I was curious if anyone knows what happens to the bikes that get returned to Performance? Do they get cleaned and resold as new?

That would be highly illegal and unethical. They most likely wind up being sold as lightly used or demos at their retail stores.

Curious because I bought a floor model as new, and I assume plenty of people have given it a test ride, since it was sitting in the shop on display.

Returned items are sold as returned items, have life time warranty, and are discounted.

Floor model would still be sold as new. That would be different than a returned purchase. A quick turn around the block is much different than unsupervised mileage for whatever the return period is.

I hate to burst anyone bubble, but sadly this isn't true. I know for certain that Performance Bikes resells used items as new. Here is my evidence:

I went there about three weeks ago and purchase a saddle: Selle Italila Max Flite Gel Flow. After riding it for a week, and more than 100 miles, I realized there was a small scratch/tear on one side. I brought the saddle back for an exchange, and the one other they had in stock also had a small tear, in a different location, which seemed to be bigger then mine. I decided to keep mine. When I got home I put a dab of clear nail polish over the tear so that it wouldn't get worse.

So, I rode the saddle several more times. I noticed that my brand new bib shorts had a very large area of damage on the right side, and this happened to with two sets of bib shorts. I realized it had to be the saddle, and I looked closely and realized that the threading on the saddle was very rough in one area, causing the damage to the bib shorts. I again went to performance bike, with my saddle (having the small spot of clear nail polish). I explained the issue to the store manager, and showed him BOTH sets of bibs and the damage the saddle caused. He was nice and exchanged it for another.

I went home without checking the new one, assuming mine was just a bad copy. Well when I got home I realized that this one too had several very rough areas, way worse then the original. I was mad, so I went back to the store and asked to see all of the saddles of this type that they had in stock. They brought out all of their "new" saddles, and sure enough, out of the three they brought my original one, with the clear nail polish, was in there.

Now, I have a strong feeling that they do this with MOST products that are returned, and in still 'new looking condition'. Take this with a grain of salt, but this is my experience.