As of July 4, 2009, we had cash and cash equivalents of $4.5 million compared with $13.1 million as of January 3, 2009. The $8.6 million decrease in cash and cash equivalents was primarily due to a $42.3 million decrease in short-term borrowing and a $1.9 million investment in property and equipment, partially offset by $35.6 million of cash provided by operating activities (which included a $25.8 million refund of income taxes associated with the carryback of our 2008 pre-tax loss).
The following table summarizes our cash flows for the six months ended July 4, 2009, and June 28, 2008 ($ in millions):
Cash provided by operating activities for the six months ended July 4, 2009, and June 28, 2008 was $35.6 million and $10.4 million, respectively. The $25.1 million year-over-year increase in cash from operating activities was comprised of a $7.1 million reduction in our net loss compared to the same period one year ago, a $7.0 million increase in adjustments to reconcile net loss to cash provided by operating activities, and an $11.0 million increase in cash from changes in operating assets and liabilities. The year-over-year increase in cash from changes in operating assets and liabilities was primarily due to a reduction in income taxes receivable as we received a $25.8 million cash refund of income taxes resulting from the carryback of 2008 pre-tax losses to prior profitable tax years. Other changes in operating assets and liabilities include a lower current-year decrease in accounts receivable (both years reflect lower sales volume), a lower current-year decrease in inventories (current-year includes impact resulting from the reduction in our store base; both years reflect efforts to align inventories with lower sales volume), and a current-year increase in prepaid expenses and other assets (primarily due to deferred costs related to the securities purchase agreement with Sterling Partners, and timing of rent and advertising expenses), partially offset by a current-year increase in accounts payable (timing of payments).
During the first six months of 2009, we invested $1.9 million in property and equipment, compared with $20.9 million for the same period one year ago. We did not open any new retail stores during the first six months of 2009, compared with 13 new retail stores opened during the same period one year ago. In 2009 we expect to limit our purchases of property and equipment to business-critical expenditures.
Net cash used in financing activities was $42.2 million for the six months ended July 4, 2009, compared with $10.0 million net cash provided by financing activities for the same period one year ago. The $52.2 million increase in cash used in financing activities resulted from a $42.3 million current-year net decrease in short-term borrowings, compared with an $11.0 million net increase in short-term borrowings for the six months ended June 28, 2008. The current-year decrease in short-term borrowings reflects the use of the $25.8 million cash refund of income taxes. Book overdrafts are included in the net change in short-term borrowings.
On April 20, 2007, our Board of Directors authorized us to repurchase up to an additional $250 million of our common stock, bringing the total availability under our share repurchase program to $290.0 million. In the third quarter of 2007, we curtailed our share repurchases following the tightening of credit markets and the continued deterioration in the general economic environment. During 2008 and the six months ended July 4, 2009, we did not purchase any shares of our common stock. As of July 4, 2009, the remaining authorization under our stock repurchase program was $206.8 million. There is no expiration date governing the period over which we can repurchase shares. We currently have no plans to repurchase our common stock.
In June 2006, we entered into a Credit Agreement (the “Credit Agreement”) with a syndicate of banks (the “Lenders”). The Credit Agreement was amended on February 1, 2008 and on May 30, 2008 to allow greater flexibility under the existing financial covenants, provide additional financial covenants and monthly measurement of financial covenants, modify the credit limit and maturity date, increase the cost of borrowing, provide the Lenders with a collateral security interest in substantially all of our assets and those of our subsidiaries, and impose additional restrictions and covenants with respect to our operations.
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The Credit Agreement, as amended to date, provides a revolving credit facility for general corporate purposes with net aggregate availability of $75.0 million (after deducting $5.0 million required by a minimum availability covenant). The Credit Agreement terminates in June 2010.
We had outstanding borrowings of $43.8 million and $79.2 million, under the credit facility as of July 4, 2009, and January 3, 2009, respectively. We also had outstanding letters of credit of $5.5 million and $5.9 million as of July 4, 2009, and January 3, 2009, respectively. Outstanding letters of credit reduce the amounts available under the credit facility. At July 4, 2009, and January 3, 2009, $25.7 million and $5.0 million, respectively, were available under this credit facility.
