UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                For the Quarterly Period Ended September 28, 2002


                           COMMISSION FILE NO. 0-25121

                               --------------------



                           SELECT COMFORT CORPORATION
             (Exact name of registrant as specified in its charter)


           MINNESOTA                                          41-1597886
  (State or other jurisdiction of                          (I.R.S. Employer
  incorporation or organization)                          Identification No.)

     6105 TRENTON LANE NORTH
     MINNEAPOLIS, MINNESOTA                                      55442
(Address of principal executive offices)                       (Zip code)

       Registrant's telephone number, including area code: (763) 551-7000



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 [X]  NO[  ]


As of September 28, 2002, 29,664,326 shares of Common Stock of the Registrant
were outstanding.






                           SELECT COMFORT CORPORATION
                                AND SUBSIDIARIES



                                      INDEX


                                                                        Page No.
                                                                        --------

PART I: FINANCIAL INFORMATION

Item 1.    Financial Statements

           Consolidated Balance Sheets
           September 28, 2002 and December 29, 2001.........................  3

           Consolidated Statements of Operations
           for the Three Months and Nine Months ended
           September 28, 2002 and September 29, 2001................ .......  4

           Consolidated Statements of Cash Flows
           for the Nine Months ended September 28, 2002
           and September 29, 2001...........................................  5

           Notes to Consolidated Financial Statements................ ......  6

Item 2.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations.................... 11

Item 3.    Quantitative and Qualitative Disclosures about Market Risk....... 16

Item 4.    Disclosure Controls and Procedures............................... 16

PART II: OTHER INFORMATION

Item 1.      Legal Proceedings.............................................. 17

Item 2.      Changes in Securities and Use of Proceeds...................... 17

Item 3.      Defaults Upon Senior Securities................................ 17

Item 4.      Submission of Matters to a Vote of Security Holders............ 17

Item 5.      Other Information.............................................. 17

Item 6.      Exhibits and Reports on Form 8-K............................... 18





PART I: FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                   SELECT COMFORT CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)


                                                                                   (UNAUDITED)
                                                                                  SEPTEMBER 28,       DECEMBER 29,
                                                                                       2002               2001
                                                                                 -----------------  -----------------
                                                                                              
                                     ASSETS
 Current assets:
    Cash and cash equivalents                                                         $ 24,400           $ 16,375
    Marketable securities - current (note 2)                                            12,681                  -
    Accounts receivable, net of allowance for doubtful
       accounts of $311                                                                  2,763              2,623
    Inventories (note 3)                                                                 9,163              8,086
    Prepaid expenses                                                                     4,737              3,588
    Deferred tax assets (note 5)                                                        11,749                  -
                                                                                 -----------------  -----------------
         Total current assets                                                           65,493             30,672
 Marketable securities - non-current (note 2)                                            2,877                  -
 Property and equipment, net                                                            29,094             30,882
 Deferred tax assets (note 5)                                                            5,777                  -
 Other assets (note 4)                                                                   3,674              5,882
                                                                                 -----------------  -----------------
         Total assets                                                                $ 106,915           $ 67,436
                                                                                 =================  =================
                      LIABILITIES AND SHAREHOLDERS' EQUITY
 Current liabilities:
    Current maturities of long-term debt                                           $        11        $        28
    Accounts payable                                                                    19,905             15,216
    Accruals:
      Sales returns                                                                      3,538              3,624
      Compensation and benefits                                                         10,953              7,179
      Taxes and withholding                                                              2,623              3,032
      Customer prepayments                                                               3,833              1,263
      Other                                                                              5,478              4,069
                                                                                 -----------------  -----------------
         Total current liabilities                                                      46,341             34,411
 Long-term debt, less current maturities (note 4)                                        7,385             17,109
 Accrued warranty costs                                                                  3,088              5,030
 Other liabilities                                                                       3,999              4,114
                                                                                 -----------------  -----------------
         Total liabilities                                                              60,813             60,664
                                                                                 -----------------  -----------------

 Shareholders' equity: (note 4)
    Undesignated preferred stock; 5,000,000 shares authorized,
       no shares issued and outstanding                                                      -                  -
    Common stock, $.01 par value; 95,000,000 shares authorized,
       29,664,326 and 18,302,307 shares issued and outstanding, respectively               297                183
    Additional paid-in capital                                                          91,492             81,687
    Accumulated deficit                                                                (45,687)           (75,098)
                                                                                 -----------------  -----------------
         Total shareholders' equity                                                     46,102              6,772
                                                                                 -----------------  -----------------
         Total liabilities and shareholders' equity                                  $ 106,915           $ 67,436
                                                                                 =================  =================



          See accompanying notes to consolidated financial statements.


                                       3





                   SELECT COMFORT CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)




                                                            THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                    ----------------------------------- -----------------------------------
                                                     SEPTEMBER 28,     SEPTEMBER 29,     SEPTEMBER 28,     SEPTEMBER 29,
                                                          2002              2001              2002              2001
                                                    ----------------- ----------------- ----------------- -----------------
                                                                                              

Net sales                                                $ 85,056          $ 64,148         $ 243,532         $ 192,346
Cost of sales                                              25,539            21,192            76,610            67,231
                                                    ----------------- ----------------- ----------------- -----------------
   Gross margin                                            59,517            42,956           166,922           125,115
                                                    ----------------- ----------------- ----------------- -----------------
Operating expenses:
   Sales and marketing                                     44,575            37,048           130,183           118,616
   General and administrative                               9,085             5,285            24,320            18,252
   Store closings and asset impairments                        24                20               233               508
                                                    ----------------- ----------------- ----------------- -----------------
        Total operating expenses                           53,684            42,353           154,736           137,376
                                                    ----------------- ----------------- ----------------- -----------------
Operating income (loss)                                     5,833               603            12,186           (12,261)
                                                    ----------------- ----------------- ----------------- -----------------
Other income (expense):
   Interest income                                            178                59               407               174
   Interest expense                                          (278)             (422)           (1,401)             (774)
   Other, net                                                 (20)              (13)              (20)             (155)
                                                    ----------------- ----------------- ----------------- -----------------
        Other income (expense), net                          (120)             (376)           (1,014)             (755)
                                                    ----------------- ----------------- ----------------- -----------------
Income (loss) before income taxes                           5,713               227            11,172           (13,016)
Income tax (benefit) expense (note 5)                     (17,891)                -           (18,239)              115
                                                    ----------------- ----------------- ----------------- -----------------
Net income (loss)                                         $23,604             $ 227          $ 29,411          $(13,131)
                                                    ================= ================= ================= =================

Net income (loss) per share (note 6 and 7) - basic         $ 0.80            $ 0.01            $ 1.30           $ (0.72)
                                                    ================= ================= ================= =================
Weighted average shares - basic                            29,634            18,179            22,570            18,118
                                                    ================= ================= ================= =================

Net income (loss) per share (note 6 and 7 - diluted        $ 0.69            $ 0.01            $ 0.88            $(0.72)
                                                    ================  ================= ================= =================
Weighted average shares - diluted                          34,203            18,953            33,941            18,118
                                                    ================  ================= ================= =================


          See accompanying notes to consolidated financial statements.


