Slide 1: Select Comfort: SCSS
Select Comfort: SCSS
Slide 2: Forward Looking Statements
2 0 82 150 0 174 239 Forward Looking Statements Statements used in this presentation 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 current and future general and in
Slide 3: Other Disclosures Required for Proxy Solicitation
3 0 82 150 0 174 239 Other Disclosures Required for Proxy Solicitation Important Additional Information and Where to Find It Select Comfort Corporation (the “Company”) has filed a proxy statement on Schedule 14A and other relevantdocuments with the Securities and Exchange Commission (“SEC”) in conne
Slide 4: Agenda
4 0 82 150 0 174 239 Agenda • Company Overview • Strategic Transformation to a Consumer Driven Innovation Company • Independent Board and Progressive Governance Practices • Why Blue Clay’s Uninformed Demands Would Jeopardize Shareholder Value Creation • Summary
Slide 5: Company Overview
5 0 82 150 0 174 239 Company Overview
Slide 6: Company Overview
6 0 82 150 0 174 239 Company Overview Vision Become one of the world’s most beloved brands by delivering an unparalleled Sleep Experience Competitive Advantages Proprietary sleep innovations, ongoing customer relationships, and exclusive distribution Team Mission -Improving lives by individualizing
Slide 7: Target: More than double EPS to $2.75 in five years
7 0 82 150 0 174 239 Target: More than double EPS to $2.75 in five years 2019 EPS Target 2014 EPS Actual $ 2.75 $ 1.25 Committed to Long-term Shareholder Value Creation 17% CAGR
Slide 8: Competitive Advantages
8 0 82 150 0 174 239 Competitive Advantages Proprietary Sleep Innovations • Technology as a differentiator • Benefit-driven sleep solutions • Strengthened core value proposition with smart technology • Sleep Innovation Leader –R&D prioritized, 39 new patent applications since the beginning of 2013 O
Slide 9: Sleep Number is the Only Manufacturer and Retailer Brand
9 0 82 150 0 174 239 Sleep Number is the Only Manufacturer and Retailer Brand Company (Rank) 2013 Sales Share Serta (1) and Simmons (3) 2.8$ 40% Sealy (2) and Tempur-Pedic (4) 2.1$ 30% Sleep Number (5) 0.4$ 5% All Other 1.7$ 25% Total Market Size 7.0$ Rank Company 2013 Sales Share 1 Mattress Firm 1.
Slide 10: Select Comfort is Outperforming Its Peers
10 0 82 150 0 174 239 Select Comfort is Outperforming Its Peers 2014 Comparable Retail Same Store Sales Growth 2014 Net Sales Growth 12% 6% Select Comfort Mattress Firm 20% 9% Select Comfort Tempur North America 60% 59% Select Comfort Mattress Firm 60% 8% Select Comfort Tempur-Sealy Total Shareholde
Slide 11: Strategic Transformation to a Consumer Driven Innovation Company
11 0 82 150 0 174 239 Strategic Transformation to a Consumer Driven Innovation Company
Slide 12: Strategic and Governance Milestones
12 0 82 150 0 174 239 Strategic and Governance Milestones 2009 2010 2011 2012 2013 2014 2015 Governance Strategic Jean-Michel Valette appointed new Board Chair Two new Board members named (Michael Harrison & Kathleen Nedorostek) Shelly Ibach named to newly created COO role Shelly Ibach named CEO and
Slide 13: Five-Year Performance Overview
13 0 82 150 0 174 239 $0.57 $1.07 $1.43 $1.07 $1.25 2010 2011 2012 2013 2014 Five-Year Performance Overview EBITDA ($ in millions) Net Sales *As adjusted EPS NOTE: See appendix for reconciliation of non-GAAP financial measures. ($ in millions) Return on Invested Capital (ROIC) * * EPS 14.7% 19.9% 21
Slide 14: Creating Superior Shareholder Value
14 0 82 150 0 174 239 $978 $1,230 TTM Q1 2014 TTM Q1 2015 NOTE: See appendix for reconciliation of non-GAAP financial measures. EBITDA ($ in millions) Creating Superior Shareholder Value Return on Invested Capital (ROIC) Net Sales ($ in millions) EPS ROIC Average invested capital ($ in millions) $27
Slide 15: Total Shareholder Return
15 0 82 150 0 174 239 60% 36% (6%) Select Comfort S&P 400 Specialty Stores Index Peers Total Shareholder Return 5-Year TSR (January 2, 2010 –April 3, 2015) 3-Year TSR (December 31, 2011 –April 3, 2015) 1-Year TSR (December 28, 2013 –April 3, 2015) 420% 315% 146% Select Comfort S&P 400 Specialty Stor
