8-K

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 23, 2008

SELECT COMFORT CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota

(State or other jurisdiction of incorporation or organization)

0-25121	41-1597886
(Commission File No.)	(IRS Employer Identification No.)

9800 59^th Avenue North, Minneapolis, Minnesota 55442

(Address of principal executive offices)                             (Zip Code)

(763) 551-7000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.   RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On April 23, 2008, Select Comfort Corporation issued a press release announcing results for the fiscal first quarter ended March 29, 2008. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K. The company also made available an accompanying presentation posted in the Investor Relations section of www.selectcomfort.com. The presentation materials are attached as Exhibit 99.2 to this Current Report on Form 8-K.

ITEM 9.01.   FINANCIAL STATEMENTS AND EXHIBITS

(c) Exhibits.

Exhibit 99.1	Press Release, dated April 23, 2008
Exhibit 99.2	Presentation materials posted in the Investor Relations section of www.selectcomfort.com

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, 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 23, 2008	By:	/s/ Mark A. Kimball
		Mark A. Kimball
	Title:	Senior Vice President

INDEX TO EXHIBITS

The exhibits listed in this index are being furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any document filed under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except as otherwise expressly stated in any such filing.

Exhibit No.	Description of Exhibit
99.1	Press Release, dated April 23, 2008
99.2	Presentation materials posted in the Investor Relations section of www.selectcomfort.com

2

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Media Contact: Gabby Nelson (763) 551-7460 gabby.nelson@selectcomfort.com Investor Contact: Jim Stoffel (763) 551-7498 investorrelations@selectcomfort.com

SELECT COMFORT REPORTS FIRST QUARTER RESULTS

Company Implements Series of Initiatives to Reduce Costs and Improve Profitability

MINNEAPOLIS –(Apr. 23, 2008) – Select Comfort Corporation (NASDAQ: SCSS), the nation’s leading bed retailer and creator of the SLEEP NUMBER^® bed, today announced results for the fiscal first quarter ended March 29, 2008. Net sales for the quarter totaled $168.2 million, a decrease of 22 percent, compared to $216.5 million in the first quarter of 2007. The company reported a first quarter net loss of $7.1 million, or $0.16 per diluted share, compared to net income of $10.7 million, or $0.21 per diluted share in the first quarter of 2007.

“Our first quarter results were affected by a combination of external and internal factors. Performance was significantly impacted by a reduction in consumer discretionary spending due to a weakening U.S. economy. At the same time, we reduced media spend in anticipation of the launch of our new marketing campaign,” said Bill McLaughlin, chief executive officer. “To mitigate the impact of lower volume, we are taking decisive action to reduce costs and preserve cash, while at the same time selectively investing in initiatives to stabilize our business and better leverage our model going forward.”

Cost Reduction and Strategic Investment Initiatives

Since late in the fourth quarter of 2007, Select Comfort has accelerated initiatives to improve bottom-line performance including significantly reducing general and administrative costs, sales and manufacturing costs, and raising prices on select models. The cumulative benefit

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Select Comfort Reports First Quarter Results – Page 2 of 9

to our cost structure from these initiatives is expected to exceed $30 million over the balance of the year and $45-plus million on an annualized basis. Specifically, the company:

• Eliminated more than 170 positions including 17 percent of corporate staff;

• Reduced promotional discounts and took pricing action that total approximately $12 million over the balance of the year;

• Reduced planned 2008 store openings from 30 to 24 stores. As previously communicated, the company will close approximately 15 stores in 2008 and will continue to monitor performance across its entire store base to determine if additional actions are necessary;

• Reduced the number of store remodels from 50 to 20 for the year;

• Deferred the launch of SAP until 2009, in order to reduce the short-term cost and resource impact associated with implementation.

In addition to aggressively managing costs and better aligning infrastructure with current business trends, the company has strategically invested in programs to drive improved sales and profitability, including:

• The launch of a new comprehensive brand marketing campaign across all company-owned channels and multiple media forums;

• Restoring media spending to 2007 levels; and

• Introducing new products at new price points.

First Quarter Summary

First quarter sales benefited from 34 net new company-owned stores opened during the past 12 months. Broader product distribution partially offset a 25 percent decline in first quarter same-store sales. First quarter e-commerce and direct-marketing sales were negatively impacted by lower media investments, with revenues in these channels declining 19 percent and 32 percent, respectively. Wholesale sales declined 37 percent, primarily due to two factors: timing of QVC shows in the first quarter, as well as the launch of an updated retail partner product last year that increased prior-year sales.

