1275211--3/23/2007--SIMMONS

related topics

{debt, indebtedness, cash}

{cost, regulation, environmental}

{cost, operation, labor}

{operation, international, foreign}

{operation, natural, condition}

{product, market, service}

{customer, product, revenue}

{stock, price, operating}

{cost, contract, operation}

{product, liability, claim}

{system, service, information}

{loss, insurance, financial}

{property, intellectual, protect}

{personnel, key, retain}

We operate in the highly competitive bedding industry, and if we are unable to compete successfully, we may lose customers and our sales may decline. Regulatory requirements relating to our products may increase our costs, alter our manufacturing processes and impair our product performance. Legal and regulatory requirements may impose costs or charges on us that impair our business and reduce our profitability Our new product launches may not be successful, which could cause a decline in our market share and our level of profitability. We may experience fluctuations in our operating results due to seasonality, which could make sequential quarter to quarter comparison an unreliable indication of our performance. We rely on a relatively small number of suppliers, and if we experience difficulty with a major supplier, we may have difficulty finding alternative sources. This could disrupt our business. We are subject to fluctuations in the cost and availability of raw materials, which could increase our costs or disrupt our production. Because we depend on our significant customers, a decrease or interruption in their business with us could reduce our sales and profits. A change or deterioration in labor relations or the inability to renew our collective bargaining agreements could disrupt our business operations and increase our costs, which could negatively impact sales and decrease our profitability. The loss of the services of any member of our executive leadership team could impair our ability to execute our business strategy and negatively impact our business, financial condition and results of operations. We may not realize the expected benefits from the integration of Simmons Canada into our operations or other profit enhancement opportunities. Our international operations are subject to foreign exchange risks and our ability to expand in certain international markets is limited by the terms of licenses we have granted to manufacture and sell Simmons products. Our international operations are subject to foreign exchange risks and our ability to expand in certain international markets is limited by the terms of licenses we have granted to manufacture and sell Simmons products. Our Canadian pension plans and supplemental executive retirement plans are currently under funded and we will be required to make cash payments to the plans, reducing the cash available for our business. The actions of our controlling stockholder could conflict with the interests of the holders of our debt. If we are not able to protect our trade secrets or maintain our trademarks, patents and other intellectual property, we may not be able to prevent competitors from developing similar products or from marketing in a manner that capitalizes on our trademarks, patents and other intellectual property. We may face exposure to product liability claims, which could reduce our liquidity and profitability and reduce consumer confidence in our products. We are vulnerable to interest rate risk with respect to our debt, which could lead to an increase in interest expense and reduce our cash available for operations. An increase in our return rates or an inadequacy in our warranty reserves could reduce our liquidity and profitability. Our substantial indebtedness could adversely affect our financial health and reduce the cash available to support our business and operations. Holdings is a holding company with no operations. It may not have access to the cash flow and other assets of its subsidiaries that may be needed to make payments on Holdings obligations. Holdings is a holding company with no operations. It may not have access to the cash flow and other assets of its subsidiaries that may be needed to make payments on Holdings obligations. We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under such indebtedness which may not be successful. We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under such indebtedness which may not be successful. The senior credit facility and the indentures related to our debt instruments contain various covenants which limit our management s discretion in the operation of our business. The senior credit facility and the indentures related to our debt instruments contain various covenants which limit our management s discretion in the operation of our business. We are in the process of upgrading our current management information system. If we fail to properly implement the upgrade, this could result in disruptions to our business, reduce our cash available for operations, and/or negatively impact our results of operations and financial condition. If the upgrade takes longer than we anticipate, we may require more resources, which could be a distraction to key personnel and result in more cash outlay to implement the upgrade. Additional terrorist attacks in the U.S. or against U.S. targets or actual or threats of war or the escalation of current hostilities involving the U.S. or its allies could negatively impact our business, financial condition or results of operations. An outbreak of avian flu or a pandemic, or the threat of a pandemic, may adversely impact our ability to produce and deliver our products or may adversely impact consumer demand.

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1275211--3/23/2007--SIMMONS_CO