Sleep Number Corp (SNBR) 2009 Q4 法說會逐字稿

Welcome to Select Comfort's fourth-quarter 2009 earnings conference call. All lines have been placed on a listen-only mode until the question-and-answer session. Today's call is being recorded. If anybody has any objections, you may disconnect at this time. And I would now like to introduce Mr. Jim Kimball, general counsel. Sir, you may begin.

Thank you, Melanie. Good afternoon and welcome to Select Comfort Corporation's fourth-quarter and year-end 2009 earnings conference call. Thank you all for joining us. I'm Mark Kimball, Senior Vice President and general counsel. With me on the call today are Bill McLaughlin, our President and Chief Executive Officer, and Jim Raabe, our Senior Vice President and Chief Financial Officer. In a moment, I'll turn the call over to Bill. Following our prepared remarks, we will open the call to your questions. Please be advised that this telephone conference is being recorded and will be available by telephone replay. It also will be archived on our website selectcomfort.com. Please refer to the details set forth in our new release to access the replay on our website. Please also refer to our news release for a reconciliation of certain non-GAAP financial measures included in the release, or that may be discussed on this call.

The primary purpose of this call to discuss the results of the fiscal period just ended. However, our commentary and responses to your questions may include certain forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties outlined in our earnings release and discussed in some detail in our annual report on Form 10-K and other periodic filings with the SEC. The Company's actual future results may vary materially.

I will now turn the call over to Bill for his comments.

Good afternoon, and thank you for your time and interest in Select Comfort. As you can see from today's news release, the quality of our fourth-quarter achievements represent a fitting end to a remarkable year, and a new base upon which to project an exciting future. Without a doubt, 2009 was a year of significant challenge, and substantial progress at Select Comfort. Specifically, costs were restructured allowing us to be profitable on lower sales; new messaging around the Sleep Number brand's uniqueness and value was developed, which restored consistent growth in units, revenue and share; and we address our capital structure for increased flexibility and business continuity. Not only do our fourth-quarter results demonstrate the progress that we've made against these strategic priorities, but they also underscore the significant leverage that exists in our business.

In the fourth quarter, total Company revenue was up 4% versus prior year, and increased 9% when adjusted for the incremental week in last-year's quarter. This sales growth was achieved with 14% fewer Company-owned stores and approximately 700 fewer wholesale partner doors, as we repositioned our distribution to our core strength. On a same-store basis, revenue increased 23% and units were up more than 22%. This strong performance built upon third-quarter same-store revenue comp of 9%. Margins improved due to our restructuring efforts. Gross margin was 62.9%, up 700-basis points versus prior year, and cash from operations in the quarter was $14 million, and we raised $26 million in equity financing. This completed a year-long effort to strengthen our balance sheet and improve our capital structure. Within the context of a more restrictive credit environment, we successfully paid off close to $80 million in debt and ended the year debt free with a positive cash balance.

In 2009, we established a base of learning to build upon in 2010 for continued profit improvement and preparation for growth. Specifically, as it relates to bran -- to the brand, we have proved the importance and the power of our core brand message, media and distribution strategies. The Sleep Number brand has a distinct competitive advantage that consumers find important, the ability to experience truly individualized comfort. Sleep Number beds are uniquely designed and clinically proven to provide people with better pain-free sleep that is personalized to meet each individual's unique need. Also important to today's consumer is value, which we stressed in 2009, relaunching our entire bed line and adopting new promotional strategies in an effort to help our customers understand the affordability of our products. As we refined the message, we also took steady and more efficient approach to our media plan, consistently supporting consumer awareness throughout the year, with incremental spending throughout key consumer shopping periods emphasizing value and urgency.

Lastly, we focused on our Company-owned distribution channels. Select Comfort sales professionals are best able to demonstrate the unique value of our products to consumers. We also reset the density and spacing of our stores within markets to drive higher same-store sales, profits, productivity, while reducing capital deployed. Next we reestablished the leverage potential of our business model, both at margin and in cash. In 2009 we realigned our distribution to the most productive core. In doing so, we demonstrated the ability to drive significantly-higher sales at existing stores, increasing average annual sales per store to just over $1 million, still with room to grow and surpass our historic productivity peak of $1.5 million per store. Also pertaining to leverage, we were careful to preserve infrastructure and capacity to grow, as we restructured in 2009. We believe we now are positioned to achieve margins above historic levels in the next several years. And finally, we improved our capital structure and our intention is to further strengthen it in the coming year.

