Sleep Number Corp - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - SELECT COMFORT 8-K 4-20-2011 - Sleep Number Corp	form8k.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

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

SELECT COMFORT ANNOUNCES FIRST QUARTER 2011 RESULTS

Reports Record First Quarter Net Income per Share of $0.30; Company-owned Comparable Sales Up 26 Percent; Increases 2011 Earnings Guidance to $0.85 to $0.93 per Share

MINNEAPOLIS – (April 20, 2011) – Select Comfort Corporation (NASDAQ: SCSS) today reported first-quarter results for the period ended April 2, 2011. Net sales for the quarter totaled $193 million, compared to $158 million in the first quarter of 2010, a year-over-year increase of 22 percent on company-owned comparable sales growth of 26 percent. The company reported first-quarter net income of $16.6 million, or $0.30 per diluted share, compared to net income of $7.8 million, or $0.14 per diluted share, in the prior-year period – representing a 114 percent year-over-year improvement in earnings per diluted share.

“Our first quarter performance demonstrates the earnings potential of our business when we achieve solid sales growth and increased market share,” said Bill McLaughlin, president and CEO, Select Comfort Corporation. “During the quarter, we remained focused on leveraging our core business, executing against our growth-driving programs and controlling costs, making solid progress against our goals of profitable growth and margin expansion.”

McLaughlin continued, “The momentum of the first quarter allowed us to advance initiatives designed to continue to broaden awareness and consideration for the Sleep Number brand and enhance customers’ store experience in order to drive long-term growth. We expect our efforts to generate strong earnings growth over the balance of the year as well as provide for continued investment in growth opportunities.”

Select Comfort Announces first Quarter 2011 Results - Page 2 of 9

First Quarter Summary

During the first quarter, net sales increased by 22 percent as compared to the year-ago period. The increase in sales was driven by a company-owned comparable sales growth of 26 percent, with the average sales-per-store over the past 12 months reaching $1.4 million, a 26 percent improvement over the prior-year period. Operating income improved by 86 percent to $26.4 million and operating margin improved 469 basis points to 13.7 percent.

Gross profit margins increased 166 basis points from 62.1 percent in the prior-year period to 63.8 percent in the first quarter of 2011. The increase reflects strong product mix offset somewhat by modest commodity-cost increases.

Sales and marketing costs in the first quarter of 2011 increased by 15 percent to $80.3 million, representing 41.6 percent of net sales. This compares to $70.1 million, or 44.4 percent of net sales in the prior-year period. Media investments in the first quarter totaled $23.7 million, 30 percent higher than a year ago.

General and administrative (G&A) expenses were $15.6 million in the first quarter, or 8.1 percent of net sales. This compares to $13.1 million, or 8.3 percent of net sales, in the year-ago period. In the quarter, G&A expenses included incentive compensation related to strong quarterly earnings performance.

Cash flows from operating activities were $32.2 million in the first quarter as compared to $30.4 million during the same period last year. Capital expenditures increased to $2.7 million, compared to $1.0 million in the year-ago period. As of the end of the quarter, cash and cash equivalents totaled $102 million and the company had no borrowings under its revolving credit agreement.

Fiscal 2011 Outlook

Based on continued solid performance, the company is increasing its fiscal 2011 outlook and now anticipates net income per share in 2011 of between $0.85 and $0.93 per diluted share. The revised outlook assumes stability in consumer-spending patterns, company-owned comparable sales growth in the mid-teens, and net-income growth of approximately 30 to 45 percent for the duration of the year. The company noted that increasing inflationary pressures could adversely impact consumer demand through the balance of the year. The company’s long-term expectation for net-income-per-share growth remains between 15 and 20 percent per year.

Select Comfort Announces first Quarter 2011 Results - Page 3 of 9

The company expects to end 2011 with approximately 380 stores after planned store openings and closings. The company anticipates that total 2011 capital expenditures will be approximately $25 million to $30 million, reflecting a total of 40 to 50 store actions (remodels and relocations), along with continued investments in marketing and information systems.

Conference Call

Management will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. Eastern Time (4 p.m. Central; 2 p.m. Pacific) today. To listen to the call, please dial (800) 593-9959 (international participants dial (517) 308-9340) and reference the passcode “Sleep.” To access the webcast, please visit the investor relations area of the Select Comfort website.

A replay will remain available until midnight Central Time, April 29, 2011, by dialing (203) 369-3207. The webcast replay will remain available in the investor relations area of the company’s website for approximately 60 days.

