T
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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£
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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MINNESOTA
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41-1597886
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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9800 59
th
Avenue North
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Minneapolis, Minnesota
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55442
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $.01 per share
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The NASDAQ Stock Market LLC
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(NASDAQ Global Select Market)
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Large accelerated filer
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£
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Accelerated filer
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T
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Non-accelerated filer
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£
(Do not check if a smaller reporting company)
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Smaller reporting company
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£
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2
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Item 1.
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2
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Item 1A.
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13
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Item 1B.
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18
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Item 2.
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19
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Item 3.
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20
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Item 4.
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20
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21
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Item 5.
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Item 6.
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24
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Item 7.
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27
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Item 7A.
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38
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Item 8.
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39
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Item 9.
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63
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Item 9A.
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63
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Item 9B.
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64
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65
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Item 10.
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65
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Item 11.
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65
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Item 12.
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Item 13.
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65
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Item 14.
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65
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66
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Item 15.
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66
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•
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Only bed with SLEEP NUMBER® settings for personalized comfort;
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•
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Adjustable firmness on each side for couples;
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•
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Clinically proven back-pain relief, improved sleep quality; and
|
•
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Exclusive head-to-toe sleep solutions to meet your unique comfort needs.
|
•
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Know our customers as no one else can…
use that insight to set new standards in end-to-end customer experience
;
|
•
|
Broaden awareness and consideration…
to take share; earn leadership in premium sleep
; and
|
•
|
Leverage our core business to achieve new levels of margin…
to fund acceleration and innovation
.
|
•
|
The Classic Series is the classic design with personal adjustability at an affordable price. The series includes the Sleep Number c2, c3 and c4 beds.
|
•
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The Performance Series includes our most popular beds, featuring enhanced performance, comfort and a great value. The series includes the Sleep Number p5, p6 and p7 beds.
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•
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The Innovation Series is the premier experience in personalized comfort combined with leading-edge innovations in sleep technology. The series includes the Sleep Number i8 and i10 beds.
|
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Ÿ
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Political instability resulting in disruption of trade;
|
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Ÿ
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Existing or potential duties, tariffs or quotas on certain types of goods that may be imported into the United States;
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Ÿ
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Disruptions in transportation due to acts of terrorism, shipping delays, foreign or domestic dock strikes, customs inspections or other factors;
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Ÿ
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Foreign currency fluctuations; and
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Ÿ
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Economic uncertainties, including inflation.
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Company-
Owned
Stores
|
Retail
Partner
Doors
|
|
Company
Owned
Stores
|
Retail
Partner
Doors
|
||||||||||||
Alabama
|
5 | — |
Missouri
|
12 | — | ||||||||||||
Alaska
|
— | 3 |
Montana
|
2 | — | ||||||||||||
Arizona
|
11 | — |
Nebraska
|
3 | — | ||||||||||||
Arkansas
|
3 | — |
Nevada
|
3 | — | ||||||||||||
California
|
41 | — |
New Hampshire
|
4 | — | ||||||||||||
Colorado
|
11 | — |
New Jersey
|
12 | — | ||||||||||||
Connecticut
|
5 | — |
New Mexico
|
2 | — | ||||||||||||
Delaware
|
2 | — |
New York
|
10 | — | ||||||||||||
Florida
|
25 | — |
North Carolina
|
13 | — | ||||||||||||
Georgia
|
12 | — |
North Dakota
|
2 | — | ||||||||||||
Hawaii
|
— | 7 |
Ohio
|
16 | — | ||||||||||||
Idaho
|
1 | — |
Oklahoma
|
3 | — | ||||||||||||
Illinois
|
19 | — |
Oregon
|
4 | — | ||||||||||||
Indiana
|
12 | — |
Pennsylvania
|
19 | — | ||||||||||||
Iowa
|
5 | — |
South Carolina
|
4 | — | ||||||||||||
Kansas
|
3 | — |
South Dakota
|
2 | — | ||||||||||||
Kentucky
|
4 | — |
Tennessee
|
5 | — | ||||||||||||
Louisiana
|
5 | — |
Texas
|
30 | — | ||||||||||||
Maine
|
2 | — |
Utah
|
3 | — | ||||||||||||
Maryland
|
11 | — |
Vermont
|
1 | — | ||||||||||||
Massachusetts
|
4 | — |
Virginia
|
10 | — | ||||||||||||
Michigan
|
11 | — |
Washington
|
10 | — | ||||||||||||
Minnesota
|
13 | — |
Wisconsin
|
9 | — | ||||||||||||
Mississippi
|
2 | — |
Canada
|
— | 140 | ||||||||||||
Total
|
386 | 150 |
Fourth
Quarter
|
Third
Quarter
|
Second
Quarter
|
First
Quarter
|
|||||||||||||
Fiscal 2010
|
||||||||||||||||
High
|
$ | 9.27 | $ | 8.82 | $ | 11.78 | $ | 8.65 | ||||||||
Low
|
6.64 | 4.95 | 8.09 | 6.45 | ||||||||||||
Fiscal 2009
|
||||||||||||||||
High
|
$ | 6.79 | $ | 5.00 | $ | 1.25 | $ | 0.98 | ||||||||
Low
|
4.76 | 0.79 | 0.55 | 0.20 |
Fiscal Period
|
Total Number of Shares Purchased
|
Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(1)
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
|
||||||||||||
October 3, 2010 through October 30, 2010
|
— | — | — |
|
||||||||||||
October 31, 2010 through November 27, 2010
|
— | — | — |
|
||||||||||||
November 28, 2010 through January 1, 2011
|
— | — | — | $ | 206,762,000 | |||||||||||
Total
|
— | — | — |
(1)
|
On April 20, 2007, our Board of Directors authorized the Company to repurchase up to an additional $250.0 million of our common stock. As of January 1, 2011, the amount remaining under this authorization was $206.8 million. There is no expiration date with respect to this repurchase authority. We may terminate or limit the stock repurchase program at any time. We currently have no plans to repurchase shares under this authorization.
|
12/31/2005
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12/30/2006
|
12/29/2007
|
1/3/2009
|
1/2/2010
|
1/1/2011
|
|||||||||||||||||||
Select Comfort Corporation
|
$ | 100 | $ | 95 | $ | 39 | $ | 1 | $ | 36 | $ | 50 | ||||||||||||
S&P 400 Specialty Stores Index
|
100 | 113 | 94 | 56 | 82 | 123 | ||||||||||||||||||
The NASDAQ Stock Market (U.S.)
Index
|
100 | 112 | 125 | 74 | 107 | 126 |
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(1)
|
Weighted average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
|
|||||||||
Equity compensation plans approved by security holders
|
3,985,000 | $ | 11.72 | 1,952,000 | ||||||||
Equity compensation plans not approved by security holders
|
None
|
Not applicable
|
None
|
|||||||||
Total
|
3,985,000 | $ | 11.72 | 1,952,000 |
(1)
|
Includes the Select Comfort Corporation 1997 Stock Incentive Plan, the Select Comfort Corporation 2004 Stock Incentive Plan and the Select Comfort Corporation 2010 Omnibus Incentive Plan.