During the first six months of 2009, we received a $25.8 million federal income tax refund associated with the carryback of 2008 losses to prior years. Pursuant to an agreement with the Lenders, in April 2009 these funds were used to reduce outstanding debt under the credit facility.
At July 4, 2009, borrowings under the credit facility bore interest at a floating rate and could be maintained as base rate loans (tied to the prime rate, plus a margin of up to 5.50%). We also pay certain facility and agent fees. As of July 4, 2009, and January 3, 2009, interest rates on borrowings outstanding under the Credit Agreement were 8.75% and 6.0%, respectively. We are subject to certain financial covenants under the agreement, including a maximum leverage ratio, a minimum interest coverage ratio, minimum EBITDA requirements, minimum availability, cash usage and capital expenditure limits.
Pursuant to a series of amendments of our Credit Agreement, the most recent of which was entered into in connection with the execution of the Securities Purchase Agreement related to the Sterling Transaction, described below, the Lenders have waived compliance with certain financial covenants under the Credit Agreement applicable to fiscal periods ended on or about December 31, 2008 through the Waiver Termination Date, including the minimum interest coverage ratio and the maximum leverage ratio covenants. At July 4, 2009, our actual interest coverage ratio was 1.08 to 1.00 and the required ratio was not less than 1.25 to 1.00. At July 4, 2009, our leverage ratio was 4.96 to 1.00 and the required ratio was a maximum of 3.50 to 1.00. The Waiver Termination Date is the earliest to occur of (i) September 14, 2009, (ii) the date that capital expenditures for fiscal 2009 exceed $4.0 million in the aggregate, (iii) the date the Company amends, supplements or modifies the Securities Purchase Agreement with Sterling Partners without the prior written consent of the Administrative Agent for the Lenders, (iv) failure of the Company to obtain shareholder approval of the Sterling Transaction by September 7, 2009, (v) the date either the Company or Sterling Partners terminates its obligations under the Securities Purchase Agreement, or (vi) the Securities Purchase Agreement at any time shall cease to be in full force and effect. Following the Waiver Termination Date, in the absence of a further amendment or waiver, we would not be in compliance with certain financial covenants under the Credit Agreement.
We have taken significant actions to improve our operating results and maintain our liquidity in the current challenging macro-economic environment, including corporate workforce reductions, reduced capital spending, executing plans to close stores, supply chain cost reduction initiatives, reduced media spending, reductions in fixed and discretionary marketing and selling expenses, and ceasing all activities associated with the implementation of SAP®-based information technology applications. We recently introduced lower product price points and initiated an enhanced promotional strategy designed to stabilize sales. We have worked with our vendors to extend our payment terms and maintain positive working relationships. In addition, we are pursuing various options to enhance our financial flexibility and fund our operations, including: implementing additional actions to reduce our cost structure and improve profitability. As a result of actions taken to date, during the first six months of 2009 we generated operating income of $1.2 million and cash flows from operating activities of $35.6 million, including a $25.8 million tax refund associated with the carryback of our 2008 pre-tax loss.
We continue to operate under and rely on short-term waivers to comply with certain ongoing covenants associated with our $75.0 million revolving credit facility. On May 26, 2009, we announced that we had entered into a securities purchase agreement with Sterling Partners, a leading growth-oriented, U.S.-based private equity firm. Under the terms of the agreement, Sterling Partners would purchase 50 million shares of common stock at $0.70 per share, for a total investment of $35.0 million. These shares would represent a 52.3 percent ownership interest in the Company. The investment is subject to shareholder approval and customary closing conditions, and the Company expects the shareholder meeting and the closing of the transaction to occur in late August. The Company believes there is uncertainty with respect to its ability to secure a longer-term amendment to the credit agreement without consummation of the transaction with Sterling Partners, and a likelihood of significant cost, dilution, limited financial flexibility and limited term in the event such an amendment could be secured. In conjunction with the purchase agreement, the Company’s existing lenders have agreed to negotiate in good faith to amend and restate the Company’s current credit agreement. The amended credit agreement would provide maximum availability of $70.0 million, include improved operating covenants and extend the maturity from June 2010 to December 2012. The amended credit agreement is subject to final lender approval and definitive documentation.