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Select Comfort Reports First Quarter Results – Page 3 of 9

First quarter gross profit margin of 57.6 percent declined 4.4 percentage points from 62.0 percent in the prior-year period. The decline reflects a downward shift in sales mix and higher commodity costs. The sales mix improved significantly in March following the introduction of the company’s new Sleep Number^® 6000 bed model.

Sales and marketing costs decreased to $90.6 million and increased as a percentage of net sales to 53.9 percent, compared to 45.3 percent in the first quarter of 2007. General and administrative expenses decreased to $16.2 million and increased to 9.6 percent of sales compared to 8.1 percent of sales in the first quarter of 2007. First quarter costs include $1.5 million in severance costs.

Cash flows from operating activities totaled $14.6 million for the first quarter, compared to $27.5 million for the same period last year. Capital expenditures totaled $10.3 million for the quarter, compared to $8.4 million in the first quarter of 2007. As of March 29, 2008, cash and cash equivalents totaled $6.2 million and outstanding debt totaled $44.0 million.

“We have made the difficult decisions required to drive improved performance as the year progresses,” said McLaughlin. “We expect operating cash flows will be positive while judiciously investing in high-return initiatives. These investments, such as our new marketing campaign and new product introductions, will help to stabilize sales volume and return to profitability in the second half of 2008.”

Fiscal 2008 Outlook

The company anticipates that macro-economic pressures will continue throughout the year. The company expects net losses to continue for the second quarter of this year, the seasonal low point for sales, with earnings improving in the second half as seasonally higher sales periods return and the benefits of cost reduction initiatives and media spend begin to take effect. Results for 2008 will benefit from a fifty-third week in the fourth quarter.

In terms of costs and margins, the company anticipates that inflationary costs from oil and currency exchange will be offset in part by higher selling prices on select products. Gross

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Select Comfort Reports First Quarter Results – Page 4 of 9

margins are expected to improve slightly in future quarters. The company anticipates that overall spending on media, selling and marketing will be in line with 2007 over the balance of the year. The company also expects general and administrative costs to be slightly lower than in 2007.

The company is forecasting capital expenditures of $27 million for new stores, store remodels, SAP implementation, and certain manufacturing and logistics investments. This compares to $44 million in 2007. The company expects to have approximately 485 retail locations at the end of fiscal 2008.

Conference Call

Management will host its regularly scheduled conference call to discuss the company’s results on April 23, 2008 at 5 p.m. Eastern Time (4 p.m. Central; 2 p.m. Pacific). To listen to the call, please dial (888) 972-6711 (international participants dial (210) 234-0123) and reference the passcode “Sleep.” In advance of the call, a presentation will be available at www.selectcomfort.com/investors. To access the Webcast, please also visit the investor relations area of the Select Comfort Web site.

A replay will remain available until midnight Eastern Time, Friday, May 2, 2008 by dialing (203) 369-1799. The Webcast replay will remain available in the investor relations area of the company’s Web site for approximately 60 days.

About Select Comfort Corporation

Founded more than 20 years ago, Select Comfort Corporation is the nation’s leading bed retailer⁽¹⁾. Based in Minneapolis, the company designs, manufactures, markets and supports a line of adjustable-firmness mattresses featuring air-chamber technology, branded the Sleep Number^® bed, as well as foundations and sleep accessories. SELECT COMFORT^® products are sold through its more than 480 company-owned stores located across the United States; select bedding retailers; direct marketing operations; and online at www.sleepnumber.com.

⁽¹⁾ Top 25 Bedding Retailers, Furniture/Today, August 2007.

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Select Comfort Reports First Quarter Results – Page 5 of 9

Forward-Looking Statements

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; risks of potential litigation; our dependence on significant suppliers, and the vulnerability of any suppliers to commodity shortages, inflationary pressures, labor negotiations, liquidity concerns or other factors; our ability to fund our operations, through cash flow from operations, or availability under our bank line of credit or other sources, and the cost of credit or other capital resources necessary to finance operations; rising commodity costs; the capability of our information systems to meet our business requirements and our ability to upgrade our systems on a cost-effective basis without disruptions to our business; and increasing government regulations, including new flammability standards for the bedding industry which bring product cost pressures and have required implementation of systems and manufacturing process changes to ensure compliance. 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.