                                       4





                   SELECT COMFORT CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


                                                                       NINE MONTHS ENDED
                                                               -----------------------------------
                                                                SEPTEMBER 28,      SEPTEMBER 29,
                                                                     2002              2001
                                                               -----------------  ----------------
                                                                          
 Cash flows from operating activities:
    Net income (loss)                                              $  29,411          $ (13,131)
    Adjustments to reconcile net income (loss) to net cash
       provided by (used in ) operating activities:
       Depreciation and amortization                                   7,220              7,522
       Loss on disposal of assets                                        249                539
       Deferred tax assets                                           (17,526)                 -
       Change in operating assets and liabilities:
         Accounts receivable, net                                       (140)             2,104
         Inventories                                                  (1,077)             3,468
         Prepaid expenses                                             (1,149)               412
         Other assets                                                  1,503             (1,096)
         Accounts payable                                              4,689              1,362
         Accrued sales returns                                           (86)            (1,795)
         Accrued compensation and benefits                             3,774                (78)
         Accrued taxes and withholding                                  (409)              (114)
         Accrued consumer prepayments                                  2,570               (531)
         Other accrued liabilities                                       756                167
         Accrued warranty costs                                       (1,289)              (616)
         Other liabilities                                              (115)               400
                                                               -----------------  ----------------
            Net cash provided by (used in) operating activities       28,381             (1,387)
                                                               -----------------  ----------------
 Cash flows from investing activities:
    Purchases of property and equipment                               (5,203)            (3,918)
    Investments in marketable securities                             (23,605)                 -
    Proceeds from maturity of marketable securities                    8,047              3,950
                                                               -----------------  ----------------
            Net cash (used in) provided by investing activities      (20,761)                32
                                                               -----------------  ----------------
 Cash flows from financing activities:
    Principal payments on debt                                           (22)               (29)
    Proceeds from issuance of common stock                               427                281
    Net proceeds from issuance of long-term debt                           -             15,040
                                                               -----------------  ----------------
            Net cash provided by financing activities                    405             15,292
                                                               -----------------  ----------------
 Increase in cash and cash equivalents                                 8,025             13,937
 Cash and cash equivalents, at beginning of period                    16,375              1,498
                                                               -----------------  ----------------
 Cash and cash equivalents, at end of period                        $ 24,400           $ 15,435
                                                               =================  ================



          See accompanying notes to consolidated financial statements.


                                       5




                   SELECT COMFORT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  BASIS OF FINANCIAL STATEMENT PRESENTATION

The consolidated financial statements for the three months and nine months ended
September  28, 2002 of Select  Comfort  Corporation  and  subsidiaries  ("Select
Comfort" or the  "Company"),  have been prepared by the Company,  without audit,
pursuant to the rules and regulations of the Securities and Exchange  Commission
and reflect,  in the opinion of  management,  all normal  recurring  adjustments
necessary  to  present  fairly  the  financial  position  of the  Company  as of
September 28, 2002 and December 29, 2001 and the results of operations  and cash
flow for the periods  presented.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with accounting  principles generally accepted
in the United States of America have been condensed or omitted  pursuant to such
rules and regulations, although management believes the disclosures are adequate
to make the information presented not misleading.  These consolidated  financial
statements  should be read in conjunction with the Company's most recent audited
consolidated  financial  statements  and related notes included in the Company's
Annual  Report to  Shareholders  and its Form  10-K for the  fiscal  year  ended
December 29, 2001.  Operating  results for the Company on a quarterly  basis may
not be  indicative  of operating  results for the full year.  No new  accounting
pronouncements  have been issued that are expected to have a material  effect on
the Company's financial statements.

(2)  MARKETABLE SECURITIES

The Company invests its cash in investment  grade highly liquid debt instruments
issued  by  the  US  government  and  related  agencies,  municipalities  and in
commercial  paper  issued  by  companies  with  investment  grade  ratings.  The
Company's  investments  have an  original  maturity  of up to 24 months  with an
average time to maturity of 130 days as of September 28, 2002.  Investments with
an  original  maturity  of greater  than 90 days are  classified  as  marketable
securities.  Marketable securities with a remaining maturity of greater than one
year are  classified as  long-term.  The Company's  debt and  marketable  equity
securities are classified as held-to-maturity and are carried at amortized cost.
Securities held at September 28, 2002 carried an amortized cost of $15.6 million
and a fair value of $15.6 million.


(3)  INVENTORIES

Inventories consist of the following (in thousands):

                                            SEPTEMBER 28,       DECEMBER 29,
                                                 2002               2001
                                           -----------------  -----------------

 Raw materials                                       $2,493             $1,824
 Work in progress                                       116                 26
 Finished goods                                       6,554              6,236

                                           -----------------  -----------------
                                                     $9,163             $8,086
                                           =================  =================

(4)  LONG-TERM DEBT

In June 2001, the Company  issued $11 million in principal  amount of its senior
secured notes (the "Notes") in a private placement.  In addition, at the time of
the original  issuance of the Notes, the holders of the Notes received  warrants
to  purchase  4.4 million  shares of the  Company's  common  stock for $1.00 per
share.   The  warrants   expire  in  June  2006  and  are  subject  to  standard
anti-dilution  protections.  On June 22, 2002 the Notes were  converted  into 11
million shares of common stock under mandatory conversion provisions of the Note
agreement. As a result of this conversion, $9.5 million ($11 million in debt net
of $1.5 million of  unamoritized  deferred costs  associated  with debt issuance
classified as other assets on the Company's Consolidated Balance Sheet) has been
reclassified as common stock and additional paid-in capital.


                                       6






                   SELECT COMFORT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Company's  debt includes $5 million of senior  secured debt  financing  (the
"Debt").  The Debt has a five-year maturity and bears interest at 12% per annum.
The Debt is subject to certain financial covenants consisting primarily of fixed
charge  coverage  ratios.  The Company has remained in full  compliance with the
financial  covenants from the time of issuance of the Debt through September 28,
2002. The Company,  as of September 28, 2002, had unamortized  discount and debt
issuance  costs  associated  with  the  Debt  totaling  $518,927  and  $129,730,
respectively.  The Company is considering  prepayment of the Debt, in which case
the remaining  unamortized discount and debt issuance costs would be expensed as
an extraordinary item in the transaction period.

