UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): OCTOBER 15, 2001
SELECT COMFORT CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 0-25121 41-1597886
(State of Incorporation) (Commission File (IRS Employer
Number) Identification No.)
6105 TRENTON LANE NORTH
MINNEAPOLIS, MINNESOTA 55442
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (763) 551-7000
ITEM 9. REGULATION FD DISCLOSURE.
On October 15, 2001, the registrant issued a press release, as follows:
FOR IMMEDIATE RELEASE
FOR MORE INFORMATION:
Mark Kimball
Select Comfort
763/551-7070
mark.kimball@selectcomfort.com
SELECT COMFORT CORPORATION
REPORTS PROFITABLE THIRD QUARTER
MINNEAPOLIS, MINN. (October 15, 2001) - Select Comfort Corporation (NASDAQ:
SCSS) announced today that it has achieved profitability in the third quarter
ended September 29, 2001. The company reported net income of $227,000, or $0.01
per share, compared to a net loss of $5.7 million, or $0.32 per share, for the
third quarter of 2000. Operating income was $603,000 compared to an operating
loss of $8.9 million in the third quarter of 2000.
Net sales were $64.1 million compared to $68.1 million for the third
quarter of 2000. Net income was realized on lower sales volume through improved
gross margins (67.0% compared to 63.5% in the third quarter of 2000), lower
sales and marketing expense ($6.6 million, or 15.1%, lower than third quarter of
2000), and lower general and administrative expense ($1.8 million, or 25.1%,
lower than third quarter of 2000).
"The achievement of profitability for the third quarter represents a major
milestone in our continuing turnaround efforts," said Bill McLaughlin, president
and chief executive officer of Select Comfort. "This remarkable accomplishment,
particularly during a significant economic slowdown, is attributable to the
consumer benefits and value provided by our product and to the perseverance of
committed employees throughout our company."
"Beyond achieving our primary objectives of profitability and positive cash
flow," McLaughlin continued, "we also made progress during the quarter against
each of our strategic imperatives. Our cost structure continued to improve. Our
Sleep Number(R) campaign continued to show positive results in comparison with
non-media markets. We expanded our product line
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with the introduction of a European Pillowtop(TM) model in our direct channel,
and we expanded our distribution by establishing an important sales relationship
with Benchmark, a leading furniture retailer in the Kansas City market."
In addition to achieving profitability in the third quarter, Select Comfort
also recently announced that it secured $5 million of senior debt financing from
Medallion Capital, Inc. "While not critical for meeting near-term objectives,
this financing significantly improves the company's cash reserves and provides
added flexibility to pursue business-building opportunities," according to
McLaughlin. "We are well positioned going forward. Continued profitability
remains our primary objective for the fourth quarter, and sales volume remains
our primary challenge in this period of economic uncertainty."
Select Comfort will hold a conference call to discuss its second quarter
results on Tuesday, October 16, at 10:00 a.m. Central Time. A simultaneous
webcast of the call will be available in the Investor Relations section of
www.selectcomfort.com. A digital replay of the conference call will be
accessible beginning at approximately 12:00 p.m. Central Time on Tuesday,
October 16, through 5:00 p.m. Central Time on Friday, October 19, 2001. To
access the replay, please call 800-947-6608 from anywhere in the U. S.
International callers may dial 402-220-4609. An archived replay of the
conference call may also be accessed after approximately 12:30 p.m. Central Time
on Tuesday, October 16, at www.selectcomfort.com.
Founded in 1987, Select Comfort is a leader in sleep solutions technology,
holding 27 U.S. issued or pending patents for its products. The company designs,
manufactures and markets a line of adjustable-firmness mattresses, including the
Sleep Number(R) bed, as well as foundations and sleep accessories. Select
Comfort's products are sold through its 326 retail stores located nationwide,
including 22 leased departments in Bed Bath Beyond stores; through its national
direct marketing operations; and on the Internet at www.selectcomfort.com.
Statements used in this press release that relate to future plans, events,
financial results or performance are forward-looking statements as defined under
the Private Securities Litigation Reform Act of 1995. Some of the
forward-looking statements in this press release relate to the success of our
turn-around strategy, including in particular our ability to continue to reduce
our
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costs, the success of our Sleep Number(R) marketing and advertising campaign,
and our ability to expand profitable distribution of our products. Actual plans,
events, results and performance may differ materially from those anticipated as
a result of certain risks and uncertainties, including but not limited to:
o The ability of the company to maintain sufficient levels of working capital
to support operating needs and growth initiatives.
o The company's ability to create product and brand name awareness.
o The efficiency and effectiveness of the company's marketing and
advertising.
o The ability of the company to effectively and efficiently pursue new
channels of distribution.
o The performance of the company's existing and new stores.
o The ability of the company to continue to attract and retain key personnel,
including qualified sales professionals.
o The ability of the company to realize the benefits of its cost saving
initiatives.
o The levels of consumer acceptance of the company's product lines.
o The ability of the company to continuously improve its existing product
lines and to introduce new products.
o The ability of the company to efficiently implement nationwide home
delivery and assembly.
o Economic trends and consumer confidence.
o Industry competition.
o The ability of the company to maintain compliance with the listing
requirements of NASDAQ.
o The risks and uncertainties detailed from time to time in the company's
filings with the SEC, including the company's 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 news release.