|
Year
|
||||||||||||||||||||||||
2010
|
2009
|
2008
(2)
|
2007
|
2006
(1)
|
2005
|
|||||||||||||||||||
Consolidated Statements of Operations Data:
|
||||||||||||||||||||||||
Net sales
|
$ | 605,676 | $ | 544,202 | $ | 608,524 | $ | 799,242 | $ | 806,038 | $ | 689,548 | ||||||||||||
Gross profit
|
378,263 | 335,460 | 358,572 | 486,415 | 490,508 | 406,476 | ||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||
Sales and marketing
|
269,901 | 259,244 | 332,068 | 372,467 | 341,630 | 286,206 | ||||||||||||||||||
General and administrative
|
53,572 | 49,560 | 57,994 | 64,351 | 65,401 | 49,300 | ||||||||||||||||||
Research and development
|
2,147 | 1,973 | 3,374 | 5,682 | 4,687 | 2,219 | ||||||||||||||||||
Asset impairment charges
|
260 | 686 | 34,594 | 409 | 5,980 | 162 | ||||||||||||||||||
Terminated equity financing costs
|
— | 3,324 | — | — | — | — | ||||||||||||||||||
Operating income (loss)
|
52,383 | 20,673 | (69,458 | ) | 43,506 | 72,810 | 68,589 | |||||||||||||||||
Net income (loss)
|
$ | 31,568 | $ | 35,552 | $ | (70,177 | ) | $ | 27,620 | $ | 47,183 | $ | 43,767 | |||||||||||
Net income (loss) as adjusted
(6)
|
$ | 31,568 | $ | 11,169 | $ | (23,174 | ) | $ | 27,620 | $ | 50,525 | $ | 43,767 | |||||||||||
Net income (loss) per share:
|
||||||||||||||||||||||||
Basic
|
$ | 0.58 | $ | 0.78 | $ | (1.59 | ) | $ | 0.59 | $ | 0.89 | $ | 0.82 | |||||||||||
Diluted
|
$ | 0.57 | $ | 0.77 | $ | (1.59 | ) | $ | 0.57 | $ | 0.85 | $ | 0.76 | |||||||||||
Diluted – as adjusted
(6)
|
$ | 0.57 | $ | 0.24 | $ | (0.52 | ) | $ | 0.57 | $ | 0.91 | $ | 0.76 | |||||||||||
Shares used in calculation of net income (loss) per share:
|
||||||||||||||||||||||||
Basic
|
54,005 | 45,682 | 44,186 | 46,536 | 52,837 | 53,357 | ||||||||||||||||||
Diluted
|
55,264 | 46,198 | 44,186 | 48,292 | 55,587 | 57,674 | ||||||||||||||||||
Consolidated Balance Sheet Data:
|
||||||||||||||||||||||||
Cash, cash equivalents and marketable debt securities
|
$ | 81,361 | $ | 17,717 | $ | 13,057 | $ | 7,279 | $ | 90,175 | $ | 123,091 | ||||||||||||
Working capital
|
20,053 | (25,435 | ) | (90,534 | ) | (70,000 | ) | 5,637 | 10,158 | |||||||||||||||
Total assets
|
169,957 | 118,240 | 135,413 | 190,489 | 228,961 | 239,838 | ||||||||||||||||||
Borrowings under revolving credit facility
|
— | — | 79,150 | 37,890 | — | — | ||||||||||||||||||
Total shareholders’ equity (deficit)
|
57,977 | 22,458 | (41,630 | ) | 24,126 | 115,694 | 121,347 | |||||||||||||||||
Selected Operating Data:
|
||||||||||||||||||||||||
Stores open at period-end
|
386 | 403 | 471 | 478 | 442 | 396 | ||||||||||||||||||
Stores opened during period
|
7 | 4 | 19 | 45 | 51 | 40 | ||||||||||||||||||
Stores closed during period
|
24 | 72 | 26 | 9 | 5 | 14 | ||||||||||||||||||
Retail partner doors
(3)
|
150 | 146 | 801 | 891 | 822 | 353 | ||||||||||||||||||
Average net sales per store (000’s)
(4)
|
$ | 1,295 | $ | 1,046 | $ | 984 | $ | 1,318 | $ | 1,493 | $ | 1,417 | ||||||||||||
Percentage of stores with more than $1.0 million in net sales
(4)
|
70 | % | 48 | % | 45 | % | 73 | % | 81 | % | 77 | % | ||||||||||||
Comparable-store sales increase (decrease)
(5)
|
21 | % | 0 | % | (25 | %) | (11 | %) | 7 | % | 15 | % | ||||||||||||
Average square footage per store open during period
(4)
|
1,484 | 1,474 | 1,410 | 1,315 | 1,200 | 1,121 | ||||||||||||||||||
Net sales per square foot
(4)
|
$ | 873 | $ | 710 | $ | 703 | $ | 1,024 | $ | 1,244 | $ | 1,264 | ||||||||||||
Average store age (in months at period end)
|
113 | 102 | 91 | 84 | 81 | 79 | ||||||||||||||||||
Earnings before interest, depreciation and amortization (“EBITDA”)
(6)
|
$ | 69,675 | $ | 42,289 | $ | (9,437 | ) | $ | 75,768 | $ | 109,821 | $ | 87,465 | |||||||||||
Free cash flows
(6)
|
$ | 63,870 | $ | 64,180 | $ | (29,229 | ) | $ | 517 | $ | 28,297 | $ | 61,658 | |||||||||||
(1)
|
In the first quarter of fiscal 2006, we adopted the fair value recognition method for our stock-based compensation awards. We elected the modified prospective transition method and, accordingly, financial results for fiscal years prior to 2006 have not been restated. Stock-based compensation expense for fiscal 2010, 2009, 2008, 2007 and 2006 was $3,962, $3,236, $3,702, $6,252 and $8,325, respectively. Prior to the adoption of the fair value recognition method, we followed the intrinsic value method to account for our employee stock options and employee stock purchase plan. Accordingly, no compensation expense was recognized for share purchase rights granted in connection with the issuance of stock options under our employee stock option plan or employee stock purchase plan; however, compensation expense was recognized in connection with the issuance of restricted and performance shares granted. See Note 7 of the Notes to the Consolidated Financial Statements for additional information regarding stock-based compensation. In 2005, prior to the adoption of the fair value recognition method, we recognized $793 of stock-based compensation expense (pre-tax).
|
(2)
|
Fiscal year 2008 had 53 weeks. All other fiscal years presented had 52 weeks.
|
(3)
|
In August 2009, we announced our decision to discontinue distribution through non-company owned mattress retailers in the contiguous United States.
|
(4)
|
For stores open during the entire period indicated.
|
(5)
|
Stores are included in the comparable-store calculation in the 13th full month of operation. Stores that have been remodeled or relocated within the same shopping center remain in the comparable-store base. The number of comparable-stores used to calculate such data was 379, 399, 452, 432, 391 and 354 for 2010, 2009, 2008, 2007, 2006 and 2005, respectively. Fiscal 2008 included 53 weeks, as compared to 52 weeks for the other periods presented. Comparable-store sales have been adjusted and reported as if all years had the same number of weeks.
|
(6)
|
These non-GAAP measures are not in accordance with, or preferable to, GAAP financial data. However, we are providing this information as we believe it facilitates annual and year-over-year comparisons for investors and financial analysts. See page 25 and 26 for the reconciliation of these non-GAAP measures to the appropriate GAAP measure.
|
Year
|
||||||||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
|||||||||||||||||||
Net income (loss) – as reported
|
$ | 31,568 | $ | 35,552 | $ | (70,177 | ) | $ | 27,620 | $ | 47,183 | $ | 43,767 | |||||||||||
Adjustments – net of income tax
(1)
|
||||||||||||||||||||||||
Terminated equity financing costs
(2)
|
— | 2,061 | — | — | — | — | ||||||||||||||||||
Impairments
(3)
|
— | — | 20,163 | — | 3,342 | — | ||||||||||||||||||
Income tax valuation
(4)
|
— | (26,444 | ) | 26,840 | — | — | — | |||||||||||||||||
Net income (loss) – as adjusted
|
$ | 31,568 | $ | 11,169 | $ | (23,174 | ) | $ | 27,620 | $ | 50,525 | $ | 43,767 | |||||||||||
Net income (loss) per share – as adjusted:
|
||||||||||||||||||||||||
Basic
|
0.58 | 0.24 | (0.52 | ) | 0.59 | 0.96 | 0.82 | |||||||||||||||||
Diluted
|
0.57 | 0.24 | (0.52 | ) | 0.57 | 0.91 | 0.76 | |||||||||||||||||
Basic shares
|
54,005 | 45,682 | 44,186 | 46,536 | 52,837 | 53,357 | ||||||||||||||||||
Diluted shares
|
55,264 | 46,198 | 44,186 | 48.292 | 55,587 | 57,674 |
(1)
|
Reflects annual effective tax rates, before discrete adjustments, of 38.0%, 40.0% and 37.8% for the fiscal years ended January 2, 2010; January 3, 2009; and December 30, 2006, respectively.
|
(2)
|
For the fiscal year ended January 2, 2010, we expensed $3.3 million ($2.1 million, net of income tax) of direct, incremental costs incurred in connection with a terminated equity financing transaction.
|
(3)
|
Fiscal year ended January 3, 2009 includes impairment charges for the abandonment of our plan to implement SAP
®
-based applications and impairment charges in excess of $1.0 million for underperforming stores. Fiscal year ended December 30, 2006 includes impairment charges for the abandonment of software projects in connection with our decision to implement an SAP enterprise resource planning system.
|
(4)
|
For the fiscal year ended January 3, 2009, we established a $26.8 million valuation allowance against deferred taxes based on uncertainty regarding future taxable income. For the fiscal year ended January 2, 2010, we reversed the valuation allowance against deferred taxes based on all available positive and negative evidence.
|
Note -
|
Our “as adjusted” data is considered a non-GAAP financial measure and is not in accordance with, or preferable to, “as reported,” or GAAP financial data. However, we are providing this information as we believe it facilitates annual and year-over-year comparisons for investors and financial analysts.
|
GAAP -
|
generally accepted accounting principles
|
|
Year
|
|||||||||||||||||||||||
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||||
|
|
|
|
|
||||||||||||||||||||
Net income (loss)
|
$ | 31,568 | $ | 35,552 | $ | (70,177 | ) | $ | 27,620 | $ | 47,183 | $ | 43,767 | |||||||||||
Income tax expense (benefit)
|
18,922 | (20,862 | ) | (2,566 | ) | 15,846 | 28,645 | 26,996 | ||||||||||||||||
Interest expense
|
1,951 | 5,996 | 3,375 | 849 | 4 | — | ||||||||||||||||||
Depreciation and amortization
|
13,012 | 17,681 | 21,635 | 24,792 | 19,684 | 15,747 | ||||||||||||||||||
Stock-based compensation
|
3,962 | 3,236 | 3,702 | 6,252 | 8,325 | 793 | ||||||||||||||||||
Asset impairments
|
260 | 686 | 34,594 | 409 | 5,980 | 162 | ||||||||||||||||||
EBITDA
|
$ | 69,675 | $ | 42,289 | $ | (9,437 | ) | $ | 75,768 | $ | 109,821 | $ | 87,465 |
|
Year
|
|||||||||||||||||||||||
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||||
|
|
|
|
|
||||||||||||||||||||
Net cash provided by operating activities
|
$ | 71,219 | $ | 66,639 | $ | 2,973 | $ | 44,031 | $ | 59,376 | $ | 87,498 | ||||||||||||
Subtract: Purchases of property and equipment
|
7,349 | 2,459 | 32,202 | 43,514 | 31,079 | 25,840 | ||||||||||||||||||
Free cash flows
|
$ | 63,870 | $ | 64,180 | $ | (29,229 | ) | $ | 517 | $ | 28,297 | $ | 61,658 |
•
|
Current and future general and industry economic trends and consumer confidence;
|
•
|
Availability of attractive and cost-effective consumer credit options;
|
•
|
The effectiveness of our marketing messages;
|
•
|
The efficiency of our advertising and promotional efforts;
|
•
|
Our ability to execute our retail distribution strategy, including our ability to cost-effectively close under-performing store locations and to find suitable new store locations;
|
•
|
Our ability to continue to improve our product line and service levels, and consumer acceptance of our products, product quality, innovation and brand image;
|
•
|
Our ability to achieve and maintain acceptable levels of product quality and acceptable product return and warranty claims rates;
|
•
|
Pending and potentially unforeseen litigation;
|
•
|
Industry competition and the adequacy of our intellectual property rights to protect our products and brand from competitive or infringing activities;
|
•
|
Our “just-in-time” manufacturing processes with minimal levels of inventory, which may leave us vulnerable to shortages in supply;
|
•
|
Our dependence on significant suppliers and our ability to maintain relationships with key suppliers, including several sole source suppliers;
|
•
|
Rising commodity costs and other inflationary pressures;
|
•
|
Risks inherent in global sourcing activities;
|
•
|
Risks of disruption in the operations of either of our two manufacturing facilities;
|
•
|
Increasing government regulations, including flammability standards for the bedding industry;
|
•
|
The adequacy of our management information systems to meet the evolving needs of our business and existing and evolving regulatory standards applicable to data privacy and security;
|
•
|
Our ability to attract and retain senior leadership and other key employees, including qualified sales professionals; and
|
•
|
Global events, such as terrorist attacks or a pandemic outbreak, or the threat of such events.
