12/18/2019
`10-K 1 snbr-10k_20181229.htm 10-K
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`snbr-10k_20181229.htm
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`UNITED STATES SECURITIES AND EXCHANGE COMMISSION
`WASHINGTON, D.C. 20549
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`FORM 10-K
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`(Mark one)
`☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the Fiscal Year Ended December 29, 2018
`☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the transition period from _________ to _________.
`Commission File No. 0-25121
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`SLEEP NUMBER CORPORATION
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`MINNESOTA
`(State or other jurisdiction of incorporation or organization)
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`(Exact name of registrant as specified in its charter)
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`41-1597886
`(I.R.S. Employer Identification No.)
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`1001 Third Avenue South
`Minneapolis, Minnesota
`(Address of principal executive offices)
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`55404
`(Zip Code)
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`Registrant's telephone number, including area code: (763) 551-7000
`Securities registered pursuant to Section 12(b) of the Act:
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`Name of each exchange on which registered
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`The NASDAQ Stock Market LLC
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`(NASDAQ Global Select Market)
`Securities registered pursuant to Section 12(g) of the Act: None
`Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. YES ☒ NO ☐
`Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒
`Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
`1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such
`filing requirements for the past 90 days. YES ☒ NO ☐
`Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
`of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
`such files). YES ☒ NO ☐
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein,
`and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
`this Form 10-K or any amendment to this Form 10-K. ☒
`Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
`an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth
`company" in Rule 12b-2 of the Exchange Act.
`☒
`☐
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` Accelerated filer
`Large accelerated filer
`☐
`☐
` Smaller reporting company
`Non-accelerated filer
`☐
` Emerging growth company
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`If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
`new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
`Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
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`Title of each class
`Common Stock, par value $0.01 per share
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`The aggregate market value of the common stock held by non-affiliates of the Registrant as of June 30, 2018, was $604,888,000 (based on the last
`reported sale price of the Registrant’s common stock on that date as reported by NASDAQ).
`As of January 26, 2019, there were 30,522,000 shares of the Registrant’s Common Stock outstanding.
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`DOCUMENTS INCORPORATED BY REFERENCE
`
`Portions of the registrant’s proxy statement to be furnished to shareholders in connection with its 2019 Annual Meeting of
`Shareholders are incorporated by reference in Part III, Items 10-14 of this Annual Report on Form 10-K.
`
`
`As used in this Form 10-K, the terms “we,” “us,” “our,” the “Company,” and “Sleep Number” mean Sleep Number
`Corporation and its subsidiaries and the term “common stock” means our common stock, par value $0.01 per share.
`
`
`Sleep Number®, SleepIQ®, Sleep Number 360®, 360®, SleepIQ Kids®, the Double Arrow logo, Select Comfort®, AirFit®,
`BAM Labs®, the “B” logo, Comfortaire®, ComfortFit®, Comfort.Individualized.®, Does Your Bed Do That?®, the DualTemp logo, the
`DualAir Technology Inside logo, FlexTop®, IndividualFit®, Individualized Sleep Experiences®, It®, Know Better Sleep®,
`Pillow[ology]®, PillowFit®, Probably the Best Bed in the World®, Responsive Air®, Sleep Number Inner Circle®, Sleep30®, Smart
`Bed For Smart Kids®, Smart Bed Technology®, Tech-e®, The Only Bed That Grows With Them®, The Only Bed That Knows You®,
`Tonight Bedtime. Tomorrow The World®, We Make Beds Smart®, What’s Your Sleep Number?®, SleepIQ LABS™, Auto Snore™,
`HealthIQ™, HeartIQ™, RespiratoryIQ™, Sleep For The Future℠, Sleep Is Training™, This Is Not A Bed™, WellnessIQ™,
`ActiveComfort™, Comfortable. Adjustable. Affordable.™, CoolFit™, DualAir™, DualTemp™, Firmness Control™, FlexFit™, In
`Balance™, Partner Snore™, the SleepIQ LABS logo, The Bed Reborn™, The Bed That Moves You™, The Best Bed For Couples™,
`our bed model names, and our other marks and stylized logos are trademarks and/or service marks of Sleep Number. This Form 10-K
`may also contain trademarks, trade names and service marks that are owned by other persons or entities.
