EXHIBIT 99.1
FOR IMMEDIATE RELEASE CONTACT: Mark Kimball (763) 551-7070
Select Comfort Corporation
mark.kimball@selectcomfort.com
SELECT COMFORT CORPORATION REPORTS
SECOND QUARTER EARNINGS PER SHARE OF $0.15
NET INCOME IS $5.9 MILLION ON SALES OF $124.7 MILLION
MINNEAPOLIS, MINN. (July 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 second quarter ended July 3, 2004. The company
reported its 12th consecutive quarterly profit with net income of $5.9 million,
or $0.15 per diluted share, compared with net income of $4.8 million, or $0.12
per share in the second quarter of 2003. Second quarter 2004 net sales increased
22 percent to $124.7 million, versus second quarter 2003 net sales of $102.0
million. Same-store sales increased 14 percent.
"We were pleased with the continued profit leverage in our business during
the second quarter, which is traditionally a seasonally slower period," said
Bill McLaughlin, chairman and chief executive officer. "We experienced
double-digit revenue gains across all channels and strong earnings growth, and
also made continued advancements during the quarter to drive our long-term
growth. These included updating our product line and technology for further
competitive advantage, strengthening our balance sheet and generating solid free
cash flow, executing an agreement with Radisson Hotels, and opening 12 new
stores. We remain confident in our strategies to achieve our long-term potential
through 15 to 25 percent annual sales growth and 30 percent annual earnings
growth."
OUTLOOK FOR THE SECOND HALF OF 2004
For the balance of fiscal 2004, Select Comfort will focus on the execution
of the company's four strategic priorities:
+ Increase brand and product awareness
- Increase marketing spending approximately 30 percent over prior year.
- Expand advertising in New York to support new store openings.
+ Expand profitable distribution
- Open nine new stores which will result in 30 opened in 2004.
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- Establish new retail partnerships to begin selling Sleep Number(R)
beds in selected furniture retailers in Alaska and Hawaii for the
first time.
- Begin executing Radisson partnership with delivery of initial orders.
+ Continue product innovation
- Introduce the newly improved Sleep Number(R)5000 bed - the company's
most popular model -- early in third quarter.
- Launch the new Sleep Number(R)3000 by the end of 2004.
- Focus on unit sales growth.
+ Strengthen financial position
- Leverage the company's advantaged business model to generate cash
and fund growth.
- Install new systems solutions for lead management and initial home
delivery automation.
For the third quarter of 2004, the company expects to generate revenue of
$144 million to $149 million and earnings per share in the range of $0.22 to
$0.25, with same-store sales growth of 15 to 20 percent.
CONFERENCE CALL ANNOUNCEMENT
Select Comfort will hold a conference call to discuss its second quarter
results on July 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 July 20, 2004,
through 5:00 p.m. Central Time on July 27, 2004. To access the replay, please
call 402-220-3774 (U.S. and International). An archived replay of the conference
call may also be accessed after approximately 7:00 p.m. Central Time on July 20,
2004 at www.selectcomfort.com.
ABOUT SELECT COMFORT
Founded in 1987, Select Comfort Corporation is the nation's leading bed
retailer(1), 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 360 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 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) TOP 25 BEDDING RETAILERS, FURNITURE TODAY, MAY 24, 2004
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ ------------------------------
JULY 3, JUNE 28, JULY 3, JUNE 28,
2004 2003 2004 2003
-------------- ------------- -------------- --------------
Net sales $ 124,720 $ 101,993 $ 264,683 $ 203,951
Cost of sales 47,806 38,920 101,735 76,977
-------------- ------------- -------------- --------------
Gross profit 76,914 63,073 162,948 126,974
-------------- ------------- -------------- --------------
Operating expenses:
Sales and marketing 57,638 46,284 121,358 95,201
General and administrative 10,050 9,209 20,684 17,510
Store closings and asset impairments - (15) - 59
-------------- ------------- -------------- --------------
Total operating expenses 67,688 55,478 142,042 112,770
-------------- ------------- -------------- --------------
Operating income 9,226 7,595 20,906 14,204
-------------- ------------- -------------- --------------
Other income (expense):
Interest income 340 137 652 250
Interest expense - (53) - (141)
Other, net - - - 24
-------------- ------------- -------------- --------------
Other income (expense), net 340 84 652 133
-------------- ------------- -------------- --------------
Income before income taxes 9,566 7,679 21,558 14,337