|
|
•
|
Overview
|
|
•
|
Results of Operations
|
|
•
|
Liquidity and Capital Resources
|
|
•
|
Off-Balance-Sheet Arrangements and Contractual Obligations
|
|
•
|
Critical Accounting Policies and Estimates
|
|
•
|
Recent Accounting Pronouncements
|
|
•
|
Know our customers as no one else can…
use that insight to set new standards in end-to-end customer experience
;
|
|
•
|
Broaden awareness and consideration…
to take share; earn leadership in premium sleep
; and
|
|
•
|
Leverage our core business to achieve new levels of margin…
to fund acceleration and innovation
.
|
|
•
|
Net income totaled $31.6 million, or $0.57 per diluted share, compared with net income of $35.6 million, or $0.77 per diluted share in 2009. The 2009 net income included the benefit from the reversal of a $26.8 million valuation allowance for deferred taxes offset by $3.3 million of terminated equity financing costs. On a comparable basis, excluding the valuation allowance and the costs associated with the terminated financing, net income per diluted share would have been $0.24 in 2009.
|
|
•
|
Net sales increased 11% to $605.7 million, compared with $544.2 million for the prior year, primarily due to a 21% comparable-store sales increase in our company-controlled retail stores, partially offset by a decrease in sales resulting from both a reduction in our store base and the termination of retail partner relationships during the third quarter of 2009.
|
|
•
|
Operating income improved to $52.4 million, or 8.6% of net sales, for 2010, compared with $20.7 million, or 3.8% of net sales, for the same period one year ago. The operating income improvement was driven by strong comparable-store sales growth and efficiency enhancements. Sales-per-store, on a trailing twelve-month basis, increased by 24% to $1.3 million.
|
|
•
|
Cash provided by operating activities in 2010 totaled $71.2 million, compared with $66.6 million for the prior year. Operating cash flows for 2009 included $26.1 million of income tax refunds associated with our 2008 pre-tax loss.
|
|
•
|
As of January 1, 2011, cash and cash equivalents totaled $81.4 million compared with $17.7 million one year ago, and we had no borrowings under our revolving credit facility.
|
|
•
|
Our outlook is for modest improvement in macro-economic trends and comparable-store sales growth higher than industry growth as we increase investments against programs designed to expand market share. We expect to end 2011 with approximately 380 stores after the consolidation of planned store openings and closings, compared with 386 at the end of 2010.
|
2010
|
2009
|
2008
|
||||||||||||||||||||||
$
|
% of
Net Sales
|
$
|
% of
Net Sales
|
$
|
% of
Net Sales
|
|||||||||||||||||||
Net sales
|
$ | 605.7 | 100.0 | % | $ | 544.2 | 100.0 | % | $ | 608.5 | 100.0 | % | ||||||||||||
Cost of sales
|
227.4 | 37.5 | 208.7 | 38.4 | 250.0 | 41.1 | ||||||||||||||||||
Gross profit
|
378.3 | 62.5 | 335.5 | 61.6 | 358.6 | 58.9 | ||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||
Sales and marketing
|
269.9 | 44.6 | 259.2 | 47.6 | 332.1 | 54.6 | ||||||||||||||||||
General and administrative
|
53.6 | 8.8 | 49.6 | 9.1 | 58.0 | 9.5 | ||||||||||||||||||
Research and development
|
2.1 | 0.4 | 2.0 | 0.4 | 3.4 | 0.6 | ||||||||||||||||||
Asset impairment charges
|
0.3 | 0.0 | 0.7 | 0.1 | 34.6 | 5.7 | ||||||||||||||||||
Terminated equity financing costs
|
— | 0.0 | 3.3 | 0.6 | — | — | ||||||||||||||||||
Total operating expenses
|
325.9 | 53.8 | 314.8 | 57.8 | 428.0 | 70.3 | ||||||||||||||||||
Operating income (loss)
|
52.4 | 8.6 | 20.7 | 3.8 | (69.5 | ) | (11.4 | ) | ||||||||||||||||
Other expense, net
|
1.9 | 0.3 | 6.0 | 1.1 | 3.3 | 0.5 | ||||||||||||||||||
Income (loss) before income taxes
|
50.5 | 8.3 | 14.7 | 2.7 | (72.7 | ) | (12.0 | ) | ||||||||||||||||
Income tax expense (benefit)
|
18.9 | 3.1 | (20.9 | ) | (3.8 | ) | (2.6 | ) | (0.4 | ) | ||||||||||||||
Net income (loss)
|
$ | 31.6 | 5.2 | % | $ | 35.6 | 6.5 | % | $ | (70.2 | ) | (11.5 | %) | |||||||||||
|
2010 | 2009 | 2008 | |||||||||||||||||||||
Net income (loss) per share:
|
||||||||||||||||||||||||
Basic
|
$ | 0.58 | $ | 0.78 | $ | (1.59 | ) | |||||||||||||||||
Diluted
|
0.57 | 0.77 | (1.59 | ) | ||||||||||||||||||||
Diluted - as adjusted
(1)
|
||||||||||||||||||||||||
Weighted-average number of common shares:
|
||||||||||||||||||||||||
Basic
|
54.0 | 45.7 | 44.2 | |||||||||||||||||||||
Diluted
|
55.3 | 46.2 | 44.2 |
(1)
|
This non-GAAP measure are not in accordance with, or preferable to, GAAP financial data. However, we are providing this information as we believe it facilitates annual and year-over-year comparisons for investors and financial analysts. See page 25 for reconciliation of this non-GAAP measure to the appropriate GAAP measure.
|
2010
|
2009
|
2008
|
||||||||||
Retail
|
84.0 | % | 81.2 | % | 78.2 | % | ||||||
Direct and E-Commerce
|
10.8 | % | 11.5 | % | 13.8 | % | ||||||
Wholesale
|
5.2 | % | 7.3 | % | 8.0 | % | ||||||
Total
|
100.0 | % | 100.0 | % | 100.0 | % |
Channel increase/(decrease)
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Retail same-store sales
|
21 | % | 0 | % | (25 | %) | ||||||
Direct and E-Commerce
|
5 | % | (26 | %) | (29 | %) | ||||||
Company-Controlled same-store sales change
|
19 | % | (4 | %) | (26 | %) | ||||||
Net store openings/closings
|
(5 | %) | (6 | %) | 4 | % | ||||||
Total Company-Controlled channels
|
14 | % | (10 | %) | (22 | %) | ||||||
Wholesale
|
(21 | %) | (19 | %) | (38 | %) | ||||||
Total net sales change
|
11 | % | (11 | %) | (24 | %) |
|
(1)
|
Stores are included in the comparable-store calculation in the 13th full month of operation. Stores that have been remodeled or relocated within the same shopping center remain in the comparable-store base. Fiscal 2008 included 53 weeks, as compared to 52 weeks in fiscal 2010 and 2009. Comparable-store sales have been adjusted and reported as if all years had the same number of weeks.
|
2010
|
2009
|
2008
|
||||||||||
Company-controlled retail stores:
|
||||||||||||
Beginning of year
|
403 | 471 | 478 | |||||||||
Opened
|
7 | 4 | 19 | |||||||||
Closed
|
(24 | ) | (72 | ) | (26 | ) | ||||||
End of year
|
386 | 403 | 471 | |||||||||
Retail partner stores
(1)
end of year
|
150 | 146 | 801 |
|
(1)
|
In August 2009, we announced our decision to discontinue distribution through non-company owned mattress retailers in the contiguous United States.
|
Fiscal Year Ended
|
||||||||
January 1,
2011
|
January 2,
2010
|
|||||||
Total cash provided by (used in):
|
||||||||
Operating activities
|
$ | 71.2 | $ | 66.6 | ||||
Investing activities
|
(7.3 | ) | (2.4 | ) | ||||
Financing activities
|
(0.2 | ) | (59.5 | ) | ||||
Increase in cash and cash equivalents
|
$ | 63.6 | $ | 4.7 |
Payments Due by Period
(1)
|
||||||||||||||||||||
Total
|
< 1 Year
|
1 – 3 Years
|
3 – 5 Years
|
> 5 Years
|
||||||||||||||||
|
||||||||||||||||||||
Operating leases
|
$ | 114,533 | $ | 32,377 | $ | 47,937 | $ | 23,039 | $ | 11,180 | ||||||||||
Capital leases
|
713 | 447 | 266 | — | — | |||||||||||||||
Purchase commitments
|
4,268 | 4,100 | 168 | — | — | |||||||||||||||
Total
|
$ | 119,514 | $ | 36,924 | $ | 48,371 | $ | 23,039 | $ | 11,180 |
(1)
|
Our unrecognized tax benefits, including interest and penalties, of $1.6 million have not been included in the Contractual Obligations table as we are not able to determine a reasonable estimate of timing of the cash settlement with the respective taxing authorities.
|
Description
|
Judgments and Uncertainties
|
Effect if Actual Results
Differ From Assumptions
|
||
Asset Impairment Charges
|
|
|
||
Long-lived assets other than goodwill and other intangible assets, which are separately tested for impairment, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When evaluating long-lived assets for potential impairment, we first compare the carrying value of the asset to the asset's estimated future cash flows (undiscounted and without interest charges). If the estimated undiscounted cash flows are less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset's estimated fair value. We generally estimate fair value of long-lived assets, including our retail stores, using the income approach, which we base on estimated future cash flows (discounted and with interest charges). The inputs used to determine fair value relate primarily to future assumptions regarding sales volumes, gross profit rates, store operating expenses and applicable probability weightings regarding future alternative uses. These inputs are categorized as Level 3 inputs under the fair value measurements guidance. The inputs used represent management’s assumptions about what information market participants would use in pricing the assets and are based upon the best information available at the balance sheet date.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated fair value plus net proceeds expected from disposition of the asset (if any). When we recognize an impairment loss, the carrying amount of the asset is reduced to estimated fair value based on discounted cash flows, quoted market prices or other valuation techniques.