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We have scheduled a Special Meeting of Shareholders for August 27, 2009 for the purpose of seeking shareholder approval of the Sterling Transaction. Definitive proxy materials have been mailed to shareholders of record as of the close of business on July 20, 2009 related to this Special Meeting of Shareholders. We urge our shareholders to read and carefully consider the matters set forth in these definitive proxy materials.
If we fail to complete the Sterling Transaction, subject to any additional agreement with the Lenders, we would not be in compliance with the terms of the Credit Agreement and our relationships with key suppliers may deteriorate. In such event, the Lenders may accelerate our debt obligations under the Credit Agreement and may exercise remedies as secured creditors, and could potentially force us to seek protection under applicable bankruptcy laws.
If the Lenders accelerated our debt obligations or took other actions to exercise their remedies as secured creditors, or such actions were perceived as likely, our existing and potential suppliers and customers could lose confidence in our viability as an operating business. We have had discussions with the Lenders regarding potential longer term amendments of the Credit Agreement in the absence of additional financing, and we believe the Lenders would cooperate with us if we could demonstrate an ability to seek other viable solutions to our liquidity requirements in the event that the Sterling Transaction is not consummated for any reason. Our ability to avoid default under the Credit Agreement or to obtain a longer term amendment of the Credit Agreement in the absence of the Sterling Transaction will be substantially dependent on our near-term business performance and may also be dependent on our ability to successfully obtain alternative sources of financing, and there can be no assurance that we would be able to obtain further forbearance under the Credit Agreement or to obtain a longer term amendment of the Credit Agreement in the absence of the Sterling Transaction.
In addition, if the Securities Purchase Agreement is terminated because our shareholders do not approve the Sterling Transaction, we would be obligated to reimburse up to $1.0 million of Sterling’s expenses and we would also be obligated to pay a termination fee of $750,000 to Sterling if within six months of such termination we entered into an agreement with respect to another transaction, assuming that no competing proposal had been publicly disclosed prior to the shareholder vote on the Sterling Transaction. The termination fee would be $1.5 million, and the applicable time period would be 12 months, in such circumstances if a competing proposal had been publicly disclosed prior to the shareholder vote on the Sterling Transaction.
We have an agreement with GE Money Bank to offer qualified customers revolving credit arrangements to finance purchases from us (the “GE Agreement”). The GE Agreement contains certain financial covenants, including a maximum leverage ratio and a minimum interest coverage ratio. At July 4, 2009, the required maximum leverage ratio was 3.00 to 1.00. Our actual leverage ratio was 4.96 to 1.00. At July 4, 2009, the required minimum interest coverage ratio was 1.75 to 1.00. Our actual interest coverage ratio was 1.08 to 1.00.
As our recent results placed us outside of these financial covenants, we were required under the terms of the GE Agreement to provide GE Money Bank with a $2.7 million letter of credit. The letter of credit is supported by our Credit Agreement and reduces the amount available under the Credit Agreement. The letter of credit covers the risk to GE Money Bank for sales returns and warranty claims should we be unable to pay these claims. Under the terms of our agreement with GE, GE Money Bank sets the minimum acceptable credit ratings, the interest rates, fees and all other terms and conditions of the customer accounts, including collection policies and procedures, and is the owner of the accounts. GE Money Bank may draw on this letter of credit by certifying that we have failed to fund any amounts due under the GE Agreement or have filed for (or are subject to an involuntary procedure with respect to) bankruptcy protection.
Outlook
We do not plan to provide specific earnings guidance for 2009. However, we have outlined our key business drivers and trends, which we believe will assist investors and analysts in understanding and analyzing our business.