As we look ahead to 2010, we believe the environment remains uncertain, particularly in the second half of the year. While January sales have continued the strong momentum we saw in the fourth quarter, we are being careful not to get out in front of ourselves in our plans for 2010 Our preference in this environment is to spend behind proven growth, taking advantage of our business model's responsiveness to capitalize on new opportunities as they are identified. If the economy demonstrates sustained recovery, and/or if our programs perform above our plans, then there is upside potential for this outlook.

With this backdrop we have three primary areas of focus in 2010. The first is to accelerate profitable growth and improve consistency of performance. As I stated, we will build upon the success and learnings of 2009 with continued emphasis on optimizing our message, our media, and our sales channels. Second we are focused on delivering a new standard for individualized customer experience in our industry. Our current level of customer satisfaction and referral is strong. We do, though, believe we can go further because of our unique product and integrated business model. From product design and performance to customer insight and each owner's lifetime experience with our Company, we have unique advantages and opportunities and we are committed to making them even better. By doing so, we will ensure more consistent and powerful growth and even greater share in the years to come. And third is to further strengthen our financial position, increasing our cash balance and remaining debt free.

To summarize, 2010 marks a new beginning for Select Comfort. We have taken valuable learnings from the past and applied them to drive growth in to the future. We are well positioned to increase profit performance under today's uncertain market conditions, and are also ready to capitalize on market recovery whenever it takes place.

Now I'll turn the call over to Jim, who will provide additional perspective about the economics of our business model and on our outlook for next year. Jim?

Thanks, Bill. As Bill noted, we're very pleased with our results, which demonstrate continued improvement in sales, profits, cash, and balance sheet strength and flexibility. We have reported both GAAP and adjusted earnings numbers for 2008 and 2009. The adjusted numbers normalize our results by excluding items specific to the economic crisis and our turnaround. We believe that the adjusted numbers are the best starting point for evaluating our progress from 2008 to 2009, as well as setting a baseline for how to assess our performance going forward. On an adjusted basis, we reported 2009 fourth-quarter earnings of $0.08 per share as compared to a net loss of $0.26 per share in 2008. For the year, adjusted earnings were $0.25 per share compared to a net loss of $0.51 last year. Two notes about our financial result that I would add to Bill's highlights.

First, one of our most significant accomplishments is the return to sustainable cash generation, with EBITDA in the year totaling $42 million. As per our credit agreement, EBITDA is equal to net operating profit, plus all non-cash charges, including depreciation, amortization, noncash compensation and asset impairments. While a number of actions contributed to the elimination of $80 million in borrowings over the last 12 months, our ability to return to solid EBITDA performance demonstrates we can generate the cash necessary to fund future growth without additional external financing. Second, the actions we took during the past 12 months effectively reset our core business. Our fourth-quarter financial results are largely representative of our cost structure going forward, and provide the baseline against which we expect to improve margins. One item that is not representative is a $1.6 million charge for contingent liabilities, which were accrued in the fourth quarter. From a distribution standpoint, we have realigned our store base and eliminated our retail partner program in markets with retail stores to improve productivity of our stores.

From a product standpoint, our supply chain is operating efficiently with gross margins at sustainable levels. While we've eliminated a significant amount of cost during the past 12 months, our business model has the flexibility and available capacity to grow, and requires only minimal cost additions as sales increase. Our manufacturing process is largely variable, with 10% of cost of goods fixed. This model allows us to maintain gross margins in a tight range, and while the low cost (inaudible) -- while the low-cost base does not provide significant gross margin leverage with growth, we have consistently delivered lower cost of goods and higher gross margins by controlling the supply chain for a product designed to customer delivery, and by working closely with our supply partners. Further, while oil is our largest commodity input, the impact of changes in oil prices has not been significant, despite the volatility of oil costs in recent years. The remainder of our cost structure is largely fixed or discretionary and does offer leverage with growth.