Assets to be disposed of are reported at the lower of the carrying amount of the asset or fair value less costs to sell. We review store assets for potential impairment based on historical cash flows, lease termination provisions and expected future store operating results.
If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated (amortized) over the remaining useful life of that asset.
|
|
Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to identify events or changes in circumstances indicating the carrying value of assets may not be recoverable, estimate future cash flows, estimate asset fair values, and select a discount rate that reflects the risk inherent in future cash flows.
Expected cash flows may not be realized, which could cause long-lived assets to become impaired in future periods and could have a material adverse effect on future results of operations.
|
|
We have not made any material changes in our impairment loss assessment methodology during the past three fiscal years.
As of January 1, 2011, we evaluated 20 under-performing retail stores that had sufficient projected future cash flows to support the carrying value of their long-lived assets and therefore, did not result in additional impairment charges. At January 1, 2011, the carrying amount of the long-lived assets for these stores totaled $0.6 million.
We believe that our estimates and assumptions used to calculate long-lived asset impairment charges were reasonable and reflect the current economic environment. Our fair value calculations reflect current consumer spending trends. Our fair value calculations assume the ongoing availability of consumer credit and our ability to provide cost-effective consumer credit options. However, it is reasonably possible that an unexpected decline in consumer spending may expose us to future impairment charges that could be material.
Alternatively, if consumer spending increases at a higher rate than we anticipated, impaired stores (which continue to operate) could generate higher than expected future cash flows and operating profits.
|
Description
|
|
Judgments and Uncertainties
|
|
Effect if Actual Results
Differ From Assumptions
|
Asset Impairment Charges (con’t)
|
||||
Asset impairment charges totaled $0.3 million, $0.7 million and $34.6 million for 2010, 2009 and 2008, respectively. During 2010 total impairment charges included a $0.2 million charge for long-lived assets related to two under-performing retail store locations. As of January 1, 2011, the remaining carrying amount of the long-lived assets at these stores was zero.
|
|
|
|
|
Stock-Based Compensation
|
|
|
|
|
We have a stock-based compensation plan, which includes non-qualified stock options and nonvested share awards. See Note 1,
Business and Summary of Significant Accounting Policies
, and Note 7,
Shareholders’ Equity
, to the Notes to Consolidated Financial Statements, included in Item 8,
Financial Statements and Supplementary Data
, of this Annual Report on Form 10-K, for a complete discussion of our stock-based compensation programs.
We determine the fair value of our non-qualified stock option awards and the resulting compensation expense at the date of grant using the Black-Scholes-Merton option-pricing model. The most significant inputs into the Black-Scholes-Merton model are exercise price, our estimate of expected stock price volatility and the expected term of the options.
We determine the fair value of our performance-based nonvested share awards at the date of grant generally based on the closing market price of our stock.
|
|
Option-pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of our awards. These assumptions and judgments include estimating the future volatility of our stock price, future employee forfeiture rates and future employee stock option exercise behaviors. Changes in these assumptions can materially affect the fair value estimate or future earnings adjustments.
Performance-based nonvested share awards require management to make assumptions regarding the likelihood of achieving performance goals.
|
|
We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to determine stock-based compensation expense. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to changes in stock-based compensation expense that could be material.
If actual results are not consistent with the assumptions used, the stock-based compensation expense reported in our financial statements may not be representative of the actual economic cost of the stock-based compensation. Also, if the actual forfeiture rates are not consistent with the assumptions used, it could result in future earnings adjustments.
A 10% change in our stock-based compensation expense for the year ended January 1, 2011, would have affected net income by approximately $246,000 in 2010.
|
Self-Insured Liabilities
|
|
|||
We are self-insured for certain losses related to health and workers’ compensation claims. However, we obtain third-party insurance coverage to limit our exposure to these claims.
When estimating our self-insured liabilities, we consider a number of factors, including historical claims experience, demographic factors, severity factors and valuations provided by third-party administrators.
Periodically, management reviews its assumptions and the valuations provided by third-party administrators to determine the adequacy of our self-insured liabilities.
|
|
Our self-insured liabilities contain uncertainties because management is required to make assumptions and to apply judgment to estimate the ultimate cost to settle reported claims and claims incurred but not reported as of the balance sheet date.
|
|
We have not made any material changes in the accounting methodology used to establish our self-insured liabilities during the past three fiscal years.
We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate our self-insured liabilities. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.
A 10% change in our self-insured liabilities at January 1, 2011, would have affected net income by approximately $273,000 in 2010.
|
Description
|
|
Judgments and Uncertainties
|
|
Effect if Actual Results
Differ From Assumptions
|
Warranty Liabilities
|
|
|
|
|
The estimated cost to service warranty claims of customers is included in cost of sales. This estimate is based on historical trends of warranty claims.
We regularly assess and adjust the estimate of accrued warranty claims by updating claims rates for actual trends and projected claim costs.
|
|
Our warranty liability contains uncertainties because our warranty obligations cover an extended period of time. A revision of estimated claim rates or the projected cost of materials and freight associated with sending replacement parts to customers could have a material adverse effect on future results of operations.
|
|
We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate our warranty liability. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.
A 10% change in our warranty liability at January 1, 2011, would have affected net income by approximately $356,000 in 2010.
|
|
|
|
|
|
Revenue Recognition
|
|
|
|
|
Revenue is recognized when the sales price is fixed or determinable, collectability is reasonably assured and title passes. Amounts billed to customers for delivery and set up are included in net sales. Revenue is reported net of estimated sales returns and excludes sales taxes.
We accrue for sales returns at the time revenue is recognized and charge actual returns against the liability when they are received. Our general return policy is to allow returns after a 30-night trial period. We estimate future projected returns based on historical return rates.
|
|
Our estimates of sales returns contain uncertainties as actual returns may vary from expected rates, resulting in adjustments to net sales in future periods. These adjustments could have a material adverse effect on future results of operations.
|
|
We have not made any material changes in the accounting methodology used to establish our sales returns allowance during the past three fiscal years.
We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate our sales returns allowance. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.
A 10% change in our sales returns allowance at January 1, 2011, would have affected net income by approximately $183,000 in 2010.
|
2010
|
2009
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 81,361 | $ | 17,717 | ||||
Accounts receivable, net of allowance for doubtful accounts of $302 and $379, respectively
|
4,564 | 5,094 | ||||||
Inventories
|
19,647 | 15,646 | ||||||
Income taxes receivable
|
— | 3,893 | ||||||
Prepaid expenses
|
6,388 | 5,879 | ||||||
Deferred income taxes
|
4,297 | 5,153 | ||||||
Other current assets
|
652 | 720 | ||||||
Total current assets
|
116,909 | 54,102 | ||||||
Property and equipment, net
|
32,953 | 37,682 | ||||||
Deferred income taxes
|
15,965 | 19,071 | ||||||
Other assets
|
4,130 | 7,385 | ||||||
Total assets
|
$ | 169,957 | $ | 118,240 | ||||
Liabilities and Shareholders’ Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 42,025 | $ | 37,538 | ||||
Customer prepayments
|
12,944 | 11,237 | ||||||
Compensation and benefits
|