We do not anticipate a significant economic recovery or improvement in consumer confidence for the balance of 2009, which will likely result in continued sales volatility in the near term. However, we expect sales declines to moderate in the second half of 2009, as we lap the impact of the significant economic downturn we experienced in the second half of 2008.
In the second half of 2009, we expect to remain cash flow positive and achieve break-even or slight profitability, before the impact of charges associated with the Sterling Partners transaction and subsequent actions. The combination of the anticipated $35.0 million cash investment and the amended credit agreement would improve our current capital structure, allowing us to better address our liquidity needs and pursue long-term opportunities that become available.
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Sales assumptions for the remainder of 2009 include the anticipated opening of two new stores and closing of at least 15 additional stores. We expect to be operating slightly more than 400 stores by the end of 2009. Capital expenditures are expected to be less than $5.0 million in 2009.
Our forecast for the second half of 2009 includes the following assumptions:
| | |
| • | A gross profit rate that is in-line with our second-quarter gross profit rate. |
| | |
| • | Media expenditures of approximately $30.0 million, consistent with the first half of 2009. |
| | |
| • | Sales and marketing expenses that are slightly lower than the first half of 2009 due to our reduced store base. |
| | |
| • | G&A expenses and R&D expenses consistent with the first half of 2009. |
| | |
| • | Interest expense that is slightly lower than the first half of 2009. |
| | |
| • | An income tax rate of approximately 40%. However, the effective tax rate for the last two quarters of 2009 is difficult to forecast and could vary significantly. |
Finally, we will continue to analyze our existing manufacturing, distribution and retail operations to optimize our business performance. As a result, in future periods, we may incur restructuring expenses or asset impairment charges.
Off-Balance-Sheet Arrangements and Contractual Obligations
Other than operating leases and $5.5 million of outstanding letters of credit, we do not have any off-balance-sheet financing. We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships. As of July 4, 2009, we are not involved in any unconsolidated special purpose entity transactions.
There has been no material change in our contractual obligations since the end of fiscal 2008 other than decreasing borrowings under our revolving credit facility from $79.2 million as of January 3, 2009 to $43.8 million as of July 4, 2009. See Note 3,Debt, of the Notes to our Condensed Consolidated Financial Statements. See our Annual Report on Form 10-K (as amended) for the fiscal year ended January 3, 2009 for additional information regarding our contractual obligations.
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Critical Accounting Policies
We discuss our critical accounting policies and estimates inManagement’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K (as amended) for the fiscal year ended January 3, 2009. There were no significant changes in our accounting policies since the end of fiscal 2008, other than an update to our Asset Impairment Charges policy (see below).
| | | | |
Description | | Judgments and Uncertainties | | Effect if Actual Results
Differ From Assumptions |
Asset Impairment Charges | | | | |
Long-lived assets other than goodwill and other intangible assets, which are separately tested for impairment, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We generally estimate fair value of long-lived assets, including our retail stores, using the income approach in accordance with SFAS No. 157. The inputs used to determine fair value relate primarily to future assumptions regarding sales volumes, gross profit rates, promotional and discount rates, store operating expenses and applicable probability weightings regarding future alternative uses. These inputs are categorized as Level 3 inputs under SFAS No. 157. The inputs used represent management’s assumptions about what information market participants would use in pricing the assets and are based upon the best information available at the balance sheet date.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated fair value plus net proceeds expected from disposition of the asset (if any). When we recognize an impairment loss, the carrying amount of the asset is reduced to estimated fair value based on discounted cash flows, quoted market prices or other valuation techniques in accordance with SFAS No. 157.
Assets to be disposed of are reported at the lower of the carrying amount of the asset or fair value less costs to sell. We review store assets for potential impairment based on historical cash flows, lease termination provisions and expected future store operating results.
If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated (amortized) over the remaining useful life of that asset.