# # #

 

Select Comfort Reports First Quarter Results – Page 6 of 9

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited – in thousands, except per share amounts)

	Three Months Ended
	March 29, 2008			% of Net Sales		March 31, 2007		% of Net Sales
Net sales	$	168,165		100.0	%	$	216,509	100.0	%
Cost of sales		71,239		42.4	%		82,341	38.0	%
Gross profit		96,926		57.6	%		134,168	62.0	%
Operating expenses:
Sales and marketing		90,600		53.9	%		98,138	45.3	%
General and administrative		16,161		9.6	%		17,619	8.1	%
Research and development		874		0.5	%		1,584	0.7	%
Asset impairment charges		333		0.2	%		—	0.0	%
Operating (loss) income		(11,042	)	(6.6	%)		16,827	7.8	%
Other (expense) income, net		(246	)	(0.1	%)		394	0.2	%
(Loss) income before income taxes		(11,288	)	(6.7	%)		17,221	8.0	%
Income tax (benefit) expense		(4,155	)	(2.5	%)		6,544	3.0	%
Net (loss) income	$	(7,133	)	(4.2	%)	$	10,677	4.9	%
Net (loss) income per share – basic	$	(0.16	)			$	0.21
Net (loss) income per share – diluted	$	(0.16	)			$	0.21
Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding		44,058					49,713
Effect of dilutive securities:
Options		—					1,879
Warrants		—					1
Restricted shares		—					205
Diluted weighted-average shares outstanding1		44,058					51,798

¹For the first quarter of fiscal 2008, potentially dilutive securities have been excluded from the calculation of diluted weighted average shares outstanding, as their inclusion would have had an anti-dilutive effect on our net loss per diluted share.

Select Comfort Reports First Quarter Results – Page 7 of 9

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except per share amounts)

subject to reclassification

	(unaudited) March 29, 2008		December 29, 2007
Assets
Current assets:
Cash and cash equivalents	$	6,203	$	7,279
Accounts receivable, net of allowance for doubtful accounts of $1,126 and $876, respectively		7,488		18,902
Inventories		25,655		32,517
Prepaid expenses		11,065		9,816
Deferred income taxes		6,552		6,796
Other current assets		2,868		3,833
Total current assets		59,831		79,143
Property and equipment, net		83,811		80,409
Deferred income taxes		27,445		25,543
Other assets		3,749		5,394
Total assets	$	174,836	$	190,489
Liabilities and Shareholders’ Equity
Current liabilities:
Borrowings under revolving credit facility	$	43,475	$	37,890
Accounts payable		52,575		69,775
Customer prepayments		9,299		8,327
Accruals:
Sales returns		3,456		3,751
Compensation and benefits		17,459		14,865
Taxes and withholding		3,921		4,812
Other current liabilities		7,953		9,723
Total current liabilities		138,138		149,143
Warranty liabilities		6,705		6,747
Capital lease obligations		410		—
Other long-term liabilities		11,583		10,473
Total liabilities		156,836		166,363
Shareholders’ equity:
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding		—		—
Common stock, $0.01 par value; 142,500 shares authorized, 44,834 and 44,597 shares issued and outstanding, respectively		448		446
Additional paid-in capital		1,005		—
Retained earnings		16,547		23,680
Total shareholders’ equity		18,000		24,126
Total liabilities and shareholders’ equity	$	174,836	$	190,489

Select Comfort Reports First Quarter Results – Page 8 of 9

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited – in thousands)

subject to reclassification

	Three Months Ended
	March 29, 2008			March 31, 2007
Cash flows from operating activities:
Net (loss) income	$	(7,133	)	$	10,677
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		5,858			6,803
Stock-based compensation		813			2,072
Excess tax benefits from stock-based compensation		(2	)		(756	)
Disposals and impairments of assets		339			10
Changes in deferred income taxes		(1,658	)		1
Change in operating assets and liabilities:
Accounts receivable		11,414			(2,380	)
Inventories		6,862			(915	)
Prepaid expenses and other assets		1,352			(478	)
Accounts payable		(4,777	)		10,016
Customer prepayments		972			653
Accrued sales returns		(295	)		872
Accrued compensation and benefits		2,607			(2,378	)
Accrued taxes and withholding		(888	)		4,587
Warranty liabilities		(59	)		(386	)
Other accruals and liabilities		(796	)		(873	)
Net cash provided by operating activities		14,609			27,525
Cash flows from investing activities:
Purchases of property and equipment		(10,274	)		(8,395	)
Proceeds from sales and maturity of marketable debt securities		—			29,796
Net cash (used in) provided by investing activities		(10,274	)		21,401
Cash flows from financing activities:
Net decrease in short-term borrowings		(5,591	)		(370	)
Repurchases of common stock		—			(43,825	)
Proceeds from issuance of common stock		178			1,170
Excess tax benefits from stock-based compensation		2			756
Net cash used in financing activities		(5,411	)		(42,269	)
(Decrease) increase in cash and cash equivalents		(1,076	)		6,657
Cash and cash equivalents, at beginning of period		7,279			8,819
Cash and cash equivalents, at end of period	$	6,203		$	15,476