24,857 | 15,518 | ||||||
Taxes and withholding
|
5,359 | 4,528 | ||||||
Other current liabilities
|
11,671 | 10,716 | ||||||
Total current liabilities
|
96,856 | 79,537 | ||||||
Warranty liabilities
|
2,815 | 5,286 | ||||||
Other long-term liabilities
|
12,309 | 10,959 | ||||||
Total non-current liabilities
|
15,124 | 16,245 | ||||||
Total liabilities
|
111,980 | 95,782 | ||||||
Shareholders’ equity:
|
||||||||
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding
|
— | — | ||||||
Common stock, $0.01 par value; 142,500 shares authorized, 55,455 and 54,310 shares issued and outstanding, respectively
|
555 | 543 | ||||||
Additional paid-in capital
|
36,799 | 32,860 | ||||||
Retained earnings (accumulated deficit)
|
20,623 | (10,945 | ) | |||||
Total shareholders’ equity
|
57,977 | 22,458 | ||||||
Total liabilities and shareholders’ equity
|
$ | 169,957 | $ | 118,240 |
2010
|
2009
|
2008
|
||||||||||
Net sales
|
$ | 605,676 | $ | 544,202 | $ | 608,524 | ||||||
Cost of sales
|
227,413 | 208,742 | 249,952 | |||||||||
Gross profit
|
378,263 | 335,460 | 358,572 | |||||||||
Operating expenses:
|
||||||||||||
Sales and marketing
|
269,901 | 259,244 | 332,068 | |||||||||
General and administrative
|
53,572 | 49,560 | 57,994 | |||||||||
Research and development
|
2,147 | 1,973 | 3,374 | |||||||||
Asset impairment charges
|
260 | 686 | 34,594 | |||||||||
Terminated equity financing costs
|
— | 3,324 | — | |||||||||
Total operating expenses
|
325,880 | 314,787 | 428,030 | |||||||||
Operating income (loss)
|
52,383 | 20,673 | (69,458 | ) | ||||||||
Other expense, net
|
1,893 | 5,983 | 3,285 | |||||||||
Income (loss) before income taxes
|
50,490 | 14,690 | (72,743 | ) | ||||||||
Income tax expense (benefit)
|
18,922 | (20,862 | ) | (2,566 | ) | |||||||
Net income (loss)
|
$ | 31,568 | $ | 35,552 | $ | (70,177 | ) | |||||
Basic net income (loss) per share:
|
||||||||||||
Net income (loss) per share – basic
|
$ | 0.58 | $ | 0.78 | $ | (1.59 | ) | |||||
Weighted-average common shares – basic
|
54,005 | 45,682 | 44,186 | |||||||||
Diluted net income (loss) per share:
|
||||||||||||
Net income (loss) per share – diluted
|
$ | 0.57 | $ | 0.77 | $ | (1.59 | ) | |||||
Weighted-average common shares – diluted
|
55,264 | 46,198 | 44,186 |
Retained
|
||||||||||||||||||||
Common Stock
|
Additional
|
Earnings/
|
||||||||||||||||||
Paid-In
|
(Accumulated
|
|||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit)
|
Total
|
||||||||||||||||
Balance at December 29, 2007
|
44,597 | $ | 446 | $ | — | $ | 23,680 | $ | 24,126 | |||||||||||
Exercise of common stock options
|
61 | 1 | 92 | — | 93 | |||||||||||||||
Tax effect from stock-based compensation
|
— | — | 28 | — | 28 | |||||||||||||||
Stock-based compensation
|
— | — | 3,702 | — | 3,702 | |||||||||||||||
Issuances of common stock
|
304 | 3 | 595 | — | 598 | |||||||||||||||
Net loss
|
— | — | — | (70,177 | ) | (70,177 | ) | |||||||||||||
Balance at January 3, 2009
|
44,962 | $ | 450 | $ | 4,417 | $ | (46,497 | ) | $ | (41,630 | ) | |||||||||
Exercise of common stock options
|
57 | — | 130 | — | 130 | |||||||||||||||
Exercise of warrants
|
2,000 | 20 | — | — | 20 | |||||||||||||||
Tax effect from stock-based compensation
|
— | — | (1,234 | ) | — | (1,234 | ) | |||||||||||||
Stock-based compensation
|
328 | 3 | 3,233 | — | 3,236 | |||||||||||||||
Issuances of common stock
|
6,963 | 70 | 26,314 | — | 26,384 | |||||||||||||||
Net income
|
— | — | — | 35,552 | 35,552 | |||||||||||||||
Balance at January 2, 2010
|
54,310 | $ | 543 | $ | 32,860 | $ | (10,945 | ) | $ | 22,458 | ||||||||||
Exercise of common stock options
|
958 | 10 | 1,004 | — | 1,014 | |||||||||||||||
Tax effect from stock-based compensation
|
— | — | 366 | — | 366 | |||||||||||||||
Stock-based compensation
|
353 | 4 | 3,958 | — | 3,962 | |||||||||||||||
Repurchases of common stock
|
(166 | ) | (2 | ) | (1,389 | ) | (1,391 | ) | ||||||||||||
Net income
|
— | — | — | 31,568 | 31,568 | |||||||||||||||
Balance at January 1, 2011
|
55,455 | $ | 555 | $ | 36,799 | $ | 20,623 | $ | 57,977 |
2010
|
2009
|
2008
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income (loss)
|
$ | 31,568 | $ | 35,552 | $ | (70,177 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
14,626 | 19,054 | 22,186 | |||||||||
Stock-based compensation
|
3,962 | 3,236 | 3,702 | |||||||||
Disposals and impairments of assets
|
251 | 683 | 34,577 | |||||||||
Excess tax benefits from stock-based compensation
|
(1,358 | ) | — | (19 | ) | |||||||
Deferred income taxes
|
2,352 | (18,209 | ) | 25,075 | ||||||||
Change in operating assets and liabilities:
|
||||||||||||
Accounts receivable
|
530 | (155 | ) | 13,963 | ||||||||
Inventories
|
(4,001 | ) | 3,029 | 13,842 | ||||||||
Income taxes
|
6,647 | 22,007 | (25,900 | ) | ||||||||
Prepaid expenses and other assets
|
1,579 | (1,776 | ) | 7,627 | ||||||||
Accounts payable
|
3,995 | 2,545 | (20,047 | ) | ||||||||
Customer prepayments
|
1,707 | (243 | ) | 3,153 | ||||||||
Accrued compensation and benefits
|
11,471 | 943 | (250 | ) | ||||||||
Other taxes and withholding
|
53 | 1,604 | (1,846 | ) | ||||||||
Warranty liabilities
|
(1,398 | ) | (906 | ) | (1,454 | ) | ||||||
Other accruals and liabilities
|
(765 | ) | (725 | ) | (1,459 | ) | ||||||
Net cash provided by operating activities
|
71,219 | 66,639 | 2,973 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Purchases of property and equipment
|
(7,349 | ) | (2,459 | ) | (32,202 | ) | ||||||
Proceeds from sales of property and equipment
|
10 | 15 | — | |||||||||
Net cash used in investing activities
|
(7,339 | ) | (2,444 | ) | (32,202 | ) | ||||||
Cash flows from financing activities:
|
||||||||||||
Net (decrease) increase in short-term borrowings
|
(1,074 | ) | (84,756 | ) | 35,809 | |||||||
Repurchases of common stock
|
(1,391 | ) | — | — | ||||||||
Proceeds from issuance of common stock
|
1,014 | 26,534 | 651 | |||||||||
Excess tax benefits from stock-based compensation
|
1,358 | — | 19 | |||||||||
Debt issuance costs
|
(143 | ) | (1,313 | ) | (1,472 | ) | ||||||
Net cash (used in) provided by financing activities
|
(236 | ) | (59,535 | ) | 35,007 | |||||||
Increase in cash and cash equivalents
|
63,644 | 4,660 | 5,778 | |||||||||
Cash and cash equivalents, at beginning of year
|
17,717 | 13,057 | 7,279 | |||||||||
Cash and cash equivalents, at end of year
|
$ | 81,361 | $ | 17,717 | $ | 13,057 | ||||||
Supplemental Disclosure of Cash Flow Information
|
||||||||||||
Income taxes paid (refunded)
|
$ | 9,732 | $ | (25,978 | ) | $ | (1,313 | ) | ||||
Interest paid
|
$ | 444 | $ | 4,747 | $ | 3,636 | ||||||
Capital lease obligations incurred
|
$ | 466 | $ | 674 | $ | 1,032 | ||||||
Purchases of property and equipment included in accounts payable
|
$ | 965 | $ | 388 | $ | 770 |
2010
|
2009
|
2008
|
||||||||||
Retail
|
84.0 | % | 81.2 | % | 78.2 | % | ||||||
Direct and E-Commerce
|
10.8 | % | 11.5 | % | 13.8 | % | ||||||
Wholesale
|
5.2 | % | 7.3 | % | 8.0 | % | ||||||
Total
|
100.0 | % | 100.0 | % | 100.0 | % |
Leasehold improvements
|
5 to 10 years
|
Office furniture and equipment
|
5 to 7 years
|
Production machinery, computer equipment and software
|
3 to 7 years
|
Property under capital lease
|
3 to 4 years
|
2010
|
2009
|
2008
|
||||||||||
Balance at beginning of year
|
$ | 7,143 | $ | 8,049 | $ | 9,503 | ||||||
Additions charged to costs and expenses for current-year sales
|
3,630 | 5,114 | 6,105 | |||||||||
Deductions from reserves
|
(4,318 | ) | (5,822 | ) | (9,537 | ) | ||||||
Changes in liability for pre-existing warranties during the current year, including expirations
|
(711 | ) | (198 | ) | 1,978 | |||||||
Balance at end of period
|
$ | 5,744 | $ | 7,143 | $ | 8,049 |
Cost of Sales
|
Sales & Marketing
|
|||
|
|
|
|
|
•
|
Costs associated with purchasing, manufacturing, shipping, handling and delivering our products to our stores and customers;
|
•
|
Advertising and media production;
|
|
|
|
|
||
•
|
Physical inventory losses, scrap and obsolescence;
|
•
|
Marketing and selling materials such as brochures, videos, customer mailings and in-store signage;
|
|
|
|
|
|
|
•
|
Related occupancy and depreciation expenses; and
|
•
|
Payroll and benefits for sales and customer service staff;
|
|
|
|
|
|
|
•
|
Estimated costs to service warranty claims of customers.
|
•
|
Store occupancy costs;
|
|
|
|
|
|
|
|
|
•
|
Store depreciation expense; and
|
|
|
|
|
|
|
|
|
•
|
Promotional financing costs.
|
|
|
|
|||
G&A
|
R&D
(1)
|
|||
|
|
|
|
|
•
|
Payroll and benefit costs for corporate employees, including information technology, legal, human resources, finance, sales and marketing administration, investor relations and risk management;
|
•
|
Internal labor and benefits related to research and development activities;
|
|
|
|
|
||
•
|
Occupancy costs of corporate facilities;
|
•
|
Outside consulting services related to research and development activities; and
|
|
|
|
|||
•
|
Depreciation related to corporate assets;
|
•
|
Testing equipment related to research and development activities.
|
|
|
||||
•
|
Information hardware, software and maintenance;
|
(1)
Costs incurred in connection with R&D are charged to expense as incurred.
|
||
|
||||
•
|
Insurance;
|
|
|
|
|
|
|||
•
|
Investor relations costs; and
|
|
|
|
|
|
|||
•
|
Other overhead costs.