`
`
`Our fiscal year ends on the Saturday closest to December 31, and, unless the context otherwise requires, all references to years
`in this Form 10-K refer to our fiscal years. Our fiscal year is based on a 52- or 53-week year. All years presented in this Form 10-K are
`52 weeks, except for the 2014 fiscal year ended January 3, 2015, which was a 53-week year.
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`TABLE OF CONTENTS
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`PART I
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`
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`Item 1. Business
`
`Item 1A. Risk Factors
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`Item 1B. Unresolved Staff Comments
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`Item 2.
`Properties
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`Item 3. Legal Proceedings
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`Item 4. Mine Safety Disclosures
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`PART II
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`Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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`Item 6.
`Selected Financial Data
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`Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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`Item 7A. Quantitative and Qualitative Disclosures About Market Risk
`
`Item 8.
`Financial Statements and Supplementary Data
`
`Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
`
`Item 9A. Controls and Procedures
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`Item 9B. Other Information
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`
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`PART III
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`Item 10. Directors, Executive Officers and Corporate Governance
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`Item 11. Executive Compensation
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`Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
`
`Item 13. Certain Relationships and Related Transactions, and Director Independence
`
`Item 14. Principal Accounting Fees and Services
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`PART IV
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`Item 15. Exhibits, Financial Statement Schedules
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`Item 16. Form 10-K Summary
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`3
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`PART I
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`
`This Annual Report on Form 10-K contains or incorporates by reference certain forward-looking statements within the meaning of the
`Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in or incorporated by reference into this
`Annual Report on Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements, including but
`not limited to projections of revenues, results of operations, financial condition or other financial items; any statements of plans,
`strategies and objectives of management for future operations; any statements regarding proposed new products, services or
`developments; any statements regarding future economic conditions, prospects or performance; statements of belief and any statement
`or assumptions underlying any of the foregoing. In addition, we or others on our behalf may make forward-looking statements from
`time to time in oral presentations, including telephone conferences and/or Webcasts open to the public, in press releases or reports, on
`our website or otherwise. We try to identify forward-looking statements in this report and elsewhere by using words such as “may,”
`“will,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “predict,” “intend,” “potential,”
`“continue” or the negative of these or similar terms.
`
`Our forward-looking statements speak only as of the date made and by their nature involve substantial risks and uncertainties. Our
`actual results may differ materially depending on a variety of factors, including the items discussed in greater detail below under the
`caption “Risk Factors.” These risks and uncertainties are not exclusive and further information concerning the Company and our
`business, including factors that potentially could materially affect our financial results or condition, may emerge from time to time,
`including factors that we may consider immaterial or do not anticipate at this time.
`
`We wish to caution readers not to place undue reliance on any forward-looking statement and to recognize that forward-looking
`statements are predictions of future results, which may not occur as anticipated. We assume no obligation to update forward-looking
`statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. We advise you,
`however, to review and consider any further disclosures we make on related subjects in our quarterly reports on Form 10-Q and
`current reports on Form 8-K that we file with or furnish to the Securities and Exchange Commission.
`
`ITEM 1. BUSINESS
`
`Overview
`
`Sleep Number Corporation, based in Minneapolis, Minnesota, was founded in 1987 and became publicly traded in 1998. We are listed
`on the NASDAQ Stock Market LLC (NASDAQ Global Select Market) under the symbol “SNBR.” When used herein, the terms
`“Sleep Number,” “Company,” “we,” “us” and “our” refer to Sleep Number Corporation, including consolidated subsidiaries.
`
`Our mission is to improve lives by individualizing sleep experiences. Our vision is to become one of the world's most beloved brands
`by delivering an unparalleled sleep experience. We expect to achieve our goals by executing our consumer innovation strategy with
`three significant competitive advantages: proprietary sleep innovations, exclusive retail distribution and lifelong customer
`relationships.
`
`As a purpose-driven brand and the leader in sleep innovation, Sleep Number delivers proven quality sleep through effortless, adjustable
`comfort and biometric sleep tracking. We are visionary leaders in sleep and wellness and are redefining what consumers should expect
`from their bed. Our vertically integrated business model and role as the exclusive designer, manufacturer, marketer, retailer and
`servicer of Sleep Number® beds allows us to offer consumers high-quality, individualized sleep solutions and services. As a direct-to-
`consumer brand, we offer a cohesive experience across our Sleep Number® stores, online at SleepNumber.com and via phone at
`(800)753-3768. We also offer mattress home-delivery/installation and maintain an in-house customer service department.
