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): APRIL 15, 2003
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
<Page>
ITEM 9. REGULATION FD DISCLOSURE. The information contained in this report is
being provided under Items 9 and 12 of Form 8-K.
On April 15, 2003, the registrant issued a press release, as follows:
FOR IMMEDIATE RELEASE CONTACT: Mark Kimball (763) 551-7070
Select Comfort Corporation
mark.kimball@selectcomfort.com
SELECT COMFORT CORPORATION REPORTS RECORD
FIRST QUARTER PROFIT AND SALES
COMPANY REPORTS NET INCOME OF $4.1 MILLION AND NET SALES OF $102 MILLION
MINNEAPOLIS, MINN. (April 15, 2003) - Select Comfort Corporation (NASDAQ: SCSS),
the nation's leading bed retailer and creator of the Sleep Number(R) bed, today
announced results for the first quarter ended March 29, 2003. The company
reported its seventh consecutive quarterly profit with net income of $4.1
million, or $0.11 per fully diluted share. This compares to pro forma, after-tax
net income in the first quarter of 2002 of $.06 per share. First quarter 2003
net sales were $102 million, 26 percent higher than first quarter 2002 net sales
of $81 million.
"First quarter 2003 marked Select Comfort's first one-hundred million
dollar quarter in sales," said Bill McLaughlin, president and chief executive
officer. "Staying true to our core initiatives, we continued to aggressively
invest in advertising, distribution and product development during the quarter
to lay the track for continued strong and sustained profitable growth in the
remainder of 2003 and beyond. Each day we are building more interest and demand
for our brand and product, positioning us well for the country's economic
recovery ahead."
A comparison of key operating results for the first quarters of 2003 and
2002 is as follows (in millions, except per-share amounts):
Q1 2003 Q1 2002
------- -------
Net sales $ 102.0 $ 81.2
Net sales growth 26% 24%
Operating income $ 6.6 $ 3.4
Net income $ 4.1 $ 3.2 (1)
Pro forma, after-tax net income NA $ 1.8
Earnings per diluted share $ 0.11 $ 0.11 (1)
Pro forma earnings per diluted share NA $ 0.06
Comparable store sales + 30% + 15%
(1) Before income tax in 2002. See full reconciliation to pro forma results on
page 8.
2
<Page>
Select Comfort's growth continues to be fueled by the company's five
strategic priorities:
o Increase brand and product awareness
- Increased investment in total advertising by more than 35 percent in
the first quarter with a planned increase of more than 40 percent in
the second quarter, while keeping total marketing costs as a
percentage of sales comparable to 2002 levels.
- Expanded local Sleep Number(R) advertising campaign to four new retail
markets.
- Introduced new national advertising campaign featuring actress Lindsay
Wagner with further expansion planned in the second quarter.
o Expand profitable distribution
- Opened two new Select Comfort stores in the first quarter with plans
for 12 new stores in the second quarter.
- Remodeled 45 stores in the first quarter with plans to remodel 45
additional stores in the second quarter.
o Provide continuous product news and improvements
- Continued to benefit from last year's improvements to our top two
models - the Sleep Number(R)5000 and Sleep Number(R)7000.
- Expanded the Precision Comfort(TM) adjustable foundation to 170 stores
in first quarter -- bringing the total to 262 stores -- with plans to
continue this rollout to 50 additional stores in the second quarter.
o Strengthen financial position
- Increased cash position to $45.7 million.
- Repurchased 200,100 shares of Select Comfort common stock at a cost of
$1.8 million, as part of a board-approved program announced in
February, authorizing open-market purchases of company stock up to
$12.5 million.
o Develop people and systems
- Launched a new inventory control process for stores.
- Introduced bar coding in the company's manufacturing plants.
GUIDANCE
For the second quarter, which is historically smaller than the first
quarter for Select Comfort due to seasonal shopping patterns, the company is
issuing earnings guidance of $.07-$.08 per diluted share in 2003, up from $.05
pro forma earnings per diluted share in second quarter 2002. Assuming continued
performance of advertising and growth programs, no
3
<Page>
significant changes to the U.S. economic recovery or mattress industry growth
rates, or competitive reaction to the company's recent success, performance
ranges for second quarter 2003 are estimated to be:
<Table>
Second Quarter Full Year
2003 2002 2003
---- ---- ----
Net sales (millions) $90 -- $95 $77.3 $410 -- $425
Earnings per diluted share $0.07 -- $0.08 $.08 (1) $.50 -- $.55
Pro forma earnings per
diluted share NA $.05 NA
Stores open at end of period 334 321 340 -- 345
Estimated fully diluted
shares (millions) 37.5 34.4 37.7
</Table>
(1) Before income tax in 2002. See full reconciliation to pro forma results on
page 8.
