**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

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

**For      the quarterly period ended September 29, 2007**

|   | **OR** |
|--------|--------|

| ** ̈** | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------|

**For      the transition period from      ___________ to ____________**

|   | **Commission                file number333-124138** |
|--------|-----------------------------------------------------|

**SIMMONS        COMPANY**

| Delaware                                                                      |   | 20-0646221                                          |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) |   | (I.R.S.                Employer Identification No.) |
|                                                                          |   |                                                |
| One                Concourse Parkway, Suite 800, Atlanta, Georgia             |   | 30328-6188                                          |
| (Address                of principal executive offices)                       |   | (Zip                Code)                           |

**DOCUMENTS      OR PARTS THEREOF INCORPORATED BY      REFERENCE:  None**

----

**PART      I — FINANCIAL INFORMATION**

**Item      1.   Financial Statements**

**Simmons      Company and Subsidiaries**

**Unaudited      Condensed Consolidated Statements of Operations**

**and      Comprehensive Income**

|                                                                                                                                |   | **Quarters                  Ended** |    |   | **Nine                  Months Ended** |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|---------|--------|----------------------------------------|--------|
|                                                                                                                                |   | **September                  29,**  |    |   | **September                  30,**     |   |   | **September                  29,** |   |   | **September                  30,** |   |
|                                                                                                                                |   | **2007**                            |    |   | **2006**                               |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                                |   |                                |    |   |                                   |   |   |   |   |   |   |   |
| Net                  sales                                                                                                          |   | $                                   | 311,992 |   |                                   | $      | 259,766 |   |   | $ | 857,269 |   |   | $ | 736,835 |   |
| Cost                  of products sold                                                                                              |   |                                | 186,712 |   |                                   |   | 142,562 |   |   |   | 517,714 |   |   |   | 411,051 |   |
| Gross                  profit                                                                                                       |   |                                | 125,280 |   |                                   |   | 117,204 |   |   |   | 339,555 |   |   |   | 325,784 |   |
|                                                                                                                                |   |                                |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  expenses:                                                                                                |   |                                |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,                  general and administrative expenses                                                                       |   |                                | 87,442  |   |                                   |   | 84,089 |   |   |   | 258,259 |   |   |   | 236,628 |   |
| Gain                  on sale of Sleep Country USA                                                                                  |   |                                | -       |   |                                   |   | (43,834 | ) |   |   | - |   |   |   | (43,834 | ) |
| Amortization                  of intangibles                                                                                        |   |                                | 1,579   |   |                                   |   | 1,386 |   |   |   | 4,551 |   |   |   | 4,220 |   |
| Licensing                  revenues                                                                                                 |   |                                | (2,507  | )      |                                   |   | (2,199 | ) |   |   | (7,821 | ) |   |   | (6,498 | ) |
|                                                                                                                                |   |                                | 86,514  |   |                                   |   | 39,442 |   |   |   | 254,989 |   |   |   | 190,516 |   |
|                                                                                                                                |   |                                |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  income                                                                                                   |   |                                | 38,766  |   |                                   |   | 77,762 |   |   |   | 84,566 |   |   |   | 135,268 |   |
|                                                                                                                                |   |                                |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense, net                                                                                              |   |                                | 20,039  |   |                                   |   | 18,041 |   |   |   | 57,686 |   |   |   | 61,932 |   |
| Income                  before income taxes                                                                                         |   |                                | 18,727  |   |                                   |   | 59,721 |   |   |   | 26,880 |   |   |   | 73,336 |   |
| Income                  tax expense                                                                                                 |   |                                | 6,389   |   |                                   |   | 17,799 |   |   |   | 9,145 |   |   |   | 22,920 |   |
| Net                  income                                                                                                         |   |                                | 12,338  |   |                                   |   | 41,922 |   |   |   | 17,735 |   |   |   | 50,416 |   |
|                                                                                                                                |   |                                |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  comprehensive income:                                                                                        |   |                                |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign                  currency translation adjustment                                                                            |   |                                | 8,971   |   |                                   |   | 37 |   |   |   | 20,205 |   |   |   | 152 |   |
| Comprehensive                  income                                                                                               |   | $                                   | 21,309  |   |                                   | $      | 41,959 |   |   | $ | 37,940 |   |   | $ | 50,568 |   |
|                                                                                                                                |   |                                |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |   |                                |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| The                  accompanying notes are an integral part of these condensed consolidated                  financial statements. |   |                                |    |   |                                   |

