Sleep Number Corporation · NASDAQ:SNBR
Sleep Number — Select Comfort — Shareholder Meeting (May 2005)
46 slides from Sleep Number's shareholder meeting presentation, May 12, 2005
Slide 1: Annual Meeting of Shareholders
o CREATOR OF THE SLEEP NUMBER’ BED Annual Meeting of Shareholders May 11, 2005
Slide 2: Welcome
select @comfort CREATOR OF THE SLEEP NUMBER® BED WELCOME 2005 Select Comfort Shareholders Meeting
Slide 3: Agenda
Agenda Welcome/Introductions Formal Business Shareholder Voting Business Overview/Outlook Voting Results Q&A Bill McLaughlin Mark Kimball Mark Kimball Jim Raabe Bill McLaughlin Robin Mears Mark Kimball
Slide 4: Introductions
Introductions = Board of Directors m Senior Management
Slide 5: Mark Kimball, Senior Vice President, General Counsel
o CREATOR OF THE SLEEP NUMBER’ BED Mark Kimball Senior Vice President, General Counsel
Slide 6: Introductions
Introductions a KPMG a Wells Fargo
Slide 7: Formal Business Agenda
Formal Business Agenda m Election of Directors ma Amendment of Employee Stock Purchase Plan a Ratification of Appointment of Independent Auditors
Slide 8: Election of Directors
Election of Directors Board Nominees Christopher P. Kirchen Brenda J. Lauderback Michael A. Peel Jean-Michel Valette
Slide 9: Amendment of Employee Stock Purchase Plan
Amendment of Employee Stock Purchase Plan m Increase price payable by participants from 85% of Fair Market Value to 95% of Fair Market Value m Increase number of shares reserved for issuance from 1,000,000 to 1,500,000
Slide 10: Independent Auditors
10 Independent Auditors Ratification of Selection of KPMG LLP to serve as Independent Auditors for 2005 Fiscal Year
Slide 11: Shareholder Voting
ul Shareholder Voting m Election of Directors ma Amendment of Employee Stock Purchase Plan a Ratification of Appointment of Independent Auditors
Slide 12: Forward Looking Statements
12 Forward Looking Statements a Cautionary statements = Certain risks on forward looking information Statements used in this presentation that relate to future plans, events, financial results or performance are forward-looking statements that are subject ta certain risks and uncertainties including
Slide 13: Business Update
select @comfort CREATOR OF THE SLEEP NUMBER® BED Business Update
Slide 14: Jim Raabe, Chief Financial Officer
o CREATOR OF THE SLEEP NUMBER’ BED Jim Raabe Senior Vice President, Chief Financial Officer
Slide 15: 2005: Execution and Growth
2005: Execution and Growth 15 Unit Growth Marketing Productivity Distribution Expansion Radisson Placements and Referrals Margin offset to inflation People/Culture
Slide 16: A Strong Start to 2005
A Strong Start to 2005 Sales Operating Profit EPS Cash 1st Quarter Versus 2004 $172.8M + 23% $ 13.4M +17% $ 022 + 22% $101.2M +$17M Stock Repurchases ($7M in Q1, $27M last 12 months) 16
Slide 17: 2005 Outlook
2005 Outlook ($MM) Net Sales +h Same store sales EPS Operating Margin Capital Expenditures Free Cash Flow 7 Guidance 2005 +18% - 20% 7% - 12% $0.98 - $1.06
Slide 18: Bill McLaughlin, Chairman, CEO and President
select @comfort CREATOR OF THE SLEEP NUMBER’ BED Bill McLaughlin Chairman, CEO and President
Slide 19: Sustained Revenue Growth
Sustained Revenue Growth Net Sales $800 $700 $658 $670 $600 $336 $270 $262 $200 $100 $0 + 00 102030405 19 REATOR °
Slide 20: Demonstrated Growth Opportunity
Demonstrated Growth Opportunity EPS $150 $0.98 - $1.00 $0.50 $000 7 (6050) (60.41) ($1.00) 1490-89) 20 REATOR °
Slide 21: Not Complacent
a Not Complacent “thou will do well in commerce as long as thou does not believe thine own odor is perfume” Chairman of Bear Stearns Alan C. Greenberg lect Comfort _ Board Member Mount Everest May 2003
Slide 22: Mission and Vision
Mission: Vision: Improve peoples lives through better sleep Leadership: Changing the way the world sleeps
Slide 23: Early Growth Opportunity
B Early Growth Opportunity 5% Share of US Industry ($) National Lead Markets Minneapolis Denver 90% of Adjustable Firmness St. Louis select comfort
Slide 24: Building Blocks of Growth
Building Blocks of Growth m Consumer Trend m Product/Brand a Distribution/Expansion Delivering The Key to 8 perfect ( i Opportunities m Business Model a People 4 0
Slide 25: Consumer Demand for Quality Sleep — Strong Trend
Consumer Demand for Quality Sleep — Strong Trend AL. m Demographics = Health Awareness m Sleep Awareness § Quality Beds Leading 5 Industry Growth lec °
Slide 26: Sleep Number
SLEEP NUMBER m Awareness = Credibility = Trial a Improved lives 26
Slide 27: Sources of Competitive Advantage
Sources of Competitive Advantage n Unique product/Supply Chain Brand Controlled distribution Integrated business model “Secret Ingredient”
Slide 28: Advantaged Business Model / Self-funded Growth
Advantaged Business Model/ Self-funded Growth 2B Cashi/Debt
Slide 29: Secret Ingredient — Customer Passion
“Secret Ingredient” — Customer Passion ] Now we cant wait to go He's a much happier sf to sleep each night. . 3 . ‘guy now that he wakes up . without back pain. 29 lec °
Slide 30: Customer Loyalty: Our Secret Ingredient
select @comfort CREATOR OF THE SLEEP NUMBER® BED Customer Loyalty: Our Secret Ingredient May, 2005 Robin Mears
Slide 31: Customer Loyalty as an Explicit Strategy
a1 Customer Loyalty as an Explicit Strategy ach ie Understand it, grow it and leverage it.