Variable selling and marketing costs represent 12% of sales. Unlike most retailers, our stores are showrooms, and we have relatively-low transaction volume, so increases in sales do not require proportionate increases in inventory or staffing. Overall we normally see a variable margin flow through of more than 50% on incremental changes in sales. The offset against this margin expansion is investment in media and growth in the store base. Media is the discretionary item, but we manage it as a variable cost equal to 12% of sales. Bottom line is that we believe we can flow through 30% of incremental sales on a near-term and long-term basis, inclusive of store growth and increases in media investments.

For 2010, our focus is on improving operating margins and earnings per share, while assuming a difficult economic environment. Our goal is to improve EPS on an adjusted basis by 30% to 50% to between $0.32 and $0.38 per diluted share. From a sales perspective, our visibility to longer-term sales trends remains limited, so we have taken what we feel is a prudent approach to planning for 2010. As a starting point, our baseline for sales from 2009 is $509 million, which excludes the annualized impact of store closures and retail partner terminations. From there we expect to grow our business, primarily through positive same-store growth throughout the year. Early 2010 sales trends have been encouraging, although comparisons get more difficult as the year progresses. We expect to improve profitability, assuming this outlook on sales, while positioning our business for profit leverage should sales growth be more robust. We plan to increase operating margins by more than 150-basis points as compared to 2009 as adjusted margins, even if sales were to be slightly less than in 2009.

Gross margins in 2010 should be in line or slightly higher as compared to 2009, and we are lower our sales, marketing, and G&A expenses as a percentage of sales. 2010 results will benefit from the annualization of 2009 cost restructuring, while we generate additional productivity by continuing to rationalize our store base around larger trade areas. Media spend will be slightly higher than a year ago, and we are prepared to further increase media investment as sales and macroeconomic conditions dictate.

A few additional data points that may be helpful for those modeling our business. First, interest costs are projected at $2.5 million on little or no debt as we amortize costs under our existing credit facility. Second, we expect that income tax rates will approximate 38%. And finally, our share count for EPS purposes will be approximately 56 million shares. Admittedly others in the industry are predicting a more reboast recovery, particularly for mattresses. We hope their predictions are correct, and we're prepared to take advantage of that recovery whenever it occurs. We are operating the business for the long run, and are excited about our potential to exceed historical sales and margin levels as growth returns.

I'd now like to turn it back to Bill for the final comments.

Thanks, Jim. I think I speak for most of my colleagues when I say that 2009 was one of the toughest years in my career. However, it was also one of the most satisfying, as we overcame many significant hurdles to get to where we are today, and we wouldn't have overcome these hurdles without the dedication of our employees, the cooperation of our suppliers and vendors, and the support of our other partners. Thank you. You all are absolutely essential to the tremendous success of 2009. And Select Comfort is well positioned for 2010 and beyond. We are committed to improving profitability in the near term, to enhancing our core competitive advantages for longer-term growth, and continuing to strengthen our cash position. More important we are motivated to advance our mission, to improve more people's lives by increasing the number of people sleeping on our bed, and benefiting from individualized comfort and better sleep. Again, thank you for your time and interest. We believe this is an opportune time for investors to learn about Select Comfort, given the power of the turn around that we're driving, the strength of our business model, and the profit and cash flow that can result from even moderate increases in sales trend.

I'd like now -- I'd like to now turn the call over to our operator, Melanie, for questions. Thank you.

Thank you. (Operator Instructions) . Our first question is going to come from Budd Bugatch. Your line is

Good afternoon, Jim. Good afternoon, Bill. Congratulations on the turnaround. It's nice to see, and nice to see the operating performance and the balance sheet, so congratulations on that.

Thanks, Budd.

Couple of questions. Can you give us -- you told us positive comps throughout the year and I know the -- as you get through the second half the comparisons get more difficult. Can you give us a feel of where you think overall for the year, and how that does progress for comps?

Sure, Budd, I -- we're not providing specific same-store growth guidance, but what I would say is that our goal and our expectation is to exceed market trends and market growth throughout the year. We do see the market a little bit more cautiously than I think some of the predictions are, but I think that we still are confident in the things that we're doing, and actually the performance that we're seeing right now, so that we're confident that we can exceed those market trends.