The Company has outstanding,  a non-interest  bearing  subordinated  convertible
debenture  ("debenture")  with a principal  amount of $4 million,  and a current
unamortized cost of $1.1 million.  The debenture is due November 10, 2005 and is
convertible  at any time at $5.50 per share,  which would result in the issuance
of 727,272 shares of the Company's common stock.

(5)  INCOME TAXES

During the three month period ended September 28, 2002, the Company  recorded an
income tax benefit of $17.9 million  dollars which was the result of a reduction
in the  valuation  allowance  for  deferred  tax assets.  The  reduction  in the
valuation allowance follows the Company's return to profitability as a result of
cost  restructuring  efforts in 2000 and 2001 and increase in sales in 2002. The
Company  believes  that it is  more  likely  than  not  that  it  will  generate
sufficient  taxable  income to utilize its  deferred tax assets,  including  net
operating loss carryforwards, within any applicable carryover periods.

The tax effects of temporary  differences  that give rise to deferred tax assets
at September 28, 2002 are as follows (in thousands):


        Deferred tax assets:
          Current:
             Net operating loss carryforwards                      $8,949
             Inventory, warranty, and returns reserves              3,298
             Allowance for doubtful accounts                          129
             Other                                                  2,274
          Long term:
             Net operating loss carryforwards                       2,056
             Other                                                  4,362
                                                            ---------------
                  Total gross deferred tax assets                  21,068
        Valuation allowance                                        (3,542)
                                                            ---------------
                  Total net deferred tax assets                   $17,526
                                                            ===============

At September 28, 2002, the Company had net operating loss carryforwards ("NOLs")
for federal income tax purposes of  approximately  $29.0  million,  $0.1 million
expiring  between the years 2003 and 2006, the remainder  expiring  between 2020
and 2021.


                                       7





                   SELECT COMFORT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6)  NET INCOME (LOSS) PER COMMON SHARE

The following computations reconcile net income (loss) with net income (loss)
per common share-basic and diluted (in thousands, except per share amounts):



                                                        THREE MONTHS ENDED                     NINE MONTHS ENDED
                                               -------------------------------------- -------------------------------------
                                                              WEIGHTED                             WEIGHTED
              SEPTEMBER 28, 2002                   NET        AVERAGE     PER SHARE      NET        AVERAGE     PER SHARE
              ------------------
                                                 INCOME        SHARES       AMOUNT      INCOME      SHARES        AMOUNT
                                               ------------  -----------  ----------- ----------- ------------  -----------
                                                                                              
Net income                                       $ 23,604                              $ 29,411

BASIC EPS
Net income attributable to common shareholders     23,604       29,634       $ 0.80      29,411       22,570       $ 1.30
                                               ------------  -----------  =========== ----------- ------------  ===========

EFFECT OF DILUTIVE SECURITIES
    Options                                             -       1,743                        -        1,654
    Common stock warrants                               -       2,826                        -        2,765
    Convertible debt                                    -           -                      563        6,952
                                               ------------  -----------               ----------- ------------

DILUTED EPS
Net income attributable to common shareholders
     plus assumed conversions                    $ 23,604      34,203       $ 0.69    $ 29,974       33,941       $ 0.88
                                              ============  ===========  =========== =========== ============  ===========

                                                       THREE MONTHS ENDED                     NINE MONTHS ENDED
                                              -------------------------------------  ------------------------------------
                                                            WEIGHTED                              WEIGHTED
             SEPTEMBER 29, 2001                   NET       AVERAGE     PER SHARE       NET       AVERAGE    PER SHARE
             ------------------                 INCOME       SHARES       AMOUNT       LOSS        SHARES      AMOUNT
                                              ------------ -----------  -----------  ----------  ----------- ------------

Net income/(loss)                                   $ 227                            $(13,131)

BASIC EPS
Net income/(loss) attributable to common
   shareholders                                       227      18,179        $0.01   $(13,131)       18,118      $(0.72)
                                              ------------  ----------- ============ ----------- ------------ ============

EFFECT OF DILUTIVE SECURITIES
    Options                                             -         277                       -             -
    Common stock warrants                               -         497                       -             -
    Convertible debt                                    -           -                       -             -
                                              ------------  -----------              ----------- ------------

DILUTED EPS
Net income/(loss) attributable to common
   shareholders plus assumed conversions            $ 227      18,953         $0.01  $(13,131)      18,118       $(0.72)
                                              ============  ===========  =========== ==========  =========== ============


Additional  potentially  dilutive securities  ("securities")  totaling 3,208 and
3,283 for the three-and  nine-month  periods ended September 28, 2002, have been
excluded  from diluted EPS because the  securities'  exercise  price was greater
than the average market price of the Company's common shares.


                                       8




                   SELECT COMFORT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(7)  PRO FORMA NET INCOME AND NET INCOME PER DILUTED SHARE

During the three-month  period ended September 28, 2002, the Company  recorded a
non-recurring,  non-operating,  non-cash  addition to earnings of $17.9 million.
The  addition to earnings  reflects the  expected  future tax benefits  from net
operating  loss  carry-forwards  and  other  deferred  tax  assets.  Due  to the
non-recurring  nature of this  transaction,  and to aid in  comparability of the
Company's  financial  results on a  going-forward  basis,  presented  below is a
reconciliation  of net income as reported under  Generally  Accepted  Accounting
Principles  (GAAP)  and pro forma net income  adjusted  for the  restoration  of
deferred tax assets and other  non-recurring  income tax benefits and  adjusting
for  estimated  income  taxes  utilizing  an  effective  tax rate of 38 percent.
Pro-forma net income  compared to GAAP net income for the three- and  nine-month
periods ended September 28, 2002 are as follows (in thousands,  except per share
amounts):


                                                            PRO FORMA                   GAAP
                                                        THREE MONTHS ENDED       THREE MONTHS ENDED
                                                        SEPTEMBER 28, 2002       SEPTEMBER 28, 2002
                                                     ------------------------- ------------------------
                                                                          

    Income before income taxes                               $ 5,713                  $  5,713

    Pro forma income taxes at 38%                             (2,171)                        -
    Restoration of deferred tax assets and
    other income tax benefits                                      -                    17,891
                                                     ------------------------- ------------------------
    Net income                                               $ 3,542                  $ 23,604
                                                     ========================= ========================

    Weighted average shares - diluted                         34,203                    34,203
                                                     ========================= ========================
    Net income per diluted share                              $ 0.10                  $   0.69
                                                     ========================= ========================

