Sleep Number (SNBR) 8-K Select Comfort Announces Second Quarter 2011 Results

Exhibit 99.1

FOR IMMEDIATE RELEASE

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

SELECT COMFORT ANNOUNCES SECOND QUARTER 2011 RESULTS

· Sets Record Second-quarter Operating Income and Margin

· Raises 2011 Guidance

MINNEAPOLIS – (July 20, 2011) – Select Comfort Corporation (NASDAQ: SCSS) today reported second-quarter results for the period ended July 2, 2011. Net sales for the quarter increased 16 percent to $161 million, compared to $139 million in the second quarter of 2010, driven by company-controlled comparable sales growth of 20 percent. The company reported net income of $11.3 million, or $0.20 per diluted share in the second quarter of 2011, as compared to net income of $6.2 million, or $0.11 per diluted share in the second quarter of 2010.

“We’re pleased that focused execution against our strategic priorities is continuing to result in strong operational and financial performance, as demonstrated in our second-quarter results,” said Bill McLaughlin, president and CEO, Select Comfort Corporation. “Specifically, we sustained double-digit comparable sales growth and strong margins, which allowed us to report record-setting second-quarter operating income.”

McLaughlin added, “During the second half of the year, we should continue to drive profitable growth as we accelerate awareness and consideration of our brand while optimizing our market-based distribution and media investments. Our efforts will also capitalize on the recent changes made to our executive leadership team and organizational structure.”

Second-quarter Summary

In the second quarter, net sales increased by 16 percent as compared to the prior-year period. The increase in sales was driven by company-controlled comparable sales growth of 20 percent,

Select Comfort Announces Second Quarter 2011 Results – Page 2 of  10

with average sales-per-store during the past 12 months reaching $1.5 million, a 25 percent improvement over the prior-year period.

Gross-profit margins in the second quarter of 2011 increased 130 basis points to 63.5 percent of net sales, compared with 62.2 percent in the prior-year period. The increase reflects strong product mix, manufacturing efficiencies and pricing actions.

Sales and marketing costs in the second quarter of 2011 increased by 12 percent to $70.5 million, representing 43.7 percent of net sales. This compares to $63.0 million, or 45.3 percent of net sales in the prior-year period. Media investments in the second quarter totaled $20.1 million, 25 percent higher than a year ago.

General and administrative expenses were $13.1 million in the second quarter, or 8.1 percent of net sales, which includes the benefit of a $1.1 million reduction to previously recorded contingent liabilities. This compares to $12.9 million, or 9.3 percent of net sales during the same period last year.

Operating income of $17.6 million and operating margin of 10.9 percent each represented the best second-quarter performance in company history. These record operating results resulted in earnings-per-diluted-share of $0.20, an 82 percent improvement versus prior year.

Cash flows from operating activities were $34 million for the first six months of 2011 compared to $29 million in the year-ago period. Capital expenditures for the first six months of 2011 increased to $9.6 million as compared to $1.7 million during the same time period last year, driven by increased investment in stores and information systems. As of the end of the quarter, cash, cash equivalents and marketable-debt securities totaled $98 million and the company had no borrowings under its revolving credit agreement.

Fiscal 2011 Outlook

Based on strong second-quarter performance, the company is increasing its fiscal 2011 outlook for earnings-per-diluted-share from between $0.85 and $0.93 to between $0.90 and $0.96. Outlook for the second half of 2011 assumes company-controlled comparable sales growth in the

Select Comfort Announces Second Quarter 2011 Results – Page 3 of  10

mid to high-teens as well as earnings-per-diluted-share growth of approximately 25 to 45 percent for the duration of the year. The company noted that sustained challenges to the economic environment could adversely impact consumer demand through the balance of the year. The company also reaffirmed its long-term goal for earnings-per-diluted-share growth of between 15 and 20 percent per year.

The company expects to end 2011 with approximately 380 stores after planned store openings and closings. The company also anticipates that total 2011 capital expenditures will be approximately $25 million to $30 million.

Conference Call

Management will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. Eastern Time (4 p.m. Central; 2 p.m. Pacific) today. To listen to the call, please dial (800) 593-9959 (international participants dial (517) 308-9340) and reference the passcode “Sleep.”  To access the webcast, please visit the investor relations area of the Select Comfort website.

A webcast replay will remain available until midnight Central Time, July 29, 2011, by dialing (203) 369-3134. The webcast replay will remain available in the investor relations area of the company’s website for approximately 60 days.

About Select Comfort Corporation

Founded more than 20 years ago and based in Minneapolis, Select Comfort Corporation designs, manufactures, markets and supports a line of adjustable-firmness mattresses featuring air-chamber technology, branded the SLEEP NUMBER® bed, as well as bases and bedding accessories. Sleep Numberproducts are sold through its 375 company-controlled stores located across the United States; select bedding retailers; direct-marketing operations; and online at www.sleepnumber.com.