Income tax expense 3,683 2,918 8,300 5,448
-------------- ------------- -------------- --------------
Net income $ 5,883 $ 4,761 $ 13,258 $ 8,889
============== ============= ============== ==============
Net income per share - basic $ 0.16 $ 0.15 $ 0.37 $ 0.28
============== ============= ============== ==============
Weighted average shares - basic 36,547 32,018 36,304 31,449
============== ============= ============== ==============
Net income per share - diluted $ 0.15 $ 0.12 $ 0.33 $ 0.23
============== ============= ============== ==============
Weighted average shares - diluted 40,236 38,778 40,101 38,492
============== ============= ============== ==============
RECONCILIATION OF EPS INFORMATION:
Net income $ 5,883 $ 4,761 $ 13,258 $ 8,889
Add: Interest expense on convertible debt - 27 - 81
-------------- ------------- -------------- --------------
Net income available to common
shareholders $ 5,883 $ 4,788 $ 13,258 $ 8,970
============== ============= ============== ==============
Weighted average shares outstanding 36,547 32,018 36,304 31,449
Effect of dilutive securities:
Options 2,334 2,613 2,427 2,481
Warrants 1,355 3,787 1,370 4,019
Convertible debt - 360 - 543
-------------- ------------- -------------- --------------
Dilutive weighted average shares
outstanding 40,236 38,778 40,101 38,492
============== ============= ============== ==============
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
JULY 3, JANUARY 3,
2004 2004
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 29,167 $ 24,725
Marketable securities - current 14,127 49,322
Accounts receivable, net of allowance for doubtful accounts
of $704 and $619, respectively 9,133 6,823
Inventories 14,312 12,381
Prepaid expenses 7,776 5,244
Deferred tax assets 6,672 6,039
----------------- -----------------
Total current assets 81,187 104,534
Marketable securities - non-current 44,778 1,071
Property and equipment, net 40,114 36,134
Deferred tax assets 6,298 5,620
Other assets 3,650 3,343
----------------- -----------------
Total assets $ 176,027 $ 150,702
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,962 $ 14,773
Customer prepayments 6,952 5,970
Accruals:
Sales returns 4,053 3,469
Compensation and benefits 11,918 16,579
Taxes and withholding 3,095 3,661
Other 5,379 6,110
----------------- -----------------
Total current liabilities 53,359 50,562
Accrued warranty costs 1,905 2,557
Other liabilities 5,174 4,821
----------------- -----------------
Total liabilities 60,438 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,
36,671,441 and 35,769,606 shares issued and outstanding,
respectively 367 358
Additional paid-in capital 114,742 104,085
Unearned compensation (1,974) (877)
Accumulated deficit 2,454 (10,804)
----------------- -----------------
Total shareholders' equity 115,589 92,762
----------------- -----------------
Total liabilities and shareholders' equity $ 176,027 $ 150,702
================= =================
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
-------------------------------------
JULY 3, JUNE 28,
2004 2003
----------------- -----------------
Cash flows from operating activities:
Net income $ 13,258 $ 8,889
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 6,741 5,155
Amortization of debt discount and deferred finance fees - 130
Non-cash compensation 183 30
Loss on disposal of assets and impaired assets - 59
Deferred tax (benefit) expense (1,311) 4,806
Change in operating assets and liabilities:
Accounts receivable (2,310) (2,900)
Inventories (1,931) (1,866)
Prepaid expenses (2,532) 424
Other assets (324) (10)
Accounts payable 7,189 4,147
Accrued sales returns 584 174
Accrued compensation and benefits (4,661) (3,152)
Accrued taxes and withholding 4,177 (233)
Customer prepayments 982 2,417
Other accruals and liabilities (1,030) 227
----------------- -----------------
Net cash provided by operating activities 19,015 18,297
----------------- -----------------
Cash flows from investing activities:
Purchases of property and equipment (10,704) (10,313)
Investments in marketable securities (54,768) (17,706)
Proceeds from maturity of marketable securities 46,256 14,717
----------------- -----------------
Net cash used in investing activities (19,216) (13,302)
----------------- -----------------
Cash flows from financing activities:
Principal payments on long-term debt - (11)
Repurchase of common stock (240) (1,834)
Proceeds from issuance of common stock 4,883 2,376
----------------- -----------------
Net cash provided by financing activities 4,643 531
----------------- -----------------
Increase in cash and cash equivalents 4,442 5,526
Cash and cash equivalents, at beginning of period 24,725 27,176
----------------- -----------------
Cash and cash equivalents, at end of period $ 29,167 $ 32,702
================= =================
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