Asset impairment charges totaled $0.5 million and $1.1 million for the six months ended July 4, 2009, and June 28, 2008, respectively.During the six months ended July 4, 2009, total impairment charges included a $0.4 million charge for long-lived assets related to nine under-performing retail store locations. As of July 4, 2009, the remaining carrying amount of the long-lived assets at these stores totaled $0.1 million. | | Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to identify events or changes in circumstances indicating the carrying value of assets may not be recoverable, estimate future cash flows, estimate asset fair values, and select a discount rate that reflects the risk inherent in future cash flows.
Expected cash flows may not be realized, which could cause long-lived assets to become impaired in future periods and could have a material adverse effect on future results of operations. | | We have not made any material changes in our impairment loss assessment methodology during the past three fiscal years.
As of July 4, 2009, we evaluated 45 under-performing retail stores and nine stores expected to close prior to their normal lease termination dates that were not impaired, as the fair-value of the long-lived assets exceeded their carrying amount. At July 4, 2009, the carrying amount of the long-lived assets for these stores totaled $3.9 million.
We believe that our estimates and assumptions used to calculate long-lived asset impairment charges were reasonable and reflect the current economic environment. Our fair value calculations reflect the deterioration of consumer spending and the more difficult economic environment. Our fair value calculations assume the ongoing availability of consumer credit and our ability to provide cost-effective consumer credit options. The tightening of credit standards, for our customers who seek extended financing from our third party financiers, was also considered in our estimates. However, it is reasonably possible that a prolonged economic slowdown or further deterioration of consumer spending may expose us to future impairment charges that could be material.
Alternatively, if consumer spending increases at a higher rate than we anticipated, impaired stores (which continue to operate) could generate higher than expected future cash flows and operating profits. |
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At July 4, 2009, our short-term debt was comprised primarily of borrowings under our revolving credit facility and capital lease obligations. We do not currently manage interest rate risk on our debt through the use of derivative instruments.
Interest rates on borrowings under our revolving credit facility are based on terms negotiated with the Lenders through September 7, 2009. The credit facility’s interest rate may also be reset due to fluctuations in a market-based index, such as the prime rate. At July 4, 2009 borrowings under the credit facility bore interest at a floating rate and could be maintained as base rate loans (tied to the prime rate, plus a margin of up to 5.50%). A hypothetical 100 basis point change in the interest rate of outstanding borrowings under our credit facility as of July 4, 2009 would change our annual consolidated pre-tax income or loss by $0.4 million.
ITEM 4. CONTROLS AND PROCEDURES
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
Management’s Report on Internal Control Over Financial Reporting
Select Comfort’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Select Comfort’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting based on the framework inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under these criteria, management concluded that our internal control over financial reporting was effective as of July 4, 2009.
Changes in Internal Controls
There were no changes in our internal control over financial reporting during the fiscal quarter ended July 4, 2009, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 25, 2008, a lawsuit was filed against one of our subsidiaries in Superior Court in Santa Clara County, California by one of our customers. The complaint asserted various claims related to products liability, breach of warranty, concealment, intentional misrepresentation and negligent misrepresentation and sought class certification. The complaint alleged that products sold by us prior to 2006 had a unique propensity to develop mold, alleged that the plaintiff suffered adverse health effects, and sought various forms of legal and equitable relief, including without limitation unspecified damages, punitive and exemplary damages, attorneys’ fees and costs, and injunctive relief. We removed the case to the U.S. District Court for the Northern District of California. On September 30, 2008, the Court granted our motion to dismiss and strike the purported class action claims, and allowed the plaintiff leave to amend the complaint. On October 30, 2008, the plaintiff filed a first amended complaint alleging facts similar to those asserted in the initial complaint and asserting additional claims, including antitrust and RICO claims. On June 5, 2009, the Court granted our motion to dismiss and strike the purported class action claims of the first amended complaint, and allowed the plaintiff leave to amend the complaint with respect to certain of the alleged claims, including claims related to negligence, product liability, breach of warranty and unfair competition under California statutes. On July 6, 2009, the plaintiff filed a second amended complaint alleging facts similar to those asserted in the initial complaint limiting the purported class to California and Florida residents, and asserting claims related to negligence, product liability, breach of warranty under federal and state statutes and unfair competition under state statutes. As of July 4, 2009, no accrual had been established with respect to this matter as we believe that the complaint is without merit and we intend to continue to vigorously defend the claims.