`
`In 2018, we revolutionized sleep with our complete line of Sleep Number 360® smart beds. The 360® smart bed, at the forefront of the
`digital health and wellness revolution, is rapidly becoming the “hub” for a healthy life by delivering proven quality sleep. It is the only
`bed in the world that offers SleepIQ® technology, a proprietary sensor technology that tracks each sleeper’s individual data, including
`movement, breathing rate, heartbeat and sleep habits. The SleepIQ technology platform captures over 8.5 billion biometric data points
`every night, building one of the most comprehensive databases of biometric sleep data in the world. Today, the 360 smart bed uses this
`data to automatically adjust the comfort of the bed for proven quality sleep. In the future, this high-quality data will likely enable
`customers to use their smart bed to manage their health and wellness. Through daily digital interactions that build lifelong
`relationships, SleepIQ technology also communicates how you slept and provides insight into what adjustments you can make,
`including adjusting your Sleep Number® setting, to optimize your sleep and improve your daily life.
`
`Our commitment to quality, value and service has been widely recognized, including being ranked #1 in Customer Satisfaction with
`Mattresses by J.D. Power in 2018 and the best in six out of seven categories (support, durability, comfort, variety of features, value and
`warranty). Sleep Number has received the highest score in the 2015, 2016 and 2018 Mattress Satisfaction Report. Sleep Number
`ranked 27 points above the industry average in 2018.
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`We are committed to delivering superior shareholder value by: (1) increasing consumer demand; (2) leveraging our business model;
`and (3) deploying capital efficiently. Over the past six years, we have transformed the business with $481 million of capital
`expenditures and acquisitions, while building vital new demand-driving capabilities. This effort has positioned us for accelerated
`profits and cash generation. In 2018, we increased net sales by 6% to $1.53 billion and increased earnings per diluted share by 24% to
`$1.92.
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`Social Impact Commitment
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`Because excellent sleep is essential to a healthier and happier society, we are committed to helping future generations achieve quality
`sleep. In 2018, we announced a social impact commitment to help one million young people achieve life-changing sleep through our
`products and sleep expertise by 2025. Since announcing this commitment, we have already donated more than $1 million and helped to
`improve the lives of nearly 100,000 youth through our partnerships with Good360, GenYOUth and the Alliance for a Healthier
`Generation.
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`Proprietary Sleep Innovations
`
`As the creator and leader of the “sleep tech” category, Sleep Number introduced the revolutionary Sleep Number 360 smart bed at the
`Consumer Electronics Show (CES) in 2017 and completed the transition to all 360 smart beds in 2018. The winner of 13 CES
`innovation awards and the Edison Award for breakthrough product design and innovation in the Wellness Technology category, the 360
`smart bed uses the sleeper’s movements and biometrics to automatically adjust the bed’s firmness throughout the night, providing the
`highest quality sleep.
`
`Unlike the “one-size-fits-all” solution offered by other mattress brands, the Sleep Number 360 smart bed offers individualized comfort
`that is adjustable on each side of the bed. Our proprietary DualAirTM technology features two independent air chambers and allows
`couples to adjust firmness to their individual preference at the touch of a button. Each sleeper can set their ideal firmness, support and
`pressure-relieving comfort – their Sleep Number® setting – for deep, restful sleep.
`
`SleepIQ technology, our proprietary sleep tracking technology, is the bed’s operating system. It measures the user's sleep, continuously
`gathering hundreds of biometric readings per second, including average heart rate, breathing rate and movement. Using these
`measurements, the 360 smart bed automatically adjusts the firmness to keep each sleeper comfortable throughout the night. This data
`also enables our proprietary algorithm to deliver a daily SleepIQ® score from 1 to 100, helping sleepers understand how restful their
`sleep was the night before. Over time, we expect SleepIQ technology to provide individualized insights so the sleeper knows how to
`improve their health and wellness.