Forward-looking Statements

Statements used in this news release relating to future plans, events, financial results or performance are forward-looking statements subject to certain risks and uncertainties including, among others, such factors as general and industry economic trends; consumer confidence; the effectiveness of our marketing messages; the efficiency of our advertising and promotional efforts;

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

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SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited – in thousands, except per share amounts)

	Three Months Ended
	July 2, 2011			% of Net Sales			July  3, 2010			% of Net Sales
Net sales	$	161,462			100.0	%	$	138,952			100.0	%
Cost of sales		58,958			36.5	%		52,487			37.8	%
Gross profit		102,504			63.5	%		86,465			62.2	%
Operating expenses:
Sales and marketing		70,517			43.7	%		62,981			45.3	%
General and administrative		13,120			8.1	%		12,934			9.3	%
Research and development		1,223			0.8	%		613			0.4	%
Asset impairment charges		18			0.0	%		-			0.0	%
Total operating expenses		84,878			52.6	%		76,528			55.1	%
Operating income		17,626			10.9	%		9,937			7.2	%
Interest expense / other		(30	)		0.0	%		(56	)		0.0	%
Income before income taxes		17,596			10.9	%		9,881			7.1	%
Income tax expense		6,307			3.9	%		3,679			2.6	%
Net income	$	11,289			7.0	%	$	6,202			4.5	%
Net income per share – basic	$	0.21					$	0.12
Net income per share – diluted	$	0.20					$	0.11
Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding		54,958						53,911
Effect of dilutive securities:
Options		911						903
Restricted shares		538						439
Diluted weighted-average shares outstanding		56,407						55,253

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SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited – in thousands, except per share amounts)

		Six Months Ended
	July 2, 2011			% of Net Sales			July 3, 2010			% of Net Sales
Net sales	$	354,530			100.0	%	$	296,905			100.0	%
Cost of sales		128,925			36.4	%		112,356			37.8	%
Gross profit		225,605			63.6	%		184,549			62.2	%
Operating expenses:
Sales and marketing		150,788			42.5	%		133,073			44.8	%
General and administrative		28,743			8.1	%		26,083			8.8	%
Research and development		1,954			0.6	%		1,267			0.4	%
Asset impairment charges		96			0.0	%		-			0.0	%
Total operating expenses		181,581			51.2	%		160,423			54.0	%
Operating income		44,024			12.4	%		24,126			8.1	%
Interest expense / other		(60	)		0.0	%		(1,776	)		(0.6	%)
Income before income taxes		43,964			12.4	%		22,350			7.5	%
Income tax expense		16,092			4.5	%		8,388			2.8	%
Net income	$	27,872			7.9	%	$	13,962			4.7	%
Net income per share – basic	$	0.51					$	0.26
Net income per share – diluted	$	0.50					$	0.25
Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding		54,842						53,763
Effect of dilutive securities:
Options		762						971
Restricted shares		553						452
Diluted weighted-average shares outstanding		56,157						55,186

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SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except per share amounts)

subject to reclassification

	(unaudited)
	July 2, 2011			January 1,  2011
Assets
Current assets:
Cash and cash equivalents	$	57,645		$	76,016
Marketable debt securities – current		19,980			-
Accounts receivable, net of allowance for doubtful accounts of $306 and $302, respectively		7,134			9,909
Inventories		20,579			19,647
Prepaid expenses		7,740			6,388
Deferred income taxes		4,149			4,297
Other current assets		4,728			652
Total current assets		121,955			116,909
Marketable debt securities – non-current		20,012			-
Property and equipment, net		36,232			32,953
Deferred income taxes		12,563			15,965
Other assets		4,518			4,130
Total assets	$	195,280		$	169,957
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	40,171		$	42,025
Customer prepayments		10,493			12,944
Compensation and benefits		21,854			24,857
Taxes and withholding		4,531			5,359
Other current liabilities		13,159			11,671
Total current liabilities		90,208			96,856
Non-current liabilities:
Warranty liabilities		2,444			2,815
Other long-term liabilities		12,941			12,309
Total non-current liabilities		15,385			15,124
Total liabilities		105,593			111,980
Shareholders’ equity:
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding		-			-
Common stock, $0.01 par value; 142,500 shares authorized, 55,991 and 55,455 shares issued and outstanding, respectively		560			555
Additional paid-in capital		40,659			36,799
Retained earnings		48,495			20,623
Accumulated other comprehensive loss		(27	)		-
Total shareholders’ equity		89,687			57,977
Total liabilities and shareholders’ equity	$	195,280		$	169,957

NOTE: In the first quarter of fiscal 2011 we began reporting cash resulting from credit and debit card transactions when received, rather than on an in-transit basis. To maintain consistency and comparability, previously reported amounts have been reclassified to conform to the current-year presentation.