We are involved from time to time in various other legal proceedings arising in the ordinary course of our business, including primarily commercial, employment and intellectual property claims. In accordance with generally accepted accounting principles in the United States, we record a liability in our consolidated financial statements with respect to any of these other matters when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. With respect to these other matters, we believe that we have valid defenses to claims asserted against us and we do not expect the outcome of these matters to have a material effect on our consolidated results of operations, financial position or cash flows. Litigation, however, is inherently unpredictable, and it is possible that the ultimate outcome of one or more claims asserted against us could adversely impact our results of operations, financial position or cash flows. We expense legal costs as incurred.
ITEM 1A. RISK FACTORS
Our business, financial condition and operating results are subject to a number of risks and uncertainties, including both those that are specific to our business and others that affect all businesses operating in a global environment. Investors should carefully consider the information in this report under the heading, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and also the information under the heading, “Risk Factors” in our most recent Annual Report on Form 10-K (as amended). The risk factors discussed in the Annual Report on Form 10-K (as amended) and in this Quarterly Report on Form 10-Q do not identify all risks that we face because our business operations could also be affected by additional risk factors that are not presently known to us or that we currently consider to be immaterial to our operations.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
| | |
| (a) – (b) | Not applicable. |
| | |
| (c) | Issuer Purchases of Equity Securities
(in thousands, except per share amounts) |
| | | | | | | | | | | | | |
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 5, 2009 through May 2, 2009 | | | — | | | NA | | | — | | | | |
May 3, 2009 through May 30, 2009 | | | — | | | NA | | | — | | | | |
May 31, 2009 through July 4, 2009 | | | — | | | NA | | | — | | | | |
Total | | | — | | | NA | | | — | | $ | 206,762 | |
| |
| (1) On April 20, 2007, our Board of Directors authorized the company to repurchase up to an additional $250.0 million of its common stock, bringing the total availability under our share repurchase program to $290.0 million. The Finance Committee of the Board of Directors reviews repurchases under this program on a quarterly basis. There is no expiration date governing the period over which we can repurchase shares. As of July 4, 2009, the total outstanding authorization was $206.8 million. We may terminate or limit the stock repurchase program at any time. We currently have no plans to repurchase shares under this authorization. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable.
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ITEM 6. EXHIBITS
| | | | |
Exhibit
Number | | Description | | Method of Filing |
| | | | |
10.1 | | Amendment No. 9 to Credit Agreement dated as of April 17, 2009 among Select Comfort Corporation, the subsidiary borrowers from time to time party thereto, JPMorgan Chase Bank, National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent and JPMorgan Chase Bank, National Association, Bank of America, N.A., Citicorp USA, Inc., Wells Fargo Bank, National Association and Branch Banking and Trust Co., as Lenders | | Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed April 23, 2009
(File No. 0-25121) |
| | | | |
10.2 | | Amendment No. 10 to Credit Agreement dated as of May 8, 2009 among Select Comfort Corporation, the subsidiary borrowers from time to time party thereto, JPMorgan Chase Bank, National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent and JPMorgan Chase Bank, National Association, Bank of America, N.A., Citicorp USA, Inc., Wells Fargo Bank, National Association and Branch Banking and Trust Co., as Lenders | | Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed May 14, 2009
(File No. 0-25121) |
| | | | |
10.3 | | Securities Purchase Agreement by and among Select Comfort Corporation and Sterling SC Investor, LLC | | Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(File No. 0-25121) |
| | | | |
10.4 | | Guarantee by Sterling Capital Partners III, LP in favor of Select Comfort Corporation | | Incorporated by reference to Exhibit 10.2 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(File No. 0-25121) |
| | | | |