----

**Simmons      Company and Subsidiaries**

**Condensed      Consolidated Balance Sheets**

|                                                                                                                                                                                                                                                                                                          |   | **September                  29,** |      |   | **December                  30,** |      |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-----------|--------|-----------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                          |   | **2007**                           |      |   | ** **                        | **2006*** |   |
|                                                                                                                                                                                                                                                                                                          |   | **(Unaudited)**                    |      |   |                              |      |   |
|                                                                                                                                                                                                                                                                                                          |   |                               |      |   |                              |      |   |
| **ASSETS**                                                                                                                                                                                                                                                                                                    |   |                               |      |   |                              |      |   |
| Current                  assets:                                                                                                                                                                                                                                                                              |   |                               |      |   |                              |      |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                                                                    |   | $                                  | 17,290    |   |                              | $         | 20,784 |   |
| Accounts                  receivable, less allowances for doubtful receivables, discounts                  and                  returns of $4,537 and $4,329                                                                                                                                                  |   |                               | 140,482   |   |                              |      | 92,035 |   |
| Inventories                                                                                                                                                                                                                                                                                                   |   |                               | 33,581    |   |                              |      | 26,718 |   |
| Deferred                  income taxes                                                                                                                                                                                                                                                                        |   |                               | 5,283     |   |                              |      | 3,136 |   |
| Prepaid                  expenses                                                                                                                                                                                                                                                                             |   |                               | 10,954    |   |                              |      | 10,426 |   |
| Other                  current assets                                                                                                                                                                                                                                                                         |   |                               | 8,358     |   |                              |      | 8,997 |   |
| Total                  current assets                                                                                                                                                                                                                                                                         |   |                               | 215,948   |   |                              |      | 162,096 |   |
|                                                                                                                                                                                                                                                                                                          |   |                               |      |   |                              |      |   |   |
| Property,                  plant and equipment, net                                                                                                                                                                                                                                                           |   |                               | 84,225    |   |                              |      | 73,185 |   |
| Goodwill                                                                                                                                                                                                                                                                                                      |   |                               | 538,955   |   |                              |      | 512,818 |   |
| Intangible                  assets, net                                                                                                                                                                                                                                                                       |   |                               | 604,852   |   |                              |      | 592,802 |   |
| Other                  assets                                                                                                                                                                                                                                                                                 |   |                               | 38,732    |   |                              |      | 32,753 |   |
| Total                  assets                                                                                                                                                                                                                                                                                 |   | $                                  | 1,482,712 |   |                              | $         | 1,373,654 |   |
|                                                                                                                                                                                                                                                                                                          |   |                               |      |   |                              |      |   |   |
|                                                                                                                                                                                                                                                                                                          |   |                               |      |   |                              |      |   |   |
| *                  Derived from the Company's 2006 audited consolidated financial                  statements,                  but does not include all                  disclosures required by accounting principles generally accepted                  in the                  United States of America. |   |
|                                                                                                                                                                                                                                                                                                          |   |                               |      |   |                              |      |   |   |
| The                  accompanying notes are an integral part of these condensed consolidated                  financial statements.                                                                                                                                                                           |   |