The company's net income and earnings per share under Generally Accepted
Accounting Principles (GAAP) for 2003 are being compared to 2002 net income and
earnings per share on a pro forma, after-tax basis to improve comparability
between the periods. GAAP did not allow the company to reduce its earnings for
income tax expense in 2002, while 2003 results reflect a reduction in earnings
for income taxes. A full reconciliation between the company's 2002 and 2003 GAAP
and pro forma net income and earnings per share can be found at the end of this
release.
Select Comfort will hold a conference call to discuss its first quarter
results on April 15, 2003, 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 1:00 p.m. Central Time on April 15, 2003,
through 5:00 p.m. Central Time on April 22, 2003. To access the replay, please
call 800-765-7014 from anywhere in the U. S. International callers may dial
402-998-0923. The passcode for the replay is Select. An archived replay of the
conference call may also be accessed after approximately 12:30 p.m. Central Time
on April 15, 2003 at www.selectcomfort.com.
Founded in 1987, Select Comfort Corporation is the nation's leading bed
retailer (2), holding 26 U.S. issued or pending patents for its personalized
sleep products. The company designs, manufactures and markets a line of
adjustable-firmness mattresses featuring air-chamber technology, branded the
Sleep Number(R) bed, as well as foundations and sleep accessories.
4
<Page>
Select Comfort's products are sold through its 324 retail stores located
nationwide, including 13 leased departments in Bed Bath & Beyond stores; through
selected bedding retailers; 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 that are subject
to certain risks and uncertainties including, among others, such factors as
general and industry economic trends, uncertainties arising from war and other
global events, consumer confidence, effectiveness of our advertising and
promotional efforts, acceptance of our products and sleep technology, industry
competition, warranty expenses, our dependence on significant suppliers,
including Conseco Finance for extension of consumer credit, and the
vulnerability of any suppliers to recessionary pressures, labor negotiations,
liquidity concerns or other factors as well as the risk factors listed 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.
(2) Top 25 Bedding Retailers, FURNITURE TODAY, August 12, 2002
5
<Page>
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
-------------------------------
MARCH 29, MARCH 30,
2003 2002
--------------- ---------------
Net sales $ 101,958 $ 81,195
Cost of sales 38,057 30,957
--------------- ---------------
Gross profit 63,901 50,238
--------------- ---------------
Operating expenses:
Sales and marketing 48,917 39,608
General and administrative 8,301 7,209
Store closings and asset impairments 74 52
--------------- ---------------
Total operating expenses 57,292 46,869
--------------- ---------------
Operating income 6,609 3,369
--------------- ---------------
Other income (expense):
Interest income 113 67
Interest expense (88) (586)
Other, net 24 46
--------------- ---------------
Other income (expense), net 49 (473)
--------------- ---------------
Income before income taxes 6,658 2,896
Income tax expense (benefit) 2,530 (348)
--------------- ---------------
Net income $ 4,128 $ 3,244
=============== ===============
Net income per share - basic $ 0.13 $ 0.18
=============== ===============
Weighted average shares - basic 30,880 18,386
=============== ===============
Net income per share - diluted $ 0.11 $ 0.11
=============== ===============
Weighted average shares - diluted 37,173 33,059
=============== ===============
RECONCILIATION OF EPS INFORMATION:
Net income $ 4,128 $ 3,244
Add: Interest expense on convertible debt 54 309
--------------- ---------------
Net income available to common shareholders $ 4,182 $ 3,553
=============== ===============
Weighted average shares outstanding 30,880 18,386
Effect of dilutive securities:
Options 2,931 1,256
Warrants 2,634 2,417
Convertible debt 728 11,000
--------------- ---------------
Dilutive weighted average shares outstanding 37,173 33,059
=============== ===============
6
<Page>
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<Table>
(UNAUDITED)
MARCH 29, DECEMBER 28,
2003 2002
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 26,552 $ 27,176
Marketable securities 14,306 12,146
Accounts receivable, net of allowance for doubtful accounts
of $367 and $340, respectively 3,215 3,270
Inventories 9,345 8,980
Prepaid expenses 5,866 5,467
