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Select Comfort Buys Competitor in $15.5M Deal

South Carolina-based Comfortaire, which makes “adjustable air-supported sleep systems,” had revenues totaling $10.5 million in 2012.

Select Comfort Buys Competitor in $15.5M Deal
Select Comfort Corporation—which makes Sleep Number adjustable beds—recently acquired a key competitor in a deal valued at $15.5 million.
 
Last week, the Plymouth-based company made headlines when it released its fourth-quarter financial results—which revealed a jump in sales and a decrease in net income.
 
While announcing the results, Select Comfort revealed that it recently bought the business and assets of Comfortaire Corporation.
 
The purchase of Greenville, South Carolina-based Comfortaire, a manufacturer and marketer of “adjustable air-supported sleep systems,” closed January 17. Select Comfort bought Comfortaire from mattress manufacturer Park Place Corporation.
 
Comfortaire, a private company that was founded in 1981, had 2012 revenues totaling $10.5 million—and Select Comfort President and CEO Shelly Ibach referred to it in a statement as “the second-largest adjustable air-bed company.” Comfortaire employs 24, and Select Comfort said that it will operate the business through an independent subsidiary.
 
“This investment progresses our role as the leader in delivering innovative products as part of an individualized sleep experience, while also strengthening our company’s competitive advantages,” Ibach said in a statement. “Specifically, with Comfortaire, we anticipate benefits from the convergence of intellectual property.”
 
Comfortaire’s website makes no secret of the fact that Select Comfort was a major competitor. In fact, the company points out that it was around “long before there was a Sleep Number Bed” and claims to have a better warranty than Select Comfort.
 
Select Comfort’s sales for the fourth quarter that ended December 29 increased 16.7 percent to a record $220.6 million, but net income for the period fell 18.7 percent to $12.5 million, or 22 cents per share. (Fourth-quarter 2011 results included a $1.9 million income tax benefit.) Analysts polled by FactSet expected earnings of 32 cents per share and sales totaling $229.8 million.
 
Ibach said that fourth-quarter results were hurt by “a significant sales slow-down the last two weeks of December,” and the company said that earnings during the fourth quarter included expenses related to sales, marketing, and research and development costs.
 
For the full year, net sales grew 25.6 percent to a record $935 million. Net income, meanwhile, increased 29.1 percent to $78.1 million.
 
Ibach said that sales have “quickly normalized” in the first few weeks of 2013 and vowed that Select Comfort will continue to work toward its goal to reach $1.5 billion in sales and 15 percent operating margin by 2015.
 
The company sees a bright 2013. It expects full-year earnings to reach between $1.65 and $1.80 per share, representing a 15 to 26 percent increase over the adjusted $1.43 per share that it reported in 2012.
 
The company, which opened 57 new stores and closed 28 in 2012, plans to boost its store count from 410 at the end of 2012 to between 435 and 445 by the end of 2013.
 
Select Comfort is among Minnesota’s 40-largest public companies based on revenue.
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