|
|
|
•
|
Level 1 – observable inputs such as quoted prices in active markets;
|
•
|
Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
•
|
Level 3 – unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
Fair Value Measured and
Recorded at Year End Using
|
||||||||||||||||||||
Year Ended
|
Net Carrying Value of Long-Lived Assets
|
Level 1
|
Level 2
|
Level 3
|
Impairment Charges for the Year Ended
|
|||||||||||||||
January 1, 2011
|
$ | — | $ | — | $ | — | $ | — | $ | (260 | ) | |||||||||
January 2, 2010
|
$ | 35 | $ | — | $ | — | $ | 35 | $ | (686 | ) |
January 1,
2011
|
January 2,
2010
|
|||||||
Raw materials
|
$ | 4,759 | $ | 3,257 | ||||
Work in progress
|
65 | 102 | ||||||
Finished goods
|
14,823 | 12,287 | ||||||
$ | 19,647 | $ | 15,646 |
January 1,
2011
|
January 2,
2010
|
|||||||
Land
|
$ | 1,999 | $ | 1,999 | ||||
Leasehold improvements
|
76,026 | 76,579 | ||||||
Office furniture and equipment
|
7,694 | 5,260 | ||||||
Production machinery, computer equipment and software
|
70,343 | 66,966 | ||||||
Property under capital lease
|
2,309 | 1,837 | ||||||
Less: Accumulated depreciation and amortization
|
(125,418 | ) | (114,959 | ) | ||||
$ | 32,953 | $ | 37,682 |
2010
|
2009
|
2008
|
||||||||||
Facility Rents:
|
||||||||||||
Minimum rents
|
$ | 33,195 | $ | 36,040 | $ | 38,157 | ||||||
Contingent rents
|
3,074 | 1,507 | 1,962 | |||||||||
Total
|
$ | 36,269 | $ | 37,547 | $ | 40,119 | ||||||
Equipment Rents
|
$ | 2,259 | $ | 2,238 | $ | 3,412 |
Operating
|
Capital
|
|||||||
2011
|
$ | 32,377 | $ | 447 | ||||
2012
|
26,932 | 184 | ||||||
2013
|
21,005 | 82 | ||||||
2014
|
14,495 | — | ||||||
2015
|
8,544 | — | ||||||
Thereafter
|
11,180 | — | ||||||
Total future minimum lease payments
|
$ | 114,533 | 713 | |||||
Less: amount representing interest
|
(41 | ) | ||||||
Present value of future minimum lease payments
|
$ | 672 |
Stock Options
|
Weighted- Average Exercise Price per Share
|
Weighted- Average Remaining Contractual Term
(years)
|
Aggregate Intrinsic Value
(1)
|
|||||||||||||
Outstanding at January 2, 2010
|
4,811 | $ | 9.57 | 4.8 | $ | 9,935 | ||||||||||
Granted
|
666 | 9.76 | ||||||||||||||
Exercised
|
(1,378 | ) | 3.16 | |||||||||||||
Canceled/Forfeited
|
(114 | ) | 12.89 | |||||||||||||
Outstanding at January 1, 2011
|
3,985 | $ | 11.72 | 5.8 | $ | 8,830 | ||||||||||
Exercisable at January 1, 2011
|
2,230 | $ | 11.22 | 4.5 | $ | 5,128 |
(1)
|
Aggregate intrinsic value includes only those options where the current share price is equal to or greater than the share price on the date of grant.
|
2010
|
2009
|
2008
|
||||||||||
Weighted-average grant date fair value of stock options granted
|
$ | 6.18 | $ | 1.17 | $ | 1.65 | ||||||
Total intrinsic value (at exercise) of stock options exercised
|
$ | 5,860 | $ | 140 | $ | 115 | ||||||
Cash received from the exercise of stock options
|
$ | 1,014 | $ | 130 | $ | 92 | ||||||
Stock-based compensation expense recognized in the consolidated statements of operations
|
$ | 2,491 | $ | 2,184 | $ | 2,916 | ||||||
Excess income tax benefits from exercise of stock options
|
$ | 1,358 | $ | — | $ | 19 |
Valuation Assumptions
|
2010
|
2009
|
2008
|
|||||||||
Expected dividend yield
|
0 | % | 0 | % | 0 | % | ||||||
Expected volatility
|
78 | % | 89 | % | 52 | % | ||||||
Risk-free interest rate
|
2.0 | % | 2.4 | % | 2.5 | % | ||||||
Expected term (in years)
|
4.9 | 4.8 | 5.3 |
Restricted Stock
|
Weighted- Average Grant Date Fair Value
|
Performance
Stock
|
Weighted- Average Grant Date Fair Value
|
|||||||||||||
Outstanding at January 2, 2010
|
314 | $ | 9.03 | 473 | $ | 5.81 | ||||||||||
Granted
|
184 | 9.27 | 289 | 9.75 | ||||||||||||
Vested
|
(36 | ) | 23.82 | (64 | ) | 24.65 | ||||||||||
Canceled/Forfeited
|
(15 | ) | 12.27 | (10 | ) | 22.64 | ||||||||||
Outstanding at January 1, 2011
|
447 | $ | 7.83 | 688 | $ | 5.48 |
2010
|
2009
|
2008
|
||||||||||
Net income (loss)
|
$ | 31,568 | $ | 35,552 | $ | (70,177 | ) | |||||
Reconciliation of weighted-average shares outstanding:
|
||||||||||||
Basic weighted-average shares outstanding
|
54,005 | 45,682 | 44,186 | |||||||||
Effect of dilutive securities:
|
||||||||||||
Options
|
817 | 219 | — | |||||||||
Restricted shares
|
442 | 269 | — | |||||||||
Warrants
|
— | 28 | — | |||||||||
Diluted weighted-average shares outstanding
|
55,264 | 46,198 | 44,186 | |||||||||
Net income (loss) per share – basic
|
$ | 0.58 | $ | 0.78 | $ | (1.59 | ) | |||||
Net income (loss) per share – diluted
|
0.57 | 0.77 | (1.59 | ) |
2010
|
2009
|
2008
|
||||||||||
Interest expense
|
$ | 838 | $ | 5,708 | $ | 4,120 | ||||||
Write-off unamortized debt cost
|
1,114 | 291 | 131 | |||||||||
Interest income
|
(59 | ) | (16 | ) | (90 | ) | ||||||
Capitalized interest expense
|
— | — | (876 | ) | ||||||||
Other expense, net
|
$ | 1,893 | $ | 5,983 | $ | 3,285 |
2010
|
2009
|
2008
|
||||||||||
Current:
|
||||||||||||
Federal
|
$ | 15,812 | $ | (2,763 | ) | $ | (26,910 | ) | ||||
State
|
758 | 103 | (732 | ) | ||||||||
16,570 | (2,660 | ) | (27,642 | ) | ||||||||
Deferred:
|
||||||||||||
Federal
|
564 | (16,231 | ) | 26,853 | ||||||||
State
|
1,788 | (1,971 | ) | (1,777 | ) | |||||||
2,352 | (18,202 | ) | 25,076 | |||||||||
Income tax expense (benefit)
|
$ | 18,922 | $ | (20,862 | ) | $ | (2,566 | ) |
2010
|
2009
|
2008
|
||||||||||
Statutory federal income tax
|
$ | 17,671 | $ | 5,141 | $ | (25,460 | ) | |||||
State income taxes, net of federal benefit
|
1,478 | 688 | (3,258 | ) | ||||||||
Manufacturing deduction
|
(1,379 | ) | — | — | ||||||||
Changes in unrecognized tax benefits
|
895 | 730 | — | |||||||||
Change in valuation allowance
|
— | (26,840 | ) | 26,840 | ||||||||
Other
|
257 | (581 | ) | (688 | ) | |||||||
$ | 18,922 | $ | (20,862 | ) | $ | (2,566 | ) |
2010
|
2009
|
|||||||
Deferred tax assets:
|
||||||||
Current:
|
||||||||
Compensation and benefits
|
$ | 1,254 | $ | 1,193 | ||||
Warranty and returns liabilities
|
1,584 | 1,775 | ||||||
Deferred rent and lease incentives
|
911 | 953 | ||||||
Other
|
570 | 1,231 | ||||||
Long-term:
|
||||||||
Property and equipment
|
3,541 | 3,188 | ||||||
Stock-based compensation
|
5,964 | 6,957 | ||||||
Deferred rent and lease incentives
|
2,416 | 2,701 | ||||||
Warranty liability
|
1,419 | 2,096 | ||||||
Net operating loss, capital loss and tax credit carryforwards
|
2,773 | 3,418 | ||||||
Other
|
469 | 806 | ||||||
Total gross deferred tax assets
|
20,901 | 24,318 | ||||||
Valuation allowance
|
(639 | ) | (94 | ) | ||||
Total net deferred tax assets
|
$ | 20,262 | $ | 24,224 |
|
Federal
And
State Tax
|
|||
Balance January 3, 2009
|
$ | 152 | ||
Increases related to prior-year tax positions
|
243 | |||
Increases related to current-year tax positions
|
980 | |||
Balance January 2, 2010
|
$ | 1,375 | ||
Increases related to prior-year tax positions
|
621 | |||
Decreases related to prior-year tax positions
|
(572 | ) | ||
Settlements with taxing authorities
|
(138 | ) | ||
Increases related to current-year tax positions
|
68 | |||
Balance January 1, 2011
|
$ | 1,354 |
2010
|
First
|
Second
|
Third
|
Fourth
|
||||||||||||
Net sales
|
$ | 157,953 | $ | 138,952 | $ | 160,103 | $ | 148,668 | ||||||||
Gross profit
|
98,084 | 86,465 | 99,989 | 93,725 | ||||||||||||
Operating income
|
14,189 | 9,937 | 16,780 | 11,477 | ||||||||||||
Net income
|
7,760 | 6,202 | 10,488 | 7,118 | ||||||||||||
Net income per share – diluted
|
0.14 | 0.11 | 0.19 | 0.13 | ||||||||||||
2009
|
First
|
Second
|
Third
|
Fourth
|
||||||||||||
Net sales
|
$ | 139,614 | $ | 120,647 | $ | 147,470 | $ | 136,471 | ||||||||
Gross profit
|
81,784 | 74,340 | 93,555 | 85,781 | ||||||||||||
Operating income
|
262 | 952 | 11,980 | 7,479 | ||||||||||||
Net (loss) income
|
(2,695 | ) | (3,961 | ) | 6,899 | 35,309 | ||||||||||
Net (loss) income per share – diluted
|
(0.06 | ) | (0.09 | ) | 0.15 | 0.69 |
(a)
|
Consolidated Financial Statements and Schedule
|
|
(1)
|
Financial Statements
|
|
(2)
|
Consolidated Financial Statement Schedule
|
|
(3)
|
Exhibits
|
|
1.