                                                            PRO FORMA                   GAAP
                                                        NINE MONTHS ENDED         NINE MONTHS ENDED
                                                        SEPTEMBER 28, 2002       SEPTEMBER 28, 2002
                                                     ------------------------- ------------------------

    Income before income taxes                               $11,172                  $ 11,172

    Pro forma income taxes at 38%                             (4,245)                        -
    Restoration of deferred tax assets and
    other income tax benefits                                      -                    18,239
                                                     ------------------------- ------------------------
    Net income                                               $ 6,927                  $ 29,411
                                                     ------------------------- ------------------------
    Income effect of dilutive securities                         563                       563
    Net income attributable to common shareholders           $ 7,490                  $ 29,974
                                                     ========================= ========================

    Weighted average shares - diluted                         33,941                    33,941
                                                     ========================= ========================
    Net income per diluted share                              $ 0.22                  $   0.88
                                                     ========================= ========================


(8)  LITIGATION

In June of 1999, the Company and certain of its former officers and directors
were named as defendants in a class action lawsuit filed in U.S.  District Court
in Minnesota.  The suit,  filed on behalf of purchasers of the Company's  common
stock  between  December 4, 1998 and June 7, 1999,  alleges that the Company and
the named former  directors  and officers  failed to disclose or  misrepresented
certain  information  concerning the Company in violation of federal  securities
laws.  The Company  believes that the suit is without  merit and has  vigorously
defended the matter.

The Company has consented to a settlement of this  litigation  negotiated by the
Company's insurance carrier. The settlement is covered by insurance and involves
no  cash or  other  payment  obligation  by the  Company,  and no  admission  of
liability or wrongdoing by the Company.  The  settlement is not expected to have
any impact on the Company's  results of operations or financial  condition.  The
settlement will be submitted to the Court for  preliminary  approval on December
13, 2002.  The Company  expects the Court will then set a schedule for notice to
the class  and a  hearing  date for final  approval  of the  settlement.  At the
hearing for final approval, the Court will hear any objections to the settlement
or its terms.  The Company  expects the final hearing on the settlement to occur
within  six  months of the date the Court  grants  preliminary  approval  of the
settlement.




                                       9



                   SELECT COMFORT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The  Company is involved  in other  various  claims,  legal  actions,  sales tax
disputes,  and other complaints  arising in the ordinary course of business.  In
the opinion of  management,  any losses that may occur from these other  matters
are  adequately  covered by insurance  or are  provided for in the  consolidated
financial  statements  and the ultimate  outcome of these other matters will not
have a material  effect on the  consolidated  financial  position  or results of
operations of the Company.

(9)  RISKS AND UNCERTAINTIES

The Company has  supplier  relationships  with Conseco and  WorldCom,  which are
experiencing   liquidity   concerns.   If  these  liquidity  concerns  create  a
significant  disruption in the business of these  suppliers,  there is potential
for significant negative impact on the Company's business from any disruption or
discontinuation  of service.  The Company is  currently  developing  contingency
plans to mitigate the risks associated with these supplier relationships.

The Company offers qualified customers an unsecured revolving credit arrangement
to finance  purchases  through a private label consumer credit facility provided
by Conseco Bank,  Inc.  (the  "Bank").  The Bank's  parent,  Conseco  Inc.,  has
experienced financial and liquidity issues which could jeopardize the ability of
the Bank to continue to provide  consumer  credit  financing  for the  Company's
customers. Termination of the agreement with the Bank, or any material change to
the  terms of the  agreement  with the Bank or in the  availability  or terms of
credit  for the  Company's  customers  from the Bank,  or any delay in  securing
replacement  credit  sources,  could  have  a  material  adverse  effect  on the
Company's business, sales, results of operations and financial condition.

The Company has an agreement with WorldCom to provide the long distance  service
for the Company's  direct selling channel and customer  service lines as well as
communication  between  the  Company's  stores,   manufacturing  facilities  and
corporate  offices.  On July 21, 2002  WorldCom  filed  voluntary  petitions for
reorganization  under Chapter 11 of the U.S.  Bankruptcy  Code. Any  disruption,
discontinuation of service,  delay in establishing an alternative  provider at a
time of disruption,  or material  change in rates could have a material  adverse
effect on the Company's business, sales, customer service, results of operations
and financial condition.

The Company acquires certain components for its products from companies that are
normally  imported through the West Coast. To date, the Company has been able to
avoid any disruption of production which might result from work stoppages by the
U.S.  West Coast port workers by  arranging  for its  components  to be imported
through  alternative  shipping methods.  However, a long work stoppage involving
West Coast port workers,  or a similar work stoppage  involving  East Coast port
workers,  could increase the cost of obtaining  materials or result in delays in
receiving  materials,  which could materially and adversely affect the Company's
results of operations and financial condition.


                                       10





ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED HEREIN. THIS
QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. YOU CAN
IDENTIFY FORWARD-LOOKING STATEMENTS BY THOSE THAT ARE NOT HISTORICAL IN NATURE,
PARTICULARLY THOSE THAT USE TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD,"
"EXPECTS," "ANTICIPATES," "CONTEMPLATES," "ESTIMATES," "BELIEVES," "PLANS,"
"PROJECTS," "PREDICTS," "POTENTIAL" OR "CONTINUE" OR THE NEGATIVE OF THESE OR
SIMILAR TERMS. THESE STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S
HISTORICAL EXPERIENCE AND ITS PRESENT EXPECTATIONS OR PROJECTIONS. IMPORTANT
FACTORS KNOWN TO SELECT COMFORT THAT COULD CAUSE SUCH MATERIAL DIFFERENCES ARE
IDENTIFIED AND DISCUSSED IN PART I, ITEM 1 OF OUR ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED DECEMBER 29, 2001, WHICH DISCUSSION IS INCORPORATED HEREIN
BY REFERENCE. THESE IMPORTANT FACTORS INCLUDE:

o    GENERAL AND INDUSTRY ECONOMIC TRENDS,
o    CONSUMER CONFIDENCE AND SPENDING,
o    THE  EFFECTIVENESS  AND  EFFICIENCY  OF  OUR  ADVERTISING  AND  PROMOTIONAL
     EFFORTS,  o ADVERTISING  RATES,
o    CONSUMER  ACCEPTANCE OF OUR PRODUCTS AND SLEEP TECHNOLOGY,
o    INDUSTRY COMPETITION,
o    OUR DEPENDENCE ON SIGNIFICANT SUPPLIERS OR SINGLE SOURCES OF SUPPLY,
o    OUR  SUPPLIER   RELATIONSHIPS  WITH  CONSECO,   AND  WORLDCOM,   WHICH  ARE
     EXPERIENCING LIQUIDITY CONCERNS, AND THE POTENTIAL FOR SIGNIFICANT NEGATIVE
     IMPACT ON OUR BUSINESS IN THE EVENT OF ANY DISRUPTION OR DISCONTINUATION OF
     SERVICE,
o    GOVERNMENTAL REGULATION,  INCLUDING ANTICIPATED FUTURE REGULATION OF DIRECT
     MARKETING TELEPHONE SOLICITATIONS AND BEDDING FLAMMABILITY STANDARDS, AND
o    RISKS AND UNCERTAINTIES DETAILED FROM TIME TO TIME IN THE COMPANY'S FILINGS
     WITH THE SEC,  INCLUDING THE COMPANY'S ANNUAL REPORT ON FORM 10-K AND OTHER
     PERIODIC REPORTS FILED WITH THE SEC.

