-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D/slBpOnERk6WgEYHa9C31Q3rdq82W39nutDdyyUTiqH0KshOm5DEFnVM8kDusMi x3C1UdVHAsg+nHrwXbme4A== 0000827187-02-000003.txt : 20020414 0000827187-02-000003.hdr.sgml : 20020414 ACCESSION NUMBER: 0000827187-02-000003 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020204 ITEM INFORMATION: FILED AS OF DATE: 20020205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SELECT COMFORT CORP CENTRAL INDEX KEY: 0000827187 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD FURNITURE [2510] IRS NUMBER: 410157886 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25121 FILM NUMBER: 02527663 BUSINESS ADDRESS: STREET 1: 6105 TRENTON LANE NORTH CITY: MINNEAPOLIS STATE: MN ZIP: 55344 BUSINESS PHONE: 7635517000 8-K 1 a2001_4thqtr-pressrelease.txt 2001 4TH QUARTER PRESS RELEASE 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): FEBRUARY 4, 2002 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 February 4, 2002, the registrant issued a press release, as follows: FOR IMMEDIATE RELEASE CONTACT: Mark Kimball (763) 551-7070 February 4, 2002 Select Comfort Corporation SELECT COMFORT CORPORATION ANNOUNCES SECOND CONSECUTIVE PROFITABLE QUARTER FOURTH QUARTER NET SALES RISE 8 PERCENT TO $69 MILLION; NET INCOME IN FOURTH QUARTER IS $1.1 MILLION, OR 4 CENTS PER SHARE MINNEAPOLIS, MINN. (February 4, 2002) - Select Comfort Corporation (NASDAQ: SCSS) today announced results for the fourth quarter and year ended December 29, 2001. The company reported its second consecutive quarterly profit with net income of $1.1 million, or $.04 per fully diluted share, and net sales of $69.3 million, 8% higher than net sales reported for the fourth quarter of 2000. A comparison of key operating results for the fourth quarter of 2001 and 2000 are as follows (in millions, except per share amounts): 4TH QUARTER 2001 2000 -------- -------- Net Sales $69.3 $64.1 Operating income (loss), exclusive of asset impairments and store write-offs of $1.3 in 2001 and $0.5 in 2000 $ 3.0 ($ 6.4) Earnings before interest, taxes, depreciation and amortization $ 5.4 ($ 4.1) Net income (loss) $ 1.1 ($25.1) Earnings per share $ .04 ($1.39) Comparable store sales increased by 2.5% in the fourth quarter and decreased by 3.8% for fiscal 2001. For the year ended December 29, 2001, the company reported a net loss of $12.1 million, or $.66 per share, compared to a net loss of $37.2 million, or $2.09 per share in 2000. Net sales for fiscal 2001 were $261.7 million, compared to net sales of $270.1 million in 2000. The net loss for the year is attributable to net losses accumulated during the first and second quarters. Operating results for the last six months of 2001 improved substantially, with net income of $1.3 2 million on net sales of $133.5 million, compared to a net loss of $30.8 million and net sales of $132.1 million in the last six months of 2000. Cash balances at December 29, 2001 were $16.4 million and debt covenant requirements have been met. Cash generated from ongoing operations and existing cash balances are sufficient to meet the Company's ongoing obligations and to fund growth initiatives. "The primary objectives we set for 2001 were all accomplished. We set out to regain profitability in the second half, to lower our costs to align with sales volumes, to rebuild our cash position, and to ready ourselves for future growth," said Bill McLaughlin, chief executive officer. "Meeting these objectives in a struggling economic environment has required strong focus and discipline and has positioned us well for 2002." "We are pleased with the improvement in sales volumes achieved in the fourth quarter," McLaughlin continued. "Throughout the year, we continued to invest in product development, advertising and distribution. Those ongoing investments build the foundation for our profitable growth going forward." 2001 HIGHLIGHTS The following summarizes some of the key accomplishments during 2001 and the effect on the financial results: o Cost structure: lowered breakeven point and returned to profitability - Reduced fixed costs and improved variable margins significantly - Improved gross margins by 2.2 percentage points to 65.6% for 2001 and by 6.1 percentage points to 67.1% in the fourth quarter of 2001 - Lowered sales and marketing costs as a percentage of sales by 2.0 percentage points to 59.4%. Sales and marketing costs include advertising costs and non-product costs associated with operating stores and call centers and servicing our customers. - Reduced general and administrative expenses by $4.4 million o Growth and quality: invested in marketing and product development to position for growth - Repositioned product line as the Sleep Number Bed by Select Comfort(TM) 3 - Introduced Sleep Number(R) ad campaign in eight markets and selected national media - Upgraded product quality and expanded product offerings for targeted customers - Expanded distribution into wholesale including successful QVC cable television programs - Net sales declined by 3%, a lower decline than estimated for the industry o Financial condition: strengthened liquidity and cash position - Raised $16 million