Deferred tax assets 10,235 12,955
----------------- -----------------
Total current assets 69,519 69,994
Marketable securities - non-current 4,828 1,502
Property and equipment, net 31,225 28,977
Deferred tax assets 4,774 4,352
Other assets 3,469 3,506
----------------- -----------------
Total assets $ 113,815 $ 108,331
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1 $ 11
Accounts payable 21,333 16,508
Accruals:
Sales returns 3,296 3,181
Compensation and benefits 7,968 13,666
Taxes and withholding 2,920 2,779
Consumer prepayments 5,341 1,964
Other 5,085 5,120
----------------- -----------------
Total current liabilities 45,944 43,229
Long-term debt, less current maturities 3,077 2,991
Accrued warranty costs 3,533 3,626
Other liabilities 3,931 3,970
----------------- -----------------
Total liabilities 56,485 53,816
----------------- -----------------
Shareholders' equity:
Undesignated preferred stock; 5,000,000 shares authorized, no
shares issued and outstanding - -
Common stock, $.01 par value; 95,000,000 shares authorized,
30,875,904 and 30,727,101 shares issued and outstanding,
respectively 309 307
Additional paid-in capital 90,869 92,184
Accumulated deficit (33,848) (37,976)
----------------- -----------------
Total shareholders' equity 57,330 54,515
----------------- -----------------
Total liabilities and shareholders' equity $ 113,815 $ 108,331
================= =================
</Table>
7
<Page>
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<Table>
THREE MONTHS ENDED
-------------------------------------
MARCH 29, MARCH 30,
2003 2002
----------------- -----------------
Cash flows from operating activities:
Net income $ 4,128 $ 3,244
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,426 2,169
Amortization of debt discount and deferred finance fees 86 216
Loss on disposal of assets and impaired assets 74 56
Deferred tax assets 2,298 -
Change in operating assets and liabilities:
Accounts receivable 55 1,564
Inventories (365) (803)
Prepaid expenses (399) (144)
Other assets 29 (3)
Accounts payable 4,825 3,373
Accrued compensation and benefits (5,698) (1,282)
Other accruals and liabilities 3,466 2,163
----------------- -----------------
Net cash provided by operating activities 10,925 10,553
----------------- -----------------
Cash flows from investing activities:
Purchases of property and equipment (4,740) (1,367)
Investments in marketable securities (17,803) (5,557)
Proceeds from maturity of marketable securities 12,317 -
----------------- -----------------
Net cash used in investing activities (10,226) (6,924)
----------------- -----------------
Cash flows from financing activities:
Principal payments on debt (10) (11)
Repurchase of common stock (1,834) -
Proceeds from issuance of common stock 521 93
----------------- -----------------
Net cash (used for) provided by financing activities (1,323) 82
----------------- -----------------
(Decrease) increase in cash and cash equivalents (624) 3,711
Cash and cash equivalents, at beginning of period 27,176 16,375
----------------- -----------------
Cash and cash equivalents, at end of period $ 26,552 $ 20,086
================= =================
</Table>
8
<Page>
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
SELECT COMFORT PRO FORMA NET INCOME AND EARNINGS PER SHARE RECONCILIATION
The company's net income and earnings per share under Generally Accepted
Accounting Principles (GAAP) for 2003 are being compared to 2002 net income and
earnings per share on a pro forma, after-tax basis to improve comparability
between the periods. GAAP did not allow the company to reduce its earnings for
income tax expense in 2002, while 2003 results reflect a reduction in earnings
for income taxes. A reconciliation of net income and diluted earnings per share
(as determined in accordance with GAAP) to pro forma net income and diluted
earnings per share is as follows:
THREE MONTHS
ENDED
MARCH 30, 2002
RECONCILIATION OF GAAP NET INCOME AND PRO FORMA NET INCOME:
GAAP net income $ 3,244
Income taxes - adjusted to 38% effective rate (1,448)
--------------
Pro forma net income $ 1,796
--------------
THREE MONTHS
ENDED
MARCH 30, 2002
RECONCILIATION OF GAAP DILUTED EARNINGS PER SHARE TO
PRO FORMA DILUTED EARNINGS PER SHARE:
GAAP diluted earnings per share $ .11
Effect of income taxes at 38% (.05)
--------------
Pro forma diluted earnings per share $ .06
--------------
9
<Page>
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: April 15, 2003 By: /s/ Mark A. Kimball
-------------------------------
Title: Senior Vice President
----------------------------
10
<Page>