Well, if we pinned a mid single digit for the full year, would that be in the range of what your thinking would be for comps?

Well, I think the market -- if the numbers are at 7% or 8%, like I said, we're -- we would say that maybe that's a little bit aggressive, but I think that we think we can outperform whatever that market is.

Yes. Well the numbers go from like 2% to 7% if you look at various predictions that are out there from the media side, so -- okay. And when we're looking at an average selling price per bed right now, what are we looking at? What id we come up with in the fourth quarter? How did that look?

We ran pretty consistently with where we were in the third quarter, $1.755 million.

I'm sorry?

I mean $1,755.

I didn't get that again. Per bed?

The three-month number, Budd, in the release is $1,755.

Okay, thank you. Okay. And just a couple of questions on tax to make sure I understand it. Right now the tax accounting will be normalized going forward at 38%; is that what you're telling us?

That is correct?

Okay. All right, I'm -- last question. Are there planned -- any store planned -- store closures planned going forward, or have you gotten all of that done?

No, there will continue to be some store closures. We're continuing to rationalize the store base, and as much as anything, I would say get the distribution of that store base correct on a market-by-market basis, which means there will be some store closures. There will be some store closures accompanied by some store openings in some stronger retail locations, but I think our expectation for the year is that net we would end up in that 380 to 390 stores by the end of 2010.

Okay. Thank you very much and congratulations again.

Thank you.

Our next question will come from John Baugh. Your line is open.

Good afternoon, I'll add my congratulations, as well. A couple of things, quickly. One, you mentioned a $1.6 million charge relating to the continued liabilities accrued in Q4. What line item did that show up in, Jim? And is that buried in the $0.08 ,as well? In other words, it would have been higher than that if you exclude that?

That is correct. The $1.6 million shows up in G&A expenses, and it is just some -- we accrued contingent liabilities related to some supplier situations that we have, nothing that impacts us on a go-forward basis, and that we're fully reserved for now, but it is kind of exclusive to Q4 of 2009.

Okay. So that would put you closer to $11.1 million in the G&A line and I recall the first quarter of 2009 had an outlier in it, as well, of 13.3 million of a year ago first quarter. So are we looking at that G&A number in the $11million to $11.5 million a quarter range, or will it be higher than that? Where do bonuses fall, et cetera?

It would be in that rage $11.5 million to $12 million, roughly, and bonuses fall into that number, but obviously, bonuses can have an impact on quarterly and annual basis depending on how the performance is overall. But I think at the starting point that $11.5 million is a good number.

Okay. And could you comment in the fourth quarter on the mix of what you saw going out the door. We see the average selling price so that looked very solid. Were you still discounting very aggressively at the high end? Just some flavor on what you did in the merchandising and discounting and promotion in Q4.

Well, John, I'm going to back up and just talk about our value strategy for the year, and then I'll just bring it forward to the fourth quarter. We've understood that the consumer in this marketplace is very motivated by value, and we understood at the beginning of the year that consumers did not understand the value that we offered in general. They thought we were a $3,000, $4,000 a bed product. Early in the year, about a year ago this month, we revised the whole product line, relaunched everything in the product line, and renamed everything, which allowed us to better communicate value, and then we accompanied that with a promotional strategy that was -- that allowed us to focus on the entry-level price points, but then have reasons for customers to move themselves up through the line. That strategy really has not changed through the year, so in the fourth quarter, we continued to promote about the same way as we had through the year, with a strong entry offer and then some trade-up offers, as well.

Okay. And is that the -- more or less a strategy, you think Bill for this coming year? Will there be any major changes to that?

I think it'll be evolution of it, but no major changes. It has been successful. It -- we believe there are still a lot of consumers out there who will benefit from understanding the value of our product and as we move them into our stores, they get the full selection of our offering. So, yes, that strategy will continue.

Okay. And I think if I calculated it right the media spend in the year just ended is around 11% or 11.2% of revenue. You mentioned you want to take it up to the 12% number. Just confirm that I heard that correctly. And then what about the sales and marketing piece, you made a comment about that, I think being lower as a percentage of revenue. If so any color on how that can get leverage going forward, particularly with the high first quarter of 2009 spend in that line item, as well?