Select Comfort Reports First Quarter Results – Page 9 of 9

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Supplemental Financial Information

(unaudited)

	Three Months Ended
	March 29, 2008			March 31, 2007
Percent of sales:
Retail		78.7	%		76.1	%
Direct		7.5	%		8.7	%
E-Commerce		6.9	%		6.6	%
Wholesale		6.9	%		8.6	%
Total		100.0	%		100.0	%
Sales growth rates:
Comparable-store sales		(25	%)		(11	%)
Net new stores		5	%		10	%
Retail total		(20	%)		(1	%)
Direct		(32	%)		(11	%)
E-Commerce		(19	%)		27	%
Wholesale		(37	%)		37	%
Total		(22	%)		2	%
Stores open:
Beginning of period		478			442
Opened		7			7
Closed		(4	)		(2	)
End of period		481			447
Retail partner doors		774			841
Other metrics:
Average sales per store ($ in 000’s) *	$	1,228		$	1,449
Average sales per square foot ($s) *	$	942		$	1,197
Stores > $1 million net sales *		67	%		79	%
Average mattress sales per mattress unit
(Q1 Company-owned channels; $s)	$	1,630		$	1,703
Return on equity (trailing twelve months)		19	%		43	%
Cash and marketable debt securities ($ in 000’s)	$	6,203		$	66,807

* trailing twelve months for stores open at least one year

EX-99.2

Select Comfort
First Quarter 2008 Investor Call



April 23, 2008

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; risks of potential litigation; our dependence on significant suppliers,
and the vulnerability of any suppliers to commodity shortages, inflationary pressures, labor
negotiations, liquidity concerns or other factors; our ability to fund our operations, through cash flow
from operations, or availability under our bank line of credit or other sources, and the cost of credit or
other capital resources necessary to finance operations; rising commodity costs; the capability of our
information systems to meet our business requirements and our ability to upgrade our systems on a
cost-effective basis without disruptions to our business; and increasing government regulations,
including new flammability standards for the bedding industry which bring product cost pressures
and have required implementation of systems and manufacturing process changes to ensure
compliance. 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.

Forward Looking Statements

FY08 First Quarter Results Summary

Q1

Q1

2008

2007

Change

Net Sales

168.2

$         

216.5

$         

(48.3)

$         

Gross Profit

96.9

$           

134.2

$         

(37.3)

$         

Operating (loss) income

(11.0)

$         

16.8

$           

(27.8)

$         

Net (loss) income per share

(0.16)

$         

0.21

$           

(0.37)

$         

Diluted Shares (millions)

44.1

51.8

(7.7)

($ in millions, except EPS)

Combination of External and Company-Specific Q1 Events

Macro - existing home sales down 23%

Media investment reduced 23% vs. PY

Product mix lowered sales by $6M

Wholesale timing lowered sales by $7M

QVC

Retail Partners

Factors Affecting First Quarter Revenue

(3%)

(3%)

(5%)

(22%)

(2%)

(25%)

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

Q1-07

Q2-07

Q3-07

Q4-07

Q1-08

Company-Owned Channels Unit Order % Change vs. Prior Year

Existing Home Sales

Total Media Spending Change vs. Prior Year

Actions in Face of Difficult Environment

2008 Impact

Cost and Margin

$30M

Staffing: Corporate, sales & operations

Lowered promotions, price increase

Cash, Inventory and Payables Management

$8M - $15M

Deferral of programs: International, SAP & Stores

Stabilize / Restore Sales

Restore media investment

Equal to 2007 for Q2 to Q4

New product introduction (6000 model)

Improving Mix

New media campaign

March Launch

Channel Performance and Store Summary

Q1 Channel Sales

Store Summary

Stores with New Fitch Design by Quarter

2         8           9          14         24         41        53        58

Total Store Count

471

485

483

478

481

478

447

460

Q1-07

Q2-07

Q3-07

Q4-07

Q1-08

Q2-08(E)

Q3-08(E)

Q4-08(E)

Q1 Net Operating Results Roadmap

($ in millions)

Cash Generation Remains Strong

($ in millions)

Operating Cash Flow of $14.6M

Targeting Return to Profitability in Q3

Operating Profit Benefit of $10M+

Q1 and Q3 historically similar: Planned Q3 Improvements

Cost Reductions

$4M -$5M

Corporate, selling, staffing reductions

Flat store count

Lower consumer financing costs (lower interest rates)

Q1 severance

Gross Margin Enhancements

+2 ppts

Plant staffing reductions

Product mix improvement

Pricing / promotion

Sales Opportunities

+$10M - $15M

Media investment

New campaign

Wholesale normalized