EXHIBIT 99.1
FOR IMMEDIATE RELEASE CONTACT: Mark Kimball (763) 551-7070
Select Comfort Corporation
mark.kimball@selectcomfort.com
SELECT COMFORT CORPORATION REPORTS
FIRST QUARTER EARNINGS
EARNINGS PER SHARE UP 64 PERCENT
COMPANY PROVIDES SECOND QUARTER GUIDANCE
MINNEAPOLIS, MINN. (April 20, 2004) - 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 April 3, 2004. The company
reported its 11th consecutive quarterly profit with net income of $7.4 million,
or $0.18 per diluted share, compared with net income of $4.1 million, or $0.11
per share in the first quarter of 2003. First quarter 2004 net sales increased
37 percent to $140 million, versus first quarter 2003 net sales of $102 million.
Same-store sales increased 25 percent.
"We sustained double-digit growth trends this quarter with consistent
growth across all channels, and better-than-expected product mix and adjustable
foundation sales," said Bill McLaughlin, president and chief executive officer.
"Expansion of our Sleep Number advertising campaign and the opening of nine new
stores in first quarter further supported our sales performance, and we remain
confident in our growth potential. Our balance sheet remains debt-free and was
strengthened by an additional $5.8 million in free cash flow(1), bringing our
total cash and marketable securities to $84 million."
SECOND QUARTER OUTLOOK
In the second quarter, Select Comfort's focus will remain on sustaining
growth through the execution of initiatives that follow the company's four
strategic priorities. The company plans to:
o Increase brand and product awareness
- Introduce six new national cable television ads.
- Continue to expand investment in the local Sleep Number(R) retail
advertising campaign.
- Increase total media spending by 45 percent over second quarter 2003,
adhering to the company's plans to accelerate media spending and store
openings in the first half of the year.
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o Expand profitable distribution
- Open 12 new stores, including seven in New York, Los Angeles and
Chicago.
o Increase proprietary product offerings
- Introduce the Sleep Number(R) 9000 bed nationally on April 5.
- Test launch the nation's first sofa sleeper featuring a Sleep
Number(R) bed inside.
o Strengthen financial position
- Leverage the company's cash-flow-generating business model to fund
growth in media and new store expansion.
Assuming continued performance of the company's advertising and growth
programs and no significant changes to the U.S. economic recovery, mattress
industry growth rates, or competitive reaction to the company's recent success,
the company is raising EPS guidance for full-year 2004 to $0.92 to $0.95 and
revenue to a range of $565 million to $585 million with same-store sales
expected to grow between 20 percent and 25 percent.
For the second quarter of 2004, the company expects to generate revenue of
$126 million to $131 million and earnings per share in the range of $0.13 to
$0.15, with same-store sales growth of 20 to 25 percent. Expected earnings for
the second quarter do not follow the company's historical patterns due to an
expected shift in QVC programming into the third quarter of 2004, and the timing
of other program investments.
Select Comfort's updated guidance ranges are in line with the company's
long-term goal to sustain annual sales growth rates of 15 to 25 percent and an
earnings growth rate of 30 percent.
CONFERENCE CALL ANNOUNCEMENT
Select Comfort will hold a conference call to discuss its first quarter
results on April 20, 2004, at 4:00 p.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 6:00 p.m. Central Time on April 20, 2004,
through 5:00 p.m. Central Time on April 27, 2004. To access the replay, please
call 402-220-4086 (U.S. and International). An archived replay of the conference
call may also be accessed after approximately 7:00 p.m. Central Time on April
20, 2004 at www.selectcomfort.com.
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ABOUT SELECT COMFORT
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. Select
Comfort's products are sold through its 356 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.
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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 global events,
consumer confidence, 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, consumer
acceptance of our products and product innovation, our ability to continue to
expand and improve our product line, industry competition, warranty expenses,
California wage and hour litigation, our dependence on significant suppliers,
and the vulnerability of any suppliers to recessionary pressures, labor
negotiations, liquidity concerns or other factors, increasing commodity and
delivery costs, increasing government regulations, including possible new
flammability standards for the bedding industry, 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.
(1) FREE CASH FLOW IS DEFINED AS NET CASH PROVIDED BY OPERATIONS LESS
PURCHASES OF PROPERTY AND EQUIPMENT AS DERIVED FROM THE STATEMENT OF
CASH FLOWS ATTACHED.