Well, media last year was closer to the 12%, and that's about where we'll continue to peg it for the year to come. And then I think that the reference to sales and marketing was in Jim's -- where the concept is that we will be particularly leveraging the selling costs as we drive same-store growth on a lower store base.

And John, I would add to that, on the media side, in the first quarter in particular, a year ago, the media rates were very favorable, so we did get a little bit more benefit in the first quarter a year ago, which now we're lapping, but that was only a first quarter event, but that does take the percentage up a little bit this year.

Okay. And then -- I hate comps, but we got to talk about them, because everybody focuses on it, and it all -- obviously the first thing hinges on what happened in the year-ago quarter, and the quarters compare very differently the first half of this year, versus the first half of last year compared to the second half. Any way to think in light of a 9% and a 23%, you still had negative comps in the first and second quarters last year compared to the prior year of how -- if you continued at the same rate, if you will, from where you were in December quarter and/or January, where that comp number would fall out on a year-over-year comparison?

Well, I think it's safe to say that, to your point, the comps are much easier in the first half of the year and therefore, much easier to see a strong comp in the first half. The -- and as we said earlier,January and early 2010 trends have continued from what we saw in the fourth quarter, so we are seeing a good strong continuation of sales trends into 2010. It obviously gets a little bit more difficult to predict when you start lapping, a little bit more difficult comps as we go through the year, and then layering on top of that some of the uncertainties in the economic environment around interest rates and those types of things, but I think you're thinking about it the right way. We would expect to have a continuation of good strong comps, but at a decreasing rate throughout the course of the year.

Okay. And Jim, what were fully diluted shares outstanding at the end of the quarter?

The fourth quarter number was about 51 million shares --

So it was a weighted average?

-- was the weighted average, and then the actual shares outstanding at the end of the fourth quarter, I think was like 53.9 million, so it was right at a 54 million share count.

Okay. And why do we go to 56?

Well, the 56 is just the impact of the dilutive effect of outstanding options under the treasury method, so it's just --

Okay.

It's going to be dependent on where the stock price falls out, but there will be some increment to that 54 million share base.

Great, thank you.

And I currently show one more question in queue. (Operator Instructions). Our last currently in queue comes from Brad Thomas. Your line is open.

Thanks, good afternoon, and let me add my congratulations, as well, Bill and Jim, nice job turning things around here this year.

Thanks, Brad.

Bill, just wanted to follow up on your point of focusing on accelerating profitable growth this year. You alluded to your message, media opportunity, and sales a channels, are there specific initiatives that are going to be really new and incremental, or is this really a continuation of what we've seen over the past several quarters?

I would say it's more of a continuation or evolution of the learning that we got from last year. We believe that we have the right message around the Sleep Number brand, and it's uniqueness -- unique features and benefits. We do believe we can continue to improve upon that base, though. For example, we're working on how to really leverage the store experience and the store locations more because, as we get people interested in the product, we can do a more effective job, we believe, driving them to our stores. Similarly, our selling team is -- has improved through the year, and does -- is doing a great job capitalizing on those inquiries that come to the store. So it is more of the same, but with continuous improvement and evolution along that way, both on creative and media.

Okay. And then just a follow up on sales trends by the different price points. Could you give us a little bit of color on how the C versus the P versus the I line performed, or those kind of place points versus a year ago?

I think we've seen good strong performance across the product line. With a specific comparison to the fourth quarter a year ago, we were extremely aggressive at the entry level as we were developing this kind of promotional strategy, so the mix was a little bit lighter a year ago than it is today. As we've gone through the year we've adjusted the promotional strategies to not only maximize the volume, but also make sure we're maximizing the step-up, where appropriate, to the higher price points, and that's a good part of the margin improvement that we've seen over the course of the year. But we really continued to see good strong reception across the line -- across the product line.

And as we think about that average price point, the $1,750 range, do you have goals or thoughts about where that could go next year?