through two debt/equity transactions - Returned to positive cash flow from operations for fiscal 2001, with cash flow from operations of $5.2 million during the last six months of the year - Increased cash balances by approximately $11 million During the fourth quarter, net sales trends improved significantly, summarized as follows: 4th Quarter 2001 % Sales 2001 vs 2000 % Sales 2001 vs 2000 ------- ------------ ------- ------------ Retail Stores 76% 0% 78% -4% Direct Marketing 16% +23% 15% -18% e-commerce 4% +60% 3% +1% Wholesale and QVC 4% +312% 4% nm OUTLOOK FOR 2002 While 2001 was dedicated to returning to profitability, 2002 will be dedicated to profitable growth. Despite the uncertain economic environment, we believe steps taken in 2001 and additional programs planned in 2002 position the company to benefit from economic recovery and minimize the impact of economic contraction. Key points for consideration: o Sales growth: Assuming a stable economy, we anticipate mid-single digit percentage sales growth in 2002. Areas of focus to drive profitable growth in 2002 are as follows: - Continue Sleep Number(R)advertising in 2002, with 5%+ higher levels of media spending and a more national emphasis - Improve the selling process in our stores, in our call center and on our internet site - Open stores selectively to leverage advertising and fixed costs in key markets, while closing a like number of under-performing stores - Continue to enhance/expand our product line - Expand wholesale distribution selectively to further leverage advertising 4 o 2002 and First Quarter Outlook: Our expectations for 2002 are to be profitable. Entering 2002 our expectations were for a loss in the first quarter, primarily due to higher levels of direct marketing advertising spending in the first quarter consistent with prior years. The first five weeks of the quarter have experienced stronger than expected sales growth. If these trends continue, we could report a first quarter profit. o Cash balance and financial position: We believe that cash flow from operations in 2002 will be positive and will fund cash required for investments - capital and otherwise. We do not anticipate a need to raise additional capital to meet operating needs. We are not yet in a position to predict volume growth and profitability in 2002, as the economic outlook is too uncertain. We are committed to maximizing our opportunities and believe that the initiatives and investments enacted in 2001 and planned for 2002 will enable us to continue to successfully build our business and increase our share of the mattress industry. Select Comfort will hold a conference call to discuss its fourth quarter results on Tuesday, February 5, 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, February 5, through 5:00 p.m. Central Time on Tuesday, February 12, 2002. To access the replay, please call 888-568-0881 from anywhere in the U. S. International callers may dial 402-998-1557. An archived replay of the conference call may also be accessed after approximately 12:30 p.m. Central Time on Tuesday, February 5 at www.selectcomfort.com. Founded in 1987, Select Comfort Corporation is the 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 328 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 that are subject to certain risks and uncertainties 5 including, among others, such factors as general and industry economic trends, consumer confidence, effectiveness of our advertising and promotional efforts, acceptance of our products and sleep technology, industry competition, our dependence on significant suppliers, including United Parcel Service (UPS) for delivery of our sleep systems and Conseco Finance for extension of consumer credit, and the vulnerability of any such suppliers to recessionary pressures, labor negotiations, liquidity concerns or other factors, the potential dilution from the issuance of additional shares from financings completed in 2001 and our ability to maintain compliance with listing requirements of NASDAQ, 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. 6 SELECT COMFORT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS DECEMBER 29, 2001 AND DECEMBER 30, 2000 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED TWELVE MONTHS ENDED ---------------------------- ---------------------------- 2001 2000 2001 2000 ------------- ------------- ------------- ------------- Net sales $ 69,341 $ 64,075 $261,687 $270,077 Cost of sales 22,845 25,021 90,076 98,924 ------------- ------------- ------------- ------------- Gross margin 46,496 39,054 171,611 171,153 ------------- ------------- ------------- ------------- Operating expenses: Sales and marketing 36,935 38,506 155,551 165,960 General and administrative 6,584 6,925 24,836 29,211 Store closings/impairments 1,318 528 1,826 1,952 ------------- ------------- ------------- ------------- Total operating expenses 44,837 45,959 182,213 197,123 ------------- ------------- ------------- ------------- Operating income (loss) 1,659 (6,905) (10,602) (25,970) ------------- ------------- ------------- ------------- Other income (expense): Interest income 63 145 237 1,082 