THE COMPANY HAS NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY OF THE
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q.

OVERVIEW

Select  Comfort(R) is the leading  manufacturer and retailer of premium quality,
innovative adjustable-firmness air-beds and other sleep related products.

We  generate  revenue  by  selling  our  products  through  four   complementary
distribution  channels.  Three of these channels,  retail,  direct marketing and
e-commerce,  are  Company-owned  and  sell  directly  to  consumers,  while  our
wholesale  channel  sells to  leading  bedding  retailers  and the QVC  shopping
channel.  Sales directly to consumers through  Company-owned  channels generally
generate higher gross margins than sales through our wholesale  channels because
we capture  both the  manufacturer  and  retailer  margins.  For  wholesale  and
Company-owned  sales,  we record  revenue at the time  product is shipped to our
customer,  except when  mattresses are delivered and set up by our home delivery
employees,  in which  case  revenu  is  recorded  at the time  the  mattress  is
delivered and set up in the home.  Shipping and handling costs are reported as a
component of sales and marketing  expenses.  We reduce sales at the time revenue
is recognized for estimated returns.

The  proportion  of our total net sales,  by dollar  volume,  from each of these
channels is summarized as follows:

                              Three Months Ended          Nine Months Ended
                            -----------------------     -----------------------
                             9/28/02      9/29/01        9/28/02      9/29/01
                            -----------  ----------     -----------  ----------
  Stores                       78%          79%            76%          78%
  Direct Call Center           14%          15%            15%          15%
  E-commerce                    5%           4%             4%           3%
  Wholesale                     3%           2%             5%           4%


                                       11





Our Company-owned retail store locations are summarized as follows:

                              Three Months Ended          Nine Months Ended
                             ----------------------     -----------------------
                              9/28/02      9/29/01        9/28/02      9/29/01
                            -----------  ----------     -----------  ----------
  Beginning of period             321          327            328         333
  Opened                            4            2              7           7
  Closed                           (2)          (2)           (12)        (13)
                            -----------  ----------     -----------  ----------
  End of period                   323          327            323         327
                            ===========  ==========     ===========  ==========

Company-owned stores include leased space within 20 Bed, Bath & Beyond stores as
of September  28, 2002 and 24 at September  29, 2001.  We  anticipate  opening 8
stores and  closing 6 stores  during the last three  months of 2002.  Comparable
store sales increased  (decreased) for the three months ended September 28, 2002
and September  29, 2001 by 32% and (7)%,  respectively.  Comparable  store sales
increased (decreased) for the nine months ended September 28, 2002 and September
29, 2001 by 23% and (6)%, respectively.

In 2002 our goal is to deliver  profitable  full year  results and  re-establish
growth, driven by the following four strategic priorities:

o    INCREASE  BRAND  AND  PRODUCT  AWARENESS  - we plan to  continue  to  build
     awareness  of our  unique  bed  and  Sleep  Number(R)  brand  by  expanding
     advertising.  In comparison to 2001, advertising spending in the first nine
     months of 2002 increased 25%. We plan to spend over 50% more on advertising
     in the fourth  quarter of 2002 as compared  to the fourth  quarter of 2001,
     which will  include  increases  in national  advertising  and the number of
     stores supported by local TV and radio.
o    EXPANDING  PROFITABLE  DISTRIBUTION  - we plan to  continue  to improve and
     expand our distribution.  Our plans include Company-owned retail store base
     expansion  through the  addition  of eight new stores (net  addition of two
     after closing six existing  stores) in the fourth  quarter and 20 to 30 new
     stores in 2003. We completed  remodeling  seven stores in the third quarter
     of 2002, and plan to remodel  approximately  100 of our existing  stores in
     2003  to  reinforce  the  Sleep   Number(R)brand.   We  expanded  wholesale
     distribution with our relationship with Sleep America (13 stores in Phoenix
     and Tucson) in the third quarter,  after  beginning our  relationship  with
     Sleep Train  (approximately 40 stores in San Francisco,  Sacramento and San
     Diego) in the second  quarter of 2002. We plan to  selectively  investigate
     new  opportunities to partner with other retailers in key markets,  as well
     as continue our successful partnership with QVC.
o    IMPROVING PRODUCT QUALITY AND ACCELERATING INNOVATION - we will continue to
     improve  our  products.  Our track  record of  continuous  improvement  and
     innovation in beds will be continued in the fourth quarter of 2002 with the
     October launch of the redesigned Sleep Number(R)7000 - the Company's luxury
     model.  Accessories  both for the top of the bed and  under bed use will be
     expanded  in the  fourth  quarter  of 2002,  with the  introduction  of the
     Personalized  Warmth CollectionTM of dual-weight  comforters,  blankets and
     mattress pads, and an under-bed  drawer system and  proprietary leg system.
     In 2003 we plan to  introduce  new Sleep  Number(R)bed  models,  expand the
     distribution  of  the  Company's  adjustable  foundation  nationally,   and
     reintroduce our sofa sleeper product.
o    STRENGTHEN  OUR  FINANCIAL  POSITION - we will  continue  to apply the cost
     disciplines   employed   during  our   turnaround.   Having  achieved  five
     consecutive  quarters  of  profitability,  we are now  focused  on  further
     strengthening  our financial  position by leveraging fixed operating costs,
     improving  operating  margins by  identifying  additional  cost savings and
     maintaining  cost  increases  at rates well below sales growth  rates,  and
     replacing our 12% coupon debt with a lower cost credit facility.


                                       12




RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the Company's results
of operations expressed as percentages of net sales.