It's been pretty consistent at that point for the last three quarters, and we're focused on driving gross margin dollars, which in some cases will drive that price point down, and at other times of the year will drive it up, but I think we feel pretty good about that price point -- or that average selling price, generally speaking.

Okay, and then just a follow up. Obviously you alluded to gross profit dollars. Jim, I think you mentioned gross margin probably at sustainable levels as we look out to 2010. I think you still have another quarter or so of anniversarying some of the initiatives you put into place to help drive gross margin improvement. Would you bias be that perhaps there could be some upside here, or do you think you would maybe take some savings, reinvest those in driving more the gross profit dollars? Is that how we should think about things?

Yes, I would think about -- for a full-year gross margin rate I would expect it to be a little bit better in 2010 than it is in 2009 for the exactly the reason you're speaking to, which is first quarter margins are a little bit lower and we had not fully implemented all of the things we have now, so we should see some improvement on a year-over-year basis in Q1. But sitting in that 62, 62-plus range is where we've been running, I think, is how we're thinking about it, at least for the near term.

Okay. And then I think in your release you broke out that there was $35 million in sales in 2009 from stores that were [closed] sales to retail partners, what's the breakdown of the sales between the stores and the retail partners, and what does that recapture rate look like between the different channels?

The -- it's about 60% stores, 40% retail partners for the year of that number. From a transfer standpoint, we've continued to get, of our retail stores, in the range of a 30% to 40% transfer of sales from those closed stores. It's a little bit difficult -- more difficult to read on a retail partner basis, because there's a much heavier number of stores that are out there and it's just a lot harder to read. But our focus is trying to make sure that we capture at least those sales dollars and hopefully better, but it's not a number that's easy for us to really calibrate.

Okay, and then just one last housekeeping question. You guys ended the year with a very strong cash balance and it seems to be positioned to drive strong cash flow in 2010. What's the cash level that you think you would feel comfortable with, at which point you might think about other alternatives for your cash?

I think our focus right now is continuing to increase that cash balance. It continues to be a difficult credit environment and our balance sheet isn't necessarily suited well to the type of lending that is out there right now. So our view is to continue to grow that cash balance, and I would say we've got at least another 12 months of cash growth before we really are in a position to answer that question specifically.

Great. Thanks so much and congratulations again.

Our next question will come from Joan Storms. Your line is open.

Hi, good afternoon. Good -- reiterate my good quarter comments.

Thanks, Joan.

Question more just on the sales and marketing efforts, obviously on the media spend you've had pretty fixed, but as your sales have gone down that has adjusted. What exactly -- and those numbers are down overall. So what exactly have you changed as far as what you've allocated to either certain markets, where you've closed stores, or certain forms of media, whether it's on the television with the infomercials or the print ads, how are you doing that in order to still drive efficiencies, and drive the sales to the stores?

Our media strategy reflects our business strategy, which is a national strategy primarily. We do have some targeted local media that -- in markets that we're looking to accelerate growth within, but in general, we're spending still about 80% on a branded basis, 20% on a promotional support basis.

Okay.

And within that branded spend, the vast majority of it still is on a direct mediums, be it TV or print, and then the balance is a little bit online and more traditional radio/TV as we work on local markets. Does --

Okay. And the 20% on the promotional basis, that's around your -- the big selling weekends?

Exactly. That's to increase value and urgency around the consumer holidays.

And I would say, Joan, relative to what we changed, we had done -- we were doing a little bit more of that local, not -- and not all focused on big selling periods, so we pulled back from those non-major selling period local spend. And then from a national standpoint we just got very focused on those things that we could really read good strong performance, and just pulled back on those things that we felt were less efficient.

So, for example, in last Sunday's newspaper on the "Parade" magazine insert, on the back cover was final closeout sale pricing. Is that really just something you would do ahead of this President's Day weekend?

Yes that would be in what I just call the promotional support.

Very good. Thank you.

Thank you, Joan.

Our next question will come from Joel Harvard. Your line is open.

Thank you. Evening, everybody.

Good evening, Joel.

Just a couple of follow ups here, maybe first of all in stores. With the 20 or so that you may be closing next year net, would those all be lease rundowns, or do you think you might be willing to accelerate a couple, and would there be a potential charge hanging out there next year for that purpose?