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30,
2001 2000 2001 2000
------------- ------------- ------------- -------------
Net sales $ 64,148 $ 68,056 $192,346 $206,002
Cost of sales 21,192 24,871 67,231 73,903
------------- ------------- ------------- -------------
Gross margin 42,956 43,185 125,115 132,099
------------- ------------- ------------- -------------
Operating expenses:
Sales and marketing 37,048 43,638 118,616 127,454
General and administrative 5,285 7,054 18,252 22,286
Store closings/impairments 20 1,387 508 1,424
------------- ------------- ------------- -------------
Total operating expenses 42,353 52,079 137,376 151,164
------------- ------------- ------------- -------------
Operating income (loss) 603 (8,894) (12,261) (19,065)
------------- ------------- ------------- -------------
Other income (expense):
Interest income 59 253 174 937
Interest expense (422) (2) (774) (6)
Equity in loss of affiliate 0 (214) 0 (642)
Other, net (13) (32) (155) (80)
------------- ------------- ------------- -------------
Other income (expense), net (376) 5 (755) 209
------------- ------------- ------------- -------------
Income (loss) before income taxes 227 (8,889) (13,016) (18,856)
Income tax expense (benefit) 0 (3,197) 115 (6,701)
------------- ------------- ------------- -------------
Net income (loss) $ 227 $ (5,692) $(13,131) $(12,155)
============= ============= ============= =============
Net income (loss) per share - basic $ 0.01 $ (0.32) $ (0.72) $ (0.68)
============= ============= ============= =============
Weighted average shares - basic 18,179 17,874 18,118 17,815
============= ============= ============= =============
Net income (loss) per share - diluted $ 0.01 $ (0.32) $ (0.72) $ (0.68)
============= ============= ============= =============
Weighted average shares - diluted 18,953 17,874 18,118 17,815
============= ============= ============= =============
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
SEPTEMBER 29, DECEMBER 30,
ASSETS 2001 2000
-------------- --------------
Current assets:
Cash and cash equivalents $ 15,435 $ 1,498
Marketable securities - 3,950
Accounts receivable, net of allowance for doubtful
accounts of $273, and $264, respectively 683 2,693
Inventories 7,615 11,083
Prepaid expenses 5,199 4,741
-------------- --------------
Total current assets 28,932 23,965
Property and equipment, net 33,410 37,063
Other assets 4,637 3,644
-------------- --------------
Total assets $ 66,979 $ 64,672
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 33 $ 38
Accounts payable 18,633 17,271
Accruals:
Sales returns 3,489 5,284
Compensation, taxes and benefits 6,125 6,238
Other 6,877 7,565
-------------- --------------
Total current liabilities 35,157 36,396
Long-term debt, less current maturities 16,942 2,322
Accrued warranty costs 5,252 5,745
Other liabilities 4,009 3,609
-------------- --------------
Total liabilities 61,360 48,072
-------------- --------------
Shareholders' equity:
Common stock, $.01 par value; 95,000,000 shares
authorized, 18,190,634 and 17,962,689 shares
issued and outstanding, respectively 182 180
Additional paid-in capital 81,600 79,452
Accumulated deficit (76,163) (63,032)
-------------- --------------
Total shareholders' equity 5,619 16,600
-------------- --------------
Total liabilities and shareholders' equity $ 66,979 $ 64,672
============== ==============
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
------------------------------
SEPTEMBER 29, SEPTEMBER 30,
2001 2000
-------------- --------------
Cash flows from operating activities:
Net loss $(13,131) $(12,155)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 7,522 6,075
Loss on disposal of assets 539 1,970
Deferred tax assets - (6,872)
Change in operating assets and liabilities:
Accounts receivable, net 2,104 408
Inventories 3,468 (579)
Prepaid expenses 412 (1,908)
Income taxes - 2,277
Accounts payable 1,362 3,894
Accrued sales returns (1,795) (776)
Accrued warranty costs (616) 1,195
Accrued compensation, taxes and benefits (113) (391)
Other accrued liabilities (443) (24)
Other assets (1,096) 696
Other liabilities 400 556
-------------- --------------
Net cash used in operating activities (1,387) (5,634)
-------------- --------------
Cash flows from investing activities:
Purchases of property and equipment (3,918) (9,741)
Sales of marketable securities 3,950 10,557
-------------- --------------
Net cash provided by investing activities 32 816
-------------- --------------
Cash flows from financing activities:
Principal payments on debt (29) (53)
Proceeds from issuance of common stock 281 539
Net proceeds from long-term obligations 15,040 -
-------------- --------------
Net cash provided by financing activities 15,292 486
-------------- --------------
Increase (decrease) in cash and cash equivalents 13,937 (4,332)
Cash and cash equivalents, at beginning of period 1,498 7,441
-------------- --------------
Cash and cash equivalents, at end of period $ 15,435 $ 3,109
============== ==============
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SELECT COMFORT CORPORATION
(Registrant)
Dated: October 16, 2001 By /s/ Mark A. Kimball
--------------------------------------
Title: Senior Vice President
----------------------------------
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