(2) TOP 25 BEDDING RETAILERS, FURNITURE TODAY, MAY 26, 2003
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
---------------------------------
APRIL 3, MARCH 29,
2004 2003
---------------- ----------------
Net sales $ 139,963 $ 101,958
Cost of sales 53,929 38,057
---------------- ----------------
Gross profit 86,034 63,901
---------------- ----------------
Operating expenses:
Sales and marketing 63,720 48,917
General and administrative 10,634 8,301
Store closings and asset impairments - 74
---------------- ----------------
Total operating expenses 74,354 57,292
---------------- ----------------
Operating income 11,680 6,609
---------------- ----------------
Other income (expense):
Interest income 312 113
Interest expense - (88)
Other, net - 24
---------------- ----------------
Other income (expense), net 312 49
---------------- ----------------
Income before income taxes 11,992 6,658
Income tax expense (4,617) (2,530)
---------------- ----------------
Net income $ 7,375 $ 4,128
================ ================
Net income per share - basic $ 0.20 $ 0.13
================ ================
Weighted average shares - basic 36,060 30,880
================ ================
Net income per share - diluted $ 0.18 $ 0.11
================ ================
Weighted average shares - diluted 39,990 37,173
================ ================
RECONCILIATION OF EPS INFORMATION:
Net income $ 7,375 $ 4,128
Add: Interest expense on convertible debt - 54
---------------- ----------------
Net income available to common shareholders $ 7,375 $ 4,182
================ ================
Weighted average shares outstanding 36,060 30,880
Effect of dilutive securities:
Options 2,545 2,932
Warrants 1,385 2,634
Convertible debt - 727
---------------- ----------------
Dilutive weighted average shares outstanding 39,990 37,173
================ ================
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
APRIL 3, JANUARY 3,
2004 2004
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 32,155 $ 24,725
Marketable securities - current 7,674 49,322
Accounts receivable, net of allowance for doubtful accounts
of $742 and $619, respectively 10,926 6,823
Inventories 12,803 12,381
Prepaid expenses 6,942 5,244
Deferred tax assets 7,014 6,039
----------------- -----------------
Total current assets 77,514 104,534
Marketable securities - non-current 44,305 1,071
Property and equipment, net 38,155 36,134
Deferred tax assets 5,937 5,620
Other assets 3,686 3,343
----------------- -----------------
Total assets $ 169,597 $ 150,702
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ - $ -
Accounts payable 21,852 14,773
Accruals:
Sales returns 4,481 3,469
Compensation and benefits 12,165 16,579
Taxes and withholding 4,820 3,661
Consumer prepayments 7,459 5,970
Other 5,303 6,110
----------------- -----------------
Total current liabilities 56,080 50,562
Long-term debt, less current maturities - -
Accrued warranty costs 2,265 2,557
Other liabilities 5,028 4,821
----------------- -----------------
Total liabilities 63,373 57,940
----------------- -----------------
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,
36,393,690 and 35,769,606 shares issued and outstanding,
respectively 364 358
Additional paid-in capital 111,375 104,085
Unearned compensation (2,086) (877)
Accumulated deficit (3,429) (10,804)
----------------- -----------------
Total shareholders' equity 106,224 92,762
----------------- -----------------
Total liabilities and shareholders' equity $ 169,597 $ 150,702
================= =================
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
-------------------------------------
APRIL 3, MARCH 29,
2004 2003
----------------- ------------------
Cash flows from operating activities:
Net income $ 7,375 $ 4,128
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,430 2,426
Amortization of debt discount and deferred finance fees - 86
Non-cash compensation 71 -
Loss on disposal of assets and impaired assets - 74
Deferred tax (benefit) expense (1,292) 2,298
Change in operating assets and liabilities:
Accounts receivable (4,103) 55
Inventories (422) (365)
Prepaid expenses (1,698) (399)
Other assets (352) 29
Accounts payable 7,079 4,825
Accrued compensation and benefits (4,414) (5,698)
Accrued taxes and withholding 3,997 141
Customer payments 1,489 3,377
Other accruals and liabilities 120 (52)
----------------- ------------------
Net cash provided by operating activities 11,280 10,925
----------------- ------------------
Cash flows from investing activities:
Purchases of property and equipment (5,442) (4,740)
Investments in marketable securities (43,192) (17,803)
Proceeds from maturity of marketable securities 41,606 12,317
----------------- ------------------
Net cash used in investing activities (7,028) (10,226)
----------------- ------------------
Cash flows from financing activities:
Principal payments on long-term debt - (10)
Repurchase of common stock (240) (1,834)
Proceeds from issuance of shares from option and warrant exercises 2,759 225
Proceeds from issuance of ESPP shares and other equity transactions 659 296
----------------- ------------------
Net cash provided by (used in) financing activities 3,178 (1,323)
----------------- ------------------
Increase (decrease) in cash and cash equivalents 7,430 (624)
Cash and cash equivalents, at beginning of period 24,725 27,176
----------------- ------------------
Cash and cash equivalents, at end of period $ 32,155 $ 26,552
================= ==================
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