Should not be any significant charges. We do have one store that we will probably buy out, but the majority of them will be early termination -- or I should say termination within the normal end of term.

Jim, does that one then show up, or do you just absorb that in costs or G&A or something?

Yes, it gets absorbed into the selling expense.

Okay. And finally then, does wholesale kind of continue, at least on the QVC side, without any major changes and what's left? I think it's 140 or something on retail partners, do those remaining stores just stay a distinct but not as important channels -- clearly not a focus any more -- or does that run down over the course of the year, as well?

The QVC should stay as it has been. You have got a little bit of OEM business with some -- like Winnebago involved, and then the remaining retail partner doors are in markets where we don't have stores, so like Alaska and Hawaii, so you don't --

The bigger number of those stores is Canada and Australia. Mainly Canada is where that -- the biggest is.

Of that 140?

Right.

Okay. So they are continue they are. All right, guys that's great. Thanks for the update and best of luck going forward.

Thank you.

And we have one more question currently in queue. (Operator Instructions). Our last question currently in queue comes from Tony Gikas. Your line is open.

This actually [Evan Tornell] jumping in for Tony. I know you guys mentioned that you haven't seen a large impact from oil volatility just yet, but maybe you guys can provide a little bit of color just around the timing and direction from input cost trends over the next year? And then my second question is -- I know you mentioned the January has been tren -- has trended pretty solid. Maybe you could talk a little bit about consumer sentiment and how that 's recovered relative to you guy's expectations, and maybe some of the things that you guys are watching as key items that are going to drive the top line here going forward over the next year, and really let some of that leverage show through, whether it's a housing recovery, or just general sentiment improvements? I'd be curious to hear what you guys think.

Sure. I'll -- this is Jim, and I'll start with the oil piece. Oil affects us in a number of different places, but not -- none of which are individually significant. Where we get a direct and immediate impact is in diesel costs relative to our home delivery, so that's pretty much an immediate and direct pass through. The majority of the rest of the costs are really product inputs and we generally have contracted prices for three or more months out. So when there are fluctuations in oil they'll go as input into those suppliers, and then we'll negotiate new pricing going out, and that lag, too. when the pricing -- when the oil prices occur gives us an opportunity for both the supplier and for us to identify ways to offset it and mitigate it,or find new efficiencies. So there's a little bit of a lag, probably a quarter or so, related to some of those fluctuations, and then there is a piece of it that comes through pretty immediately. But we've done a pretty good job of really offsetting those swings, at least within a quarterly basis. Our outlook for oil as a whole is that we do expect some pressure, we do expect some increase in oil prices over the course of 2010, and we built that into our expectations.

In terms of that consumer sentiment question, we do believe that consumer confidence is a factor in driving consumer's willingness to buy, or even shop. We don't know, really, the balance today between what the environment's doing, and what our programs are doing. But what we tend to track is consumer confidence as measured by, particularly, existing home sales. And in terms of the how is it tracking to what we were projecting, we honestly are just more -- we're not -- we're responding to trends after they've happened in a way, so we're measure -- we're supporting the business, we're measuring the results, and then we're investing behind proven success and finding that our business model is responsive enough to do that and take full advantage of those opportunities.

Okay, thanks.

And we do have a follow-up question from Joan Storms. Your line is now open.

Hey, Jim, on the mattress industry projections that are out there, are you looking -- talking primarily about ISBA, or a combination of other sources?

It's mainly ISBA, which I'm referring to, which is, I think, is a 7% or 8% number that they're projecting for 2010.

And have you provided, or are you -- or will you -- did you provide a percent change in our unit growth for the quarter?

We did provide a -- the unit comp was 22% versus the $1 comp of 23%.

Got it.

So the units were pretty much in line with the overall growth.

Okay, perfect, that's just what I needed. Thank you.

Thank you.

I'm show nothing further questions from the phone lines, so I'd like to turn the call back over to the speakers for closing comments.

Thank you. If there are no further questions at this time then we will conclude the call. We thank you all very much for joining us, and we look forward to speaking with you again after the first quarter. Thank you.

Thanks.

That does conclude today's conference. Thank you for your participation. You may all disconnect at this time.