`
`The Sleep Number 360 smart bed includes additional smart features, like foot warming, which gently warms your feet to help you fall
`asleep faster. The 360 smart bed also connects seamlessly with other smart devices, like the Nest Learning ThermostatTM and fitness
`trackers like Apple® HealthKit or Fitbit®, to help sleepers understand how daily activities impact their sleep. The Sleep Number 360
`smart bed is more than just a bed – it’s the center of health and wellness.
`
`The Sleep Number 360 smart bed is available at our Sleep Number stores and online at SleepNumber.com, with pricing starting at
`$999. We offer our beds in good, better and best price ranges within the premium mattress category. Our Classic, Performance and
`Innovation lines come in a broad range of sizes, including twin, full, queen, eastern king and California king.
`
`Additional Sleep Number Innovations
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`We also offer a full line of exclusive FlexFitTM smart adjustable bases that allow customers to raise the head or foot of the bed. Our
`industry-leading FlexFit bases seamlessly integrate with SleepIQ to deliver features like our Partner SnoreTM technology, which allows
`your partner to press a button and raise the head of the bed to temporarily relieve snoring.
`
`The SleepIQ Kids® k2 bed extends Sleep Number's DualAir adjustability and SleepIQ technology to the children's mattress market.
`The k2 bed adjusts with children as they grow, giving them the best possible sleep.
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`Our exclusive Sleep Number® bedding collection features a full line of sleep products that are designed to help you get better sleep.
`Sleep Number has a wide assortment of pillows designed to fit each individual's size, shape and sleeping position for a more
`comfortable sleep.
`
`We also offer a wide assortment of temperature-balancing products including the DualTemp® layer. This proprietary sleep innovation
`features active air technology that allows each sleeper to select their ideal temperature at the simple touch of a button and can be used
`with any mattress brand or adjustable base.
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`Exclusive Distribution
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`Over 99% of our net sales are generated by our direct-to-consumer business, through a cohesive experience across our Sleep Number
`stores, online at SleepNumber.com and via phone.
`
`As the exclusive distributor of Sleep Number products, we target high-quality, convenient and visible store locations based on several
`factors, including each market’s overall sales potential, store geographic location, demographics and proximity to other specialty retail
`stores. Since 2012, we have overhauled our direct-to-consumer distribution strategy, repositioning a large percentage of our mall stores
`to stronger, out-of-mall locations, improving the size and positioning within each location and adding stores in both existing and new
`markets. As of December 29, 2018, there were 579 Sleep Number stores in all 50 states, 41% more than six years ago. Approximately
`55% of our stores (including remodels) are less than five years old. With these investments, we created an exclusive, value-added retail
`in-store experience through award-winning store design, technology enhancements and stores that are about 50% larger on average.
`
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`Our sleep experts in each store recognize that sleep is not “one size fits all” and provide individualized sleep solutions for each person.
`Shopping online is easy, too, at SleepNumber.com. Working in conjunction with our retail stores, we have a cohesive online experience
`that helps customers easily research our products and solutions, find and purchase products online, and receive post-sales support. Our
`omni-channel experience expands our digital brand, connecting with consumers to drive deeper awareness, consideration and
`engagement.
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`Our retail stores accounted for 91.5% of our net sales in 2018. Average annual net sales per store, based on Company-Controlled
`comparable sales, were $2.7 million in 2018. In 2018, 98% of our stores open for a full year, generated net sales over $1 million and
`65% of our stores open for a full-year generated net sales over $2 million. We now have 25% of our stores delivering greater than $3
`million in annual net sales. In 2018, our online and phone sales accounted for 7.6% of our net sales and increased double digits year-
`over-year. Wholesale/Other channel accounted for 0.9% of our net sales in 2018.
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`Marketing
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`We use a wide-ranging set of marketing and advertising instruments to expand brand reach, drive emotional brand engagement and
`create lifelong customer relationships. This relationship with our customers is an effective driver of repeat purchases and new
`customers referrals. Our marketing efforts target a broad customer demographic: 35-64 years old with greater than $75,000 household
`income for our core line of products. Our customers care about their own and their family's sleep quality and know that it leads to
`better overall health and well-being.
