products, product quality, innovation and brand image; our ability to continue to expand
and improve our product line; industry competition; warranty expenses; risks of potential litigation; our
dependence on significant suppliers, and the vulnerability of any suppliers to commodity shortages,
inflationary pressures, labor negotiations, liquidity concerns or other factors; uncertainties related to the
supply of foam used to manufacture our products; rising commodity costs; and increasing government
regulations, including new flammability standards for the bedding industry. 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
that may be in this presentation.
Forward Looking Statements
“Realizing a Mission”
Bill McLaughlin
Chairman & CEO
NASDAQ: SCSS
Select Comfort Profile
Minneapolis, MN based
Founded in 1987; IPO in
1998
Vertically integrated - we
design, make and sell a
complete line of adjustable
firmness beds and
accessories
complete line of adjustable
firmness beds and
accessories
Self-funded business
model
NASDAQ: SCSS
Select Comfort Profile
Industry disruptor
§
Differentiated product
§
Building brand awareness
§
#1 U.S. bed retailer
Advantaged business model
§
Few plants (2)
§
Controlled distribution
§
Nationwide delivery
Management expertise
Focus, mission & culture
NASDAQ: SCSS
$0
$1000
2005
2001
Net Sales, in $millions
$(0.50)
$1.00
Earnings Per Share, in $
$0
2005
2001
$1.2B Market Capitalization
Attractive Investment Opportunity
NASDAQ: SCSS
Mattress Unit Shipments (in millions)
1985
2005
0
25
Cumulative Average Growth Rates
Units Revenues
5-Year 1.6% 6.8%
10-Year 2.6% 7.2%
20-Year 2.7% 6.8%
Source: International Sleep Products Association (ISPA) and company information
Positive Industry Dynamics
NASDAQ: SCSS
National Market Share
5.5%
Mattress Unit Shipments (in millions)
1985
2005
0
25
Cumulative Average Growth Rates
Units Revenues
5-Year 1.6% 6.8%
10-Year 2.6% 7.2%
20-Year 2.7% 6.8%
Positive Industry Dynamics
NASDAQ: SCSS
Mattress Unit Shipments (in millions)
1985
2005
0
25
Cumulative Average Growth Rates
Units Revenues
5-Year 1.6% 6.8%
10-Year 2.6% 7.2%
20-Year 2.7% 6.8%
Source: International Sleep Products Association (ISPA)
and company information
< 10%
11 ~ 20%
> 20%
40
9
1
Lead Market Share
National Market Share
5.5%
Positive Industry Dynamics
NASDAQ: SCSS
“Get down before you hurt yourself.”
Starts with Differentiated Product/Service
NASDAQ: SCSS
Unique, Proprietary Product
Adjustable firmness beds
§
Clinically proven
§
Personalization
§
Health & wellness trend
§
Priced for broad market
acceptance
NASDAQ: SCSS
and
Marketing
Manufacturing
Traditional Business Model
NASDAQ: SCSS
Marketing
Selling
Manufacturing
Delivery
Service
Referral
Advantaged Business Model
Build-to-order
Controlled distribution
Low inventory,
just-in-time system
Nationwide delivery
After-sale support
Customer loyalty
NASDAQ: SCSS
Board of Directors
Management
Focused Management
NASDAQ: SCSS
ISPA CAGR 6.8%
Revenue Growth (in %)
Source: International Sleep Products Association (ISPA)
and company data
2000
1Q06
(10)%
40%
0
20%
2005
2004
2003
2002
2001
Strong Track Record of
Performance
Consistent Strategies 2001-2006
Awareness
Distribution
Innovation
Leverage
Expand
People
&
Systems
NASDAQ: SCSS
$0
10%
14%
As %Revenue
$120
2006E
2001
Media Spending
Building Brand Awareness
“Strength in Numbers”
Jim Raabe
Chief Financial Officer
NASDAQ: SCSS
Sources of Growth
Same
Store
New
Stores
Retail
Partners
New
Channels/
Geography
Geography
Retail Partners - 3%
Other - 4%
Direct - 11%
eCommerce - 5%
2005 Revenue Mix - $691.1M
Multiple Sources of Growth
NASDAQ: SCSS
-0.3
2001A
$1.2 B
Net Sales
2005A
Operating Margin %
0
0.9
0.6
0.3
-5%
20%
0
15%
10%
5%
2005 - 2007
2 Points of
Operating
Margin
Gross
margin --
Marketing
expense ~0.5
Selling
expense ~1.0
General &
administrative expense ~0.5
Significant Operating Leverage
NASDAQ: SCSS
-0.3
2001A
2007E
$1.2 B
Net Sales
2005A
Operating Margin %
0
0.9
0.6
0.3
-5%
0
15%
10%
5%
Long-Term Guidance
Revenue + 15 ~ 20%
Earnings + 20 ~ 25%
2006 Guidance
Revenue at high-end
of L-T target
Post-split earnings of
$0.91 ~ $0.95
$1.0B
12%
On Track to Realize Milestone
NASDAQ: SCSS
Operating Cash
Flows
Capital Expenditures
Free Cash Flows
$0
$100
2006E
2003
2005
2004
2001
$(50)
2002
In $millions
Self Funded Growth
NASDAQ: SCSS
Cash and Debt (in $millions)
Shares (in millions)
O/S
Buy-back
Cash
Debt
In $Millions 2004 2005
Cash & Mkt. Sec. $ 91.7 $112.1
Inventory 20.5 22.0
Receivables 8.6 10.1
Customer Prepays (9.4) (14.7)
Payables (26.3) (31.7)
Debt -- --
Equity 114.3 121.3
In Days
Inventory 32 28
Receivables 5 6
Payables (41) (37)
Cash Conversion Cycle (4) (3)
Balance Sheet Strength
NASDAQ: SCSS
Mission:
To improve lives
through better sleep.
Vision:
To be a leader in
sleep.
NASDAQ: SCSS
Unique Investment Opportunity
Positive industry dynamics
Unique, proprietary product
Advantaged business model
Strong experienced leadership team
Strong track record of performance
Self-funded growth
Select Comfort Corporation
Frank Milano - Director, Investor Relations
6105 Trenton Lane North
Minneapolis, MN 55442
Tel: 001-763-551-6908
frank.milano@selectcomfort.com