Select Comfort Corporation (ticker: SCSS, exchange: NASDAQ Global Market (.O))
News Release -
24-Apr-2001
Select Comfort Corporation Announces First Quarter Results
MINNEAPOLIS--(BUSINESS WIRE)--April 24, 2001--Select Comfort
Corporation (Nasdaq:SCSS) announced results for the first quarter
ended March 31, 2001. For the first quarter of 2001, net sales were
$65.5 million compared to $76.2 million for the first quarter of 2000.
Consistent with its earlier released estimate of results for the first
quarter of 2001, the company reported a net loss of $9.8 million, or
$0.54 per share, compared to a net loss of $3.0 million, or $0.17 per
share, for the first quarter of 2000. Comparable store sales for first
quarter 2001 declined by 6 percent.
Sales volume trends were attributable to the slowing economy and
to reduced advertising levels in the final months of 2000 carrying
into January 2001. First quarter results were also adversely impacted
by an increase in media expenditures in February and March 2001, for
both direct response and the company's retail SLEEP NUMBER(R)
campaign, now in eight markets. These expenditures are not expected to
significantly impact sales until later in the year. First quarter
results reflect early benefits from cost-reduction efforts, with
approximately $2.9 million of reductions in fixed selling and general
and administrative expenses as compared to the first quarter of 2000,
and a nearly 3 percentage point improvement in gross margins compared
to the fourth quarter of 2000. Results for 2000 are net of income tax
benefits of $1.6 million, while 2001 results include nominal levels of
income tax expense.
The company has taken additional steps to adjust its cost
structure to correspond to current sales trends resulting from the
slowing economy. Steps taken in April or planned for the remainder of
the year include:
-
Discontinuation of manufacturing in the company's Minnesota
plant
-
Elimination of 10% of its corporate staff
-
Expected closure of 13 or more underperforming retail stores
-
Continuing quality and cost improvements through redesign of
bed components
-
Continuing successful reduction of returns and related
expenses
"We have made adjustments in our cost structure necessitated by
the slowing economy," said Bill McLaughlin, Select Comfort president
and CEO. "Following investment in the initial rollout of our Sleep
Number campaign in eight markets during the first quarter, we are now
moving into the lowered sustaining level of quarterly media spending
for the remainder of the year. We expect these changes will be
reflected in improving profitability during the remaining quarters of
2001, and we expect to be cash flow positive in the second half of the
year."
"Sales volume remains our critical issue," McLaughlin continued.
"Our immediate focus is on stabilizing volume with our new cost
structure. For the longer term, we are encouraged by early results of
our Sleep Number advertising campaign. We are not planning on
significant change in consumer confidence, although improvement would
be welcomed."
The company is continuing efforts to obtain $10 million to $12
million of financing to meet liquidity needs and expects these
financing efforts to be concluded in the near term.
Select Comfort will hold a conference call to discuss its first
quarter results on Wednesday, April 25, at 10:00 a.m. Central Time. A
simultaneous webcast of the call will be available in the Investor
Relations section of www.selectcomfort.com. A digital replay of the
conference call will be accessible beginning at approximately 12:00
p.m. Central Time on Wednesday, April 25, through 5:00 p.m. Central
Time on Friday, April 27, 2001. To access the replay, please call
800-839-2157 from anywhere in the U. S. International callers may dial
402-998-0973. An archived replay of the conference call may also be
accessed after approximately 12:30 p.m. Central Time on Wednesday,
April 25, at www.selectcomfort.com.
Founded in 1987, Select Comfort Corporation is the leader in sleep
solutions technology, holding 24 U.S. issued or pending patents for
its products. The company designs, manufactures and markets a line of
mattresses with adjustable firmness, as well as foundations and sleep
accessories. Select Comfort's products are sold primarily through
three channels: i) 330 retail stores located nationwide, including 24
leased departments in Bed Bath & Beyond stores, ii) Select Comfort's
national direct sales operations, and iii) on the Internet at
www.selectcomfort.com.
Statements used in this press release that relate to future plans,
events, financial results or performance are forward-looking
statements as defined under the Private Securities Litigation Reform
Act of 1995. Some of the forward-looking statements in this press
release relate to our ability to consummate our planned financing and
the success of our turn-around strategy, including in particular our
ability to continue to reduce our costs, the success of our Sleep
Number marketing and advertising campaign, and our ability to expand
profitable distribution of our products. Actual plans, events, results
and performance may differ materially from those anticipated as a
result of certain risks and uncertainties, including but not limited
to:
-
The ability of the company to secure debt or equity financing
to support working capital needs and growth initiatives.
-
The company's ability to create product and brand name
awareness.
-
The efficiency and effectiveness of the company's marketing
and advertising.
-
The ability of the company to effectively and efficiently
pursue new channels of distribution.