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`Marketing drives growth in our business by building brand relevance, reputation, awareness, consideration and ongoing engagement
`through integrated and authentic communications that amplify the value of the 360 smart bed. This results in increased quality traffic to
`our website and stores. Our advertising communications use a mix of national and local marketing to target existing customers for
`referral and repeat purchases and to attract new customers. Television is our most efficient media, followed by digital and social media.
`Our in-house digital capabilities, content marketing, user experience and data-driven tools allow us to optimize media investment,
`messages and audience in real-time. In 2018, media expense represented 13.7% of net sales.
`
`In early 2018, we entered into a multi-year, strategic partnership as the Official Sleep and Wellness Partner of the National Football
`League (NFL) to broaden brand reach and engagement, amplify the benefits of our 360 smart beds and link quality sleep to
`performance. We also established partnerships with the NFL Players Associations (NFLPA) and the Professional Football Athletic
`Trainers Society (PFATS). After year one of our partnership with the NFL, most active NFL players have Sleep Number 360 smart
`beds, which are helping players compete more effectively by measuring, understanding and maximizing the benefits of a great night's
`sleep. Sleep Number will continue to work with the NFL, the NFLPA, PFATS, trainers, teams and players as they integrate sleep
`insights into their overall performance regimens.
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`Operations
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`Manufacturing and Distribution
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`We have two manufacturing plants located in Irmo, South Carolina and Salt Lake City, Utah. The manufacturing operations in South
`Carolina and Utah consist of cutting and sewing of the fabric covers for our beds and final assembly and packaging of mattresses and
`bases. In addition, our electrical Firmness ControlTM systems are assembled in our Utah plant.
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`We obtain all the raw materials and components used to produce our beds from outside sources. A number of components, including
`our air chambers, our adjustable foundations, various components for our Firmness Control systems, as well as fabrics and zippers, are
`sourced from suppliers who currently serve as our sole or primary source of supply for these components. We believe we can obtain
`these raw materials and components from other sources of supply, although we could experience some short-term disruption in our
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`ability to fulfill orders in the event of an unexpected loss of supply from one of our primary suppliers. We utilize dual sourcing on
`targeted components when effective.
`
`We have taken, and continue to take, various measures to mitigate the potential impact of an unexpected disruption in supply from any
`sole-source suppliers, including increasing safety stocks and identifying potential secondary sources of supply. All the suppliers that
`produce unique or proprietary products for us have in place either contingency or disaster recovery plans, or redundant production
`capabilities in multiple locations in order to safeguard against any unforeseen disasters. We review these plans and sites on a regular
`basis to ensure the suppliers' ability to maintain an uninterrupted supply of materials and components.
`
`Historically, we manufactured our bed components in our two plants and completed final bed assembly in customers’ homes. We are
`pursuing a multi-year evolution to enable delivery of assembled mattresses to customers’ homes. Since 2017, we have opened three
`assembly distribution centers to assemble beds prior to delivery: Irmo, South Carolina, Salt Lake City, Utah and Baltimore, Maryland.
`We expect to expand this capability to approximately six assembly distribution centers over the next few years. We are also advancing
`our outbound logistics network to reduce product handling, hand-offs, damage and costs while in transit to customers’ homes. We see
`these initiatives providing a superior and reliable experience for customers with lower costs for the business.
`
`Home Delivery Service
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`In July 2018, we completed the transition of our entire core mattress line to 360 smart beds. With this change, 100% of our 360 smart
`beds sold are now delivered and installed by our home delivery technicians or by our third-party service providers in certain markets.
`
`Customer Service
`
`Through our U.S.-based, in-house customer service team, we provide direct post-purchase support and are able to develop one-to-one
`relationships that improve the customer experience and drive our business. This team provides service and support via phone, email,
`“live chat” and social media. They also provide a unique opportunity to gather insights that help us continuously improve our product,
`strengthen our service quality and advance our innovation. This integration enables operational synergies and drives organizational
`efficiencies.
`
`Research and Development
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`As the leader in consumer-driven sleep innovation, Sleep Number conducts extensive research to understand consumers’ needs and
`operates R&D facilities in San Jose, California and Minneapolis, Minnesota. This research drives the design and delivery of our award-
`winning sleep innovations, our customer experience and our proprietary SleepIQ technology. As consumers are rapidly adopting new
`digital tools and using their personal data to improve health and wellness, developing new technology that improves the quality of
`sleep and overall wellness of our customers will remain a top priority for Sleep Number. Our research and development expenses were
`$29 million in 2018, $28 million in 2017 and $28 million in 2016.