                                                            THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                    ----------------------------------- -----------------------------------
                                                     SEPTEMBER 28,     SEPTEMBER 29,     SEPTEMBER 28,      SEPTEMBER 29,
                                                          2002              2001              2002              2001
                                                    ----------------- ----------------- -----------------  ----------------
                                                                                               
        Net sales                                        100.0%            100.0%            100.0%            100.0%
        Cost of sales                                     30.0              33.0              31.5              35.0
                                                    ----------------- ----------------- -----------------  ----------------
           Gross margin                                   70.0              67.0              68.5              65.0
                                                    ----------------- ----------------- -----------------  ----------------
        Operating expenses:
           Sales and marketing                            52.4              57.8              53.4              61.7
           General and administrative                     10.7               8.2              10.0               9.5
           Store closings and asset impairments            0.0               0.0               0.1               0.3
                                                    ----------------- ----------------- -----------------  ----------------
                Total operating expenses                  63.1              66.0              63.5              71.4
                                                    ----------------- ----------------- -----------------  ----------------
        Operating income (loss)                            6.9               1.0               5.0              (6.4)
        Other expense, net                                (0.2)             (0.6)             (0.4)             (0.4)
                                                    ----------------- ----------------- -----------------  ----------------
        Income (loss) before income taxes                  6.7               0.4               4.6              (6.8)
        Income tax benefit                               (21.1)              0.0              (7.5)              0.0
                                                    ----------------- ----------------- -----------------  ----------------
        Net income (loss)                                 27.8%              0.4%             12.1%             (6.8)%
                                                    ================= ================= =================  ================


COMPARISON  OF THREE  MONTHS  ENDED  SEPTEMBER  28, 2002 WITH THREE MONTHS ENDED
SEPTEMBER 29, 2001

Operating  income for the third  quarter 2002  totaled $5.8 million  compared to
$0.6 million for the third quarter of 2001. The improvement in profitability was
a  direct  result  of  33%  higher  sales  and  successful   execution  of  cost
restructuring  efforts. Net income for the three months ended September 28, 2002
was increased by a $17.9 million non-recurring,  non-cash,  non-operating income
tax benefit due to the expected  realization  of tax benefits from net operating
loss carry-forwards and other deferred tax assets.

NET SALES
Net sales  increased 33% to $85.1  million for the three months ended  September
28, 2002 from $64.1 million for the three months ended  September 29, 2001,  due
to an 18%  increase in mattress  unit sales and higher  average  selling  prices
resulting primarily from improvements in product mix and lower return rates. The
increase in net sales by sales channel was  attributable  to (i) a $16.2 million
increase in sales from  Company-owned  retail  stores,  including an increase in
comparable store sales of $15.8 million,  (ii) a $2.3 million increase in direct
marketing  sales,  (iii) a $1.4 million  increase in sales through the Company's
e-commerce  channel and (iv) a $1.0 million increase in sales from the Company's
wholesale channel.

GROSS MARGIN
Gross margin  increased to 70.0% for the three months ended  September  28, 2002
from 67.0% for the three  months ended  September  29,  2001,  primarily  due to
improved  product sales mix,  savings in processing  returned  product,  reduced
warranty  claim  rates  resulting  from  improved  product  quality  and greater
manufacturing  leverage.  In  addition,   there  was  a  non-recurring  positive
improvement  of  approximately  0.7% on margin  resulting  from an adjustment of
warranty reserves following continued improvements in claim rates due to product
quality improvements.

SALES AND MARKETING
Sales and marketing expenses increased 21% to $44.6 million for the three months
ended September 28, 2002 from $37.0 million for the three months ended September
29, 2001 but  decreased as a percentage of net sales to 52.4% from 57.8% for the
comparable prior-year period. The increase was primarily due to additional media
investments, sales- based compensation, and home delivery expenses. The decrease
as a  percentage  of net sales was  attributable  to greater  leverage  in fixed
selling  expenses and lower cost  promotional  offerings.  Shipping and handling
costs for the three  months  ended  September  28, 2002 and  September  29, 2001
totaled $5.4 million and $4.2 million, respectively.

                                       13





GENERAL AND ADMINISTRATIVE
General and administrative  expenses increased 72% to $9.1 million for the three
months  ended  September  28, 2002 from $5.3  million for the three months ended
September 29, 2001 and increased as a percentage of net sales to 10.7% from 8.2%
for the prior-year period.  The increase in general and administrative  expenses
in total and as a percentage of net sales was due primarily to accrued incentive
compensation  as a  result  of  Company  performance,  increased  investment  in
information  technology,  and accrued rent  requirements for previously  vacated
office space.

STORE CLOSINGS AND ASSET IMPAIRMENTS
Store closing and asset impairment  expense  increased $4,000 to $24,000 for the
three  months ended  September  28, 2002 from $20,000 for the three months ended
September 29, 2001. In 2002, the entire $24,000 represents  impairments  related
to store closures.

OTHER INCOME (EXPENSE), NET
Other expense decreased $256,000 to approximately  $120,000 for the three months
ended  September 28, 2002 from $376,000 for the three months ended September 29,
2001. The decrease is primarily due to reduced  interest  expense  following the
conversion of $11 million from debt to equity in the second quarter of 2002, and
an increase in interest income from the Company's improved cash position.

INCOME TAX (BENEFIT) EXPENSE
Income tax  (benefit)  expense  changed  $17.9  million as compared to the three
months ended  September 29, 2001.  The $17.9 million  income tax benefit for the
three  months  ended   September   28,  2002  was  the  result  of  recording  a
non-recurring,  non-operating,  non-cash addition to third quarter earnings, due
to  the  expected   realization   of  tax  benefits  from  net  operating   loss
carry-forwards  and other deferred tax assets.  The Company expects to record no
income  tax  expense  in  the  fourth  quarter  of  2002  as a  result  of  this
transaction.  However, during fiscal 2003 the Company expects to begin recording
income tax expense at an estimated  rate of 38 percent.  There was no income tax
expense for the three months ended September 29, 2001.

COMPARISON  OF NINE MONTHS  ENDED  SEPTEMBER  28,  2002 WITH NINE  MONTHS  ENDED
SEPTEMBER 29, 2001

Operating  income for the nine months ended  September  28, 2002  totaled  $12.2
million compared to an operating loss of $12.3 million for the nine months ended
September 29, 2001. The improvement in profitability  was a direct result of 27%
higher sales and successful execution of cost restructuring  efforts. Net income
for the nine months ended  September  28, 2002 was  increased by a $17.9 million
non-recurring,  non-cash,  non-operating  income tax benefit due to the expected
realization  of tax benefits from net operating  loss  carry-forwards  and other
deferred tax assets.

NET SALES
Net sales  increased 27% to $243.5  million for the nine months ended  September
28, 2002 from $192.3  million for the nine months ended  September 29, 2001, due
to a 16%  increase  in mattress  unit sales and higher  average  selling  prices
resulting  primarily  from  improvements  in product  sales mix and lower return
rates.  The  increase in net sales by sales  channel was  attributable  to (i) a
$33.9 million increase in sales from Company-owned  retail stores,  including an
increase  in  comparable  store  sales of  $33.2  million,  (ii) a $7.4  million
increase  in direct  marketing  sales,  (iii) a $4.3  million  increase in sales
through the  Company's  e-commerce  channel and (iv) a $5.5 million  increase in
sales from the Company's wholesale channel.