About Select Comfort Corporation

Founded more than 20 years ago and based in Minneapolis, Select Comfort Corporation 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 bedding accessories. SELECT COMFORT® products are sold through its 375 company-owned stores located across the United States; select bedding retailers; direct-marketing operations; and online at www.sleepnumber.com.

Select Comfort Announces first Quarter 2011 Results - Page 4 of 9

Forward-Looking Statements

Statements used in this news release relating to future plans, events, financial results or performance are forward-looking statements subject to certain risks and uncertainties including, among others, such factors as general and industry economic trends; consumer confidence; the effectiveness of our marketing messages; the efficiency of our advertising and promotional efforts; consumer acceptance of our products, product quality, innovation and brand image; availability of attractive and cost-effective consumer credit options; execution of our retail store distribution strategy, including our ability to cost-effectively close under-performing store locations; our dependence on significant suppliers, and our ability to maintain relationships with key suppliers, including several sole-source suppliers; the vulnerability of key suppliers to recessionary pressures, labor negotiations, liquidity concerns or other factors; rising commodity costs and other inflationary pressures; industry competition; our ability to continue to improve our product line; warranty expenses; risks of pending and potentially unforeseen litigation; increasing government regulations, which have added or will add cost pressures and process changes to ensure compliance; the adequacy of our management information systems to meet the evolving needs of our business 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 uncertainties arising from global events, such as terrorist attacks or a pandemic outbreak, or the threat of such events. Additional information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission (SEC), 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 in this news release.

# # #

Select Comfort Announces first Quarter 2011 Results - Page 5 of 9

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Operations

(unaudited – in thousands, except per share amounts)

	Three Months Ended
	April 2,			% of			April 3,			% of
	2011			Net Sales			2010			Net Sales

Net sales	$	193,068			100.0	%	$	157,953			100.0	%
Cost of sales		69,967			36.2	%		59,869			37.9	%
Gross profit		123,101			63.8	%		98,084			62.1	%
Operating expenses:
Sales and marketing		80,271			41.6	%		70,092			44.4	%
General and administrative		15,623			8.1	%		13,149			8.3	%
Research and development		731			0.4	%		654			0.4	%
Asset impairment charges		78			0.0	%		-			0.0	%
Total operating expenses		96,703			50.1	%		83,895			53.1	%
Operating income		26,398			13.7	%		14,189			9.0	%
Interest expense / other		(30	)		0.0	%		(1,720	)		(1.1	%)
Income before income taxes		26,368			13.7	%		12,469			7.9	%
Income tax expense		9,785			5.1	%		4,709			3.0	%
Net income	$	16,583			8.6	%	$	7,760			4.9	%

Net income per share – basic	$	0.30					$	0.14

Net income per share – diluted	$	0.30					$	0.14

Reconciliation of weighted-average shares outstanding:
Basic weighted-average shares outstanding		54,726						53,615
Effect of dilutive securities:
Options		714						996
Restricted shares		537						470
Diluted weighted-average shares outstanding		55,977						55,081

Select Comfort Announces first Quarter 2011 Results - Page 6 of 9

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except per share amounts)

subject to reclassification

	(unaudited)
	April 2,		January 1,
	2011		2011
Assets
Current assets:
Cash and cash equivalents	$	101,882	$	76,016
Accounts receivable, net of allowance for doubtful accounts of $351 and $302, respectively		8,750		9,909
Inventories		18,533		19,647
Prepaid expenses		7,386		6,388
Deferred income taxes		4,162		4,297
Other current assets		4,588		652
Total current assets		145,301		116,909

Property and equipment, net		35,899		32,953
Deferred income taxes		14,108		15,965
Other assets		4,287		4,130
Total assets	$	199,595	$	169,957

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	48,508	$	42,025
Customer prepayments		15,524		12,944
Compensation and benefits		18,066		24,857
Taxes and withholding		12,567		5,359
Other current liabilities		13,747		11,671
Total current liabilities		108,412		96,856

Non-current liabilities:
Warranty liabilities		2,532		2,815
Other long-term liabilities		13,019		12,309
Total non-current liabilities		15,551		15,124
Total liabilities		123,963		111,980

Shareholders’ equity:
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding		-		-
Common stock, $0.01 par value; 142,500 shares authorized, 55,587 and 55,455 shares issued and outstanding, respectively		556		555
Additional paid-in capital		37,870		36,799
Retained earnings		37,206		20,623
Total shareholders’ equity		75,632		57,977
Total liabilities and shareholders’ equity	$	199,595	$	169,957

NOTE: In the first quarter of fiscal 2011 we began reporting cash resulting from credit and debit card transactions when received, rather than on an in-transit basis. To maintain consistency and comparability, previously reported amounts have been reclassified to conform to the current-year presentation.