10.5 | | Form of Registration Rights Agreement to be entered into by and among Select Comfort Corporation and Sterling SC Investor, LLC | | Incorporated by reference to Exhibit 10.3 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(File No. 0-25121) |
| | | | |
| | | | |
10.6 | | Form of Management Services Agreement to be entered into by and among Select Comfort Corporation and Sterling SC Investor, LLC | | Incorporated by reference to Exhibit 10.4 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(File No. 0-25121) |
| | | | |
10.7 | | Amendment No. 11 to Credit Agreement dated as of May 22, 2009 among Select Comfort Corporation, the subsidiary borrowers from time to time party thereto, JPMorgan Chase Bank, National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent and JPMorgan Chase Bank, National Association, Bank of America, N.A., Citicorp USA, Inc., Wells Fargo Bank, National Association and Branch Banking and Trust Co., as Lenders | | Incorporated by reference to Exhibit 10.5 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(File No. 0-25121) |
| | | | |
10.8 | | GE Waiver and Consent dated May 21, 2009 | | Incorporated by reference to Exhibit 10.6 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(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 |
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | |
| | SELECT COMFORT CORPORATION |
| | (Registrant) |
| | | |
Dated: August 7, 2009 | | By: | /s/ William R. McLaughlin |
| | | William R. McLaughlin |
| | | Chief Executive Officer |
| | | (principal executive officer) |
| | | |
| | By: | /s/ James C. Raabe |
| | | James C. Raabe |
| | | Chief Financial Officer |
| | | (principal financial and accounting officer) |
| | | |
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EXHIBIT INDEX
| | | | |
Exhibit
Number | | Description | | Method of Filing |
| | | | |
10.1 | | Amendment No. 9 to Credit Agreement dated as of April 17, 2009 among Select Comfort Corporation, the subsidiary borrowers from time to time party thereto, JPMorgan Chase Bank, National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent and JPMorgan Chase Bank, National Association, Bank of America, N.A., Citicorp USA, Inc., Wells Fargo Bank, National Association and Branch Banking and Trust Co., as Lenders | | Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed April 23, 2009
(File No. 0-25121) |
| | | | |
10.2 | | Amendment No. 10 to Credit Agreement dated as of May 8, 2009 among Select Comfort Corporation, the subsidiary borrowers from time to time party thereto, JPMorgan Chase Bank, National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent and JPMorgan Chase Bank, National Association, Bank of America, N.A., Citicorp USA, Inc., Wells Fargo Bank, National Association and Branch Banking and Trust Co., as Lenders | | Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed May 14, 2009
(File No. 0-25121) |
| | | | |
10.3 | | Securities Purchase Agreement by and among Select Comfort Corporation and Sterling SC Investor, LLC | | Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(File No. 0-25121) |
| | | | |
10.4 | | Guarantee by Sterling Capital Partners III, LP in favor of Select Comfort Corporation | | Incorporated by reference to Exhibit 10.2 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(File No. 0-25121) |
| | | | |
10.5 | | Form of Registration Rights Agreement to be entered into by and among Select Comfort Corporation and Sterling SC Investor, LLC | | Incorporated by reference to Exhibit 10.3 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(File No. 0-25121) |
| | | | |
10.6 | | Form of Management Services Agreement to be entered into by and among Select Comfort Corporation and Sterling SC Investor, LLC | | Incorporated by reference to Exhibit 10.4 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(File No. 0-25121) |
| | | | |
10.7 | | Amendment No. 11 to Credit Agreement dated as of May 22, 2009 among Select Comfort Corporation, the subsidiary borrowers from time to time party thereto, JPMorgan Chase Bank, National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent and JPMorgan Chase Bank, National Association, Bank of America, N.A., Citicorp USA, Inc., Wells Fargo Bank, National Association and Branch Banking and Trust Co., as Lenders | | Incorporated by reference to Exhibit 10.5 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(File No. 0-25121) |
| | | | |
10.8 | | GE Waiver and Consent dated May 21, 2009 | | Incorporated by reference to Exhibit 10.6 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009
(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 |
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