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SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited - in thousands)

subject to reclassification

	Six Months Ended
	July 2, 2011			July 3, 2010
Cash flows from operating activities:
Net income	$	27,872		$	13,962
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,386			8,139
Stock-based compensation		2,256			1,491
Net disposals and impairments of assets		89			(2	)
Excess tax benefits from stock-based compensation		(1,132	)		(901	)
Deferred income taxes		2,819			(1,363	)
Change in operating assets and liabilities:
Accounts receivable		2,775			3,596
Inventories		(932	)		(790	)
Income taxes		1,181			2,059
Prepaid expenses and other assets		(3,212	)		33
Accounts payable		(682	)		(1,126	)
Customer prepayments		(2,451	)		(284	)
Accrued compensation and benefits		(2,716	)		4,578
Other taxes and withholding		(320	)		(618	)
Warranty liabilities		(314	)		(96	)
Other accruals and liabilities		2,066			(89	)
Net cash provided by operating activities		33,685			28,589
Cash flows from investing activities:
Purchases of property and equipment		(9,585	)		(1,744	)
Proceeds from sales of property and equipment		7			3
Investments in marketable debt securities		(40,021	)		-
Increase in restricted cash		(2,650	)		-
Net cash used in investing activities		(52,249	)		(1,741	)
Cash flows from financing activities:
Net decrease in short-term borrowings		(1,500	)		(1,573	)
Repurchases of common stock		(309	)		(1,360	)
Proceeds from issuance of common stock		870			120
Excess tax benefits from stock-based compensation		1,132			901
Debt issuance costs		-			(139	)
Net cash provided by (used in) financing activities		193			(2,051	)
Net (decrease) increase in cash and cash equivalents		(18,371	)		24,797
Cash and cash equivalents, at beginning of period		76,016			12,184
Cash and cash equivalents, at end of period	$	57,645		$	36,981

NOTE: To maintain consistency and comparability, certain amounts from previously reported financial statements have been reclassified to conform to the current-year presentation. See Note on page 7.

Select Comfort Announces Second Quarter 2011 Results – Page 9 of  10

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Supplemental Financial Information

(unaudited)

	Three Months Ended						Six Months Ended
	July 2, 2011			July 3, 2010			July 2, 2011			July 3, 2010
Percent of sales:
Retail		87.1	%		82.3	%		86.8	%		82.9	%
Direct and E-Commerce		8.7	%		11.7	%		9.1	%		11.7	%
Wholesale		4.2	%		6.0	%		4.1	%		5.4	%
Total		100.0	%		100.0	%		100.0	%		100.0	%
Sales growth rates:
Retail comparable-store sales		25	%		28	%		28	%		29	%
Direct and E-Commerce		(13	%)		6	%		(8	%)		11	%
Company-Controlled comparable sales change		20	%		25	%		23	%		25	%
Net closed stores/other		(2	%)		(7	%)		(2	%)		(6	%)
Total Company-Controlled Channels		18	%		18	%		21	%		19	%
Wholesale		(19	%)		(18	%)		(8	%)		(31	%)
Total		16	%		15	%		19	%		14	%
Stores open:
Beginning of period		375			399			386			403
Opened		5			-			6			-
Closed		(5	)		(4	)		(17	)		(8	)
End of period		375			395			375			395
Other metrics:
Average sales per store ($ in 000's)1	$	1,492		$	1,192
Average sales per square foot1	$	998		$	810
Stores > $1 million net sales1		85	%		64	%
Average mattress sales per mattress unit - Company Controlled Channels2	$	2,223		$	2,027		$	2,157		$	1,986

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

2Includes revenue from adjustable foundations which has become a more significant part of the mattress mix. The prior definition excluded revenue from adjustable foundations. Previously reported amounts have been reclassified to conform to the current-year presentation.

Select Comfort Announces Second Quarter 2011 Results – Page 10 of  10

SELECT COMFORT CORPORATION AND SUBSIDIARIES

Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)

(in thousands)

We define earnings before interest, taxes, depreciation and amortization (EBITDA) as net income plus: income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation and asset impairments consistent with the definition used in our debt covenant calculations. Management believes EBITDA is a useful indicator of the Company's financial performance.  Our definition of EBITDA may not be comparable to similarly titled definitions used by other companies. The tables below reconcile EBITDA, which is a non-GAAP financial measure, to comparable GAAP financial measures:

	Three Months Ended				Trailing-Twelve Months Ended
	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Net income	$	11,289	$	6,202	$	45,478	$	56,170
Income tax expense (benefit)		6,307		3,679		26,625		(17,098	)
Interest expense		64		70		279		4,532
Depreciation and amortization		3,210		3,228		12,815		14,934
Stock-based compensation		1,122		729		4,727		2,898
Asset impairments		18		-		356		199
EBITDA	$	22,010	$	13,908	$	90,280	$	61,635

Note - Our EBITDA calculation is considered a non-GAAP financial measure and is not in accordance with, or preferable to, "as reported," or GAAP financial data. However, we are providing this information as we believe it facilitates analysis of the Company's financial performance by investors and financial analysts.

GAAP - generally accepted accounting principles