Slide 32: What is Loyalty?
2 What is Loyalty? Loyalty is more than satisfaction... It’s: = A strongly held preference a An emotional attachment u A deep level of engagement and commitment ._.that drives behavior
Slide 33: Loyal Customers Drive Business Results
3 Loyal Customers Drive Business Results Loyal Customer o» Baikal / : 4 oy coves i se 8 Cost Less to Serve
Slide 34: Select Comfort Loyalty Indicators
Select Comfort Loyalty Indicators verall Custome Loyalty Advocacy Preference uu Customers’ likelihood to: § = Repurchase again if had to do all over = Choose a hotel if had Sleep Number Beds
Slide 35: Some Survey Highlights
35 Some Survey Highlights
Slide 36: Customer Loyalty
Customer Loyalty Current owners are highly committed to Select Comfort, exhibiting strong preference and advocacy intentions and heaithy future purchase intentions. 92% 76% Repurchase Choose Hotel with Beds Preference 93% 81% Recommend. Actively Encourage. + Purchase More Beds for Self..........67%
Slide 37: Actual Customer Behavior
Actual Customer Behavior Word of Mouth Mean 15.59 people (20.52 for long-term customers!) Happy Customers Impact > 94% have spread positive word-of-mouth | Bed Purchases from Customer Referral about Select Comfort and their bed! ee =| & 37 aa:
Slide 38: Overall Performance
Overall Performance Sefect Comfort has done a great job of positioning and delivering on its premium-based value proposition. Senin My 24% Excellent/Very Good ae 85% ExcellentiVery Good 87% Excellent/Very Good 38
Slide 39: Brand Associations
Brand Associations Emotional Connections Customers feel a strong emotional attachment to the Select Comfort brand Area’s of Brand Strength: + Premium Brand + Customer Focused + Known for High Quality - ing up to Promises + Innovative + Easy to do Business With + Committed to Improving Sleep + A Slee
Slide 40: Summary
Summary This is a story of success as well as opportunity + Select Comfort is delivering on its core value proposition and creating passionately loyal customers as a result. « There is a ready (and large) base of existing customers who can be stimulated to act on their willingness to serve as advoca
Slide 41: Mission Driven — Select Team
Mission Driven — Select Team Manufacture 7] ah ry
Slide 42: More than Doubled Company Size in Past Five Years
More than Doubled Company Size in Past Five Years 42 Revenue Operating Profit Sef £ 8 8 2000 2005
Slide 43: Goal: $1 Billion+ and 12%+ Margin by 2007
Goal: $1 Billion+ and 12%+ Margin by 2007 $1,200 $1,000 $800 $600 $400 $200 $0 43 Revenue Profit $130 $100 $70 40 a . «oo = 2000 2005 2007 2000 2005 2007
Slide 44: Thank you for your support
Thank you for your support =m) ee = 2004 a good year, but we r ; a can and will do better = Bold expectations for next Sree 5 years \m Many customers in need of personal comfort and > Ne better sleep select @comfort
Slide 45: Shareholder Vote Results
o CREATOR OF THE SLEEP NUMBER’ BED Shareholder Vote Results Mark Kimball
Slide 46: Searchable text section of graphics shown above
Searchable text section of graphics shown above [ LOG O] Annual Meeting of Shareholders May 11, 2005 [ GRA PHIC] WELCOME 2005 Select Comfort Shareholders Meeting Age nda • Welcome/Introductions Bill McLaughlin • Formal Business Mark Kimball • Shareholder Voting Mark Kimball • Business Overview/Outlo