The U.S. bedding industry generated wholesale revenues of approximately $5.6 billion during calendar 2004 according to International Sleep Products Association,or ISPA. The U.S. bedding industry has historically displayed healthy revenue growth, driven by both growing unit demand and rising average unit selling prices. From 1984 to 2004, the U.S. bedding industry has grown revenues at a compound annual growth rate of approximately 6.2%, driven by compounded growth in units of 2.4% and compounded growth in average unit selling price of 3.4%. During this 20 year period, there has been just one year in which industry revenues declined (by 0.3% in 2001). This stability and resistance to economic downturns is partially due to replacement purchases, which account for an estimated 70% of bedding industry sales. In 2004, ISPA estimates industry revenues grew by 11.3% as compared to 2003, reflecting the strongest growth in 20 years for the industry.

The growth of the U.S. bedding industry has been supported by demographic and economic factors that favor the ongoing growth of consumer spending on mattresses.

In 2004, the Company successfully completed the rollout of its new proprietary single-sided Posturepedic UniCased, and Stearns & FosterTripLCased product lines in the United States, Canada, and Mexico. These technologically advanced, one-sided bedding systems represent the broadest redesign in the Company’s history and are the result of significant customer and market research and extensive product research and development efforts.

The Company also produces a variety of visco-elastic (memory foam) and latex foam bedding products for the specialty bedding category. The specialty bedding category, which includes air-adjustable mattress products, has experienced substantial growth. Late in the first quarter of 2005, the Company introduced its new Posturepedic TrueForm visco-elastic bedding product line to take advantage of the rapid growth of the specialty bedding category. The Company expects to experience additional growth in the specialty bedding category in 2005 as it rolls out the TrueForm product and introduce additional specialty bedding offerings to strengthen its competitive position. The Company is planning significant product introductions and placements over the next 12 months, featuring a broader array of bedding products in the conventional and specialty arenas, including latex and visco-elastic products.

The Company serves domestically a large and well-diversified base of approximately 2,900 customers representing approximately 7,000 outlets, including furniture stores, specialty bedding stores, department stores and national mass merchandisers. The Company’s five largest customers accounted for approximately 20.2% of its net sales for fiscal 2004 and no single customer represented more than 10.0% of its net sales for this period.

Cost of goods sold for the quarter ended February 27, 2005 was $200.0 million, an increase of $16.4 million compared to $183.6 million for the fiscal quarter ended February 29, 2004

Gross profit for the fiscal quarter ended February 27, 2005 was $159.0 million, an increase of $24.4 million compared to $134.6 million for the quarter ended February 29, 2004

Interest expense for the fiscal quarter ended February 27, 2005 was $19.7 million, an increase of $2.8 million compared to $16.9 million for the quarter ended February 29, 2004.