GROSS MARGIN
Gross margin  increased to 68.5% for the nine months  ended  September  28, 2002
from 65.0% for the nine  months  ended  September  29,  2001,  primarily  due to
improved product sales mix, reduced warranty claim rates resulting from improved
product  quality,  greater  manufacturing  leverage,  and savings in  processing
returned product.

SALES AND MARKETING
Sales and marketing expenses increased 10% to $130.2 million for the nine months
ended September 28, 2002 from $118.6 million for the nine months ended September
29, 2001 but  decreased as a percentage of net sales to 53.4% from 61.7% for the
comparable  prior-year  period.  The decrease as a  percentage  of net sales was
attributable  primarily to greater leverage in media and media production costs.
In the first  quarter  2001 we  introduced  the  Sleep  Number(R)  ad  campaign,
launching  initial markets with heavy  advertising  spending,  and developed the
creative material to support the ongoing campaign.  The decrease as a percentage
of net sales was also a result of leveraging other fixed marketing,  selling and
promotional  costs across a higher sales base.  Shipping and handling  costs for
the nine months ended  September  28, 2002 and  September 29, 2001 totaled $14.6
million and $13.0 million, respectively.


                                       14



GENERAL AND ADMINISTRATIVE
General and administrative  expenses increased 33% to $24.3 million for the nine
months  ended  September  28, 2002 from $18.3  million for the nine months ended
September 29, 2001 and increased as a percentage of net sales to 10.0% from 9.5%
for the  comparable  prior-year  period.  The increase was primarily a result of
accrued incentive compensation based on Company performance.

STORE CLOSINGS AND ASSET IMPAIRMENTS
Store closing and asset impairment  expense  decreased  $275,000 to $233,000 for
the nine months ended September 28, 2002 from $508,000 for the nine months ended
September  29, 2001. In 2002,  the expense  includes  $174,000  related to store
closures and $59,000 related to the write-off of unusable  fixtures due to store
remodels.  In 2001, the expense included  $170,000 related to store closures and
$338,000   related   primarily  to  the  write-off  of  unusable   fixtures  for
merchandising of our sleeper sofa products.

OTHER INCOME (EXPENSE), NET
Other  expense  increased  $259,000 to  approximately  $1.0 million for the nine
months  ended  September  28,  2002  from  $755,000  for the nine  months  ended
September  29,  2001.  The increase is  primarily  due to interest  expense from
long-term debt initiated in June and September of 2001.

INCOME TAX (BENEFIT) EXPENSE
Income tax  (benefit)  expense  changed  $18.4  million as  compared to the nine
months ended  September 29, 2001.  The $18.4 million  income tax benefit for the
nine months ended  September  28, 2002 was  primarily  the result of recording a
$17.9 million non-recurring  non-operating,  non-cash addition to 2002 earnings,
due to the  expected  realization  of  tax  benefits  from  net  operating  loss
carry-forwards  and other deferred tax assets.  The Company expects to record no
income  tax  expense  in  the  fourth  quarter  of  2002  as a  result  of  this
transaction.  However, during fiscal 2003 the Company expects to begin recording
income tax  expense at an  estimated  rate of 38 percent.  The Company  recorded
$115,000 of income tax expense in the nine months ended September 29, 2001.

LIQUIDITY AND CAPITAL RESOURCES

Our primary  source of capital in recent periods has been from the completion of
our $11.0 million convertible debt offering in June 2001 and $5.0 million senior
secured term debt  financing  completed in September  2001. The $11.0 million in
convertible  debt was  converted  to equity in the second  quarter  of 2002.  In
addition, we generated cash from operations for the full year in 2001 and during
the first nine months of 2002.  Barring any  material  changes in our  financial
position or economic  outlook,  we anticipate paying off the senior secured debt
in the next  three to six  months.  We do not  anticipate  incurring  any  early
payment  penalties,  however  there  will be a  non-cash  extraordinary  expense
recorded  to  account  for the  unamortized  discount  and debt  issuance  costs
aggregating approximately $649,000.  Substantially all of our assets are pledged
as collateral for the senior secured debt offering.

We are  currently  pursuing a bank  revolving  line of  credit.  While it is not
currently  anticipated  that this line will be necessary for short- or long-term
liquidity needs, the line would provide additional cash flexibility. Barring any
unexpected significant external or internal developments, we expect current cash
balances on hand and cash generated from operations to be sufficient to meet our
short-term and long-term liquidity needs.

Net cash provided by operating  activities  for the nine months ended  September
28, 2002 was  approximately  $28.4  million and  consisted  primarily of our net
income adjusted for non-cash  expenses,  decreases in other assets and increases
in accrued  compensation and benefits,  accounts  payable,  and accrued customer
pre-payments.  Cash increases were partially  offset by increases in inventories
and prepaid expenses,  and a decrease in accrued warranty costs. The increase in
accrued  compensation  is a result  of  increases  in  incentive  pay  accruals.
Accounts  payable  has  increased  as a  result  of  timing  and the  additional
commitments  made to  advertising  in 2002.  The  increase  in accrued  customer
prepayments  is related to the timing of cash  received  on  customer  orders in
advance  of  customer  shipments  at the end of the  quarter.  Net cash  used in
operating   activities  for  the  nine  months  ended  September  29,  2001  was
approximately $1.4 million and consisted  primarily of the net loss adjusted for
non-cash expenses,  decreases in accrued sales returns, and an increase in other
assets.  Cash decreases were  partially  offset by decreases in inventories  and
accounts receivable, and increases in accounts payable. The increase in accounts
payable related  primarily to the deferral of certain  supplier  payments during
the first half of 2001. These deferrals have subsequently  been paid.  Decreases
in inventory balances were a result of specific  initiatives to reduce inventory
balances at our manufacturing locations.

Net cash used in investing  activities was  approximately  $20.8 million for the
nine months ended  September 28, 2002.  The net investing  activity for the nine
months ended September 29, 2001 was $0. Investing activities


                                       15


consisted primarily of purchases of property and equipment for new retail stores
and  development  costs  for  information  technology  systems.  In 2002 we made
investments  of $23.6  million  of cash in  marketable  securities  and had $8.0
million  of  marketable  securities  mature,  while in 2001 we  liquidated  $4.0
million of marketable securities to support continuing operations.

