FOR IMMEDIATE RELEASE CONTACT: Tammy Nystuen
Select Comfort Corporation
(763) 551-7496
tamara.nystuen@selectcomfort.com
SELECT COMFORT BEATS FIRST QUARTER EARNINGS ESTIMATES
EARNINGS PER SHARE RISE 22 PERCENT; SALES INCREASE 23 PERCENT
COMPANY RAISES 2005 GUIDANCE
MINNEAPOLIS - (April 26, 2005) - 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 2, 2005. The company
reported net income of $8.6 million, or $0.22 per diluted share, compared to net
income of $7.3 million, or $0.18 per diluted share, in the first quarter of
2004. First quarter 2005 net sales increased 23 percent to $172.8 million,
compared to first quarter 2004 net sales of $140.0 million. Same-store sales
increased 16 percent.
"We are pleased once again to report double-digit revenue and earnings
growth, a pace the company has now sustained for four years," said Bill
McLaughlin, chairman and chief executive officer. "Strong unit growth across all
channels was a primary contributor to our sales increases, particularly in our
retail stores and other consumer-oriented channels such as ecommerce and retail
partners. We are especially pleased with the sales performance of our
entry-level products, as we've refined the sales mix and refocused our efforts
toward reaching a broader consumer base."
McLaughlin continued, "Our balance sheet remains debt-free and was
strengthened by the addition of $17 million in cash from operations, bringing
our total cash and marketable securities to $101 million, after repurchasing
$6.9 million of company stock in the quarter."
The company's expansion plans for 2005 are on target to open up to 40
new stores during the year and to close approximately 15 stores, including the
phase-out of leased departments in Bed, Bath & Beyond stores. In the first
quarter, Select Comfort opened five new stores and closed five, ending the
quarter with a total of 370 retail stores. In the second quarter, the company
expects to open at least 10 new stores and to close 10.
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Two new members joined Select Comfort's senior management team in April,
bringing further leadership strength and experience to the company. Kathryn
Roedel joined Select Comfort as senior vice president, global supply chain,
replacing Greg Kliner, who announced his intention to retire in May. In
addition, Wendy Schoppert joined the company as senior vice president and
general manager, new channel development.
"Kathy's global expertise in quality and supply chain strategy will play
a key role in advancing Select Comfort's scalable processes and systems, helping
us to better implement and execute on our aggressive sales and profit goals
moving forward," McLaughlin said. "Wendy will focus primarily on new and
emerging channel opportunities for the company, which will play an increasingly
greater role in Select Comfort's success over the next three to five years."
OUTLOOK
The company reiterated its expectations to sustain long-term sales
growth rates of at least 15 to 20 percent, with same-store growth between 7 and
12 percent, leveraging the business model with long-term earnings growth rates
of at least 20 to 25 percent.
Assuming continued performance of the company's advertising and growth
programs and no significant changes to the U.S. economy, mattress industry
growth rates or competitive response to the company's products, the company
believes that in 2005 it could exceed its 7 to 12 percent target range for
same-store growth, as well as its sales growth target range of 18 to 20 percent.
Accordingly, the company is raising EPS guidance for full-year 2005 to $0.98 to
$1.06.
"We are optimistic about our prospects for the balance of 2005, but
remain cautious moving forward due to ongoing challenges with increased pricing
pressures and the effect that rising fuel costs could have on our business,"
McLaughlin said. "We have continued confidence in our company's long-term growth
potential."
Select Comfort will hold a conference call to discuss its first quarter
results on April 26, 2005, 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 26, 2005,
through 5:00 p.m. Central Time on May 3, 2005. To access the replay, please call
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888-673-3568. An archived replay of the conference call may also be accessed
after approximately 7:00 p.m. Central Time on April 26, 2005, at
www.selectcomfort.com.