Interest expense (588) (20) (1,362) (26) Equity in loss of affiliate - - - (642) Other, net (184) 14 (339) (66) ------------- ------------- ------------- ------------- Other income (expense), net (709) 139 (1,464) 348 ------------- ------------- ------------- ------------- Income (loss) before income taxes 950 (6,766) (12,066) (25,622) Income tax expense (benefit) (115) 18,293 - 11,592 ------------- ------------- ------------- ------------- Net income (loss) $ 1,065 $(25,059) $(12,066) $(37,214) ============= ============= ============= ============= Net income (loss) per share - basic $ 0.06 $ (1.39) $ (0.66) $ (2.09) ============= ============= ============= ============= Weighted average shares - basic 18,274 17,949 18,157 17,848 ============= ============= ============= ============= Net income (loss) per share - diluted $ 0.04 $ (1.39) $ (0.66) $ (2.09) ============= ============= ============= ============= Weighted average shares - diluted 30,869 17,949 18,157 17,848 ============= ============= ============= =============
Basic and fully diluted earnings per share and the number of shares used to calculate earnings per share are the same for the three months ended December 29, 2000 and for the twelve months ended 2000 and 2001. Reconciliation of basic and fully diluted earnings per share for the fourth quarter of 2001 is as follows: NET PER SHARE INCOME SHARES AMOUNT ------ ------ ------ BASIC EPS Net income available to common shareholders $1,065 18,274 $0.06 ========== EFFECT OF DILUTIVE SECURITIES: Options - 507 Warrants - 1,088 Convertible Debt 310 11,000 -------- ---------- DILUTED EPS Net income attributable to common shareholders plus assumed conversion $1,375 30,869 $0.04 ======== ========== ========== 7 SELECT COMFORT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 29, 2001 AND DECEMBER 30, 2000 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 2001 2000 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 16,375 $ 1,498 Marketable securities - 3,950 Accounts receivable, net of allowance for doubtful accounts of $311 and $264, respectively 2,623 2,693 Inventories 8,086 11,083 Prepaid expenses 3,588 4,741 ------------- ------------- Total current assets 30,672 23,965 Property and equipment, net 30,882 37,063 Other assets 5,882 3,644 ------------- ------------- Total assets $ 67,436 $ 64,672 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 28 $ 38 Accounts payable 15,216 17,271 Accruals: Sales returns 3,624 5,284 Compensation, taxes and benefits 7,403 6,238 Other 8,140 7,565 ------------- ------------- Total current liabilities 34,411 36,396 Long-term debt, less current maturities 17,109 2,322 Accrued warranty costs 5,030 5,745 Other liabilities 4,114 3,609 ------------- ------------- Total liabilities 60,664 48,072 ------------- ------------- 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, 18,302,307 and 17,962,689 shares issued and outstanding, respectively 183 180 Additional paid-in capital 81,687 79,452 Accumulated deficit (75,098) (63,032) ------------- ------------- Total shareholders' equity 6,772 16,600 ------------- ------------- Total liabilities and shareholders' equity $ 67,436 $ 64,672 ============= =============
8 SELECT COMFORT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS DECEMBER 29, 2001 AND DECEMBER 30, 2000 (IN THOUSANDS) 2001 2000 ------------- ------------- Cash flows from operating activities: Net loss $(12,066) $(37,214) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 10,082 8,409 Loss on disposal of assets and impaired assets 1,687 10,887 Deferred tax assets - 2,167 Change in operating assets and liabilities: Accounts receivable, net 70 (1,637) Inventories 2,926 640 Prepaid expenses 2,023 80 Other assets (2,244) 535 Income taxes - 2,579 Accounts payable (2,050) 1,360 Accrued sales returns (1,660) (596) Accrued warranty costs 1,165 1,340 Accrued compensation, taxes and benefits 871 (173) Other accrued liabilities (894) 537 Other liabilities 505 800 ------------- ------------- Net cash provided by (used in) operating activities 415 (10,286) ------------- ------------- Cash flows from investing activities: Purchases of property and equipment (4,859) (12,084) Sales of marketable securities 3,950 16,179 Investment in affiliate - (400) ------------- ------------- Net cash (used in) provided by investing activities (909) 3,695 ------------- ------------- Cash flows from financing activities: Principal payments on debt (38) (16) Proceeds from issuance of common stock 369 664 Net proceeds from long-term obligations 15,040 - ------------- ------------- Net cash provided by financing activities 15,371 648 ------------- ------------- Increase (decrease) in cash and cash equivalents 14,877 (5,943) Cash and cash equivalents, at beginning of period 1,498 7,441 ------------- ------------- Cash and cash equivalents, at end of period $ 16,375 $ 1,498 ============= =============
9 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: February 4, 2002 By /s/ Mark A. Kimball ----------------------------------------- Title: Senior Vice President -------------------------------------- 10 -----END PRIVACY-ENHANCED MESSAGE-----