Slide 1: Select Comfort: Creator of the Sleep Number Bed
select @ comfort. CREATOR OF THE SLEEP NUMBER’ BED
Slide 2: Forward Looking Statements
Statements used in this presentation that relate to future plans, events, financial results or performance are forward-looking statements that are subject to certain risks and uncertainties including, among others, such factors as general and industry economic trends; uncertainties arising from glob
Slide 3: Realizing a Mission
“Realizing a Mission” Bill McLaughlin Chairman & CEO
Slide 4: Select Comfort Profile
Select Comfort Profile Minneapolis, MN based Founded in 1987; IPO in 1998 Vertically integrated - we design, make and sell a complete line of adjustable firmness beds and accessories Self-funded business model
Slide 5: Select Comfort Profile
Select Comfort Profile Industry disruptor § Differentiated product § Building brand awareness § #1 U.S. bed retailer Advantaged business model § Few plants (2) § Controlled distribution § Nationwide delivery Management expertise Focus, mission & culture
Slide 6: Attractive Investment Opportunity
$0 $1000 2005 2001 Net Sales, in $millions $(0.50) $1.00 Earnings Per Share, in $ $0 2005 2001 $1.2B Market Capitalization Attractive Investment Opportunity
Slide 7: Positive Industry Dynamics
Mattress Unit Shipments (in millions) 1985 2005 Cumulative Average Growth Rates Units Revenues 5-Year 1.6% 6.8% 10-Year 2.6% 7.2% 20-Year 2.7% 6.8% Source: International Sleep Products Association (ISPA) and company information Positive Industry Dynamics
Slide 8: Positive Industry Dynamics
National Market Share 5.5% Mattress Unit Shipments (in millions) 1985 2005 Cumulative Average Growth Rates Units Revenues 5-Year 1.6% 6.8% 10-Year 2.6% 7.2% 20-Year 2.7% 6.8% Positive Industry Dynamics
Slide 9: Positive Industry Dynamics
Mattress Unit Shipments (in millions) 1985 2005 Cumulative Average Growth Rates Units Revenues 5-Year 1.6% 6.8% 10-Year 2.6% 7.2% 20-Year 2.7% 6.8% Source: International Sleep Products Association (ISPA) and company information < 10% ~ 20% > 20% Lead Market Share National Market Share 5.5% Positive
Slide 10: Starts with Differentiated Product/Service
“Get down before you hurt yourself.” Starts with Differentiated Product/Service
Slide 11: Unique, Proprietary Product
Unique, Proprietary Product Adjustable firmness beds § Clinically proven § Personalization § Health & wellness trend § Priced for broad market acceptance
Slide 12: Traditional Business Model: Manufacturing and Marketing
and Marketing Manufacturing Traditional Business Model
Slide 13: Advantaged Business Model
Marketing Selling Manufacturing Delivery Service Referral Advantaged Business Model Build-to-order Controlled distribution Low inventory, just-in-time system Nationwide delivery After-sale support Customer loyalty
Slide 14: Focused Management
Board of Directors Management Focused Management
Slide 15: Strong Track Record of Performance
ISPA CAGR 6.8% Revenue Growth (in %) Source: International Sleep Products Association (ISPA) and company data 2000 1Q06 (10)% 40% 20% 2005 2004 2003 2002 2001 Strong Track Record of Performance
Slide 16: Consistent Strategies 2001-2006
Consistent Strategies 2001-2006 Awareness Distribution Innovation Leverage Expand People & Systems
Slide 17: Building Brand Awareness
$0 10% 14% As %Revenue $120 2006E 2001 Media Spending Building Brand Awareness
Slide 18: Strength in Numbers
“Strength in Numbers” Jim Raabe Chief Financial Officer
Slide 19: Multiple Sources of Growth
Sources of Growth Same Store New Stores Retail Partners New Channels/ Geography Retail Partners - 3% Other - 4% Direct - 11% eCommerce - 5% 2005 Revenue Mix - $691.1M Multiple Sources of Growth
Slide 20: Significant Operating Leverage
-0.3 2001A $1.2 B Net Sales 2005A Operating Margin % 0.9 0.6 0.3 -5% 20% 15% 10% 5% 2005 - 2007 Points of Operating Margin Gross margin -- Marketing expense ~0.5 Selling expense ~1.0 General & administrative expense ~0.5 Significant Operating Leverage
Slide 21: On Track to Realize Milestone
-0.3 2001A 2007E $1.2 B Net Sales 2005A Operating Margin % 0.9 0.6 0.3 -5% 15% 10% 5% Long-Term Guidance Revenue + 15 ~ 20% Earnings + 20 ~ 25% 2006 Guidance Revenue at high-end of L-T target Post-split earnings of $0.91 ~ $0.95 $1.0B 12% On Track to Realize Milestone
Slide 22: Self Funded Growth
Operating Cash Flows Capital Expenditures Free Cash Flows $0 $100 2006E 2003 2005 2004 2001 $(50) 2002 In $millions Self Funded Growth
Slide 23: Balance Sheet Strength
Cash and Debt (in $millions) Shares (in millions) O/S Buy-back Cash Debt In $Millions 2004 2005 Cash & Mkt. Sec. $ 91.7 $112.1 Inventory 20.5 22.0 Receivables 8.6 10.1 Customer Prepays (9.4) (14.7) Payables (26.3) (31.7) Debt -- -- Equity 114.3 121.3 In Days Inventory 32 28 Receivables 5 Payables (4
Slide 24: Mission and Vision
Mission: To improve lives through better sleep. Vision: To be a leader in sleep.
Slide 25: Unique Investment Opportunity
Unique Investment Opportunity Positive industry dynamics Unique, proprietary product Advantaged business model Strong experienced leadership team Strong track record of performance Self-funded growth
Slide 26: Select Comfort Corporation Investor Relations
Select Comfort Corporation Frank Milano - Director, Investor Relations 6105 Trenton Lane North Minneapolis, MN 55442 Tel: 001-763-551-6908 frank.milano@selectcomfort.com