Slide 16: Advantaged Vertical Business Model – EPS Drivers
16 0 82 150 0 174 239 Advantaged Vertical Business Model –EPS Drivers Increase Consumer Demand • Benefit-driven sleep innovations with technology as a differentiator • Broadened target customer to 4x historical size • Emotionally engaging advertising to increase awareness and consideration Leverage
Slide 17: Increase Consumer Demand
17 0 82 150 0 174 239 Increase Consumer Demand Benefit-driven sleep innovations • Reaching and engaging broader target market (4X historical target) • Driving traffic to stores and website (Unique visitors +>40% in 2014) • Leveraging national scale while funding local market growth –broad- reach TV
Slide 18: Leveraging the Business Model
18 0 82 150 0 174 239 Leveraging the Business Model Exclusive Distribution is the Foundation for Sustainable Profitable Growth • Gross margin expansion o Supply chain transformation o Manufacturing and sourcing leverage • Operating expense productivity o Higher sales per store drives 4-wall profit l
Slide 19: Exclusive Distribution – 'Only at a Sleep Number Store'
19 0 82 150 0 174 239 Exclusive Distribution –‘Only at a Sleep Number Store’ High-quality real estate portfolio optimized for our target customer •Targeting one store per population of 350k –500k (30-54 yrs. old, >$75k household income) •Proven radius (10 mile/20 minute drive-time) •Over 70% of exis
Slide 20: Exclusive Distribution - Store Productivity
20 0 82 150 0 174 239 $1.30M $2.16M $2.33M $3M+ 2010 2012 2014 Next Milestone Exclusive Distribution -Store Productivity Four-wall Profitability Retail Employee Productivity Sales per Comp Store Sales per Square Foot Top 10 performance among U.S. specialty retail brands +80% ~$800k in Profit $2.3M s
Slide 21: Aggressive Growth Markets
21 0 82 150 0 174 239 Aggressive Growth Markets 2010 2014 $13m DMA Sales $39m $1.5m Sales/Store $3.2m $450k Profit/Store $1.1m 9 # of Stores 12 4% Market Share 9% • Focused strategy initiated in 2011 to grow market share in 13 large and underpenetrated markets representing one-third of U.S. bedding
Slide 22: Deploy Capital Efficiently
22 0 82 150 0 174 239 Deploy Capital Efficiently Return on Invested Capital (ROIC) Total Shareholder Return (TSR) (Through 4/3/15) 1-Year 3-Year 5-Year 2015 Cash Priorities • Fund organic growth • Share repurchases accretive to EPS • Financial flexibility 420% 315% 56% 147% Select Comfort S&P 400 Sp
Slide 23: Independent Board and Progressive Governance Practices
23 0 82 150 0 174 239 Independent Board and Progressive Governance Practices
Slide 24: Key Governance Factors that Support Long-Term Growth
24 0 82 150 0 174 239 Key Governance Factors that Support Long-Term Growth Independent & Diverse Leadership • Separate Chair and CEO roles • 8 of 9 Board members are independent • 3 women; 2 minorities (Daniel Alegre and Brenda Lauderback) • Breadth of senior executive experience across range of are
Slide 25: Board Refreshment, Progression and Diversity
25 0 82 150 0 174 239 Board Refreshment, Progression and Diversity Our Board has engaged in robust succession planning, including continuous assessment of Board skills in the context of our strategic direction and the changing consumer environment. This has resulted in: •New independent Board Chair
Slide 26: Board Effectiveness Norms That Guide Board and Management
26 0 82 150 0 174 239 Board Effectiveness Norms That Guide Board and Management Board Effectiveness Norms: •Establish clear expectations among Board members and between Board and Management •Create expectation that all Board members contribute views on all major decisions, but not monopolize the con
Slide 27: Select Comfort Board Nominees Possess Critical Skills
27 0 82 150 0 174 239 Select Comfort Board Nominees Possess Critical Skills Daniel Alegre Google, Inc. President of Global Partner Business Solutions Stephen Gulis Previously at Wolverine World Wide, Inc. Former Executive Vice President and President of Global Operations Brenda Lauderback Previously
Slide 28: Financial Community Support of our Strategy