`
`Information Systems
`
`We use information technology systems to operate, analyze and manage our business, to reduce operating costs and to enhance our
`customers' experience. Our major systems include an in-store order entry system, a retail portal system, a payment processing system,
`in-bound and out-bound telecommunications systems for direct marketing, delivery scheduling and customer service, e-commerce
`systems, a data warehouse system and an enterprise resource planning (ERP) system. These systems are primarily comprised of
`packaged applications licensed from various software vendors plus a limited number of internally developed programs. Please refer to
`the information set forth in Part I, Item 1A., Risk Factors, for a discussion of certain risks that may be encountered in connection with
`our information systems.
`
`Intellectual Property
`
`We hold various U.S. and foreign patents and patent applications regarding certain elements of the design and function of our products,
`including air control systems, remote control systems, air chamber features, mattress construction, foundation systems, sensing
`systems, as well as other technology. We have numerous U.S. patents, expiring at various dates between February 2019 and February
`2037 and numerous U.S. patent applications pending. We also have numerous foreign patents and patent applications pending.
`Notwithstanding these patents and patent applications, we cannot ensure that these patent rights will provide substantial protection or
`that others will not be able to develop products that are similar to or competitive with our products.
`
`We have a number of trademarks and service marks registered with the U.S. Patent and Trademark Office, including Sleep Number®,
`SleepIQ®, Sleep Number 360®, 360®, SleepIQ Kids®, the Double Arrow logo, Select Comfort®, AirFit®, BAM Labs®, the “B” logo,
`
`https://www.sec.gov/Archives/edgar/data/827187/000156459019004499/snbr-10k_20181229.htm
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`EXHIBIT 1042
`IPR2019-00500
`Page 11
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`Comfortaire®, ComfortFit®, Comfort.Individualized.®, Does Your Bed Do That?®, the DualTemp logo, the DualAir Technology
`Inside
`
`6
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`https://www.sec.gov/Archives/edgar/data/827187/000156459019004499/snbr-10k_20181229.htm
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`American National Manufacturing, Inc.
`EXHIBIT 1042
`IPR2019-00500
`Page 12
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`snbr-10k_20181229.htm
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`12/18/2019
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`logo, FlexTop®, IndividualFit®, Individualized Sleep Experiences®, It®, Know Better Sleep®, Pillow[ology]®, PillowFit®, Probably
`the Best Bed in the World®, Responsive Air®, Sleep Number Inner Circle®, Sleep30®, Smart Bed For Smart Kids®, Smart Bed
`Technology®, Tech-e®, The Only Bed That Grows With Them®, The Only Bed That Knows You®, Tonight Bedtime. Tomorrow The
`World®, We Make Beds Smart® and What’s Your Sleep Number?®. We have several trademarks that are the subject of pending
`applications, including SleepIQ LABS™, Auto Snore™, HealthIQ™, HeartIQ™, RespiratoryIQ™, Sleep for the Future℠, Sleep Is
`Training™, This Is Not A Bed™ and WellnessIQ™. Each registered mark is renewable indefinitely as long as the mark remains in use
`and/or is not deemed to be invalid or canceled. We also have a number of common law trademarks, including ActiveComfort™,
`Comfortable. Adjustable. Affordable.™, CoolFit™, DualAir™, DualTemp™, Firmness Control™, FlexFit™, In Balance™, Partner
`Snore™, the SleepIQ LABS logo, The Bed Reborn™, The Bed That Moves You™, The Best Bed For Couples™ and our bed model
`names. Several of our trademarks have been registered, or are the subject of pending applications for registration, in various foreign
`countries. We also have other intellectual property rights related to our products, processes and technologies, including trade secrets,
`trade dress and copyrights. We protect and enforce our intellectual property rights, including through litigation as necessary.
`
`Industry and Competition
`
`The U.S. bedding industry, including mattresses and foundations, is a mature and generally stable industry. According to the
`International Sleep Products Association (ISPA), the industry has grown by approximately 4%