Net cash provided by financing  activities  was  approximately  $405,000 for the
nine months ended September 28, 2002 primarily from the issuance of common stock
and $15.3 million for the nine months ended  September 29, 2001 which  consisted
primarily of net proceeds from issuance of long-term debt.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's  debt  obligations at September 28, 2002 consisted of a $5 million
note at a fixed rate of 12% and a $4 million  non-interest  bearing subordinated
convertible  debenture.  As a  result,  the  Company  does  not  believe  it has
significant exposure to interest rate risk.

Other   financial   instruments   that   potentially   subject  the  Company  to
concentrations   of  credit  risk  consist   principally  of  investments.   The
counterparties  to the  agreements  consist of  government  agencies and various
major  corporations of investment  grade credit  standing.  The Company does not
believe there is significant  risk of  non-performance  by these  counterparties
because the Company  limits the amount of credit  exposure to any one  financial
institution and any one type of investment.


ITEM 4.  DISCLOSURE CONTROLS AND PROCEDURES.

(a) Within 90 days prior to the  filing of this  Quarterly  Report on Form 10-Q,
the Company's  President and Chief  Executive  Officer ("CEO") and the Company's
Chief Financial  Officer ("CFO") carried out an evaluation of the  effectiveness
of the Company's disclosure controls and procedures. Based upon this evaluation,
the CEO and CFO concluded that the Company's  disclosure controls and procedures
are effective in:

o    accumulating  and  communicating  information to the Company's  management,
     including  the CEO and CFO, to allow timely  decisions  regarding  required
     disclosure; and

o    recording, processing, summarizing and reporting information required to be
     included in the Company's  periodic  reports filed with the SEC in a timely
     manner.

(b) There were no significant  changes in the Company's  internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of the evaluation described above.


                                       16




PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

In June of 1999,  the Company and certain of its former  officers and  directors
were named as defendants in a class action lawsuit filed in U.S.  District Court
in Minnesota.  The suit,  filed on behalf of purchasers of the Company's  common
stock  between  December 4, 1998 and June 7, 1999,  alleges that the Company and
the named former  directors  and officers  failed to disclose or  misrepresented
certain  information  concerning the Company in violation of federal  securities
laws.  The Company  believes that the suit is without  merit and has  vigorously
defended  the matter.

The Company has consented to a settlement of this  litigation  negotiated by the
Company's insurance carrier. The settlement is covered by insurance and involves
no  cash or  other  payment  obligation  by the  Company,  and no  admission  of
liability or wrongdoing by the Company.  The  settlement is not expected to have
any impact on the Company's  results of operations or financial  condition.  The
settlement will be submitted to the Court for  preliminary  approval on December
13, 2002.  The Company  expects the Court will then set a schedule for notice to
the class  and a  hearing  date for final  approval  of the  settlement.  At the
hearing for final approval, the Court will hear any objections to the settlement
or its terms.  The Company  expects the final hearing on the settlement to occur
within  six  months of the date the Court  grants  preliminary  approval  of the
settlement.

The  Company is involved  in other  various  claims,  legal  actions,  sales tax
disputes,  and other complaints  arising in the ordinary course of business.  In
the opinion of  management,  any losses that may occur from these other  matters
are  adequately  covered by insurance  or are  provided for in the  consolidated
financial  statements  and the ultimate  outcome of these other matters will not
have a material  effect on the  consolidated  financial  position  or results of
operations of the Company.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

          Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

          Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable

ITEM 5.  OTHER INFORMATION

          Not applicable.


                                       17






ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits.
               --------

               Exhibit
               Number      Description
               --------    -----------
               99.1        Certification
               99.2        Certification

         (b)   Reports  on Form 8-K
               --------------------
               During the quarter ended September 28, 2002, the Company filed
               three Current Reports on Form 8-K. The Report consisted of the
               following:

               (i)  Current Report filed July 9, 2002,  announcing net sales for
                    the second quarter ended June 29, 2002.

               (ii) Current Report filed July 16, 2002,  announcing  comments on
                    unaudited  results  for the  second  quarter  ended June 29,
                    2002.

               (iii)Current Report filed September 16, 2002,  announcing revised
                    third  quarter   guidance  and   authorization  of  a  stock
                    repurchase program.


                                       18






                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                Select Comfort Corporation



                                /s/ William R. McLaughlin
                                ------------------------------------------------
November 12, 2002               William R. McLaughlin
                                President and Chief Executive Officer
                                (principal executive officer)



                                /s/ James C. Raabe
                                ------------------------------------------------
                                James C. Raabe
                                Chief Financial Officer
                                (principal financial and accounting officer)


                                       19





                    Certification by Chief Executive Officer

I, William R. McLaughlin, certify that:

1.   I have  reviewed  this  quarterly  report on Form  10-Q of  Select  Comfort
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  November 12, 2002


                                        ----------------------------------------
                                        William R. McLaughlin
                                        President and Chief Executive Officer

                                       20





                    Certification by Chief Financial Officer

I, James C. Raabe, certify that:

1.   I have  reviewed  this  quarterly  report on Form  10-Q of  Select  Comfort
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  November 12, 2002


                               ------------------------------------------------
                               James C. Raabe
                               Senior Vice President and Chief Financial Officer


                                       21





                                  EXHIBIT INDEX

Exhibit Number                Description                            Location
--------------                -----------                            --------
     99.1             Certification....................          Filed herewith.
     99.2             Certification....................          Filed herewith.



                                       22




                                                                    Exhibit 99.1


                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss.1350,
                             AS ADOPTED PURSUANT TO
                   SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In  connection  with the Quarterly  Report of Select  Comfort  Corporation  (the
"Company")  on Form 10-Q for the period ended  September  28, 2002 as filed with
the Securities and Exchange  Commission on the date hereof (the  "Report"),  the
undersigned,  William R.  McLaughlin,  Chief  Executive  Officer of the Company,
solely for the purposes of 18 U.S.C. ss.1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, does hereby certify that:

     (1)  The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.



                                              /s/ William R. McLaughlin
                                              ------------------------------
                                              William R. McLaughlin
                                              Chief Executive Officer
                                              November 12, 2002


                                       23




                                                                    Exhibit 99.2



                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss.1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In  connection  with the Quarterly  Report of Select  Comfort  Corporation  (the
"Company")  on Form 10-Q for the period ended  September  28, 2002 as filed with
the Securities and Exchange  Commission on the date hereof (the  "Report"),  the
undersigned,  James C. Raabe, Chief Financial Officer of the Company, solely for
the  purposes of 18 U.S.C.  ss.1350,  as adopted  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, does hereby certify that:

     (1)  The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.



                                                     /s/ James C. Raabe
                                                     --------------------------
                                                     James C. Raabe
                                                     Chief Financial Officer
                                                     November 12, 2002


                                       24