ABOUT SELECT COMFORT
Founded in 1987, Select Comfort Corporation is the nation's leading bed
retailer(1), holding 32 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 370 retail stores located nationwide,
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, product quality, innovation and brand image; our
ability to continue to expand and improve our product line; industry
competition; warranty expenses; the outcome of pending litigation, including
consumer class action litigation; our dependence on significant suppliers, and
the vulnerability of any suppliers to inflationary pressures, labor
negotiations, liquidity concerns or other factors; rising commodity costs; and
increasing government regulations, including new flammability standards for the
bedding industry. Additional information concerning these and other risks and
uncertainties is contained in our filings with the Securities and Exchange
Commission, 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 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
-----------------------------
APRIL 2, APRIL 3,
2005 2004
------------- -------------
Net sales $ 172,832 $ 139,963
Cost of sales 70,735 53,929
------------- -------------
Gross profit 102,097 86,034
Operating expenses:
Sales and marketing 75,025 63,782
General and administrative 13,424 10,634
------------- -------------
Operating income 13,648 11,618
Other income:
Interest income 473 312
------------- -------------
Income before income taxes 14,121 11,930
Income tax expense 5,479 4,597
------------- -------------
Net income $ 8,642 $ 7,333
============= =============
Net income per share - basic $ 0.24 $ 0.20
============= =============
Weighted average shares - basic 35,799 35,929
============= =============
Net income per share - diluted $ 0.22 $ 0.18
============= =============
Weighted average shares - diluted 39,071 39,990
============= =============
RECONCILIATION OF EPS INFORMATION:
-------------- -------------
Net income available to common shareholders $ 8,642 $ 7,333
============== =============
Weighted average shares outstanding 35,799 35,929
Effect of dilutive securities:
Options 1,791 2,545
Warrants 1,306 1,385
Restricted shares 175 131
-------------- -------------
Dilutive weighted average shares outstanding 39,071 39,990
============== =============
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
APRIL 2, JANUARY 1,
2005 2005
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 24,238 $ 15,066
Marketable securities - current 40,078 35,747
Accounts receivable, net of allowance for doubtful accounts
of $670 and $685, respectively 9,212 8,644
Inventories 18,307 20,481
Prepaid expenses 8,362 7,375
Deferred tax assets 6,041 5,287
---------------- -----------------
Total current assets 106,238 92,600
Marketable securities - non-current 36,845 40,930
Property and equipment, net 45,803 43,911
Deferred tax assets 11,494 10,755
Other assets 3,577 3,617
----------------- -----------------
Total assets $ 203,957 $ 191,813
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $29,229 $26,267
Consumer prepayments 8,919 9,368
Accruals:
Sales returns 5,980 5,038
Compensation and benefits 15,493 13,913
Taxes and withholding 6,138 6,392
Other 7,890 8,143
----------------- -----------------
Total current liabilities 73,649 69,121
Long-term liabilities 8,791 8,348
----------------- -----------------
Total liabilities 82,440 77,469
----------------- -----------------
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,
36,082,919 and 35,828,222 shares issued and outstanding,
respectively 361 358
Additional paid-in capital 96,020 95,548
Unearned compensation (3,696) (1,752)
Retained earnings 28,832 20,190
---------------- -----------------
Total shareholders' equity 121,517 114,344
----------------- -----------------
Total liabilities and shareholders' equity $ 203,957 $ 191,813
================= =================
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
------------------------------------
APRIL 2, APRIL 3,
2005 2004
----------------- -----------------
Cash flows from operating activities:
Net income $ 8,642 $ 7,333
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,701 3,430
Non-cash compensation 64 71
Deferred tax benefit (1,493) (1,312)
Change in operating assets and liabilities:
Accounts receivable (568) (4,103)
Inventories 2,174 (522)
Prepaid expenses (987) (1,698)
Other assets 31 (352)
Accounts payable 2,962 7,179
Customer prepayments (449) 1,489
Accrued sales returns 942 1,012
Accrued compensation and benefits 1,580 (4,414)
Accrued taxes and withholding 171 3,997
Other accruals and liabilities 190 (830)
----------------- -----------------
Net cash provided by operating activities 16,960 11,280
----------------- -----------------
Cash flows from investing activities:
Purchases of property and equipment (5,584) (5,442)
Investments in marketable securities (2,696) (43,192)
Proceeds from maturity of marketable securities 2,450 41,606
----------------- -----------------
Net cash used in investing activities (5,830) (7,028)
----------------- -----------------
Cash flows from financing activities:
Repurchase of common stock (6,911) (240)
Proceeds from issuance of common stock 4,953 3,418
----------------- -----------------
Net cash (used in) provided by financing activities (1,958) 3,178
----------------- -----------------
Increase in cash and cash equivalents 9,172 7,430
Cash and cash equivalents, at beginning of period 15,066 24,725
----------------- -----------------
Cash and cash equivalents, at end of period $ 24,238 $ 32,155
================= =================
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SELECT COMFORT CORPORATION
AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
THREE MONTHS ENDED
----------------------------------
APRIL 2, APRIL 3,
2005 2004
---------------- ----------------
Percent of sales
Retail 76.5% 76.5%
Direct 12.1 12.8
E-Commerce 4.7 4.6
Wholesale 6.7 6.1
---------------- ----------------
Total 100% 100%
Sales growth rates
Retail 24% 34%
Direct 17 27
E-Commerce 25 54
Wholesale 37 147
---------------- ----------------
Total 23% 37%
Same store sales growth 16% 25%
Stores open:
Beginning of period 370 344
Opened 5 9
Closed 5 2
---------------- ----------------
End of period 370 351
Total square footage (000s) 401 352
Average sales per store (000s) * $1,297 $1,166
Stores > $1 million sales * 69% 55%
Avg. sales per mattress unit $1,932 $1,818
(Co-owned Channels)
* trailing twelve month data
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