28 0 82 150 0 174 239 Financial Community Support of our Strategy Buy-side Support Sell-side Support The company is executing really well. We just don’t see the need for a change at the board level or executive management. -Scott Link, Portfolio Manager at Disciplined Growth Investors (~7% of SCSS)
Slide 29: Blue Clay's Demands
29 0 82 150 0 174 239 Blue Clay’s Demands
Slide 30: Blue Clay's Demands Compromise Select Comfort's Competitive Advantages
30 0 82 150 0 174 239 Blue Clay’s Demands Compromise Select Comfort’s Competitive Advantages Blue Clay Starts with the consumer Designed to compete on product innovationwith exclusive distribution Advertising driving consumer demand & growth Acknowledges changing consumer shopping behavior towards d
Slide 31: Blue Clay Demands Double Store Count
31 0 82 150 0 174 239 BlueClay Demands Double Store Count to 900 -“Immediately & Aggressively” Blue Clay’s poorly-conceived agenda impairs financial flexibility which diminishes our ability to fund our proven growth drivers Drains capital; cash outlay of >$175M Induces risk; adding fixed costs of >$
Slide 32: 2014-2015 U.S. Retail Industry Store Closings
32 0 82 150 0 174 239 2014-2015 U.S. Retail Industry Store Closings Walgreens Plans to Close 200 Stores Pier 1 to close 100 stores over three years Women's apparel retailer Chico's to shut 120 stores by 2017 Macy’s and J.C. Penney to Close Stores Children’s Place Plans to Close to 200 Stores Through
Slide 33: Blue Clay's Demand for 25% Reduction in Advertising
33 0 82 150 0 174 239 Blue Clay stated “TV is not right for the Company”–demands a 25% reduction in advertising as a percent of net sales •Elimination of highest ROI media (TV) reveals Blue Clay’s lack of understanding of our consumer-driven innovation strategy in a low interest category •A reductio
Slide 34: Blue Clay's Nominees Are Not Qualified to Serve on our Board
34 0 82 150 0 174 239 Blue Clay’s Nominees Are Not Qualified to Serve on our Board • Select Comfort Board adheres to a disciplined process to evaluate critical Board member skills based on business needs and the Blue Clay nominees do not meet the criteria established for next Select Comfort Board me
Slide 35: Summary
35 0 82 150 0 174 239 Summary
Slide 36: Select Comfort's Transformative Innovation Strategy is Delivering Shareholder Value
36 0 82 150 0 174 239 Select Comfort’s Transformative Innovation Strategy is Delivering Shareholder Value • Select Comfort’s Board and Management are investing in a consumer-driven innovation strategy that is differentiated in the industry and driving strong results • Our Net Sales and EPS growth in
Slide 37: Strategic and Governance Milestones
37 0 82 150 0 174 239 Strategic and Governance Milestones 2009 2010 2011 2012 2013 2014 2015 Governance Strategic Jean-Michel Valette appointed new Board Chair Two new Board members named (Michael Harrison & Kathleen Nedorostek) Shelly Ibach named to newly created COO role Shelly Ibach named CEO and
Slide 38: Target: More than double EPS to $2.75 in five years
38 0 82 150 0 174 239 Target: More than double EPS to $2.75 in five years 2019 EPS Target 2014 EPS Actual $ 2.75 $ 1.25 Committed to Long-term Shareholder Value Creation 17% CAGR
Slide 39: Appendix
39 0 82 150 0 174 239 Appendix
Slide 40: Adjusted EBITDA
41 0 82 150 0 174 239 Adjusted EBITDA Columns may not foot due to rounding Note: Our Adjusted 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 webelieve
Slide 41: Net income and net income per share reconciliation
40 0 82 150 0 174 239 (in thousands, except per share amounts) 2010 2011 2012 2013 2014 Net income and net income per share Net income - as reported 31,568$ 60,478$ 78,094$ 60,081$ 67,974$ Adjustments - net of income tax (1) : CEO transition costs (benefit) (2) - - 3,654 (351) - Net income - as adju
Slide 42: Return on Invested Capital (ROIC)
42 0 82 150 0 174 239 Return on Invested Capital (ROIC) ROIC is a financial measure that we use which quantifies the return we earn on our invested capital. Management believes ROIC isa useful metric for investors and financial analysts. Our definition and calculation of ROIC may not be comparable t