-
The performance of the company's existing and new stores.
-
The ability of the company to realize the benefits of cost
saving initiatives.
-
The levels of consumer acceptance of the company's product
lines.
-
The ability of the company to continuously improve its
existing product lines and introduce new products.
-
The ability of the company to efficiently implement nationwide
home delivery and assembly.
-
Economic trends and consumer confidence.
-
Industry competition.
-
The risks and uncertainties detailed from time to time in the
company's filings with the SEC, including the company's Annual
Report on Form 10-K and other periodic reports filed with the
SEC.
The company has no obligation to publicly update or revise any of the
forward-looking statements that may be in this news release.
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
--------------------
March 31, April 1,
2001 2000
-------- --------
Net sales $ 65,456 $ 76,159
Cost of sales 23,611 27,146
-------- --------
Gross margin 41,845 49,013
-------- --------
Operating expenses:
Sales and marketing 44,174 45,273
General and administrative 7,013 8,520
Store closings/impairments 346 --
-------- --------
Total operating expenses 51,533 53,793
-------- --------
Operating loss (9,688) (4,780)
-------- --------
Other income (expense):
Interest income 75 375
Interest expense (98) (2)
Equity in loss of affiliate -- (182)
Other, net (2) (43)
-------- --------
Other income (expense), net (25) 148
-------- --------
Loss before income taxes (9,713) (4,632)
Income tax expense (benefit) 115 (1,634)
-------- --------
Net loss $ (9,828) $ (2,998)
======== ========
Net loss per share - diluted $ (0.54) $ (0.17)
======== ========
Weighted average share - diluted 18,056 17,753
======== ========
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(Unaudited)
March 31, Dec. 30,
2001 2000
Assets -------- --------
Current assets:
Cash and cash equivalents $ 4,532 $ 1,498
Marketable securities -- 3,950
Accounts receivable, net of allowance for
doubtful accounts of $283, and $264,
respectively 1,376 2,693
Inventories 9,701 11,083
Prepaid expenses 5,343 4,741
-------- --------
Total current assets 20,952 23,965
Property and equipment, net 35,609 37,063
Other assets 3,685 3,644
-------- --------
Total assets $ 60,246 $ 64,672
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt $ 38 $ 38
Accounts payable 21,993 17,271
Accruals:
Sales returns 4,887 5,284
Warranty costs 7,368 7,181
Compensation, taxes and benefits 6,501 6,238
Other 6,407 6,129
-------- --------
Total current liabilities 47,194 42,141
Long-term debt, less current maturities 2,409 2,322
Other liabilities 3,774 3,609
-------- --------
Total liabilities 53,377 48,072
-------- --------
Shareholders' equity:
Undesignated preferred stock; 5,000,000
shares authorized, no shares issued
and outstanding -- --
Common stock, $.01 par value; 95,000,000
shares authorized, 18,055,633 and
17,962,689 shares issued and outstanding,
respectively 181 180
Additional paid-in capital 79,548 79,452
Accumulated deficit (72,860) (63,032)
-------- --------
Total shareholders' equity 6,869 16,600
-------- --------
Total liabilities and shareholders' equity $60,246 $ 64,672
======== ========
SELECT COMFORT CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months
Ended
----------------
March 31, April 1,
2001 2000
------- -------
Cash flows from operating activities:
Net loss $(9,828) $(2,782)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 2,484 2,046
Loss on disposal of assets 347 69
Deferred tax assets -- (1,667)
Change in operating assets and liabilities:
Accounts receivable, net 1,411 444
Inventories 1,382 (317)
Prepaid expenses (602) 128
Income taxes -- 2,188
Accounts payable 4,722 523
Accrued sales returns (397) 550
Accrued warranty costs 187 859
Accrued compensation, taxes and benefits 263 (69)
Other accrued liabilities 278 194
Other assets (120) (26)
Other liabilities 165 345
------- -------
Net cash provided by operating activities 292 2,485
------- -------
Cash flows from investing activities:
Purchases of property and equipment (1,296) (3,467)
Investment in marketable securities 3,950 (1,983)
------- -------
Net cash provided by (used in) investing
activities 2,654 (5,450)
------- -------
Cash flows from financing activities:
Principal payments on debt (9) (32)
Proceeds from issuance of common stock 97 248
------- -------
Net cash provided by financing activities 88 216
------- -------
Increase (decrease) in cash and cash equivalents 3,034 (2,749)
Cash and cash equivalents, at beginning of period 1,498 7,441
------- -------
Cash and cash equivalents, at end of period $ 4,532 $ 4,692
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--30--sh/ms*
| CONTACT: |
Select Comfort Corporation, Minneapolis |
| |
Mark Kimball, 763/551-7070 |
|
|
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Select Comfort Corporation