|
Select Comfort Corporation 1997 Stock Incentive Plan, as amended and restated
|
|
2.
|
Form of Incentive Stock Option Agreement under the 1997 Stock Plan
|
|
3.
|
Form of Performance Based Stock Option Agreement under the 1997 Stock Plan
|
|
4.
|
Select Comfort Corporation 2004 Stock Incentive Plan (Amended and Restated as of January 1, 2007)
|
|
5.
|
Form of Nonstatutory Stock Option Award Agreement under the 2004 Stock Incentive Plan
|
|
6.
|
Form of Restricted Stock Award Agreement under the 2004 Stock Incentive Plan
|
|
7.
|
Form of Performance Stock Award Agreement under the 2004 Stock Incentive Plan
|
|
8.
|
Form of Nonstatutory Stock Option Award Agreement (Subject to Performance Adjustment) under the 2004 Stock Incentive Plan
|
|
9.
|
Select Comfort Corporation 2010 Omnibus Incentive Plan
|
|
10.
|
Form of Nonstatutory Stock Option Award Agreement under the 2010 Omnibus Incentive Plan
|
|
11.
|
Form of Restricted Stock Award Agreement under the 2010 Omnibus Incentive Plan
|
|
12.
|
Form of Performance Stock Award Agreement under the 2010 Omnibus Incentive Plan
|
|
13.
|
Select Comfort Profit Sharing and 401(K) Plan – 2007 Restatement
|
|
14.
|
Select Comfort Executive Investment Plan, as Amended and Restated October 29, 2008
|
|
15.
|
Employment Letter from the Company to William R. McLaughlin dated March 3, 2000
|
|
16.
|
Employment Letter from the Company to William R. McLaughlin dated March 2, 2006
|
|
17.
|
Letter Agreement between William R. McLaughlin and Select Comfort Corporation dated as of February 21, 2008
|
|
18.
|
Amended and Restated Non-Statutory Stock Option Agreement between Select Comfort Corporation and William R. McLaughlin dated as of April 22, 2008
|
|
19.
|
Employment Letter from the Company to Kathryn V. Roedel dated March 8, 2005
|
|
20.
|
Employment Letter from the Company to Wendy L. Schoppert dated March 15, 2005
|
|
21.
|
Employment Letter from the Company to Mark A. Kimball dated April 22, 1999
|
|
22.
|
Summary of Executive Health Program
|
|
23.
|
Summary of Executive Tax and Financial Planning Program
|
|
24.
|
Amended and Restated Select Comfort Corporation Executive Severance Pay Plan
|
|
25.
|
First Amendment to Amended and Restated Select Comfort Corporation Executive Severance Pay Plan
|
|
26.
|
Summary of Non-Employee Director Compensation
|
|
SELECT COMFORT CORPORATION
|
|
|
(Registrant)
|
|
|
|
|
Dated: February 24, 2011
|
By:
|
/s/ William R. McLaughlin
|
|
|
William R. McLaughlin
|
|
|
Chief Executive Officer
|
|
|
(principal executive officer)
|
|
|
|
|
By:
|
/s/ James C. Raabe
|
|
|
James C. Raabe
|
|
|
Chief Financial Officer
|
|
|
(principal financial officer)
|
By:
|
/s/ Robert J. Poirier
|
|
|
Robert J. Poirier
|
|
|
Chief Accounting Officer
|
|
|
(principal accounting officer)
|
|
NAME
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
/s/ Jean-Michel Valette
|
|
Chairman of the Board
|
|
February 24, 2011
|
Jean-Michel Valette
|
|
|
|
|
|
|
|
|
|
/s/ William R. McLaughlin
|
|
Director
|
|
February 24, 2011
|
William R. McLaughlin
|
|
|
|
|
|
|
|
|
|
/s/ Stephen L. Gulis, Jr.
|
|
Director
|
|
February 24, 2011
|
Stephen L. Gulis, Jr.
|
|
|
|
|
|
|
|
|
|
/s/ Christopher P. Kirchen
|
|
Director
|
|
February 24, 2011
|
Christopher P. Kirchen
|
|
|
|
|
|
|
|
|
|
/s/ David T. Kollat
|
|
Director
|
|
February 24, 2011
|
David T. Kollat
|
|
|
|
|
|
|
|
|
|
/s/ Brenda J. Lauderback
|
|
Director
|
|
February 24, 2011
|
Brenda J. Lauderback
|
|
|
|
|
|
|
|
|
|
/s/ Michael A. Peel
|
|
Director
|
|
February 24, 2011
|
Michael A. Peel
|
|
|
|
|
|
|
|
|
|
/s/ Ervin R. Shames
|
|
Director
|
|
February 24, 2011
|
Ervin R. Shames
|
|
|
|
|
Exhibit
No.
|
|
Description
|
|
Method Of Filing
|
|
|
|
|
|
3.1
|
|
Third Restated Articles of Incorporation of the Company, as amended
|
|
Incorporated by reference to Exhibit 3.1 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended January 1, 2000
(File No. 0-25121)
|
|
|
|
|
|
3.2
|
|
Articles of Amendment to Third Restated Articles of Incorporation of the Company
|
|
Incorporated by reference to Exhibit 3.1 contained in Select Comfort’s Current Report on Form 8-K filed May 16, 2006 (File No. 0-25121)
|
|
|
|
|
|
3.3
|
Articles of Amendment to Third Restated Articles of Incorporation of the Company
|
Incorporated by reference to Exhibit 3.1 contained in Select Comfort’s Current Report on Form 8-K filed May 25, 2010 (File No. 0-25121)
|
||
|
|
|
|
|
3.4
|
|
Restated Bylaws of the Company
|
|
Incorporated by reference to Exhibit 3.1 contained in Select Comfort’s Current Report on Form 8-K filed December 20, 2010 (File No. 0-25121)
|
|
|
|
|
|
10.1
|
|
Net Lease Agreement dated December 3, 1993 between the Company and Opus Corporation
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Registration Statement on Form S-1, as amended
(Reg. No. 333-62793)
|
|
|
|
|
|
10.2
|
|
Amendment of Lease dated August 10, 1994 between the Company and Opus Corporation
|
|
Incorporated by reference to Exhibit 10.2 contained in the Select Comfort’s Registration Statement on Form S-1, as amended
(Reg. No. 333-62793)
|
|
|
|
|
|
10.3
|
|
Second Amendment to Lease dated May 10, 1995 between the Company and Rushmore Plaza Partners Limited Partnership (successor to Opus Corporation)
|
|
Incorporated by reference to Exhibit 10.3 contained in Select Comfort’s Registration Statement on Form S-1, as amended
(Reg. No. 333-62793)
|
|
|
|
|
|
10.4
|
|
Letter Agreement dated as of October 5, 1995 between the Company and Rushmore Plaza Partners Limited Partnership
|
|
Incorporated by reference to Exhibit 10.4 contained in Select Comfort’s Registration Statement on Form S-1, as amended
(Reg. No. 333-62793)
|
|
|
|
|
|
10.5
|
|
Third Amendment of Lease, Assignment and Assumption of Lease and Consent dated as of January 1, 1996 among the Company, Rushmore Plaza Partners Limited Partnership and Select Comfort Direct Corporation
|
|
Incorporated by reference to Exhibit 10.5 contained in Select Comfort’s Registration Statement on Form S-1, as amended
(Reg. No. 333-62793)
|
|
|
|
|
|
10.6
|
|
Fourth Amendment to Lease dated June 30, 2003 between Cabot Industrial Properties, L.P. (successor to Rushmore Plaza Partners Limited Partnership) and Select Comfort Direct Corporation
|
|
Incorporated by reference to Exhibit 10.6 contained in Select Comfort’s Annual report on Form 10-K for the fiscal year ended January 3, 2004 (File No. 0-25121)
|
Exhibit
No.
|
|
Description
|
|
Method Of Filing
|
|
|
|
|
|
10.7
|
|
Fifth Amendment to Lease dated August 28, 2006 between Cabot Industrial Properties, L.P. (successor to Rushmore Plaza Partners Limited Partnership) and Select Comfort Direct Corporation
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Quarterly report on Form 10-Q for the quarter ended September 30, 2006 (File No. 0-25121)
|
|
|
|
|
|
10.8
|
|
Lease Agreement dated as of September 19, 2002 between the Company and Blind John, LLC (as successor to Frastacky (US) Properties Limited Partnership)
|
|
Incorporated by reference to Exhibit 10.6 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 28, 2002 (File No. 0-25121)
|
|
|
|
|
|
10.9
|
|
Lease Agreement dated September 30, 1998 between the Company and ProLogis Development Services Incorporated
|
|
Incorporated by reference to Exhibit 10.12 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 28, 2002 (File No. 0-25121)
|
|
|
|
|
|
10.10
|
|
Net Lease Agreement (Build-to-Suit) by and between Opus Northwest LLC, as Landlord, and Select Comfort Corporation, as Tenant, dated July 26, 2006
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Quarterly report on Form 10-Q for the quarter ended July 1, 2006 (File No. 0-25121)
|
|
|
|
|
|
10.11
|
|
Select Comfort Corporation 1997 Stock Incentive Plan, as amended and restated
|
|
Incorporated by reference to Exhibit 10.8 contained in Select Comfort’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (File No. 0-25121)
|
|
|
|
|
|
10.12
|
|
Form of Incentive Stock Option Agreement under the 1997 Stock Plans
|
|
Incorporated by reference to Exhibit 10.16 contained in the Company’s Registration Statement on Form S-1, as amended
(Reg. No. 333-62793)
|
|
|
|
|
|
10.13
|
|
Form of Performance Based Stock Option Agreement under the 1997 Stock Plans
|
|
Incorporated by reference to Exhibit 10.17 contained in Select Comfort’s Registration Statement on Form S-1, as amended
(Reg. No. 333-62793)
|
|
|
|
|
|
10.14
|
|
Select Comfort Corporation 2004 Stock Incentive Plan (Amended and Restated as of January 1, 2007)
|
|
Incorporated by reference to Exhibit 10.16 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006 (File No. 0-25121)
|
|
|
|
|
|
10.15
|
|
Form of Nonstatutory Stock Option Award Agreement under the Select Comfort Corporation 2004 Stock Incentive Plan
|
|
Incorporated by reference to Exhibit 10.28 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (File No. 0-25121)
|
|
|
|
|
|
10.16
|
|
Form of Restricted Stock Award Agreement under the Select Comfort Corporation 2004 Stock Incentive Plan
|
|
Incorporated by reference to Exhibit 10.29 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (File No. 0-25121)
|
|
|
|
|
|
10.17
|
|
Form of Performance Stock Award Agreement under the Select Comfort Corporation 2004 Stock Incentive Plan
|
|
Incorporated by reference to Exhibit 10.30 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (File No. 0-25121)
|
Exhibit
No.