Select Comfort Announces first Quarter 2011 Results - Page 7 of 9

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited - in thousands)

subject to reclassification

	Three Months Ended
	April 2,			April 3,
	2011			2010

Cash flows from operating activities:
Net income	$	16,583		$	7,760
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,162			4,898
Stock-based compensation		1,134			762
Disposals and impairments of assets		78			-
Excess tax benefits from stock-based compensation		(296	)		(659	)
Deferred income taxes		1,442			(606	)
Change in operating assets and liabilities:
Accounts receivable		1,159			813
Inventories		1,114			194
Income taxes		6,531			4,941
Prepaid expenses and other assets		(2,533	)		261
Accounts payable		4,181			2,321
Customer prepayments		2,580			7,511
Accrued compensation and benefits		(6,681	)		1,579
Other taxes and withholding		1,305			494
Warranty liabilities		(119	)		19
Other accruals and liabilities		2,583			74
Net cash provided by operating activities		32,223			30,362

Cash flows from investing activities:
Purchases of property and equipment		(2,744	)		(999	)
Investments in restricted cash		(2,650	)		(4,515	)
Net cash used in investing activities		(5,394	)		(5,514	)

Cash flows from financing activities:
Net decrease in short-term borrowings		(1,119	)		(1,486	)
Repurchases of common stock		(283	)		(1,335	)
Proceeds from issuance of common stock		143			19
Excess tax benefits from stock-based compensation		296			659
Debt issuance costs		-			(79	)
Net cash used in financing activities		(963	)		(2,222	)

Increase in cash and cash equivalents		25,866			22,626
Cash and cash equivalents, at beginning of period		76,016			12,184
Cash and cash equivalents, at end of period	$	101,882		$	34,810

NOTE: To maintain consistency and comparability, certain amounts from previously reported financial statements have been reclassified to conform to the current-year presentation. See Note on page 6.

Select Comfort Announces first Quarter 2011 Results - Page 8 of 9

SELECT COMFORT CORPORATION

AND SUBSIDIARIES

Supplemental Financial Information

(unaudited)

	Three Months Ended
	April 2,			April 3,
	2011			2010

Percent of sales:
Retail		86.6	%		83.4	%
Direct and E-Commerce		9.3	%		11.7	%
Wholesale		4.1	%		4.9	%
Total		100.0	%		100.0	%

Sales growth rates:
Retail same-store sales		30	%		29	%
Direct and E-Commerce		(3	%)		16	%
Company-Controlled comparable sales change		26	%		27	%
Net closed stores/other		(3	%)		(9	%)
Total Company-Controlled Channels		23	%		19	%
Wholesale		4	%		(42	%)
Total		22	%		13	%

Stores open:
Beginning of period		386			403
Opened		1			-
Closed		(12	)		(4	)
End of period		375			399

Other metrics:
Average sales per store ($ in 000's)1	$	1,416		$	1,123
Average sales per square foot1	$	951		$	762
Stores > $1 million net sales1		81	%		57	%
Average mattress sales per mattress unit:
Company-Controlled Channels2	$	2,107		$	1,953

1Trailing twelve months for stores open at least one year.

2Includes revenue from adjustable foundations which has become a more significant part of the mattress mix. The new definition was adopted in the fourth quarter of fiscal 2010. The prior definition excluded revenue from adjustable foundations.

Select Comfor Announces first Quarter 2011 Results - Page 9 of 9

SELECT COMFORT CORPORATION AND SUBSIDIARIES

Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)

(in thousands)

We define earnings before interest, taxes, depreciation and amortization (EBITDA) as net income plus: income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation and asset impairments consistent with the definition used in our debt covenant calculations. Management believes EBITDA is a useful indicator of the Company's financial performance. Our definition of EBITDA may not be comparable to similarly titled definitions used by other companies. The tables below reconcile EBITDA, which is a non-GAAP financial measure, to comparable GAAP financial measures:

	Three Months Ended				Trailing-Twelve Months Ended
	April 2,		April 3,		April 2,		April 3,
	2011		2010		2011		2010

Net income	$	16,583	$	7,760	$	40,390	$	46,008
Income tax expense (benefit)		9,785		4,709		23,998		(17,341	)
Interest expense		57		1,724		284		5,937
Depreciation and amortization		3,149		3,327		12,834		16,395
Stock-based compensation		1,134		762		4,334		2,977
Asset impairments		78		-		338		308
EBITDA	$	30,786	$	18,282	$	82,178	$	54,284

Note -

Our EBITDA calculation 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 analysis of the Company's financial performance by investors and financial analysts.

GAAP -

generally accepted accounting principles

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