|
|
Description
|
|
Method Of Filing
|
|
|
|
|
|
10.18
|
|
Form of Nonstatutory Stock Option Award Agreement (Subject to Performance Adjustment) under the Select Comfort Corporation 2004 Stock Incentive Plan
|
|
Incorporated by reference to Exhibit 10.20 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006 (File No. 0-25121)
|
|
|
|
|
|
10.19
|
|
Select Comfort Corporation 2010 Omnibus Incentive Plan
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed May 25, 2010 (File No. 0-25121)
|
Form of Nonstatutory Stock Option Award Agreement under the 2010 Omnibus Incentive Plan
|
Filed herewith
|
|||
Form of Restricted Stock Award Agreement under the 2010 Omnibus Incentive Plan
|
Filed herewith
|
|||
Form of Performance Stock Award Agreement under the 2010 Omnibus Incentive Plan
|
Filed herewith
|
|||
10.23
|
|
Select Comfort Profit Sharing and 401(K) Plan – 2007 Restatement
|
|
Incorporated by reference to Exhibit 10.22 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006 (File No. 0-25121)
|
|
|
|
|
|
10.24
|
|
Select Comfort Executive Investment Plan, as Amended and Restated October 29, 2008
|
|
Incorporated by reference to Exhibit 10.21 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009 (File No. 0-25121).
|
|
|
|
|
|
10.25
|
|
Employment Letter from the Company to William R. McLaughlin dated March 3, 2000
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2000 (File No. 0-25121)
|
|
|
|
|
|
10.26
|
|
Employment Letter from the Company to William R. McLaughlin dated March 2, 2006
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed March 6, 2006 (File No. 0-25121)
|
|
|
|
|
|
10.27
|
|
Letter Agreement between William R. McLaughlin and Select Comfort Corporation dated as of February 21, 2008
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed February 27, 2008
(File No. 0-25121)
|
|
|
|
|
|
10.28
|
|
Amended and Restated Non-Statutory Stock Option Agreement between Select Comfort Corporation and William R. McLaughlin dated as of April 22, 2008
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed April 24, 2008 (File No. 0-25121)
|
10.29
|
|
Employment Letter from the Company to Kathryn V. Roedel dated March 8, 2005
|
|
Incorporated by reference to Exhibit 10.17 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (File No. 0-25121)
|
|
|
|
|
|
10.30
|
|
Employment Letter from the Company to Wendy L. Schoppert dated March 15, 2005
|
|
Incorporated by reference to Exhibit 10.18 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (File No. 0-25121)
|
Exhibit
No.
|
|
Description
|
|
Method Of Filing
|
|
|
|
|
|
10.31
|
|
Employment Letter from the Company to Mark A. Kimball dated April 22, 1999
|
|
Incorporated by reference to Exhibit 10.25 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended January 1, 2000 (File No. 0-25121)
|
|
|
|
|
|
10.32
|
|
Summary of Executive Health Program
|
|
Incorporated by reference to Exhibit 10.36 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (File No. 0-25121)
|
|
|
|
|
|
10.33
|
|
Summary of Executive Tax and Financial Planning Program
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed January 3, 2005 (File No. 0-25121)
|
|
|
|
|
|
10.34
|
|
Amended and Restated Select Comfort Corporation Executive Severance Pay Plan
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed August 21, 2008
(File No. 0-25121)
|
|
|
|
|
|
10.35
|
|
First Amendment to Amended and Restated Select Comfort Corporation Executive Severance Pay Plan
|
|
Incorporated by reference to Exhibit 10.34 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009 (File No. 0-25121).
|
|
|
|
|
|
|
Summary of Non-Employee Director Compensation
|
|
Filed herewith
|
|
|
|
|
|
|
10.37
|
|
Supply Agreement dated October 3, 2006 between the Company and Supplier (1)
|
|
Incorporated by reference to Exhibit 10.39 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006 (File No. 0-25121)
|
10.38
|
|
Amended and Restated Private Label Consumer Credit Card Program Agreement dated as of December 14, 2005 between GE Money Bank and Select Comfort Corporation and Select Comfort Retail Corporation (1)
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed December 20, 2005
(File No. 0-25121)
|
|
|
|
|
|
10.39
|
|
First Amendment to Amended and Restated Private Label Consumer Credit Card Program Agreement dated as of April 23, 2007 between GE Money Bank and Select Comfort Corporation and Select Comfort Retail Corporation
|
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed April 27, 2007 (File No. 0-25121)
|
|
|
|
|
|
10.40
|
|
Second Amendment to Amended and Restated Private Label Consumer Credit Card Program Agreement dated as of February 1, 2008 between GE Money Bank and Select Comfort Corporation and Select Comfort Retail Corporation
|
|
Incorporated by reference to Exhibit 10.3 contained in Select Comfort’s Current Report on Form 8-K filed February 7, 2008
(File No. 0-25121)
|
|
|
|
|
|
10.41
|
|
GE Waiver and Consent dated May 21, 2009
|
|
Incorporated by reference to Exhibit 10.6 contained in Select Comfort’s Current Report on Form 8-K filed May 26, 2009 (File No. 0-25121)
|
|
|
|
|
|
10.42
|
Credit Agreement, dated March 26, 2010, by and among Select Comfort Corporation and Wells Fargo Bank, National Association
|
Incorporated by reference to Exhibit 10.1 contained in Select Comfort’s Current Report on Form 8-K filed March 29, 2010 (File No. 0-25121)
|
Exhibit
No.
|
|
Description
|
|
Method Of Filing
|
|
|
|
|
|
21.1
|
|
Subsidiaries of the Company
|
|
Incorporated by reference to Exhibit 21.1 contained in Select Comfort’s Annual Report on Form 10-K for the fiscal year ended January 2, 2010 (File No. 0-25121)
|
|
|
|
|
|
|
Consent of Independent Registered Public Accounting Firm
|
|
Filed herewith
|
|
|
|
|
|
|
Consent of Independent Registered Public Accounting Firm
|
Filed herewith
|
|||
24.1
|
|
Power of Attorney
|
|
Included on signature page
|
|
|
|
|
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
|
|
|
|
|
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
|
|
|
|
|
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
(1)
|
Confidential treatment has been granted by the Securities and Exchange Commission with respect to designated portions contained within document. Such portions have been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.
|
Description
|
Balance at Beginning of Period
|
Additions Charged to Costs and Expenses
|
Deductions From Reserves
|
Balance at End of Period
|
||||||||||||
Allowance for doubtful accounts
|
||||||||||||||||
2010
|
$ | 379 | $ | 197 | $ | 274 | $ | 302 | ||||||||
2009
|
713 | 138 | 472 | 379 | ||||||||||||
2008
|
876 | 814 | 977 | 713 | ||||||||||||
|
||||||||||||||||
Accrued sales returns
|
||||||||||||||||
2010
|
$ | 2,885 | $ | 29,885 | $ | 29,826 | $ | 2,944 | ||||||||
2009
|
2,744 | 25,920 | 25,779 | 2,885 | ||||||||||||
2008
|
3,751 | 34,410 | 35,417 | 2,744 |
(Signature)
|
1.
|
Grant of Award
.
|
2.
|
Grant Restriction
.
|
3.
|
Issuance of Award Shares
.
|
4.
|
Rights of Grantee
.
|
5.
|
Withholding Taxes
.
|
6.
|
Adjustments
.
|
7.
|
Subject to Plan
.
|
8.
|
Miscellaneous
.
|
SELECT COMFORT CORPORATION
|
|
/s/William R. McLaughlin
|
|
William R. McLaughlin
|
|
President and CEO
|
By execution of this Agreement,
|
GRANTEE
|
the Grantee acknowledges having
|
|
received a copy of the Plan.
|
|
(Signature)
|
|
(Name and Address)
|
|
1.
|
Grant of Award and Performance Adjustment
.
|
2.
|
Grant Restriction
.
|
3.
|
Issuance of Award Shares
.
|
4.
|
Rights of Grantee
.
|
6.
|
Adjustments
.
|
7.
|
Subject to Plan
.
|
8.
|
Miscellaneous
.
|
SELECT COMFORT CORPORATION
|
|
/s/William R. McLaughlin
|
|
William R. McLaughlin
|
|
President and CEO
|
By execution of this Agreement,
|
GRANTEE
|
the Grantee acknowledges having
|
|
received a copy of the Plan.
|
|
(Signature) | |
|
|
(Name and Address) | |
1.
|
I have reviewed this annual report on Form 10-K of Select Comfort Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ William R. McLaughlin
|
||
William R. McLaughlin
|
||
Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K of Select Comfort Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ James C. Raabe
|
||
James C. Raabe
|
||
Senior Vice President and Chief Financial Officer
|
/s/ William R. McLaughlin
|
||
William R. McLaughlin
|
||
Chief Executive Officer
|
/s/ James C. Raabe
|
||
James C. Raabe
|
||
Senior Vice President and Chief Financial Officer
|