----

**Simmons      Company and Subsidiaries**

**Condensed      Consolidated Balance Sheets**

|                                                                                                                                                                                                                                                                                                                                     |   | **September                      29,** |      |   | **December                      30,** |      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|-----------|--------|---------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                     |   | **2007**                               |      |   | ** **                            | **2006*** |   |
|                                                                                                                                                                                                                                                                                                                                     |   | **(Unaudited)**                        |      |   |                                  |      |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                                   |      |   |                                  |      |   |
| **LIABILITIES                      AND STOCKHOLDER'S EQUITY**                                                                                                                                                                                                                                                                            |   |                                   |      |   |                                  |      |   |
| Current                      liabilities:                                                                                                                                                                                                                                                                                                |   |                                   |      |   |                                  |      |   |
| Current                      maturities of long-term debt                                                                                                                                                                                                                                                                                |   | $                                      | 1,178     |   |                                  | $         | 778 |   |
| Accounts                      payable                                                                                                                                                                                                                                                                                                    |   |                                   | 68,453    |   |                                  |      | 60,318 |   |
| Accrued                      liabilities                                                                                                                                                                                                                                                                                                 |   |                                   | 85,809    |   |                                  |      | 74,594 |   |
| Total                      current liabilities                                                                                                                                                                                                                                                                                           |   |                                   | 155,440   |   |                                  |      | 135,690 |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                                   |      |   |                                  |      |   |   |
| Non-current                      liabilities:                                                                                                                                                                                                                                                                                            |   |                                   |      |   |                                  |      |   |   |
| Long-term                      debt                                                                                                                                                                                                                                                                                                      |   |                                   | 925,970   |   |                                  |      | 896,001 |   |
| Deferred                      income taxes                                                                                                                                                                                                                                                                                               |   |                                   | 193,358   |   |                                  |      | 177,692 |   |
| Other                                                                                                                                                                                                                                                                                                                                    |   |                                   | 27,594    |   |                                  |      | 14,410 |   |
| Total                      liabilities                                                                                                                                                                                                                                                                                                   |   |                                   | 1,302,362 |   |                                  |      | 1,223,793 |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                                   |      |   |                                  |      |   |   |
| Commitments                      and contingencies                                                                                                                                                                                                                                                                                       |   |                                   |      |   |                                  |      |   |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                                   |      |   |                                  |      |   |   |
| Stockholder's                      equity:                                                                                                                                                                                                                                                                                               |   |                                   |      |   |                                  |      |   |   |
| Common                      stock, $0.01 par value: authorized - 1,000 shares; issued -                      100                      shares                                                                                                                                                                                             |   |                                   | 1         |   |                                  |      | 1 |   |
| Additional                      paid-in capital                                                                                                                                                                                                                                                                                          |   |                                   | 100,737   |   |                                  |      | 102,843 |   |
| Retained                      earnings                                                                                                                                                                                                                                                                                                   |   |                                   | 62,002    |   |                                  |      | 51,961 |   |
| Accumulated                      other comprehensive income (loss)                                                                                                                                                                                                                                                                       |   |                                   | 17,610    |   |                                  |      | (2,595 | ) |
| Treasury                      stock, at cost                                                                                                                                                                                                                                                                                             |   |                                   | -         |   |                                  |      | (2,349 | ) |
| Total                      stockholder's equity                                                                                                                                                                                                                                                                                          |   |                                   | 180,350   |   |                                  |      | 149,861 |   |
| Total                      liabilities and stockholder's equity                                                                                                                                                                                                                                                                          |   | $                                      | 1,482,712 |   |                                  | $         | 1,373,654 |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                                   |      |   |                                  |      |   |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                                   |      |   |                                  |      |   |   |
| *                      Derived from the Company's 2006 audited consolidated financial                      statements,                      but does not include all disclosures required by accounting                      principles                      generally accepted in the United States of America.     |   |
|                                                                                                                                                                                                                                                                                                                                     |   |                                   |      |   |                                  |      |   |   |
| The                      accompanying notes are an integral part of these condensed                      consolidated                      financial statements.                                                                                                                                                                         |   |                                   |      |   |                                  |

----

**Simmons      Company and Subsidiaries**

**Unaudited      Condensed Consolidated Statements of Cash Flows**

|                                                                                                                                |   | **Nine                  Months Ended** |    |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|---------|
|                                                                                                                                |   | **September                  29,**     |    |   | **September                  30,** |   |
|                                                                                                                                |   | **2007**                               |    |   | **2006** |   |
| Cash                  flows from operating activities:                                                                              |   |                                   |    |   |   |   |
| Net                  income                                                                                                         |   | $                                      | 17,735  |   |   | $ | 50,416 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities:                 |   |                                   |    |   |   |   |   |   |
| Depreciation                  and amortization                                                                                      |   |                                   | 22,217  |   |   |   | 21,885 |   |
| Provision                  for bad debts, net                                                                                       |   |                                   | 150     |   |   |   | 1,296 |   |
| Provision                  for deferred income taxes                                                                                |   |                                   | 6,813   |   |   |   | 20,955 |   |
| Non-cash                  interest expense                                                                                          |   |                                   | 16,803  |   |   |   | 21,979 |   |
| Gain                  on sale of Sleep Country USA                                                                                  |   |                                   | -       |   |   |   | (43,834 | ) |
| Non-cash                  stock compensation expense                                                                                |   |                                   | 217     |   |   |   | 530 |   |
| Net                  changes in operating assets and liabilities:                                                                   |   |                                   |    |   |   |   |   |   |
| Accounts                  receivable                                                                                                |   |                                   | (44,976 | ) |   |   | (10,334 | ) |
| Inventories                                                                                                                         |   |                                   | (5,833  | ) |   |   | 3,270 |   |
| Other                  current assets                                                                                               |   |                                   | 323     |   |   |   | (2,881 | ) |
| Accounts                  payable                                                                                                   |   |                                   | 7,394   |   |   |   | 2,943 |   |
| Accrued                  liabilities                                                                                                |   |                                   | 8,194   |   |   |   | 4,319 |   |
| Other,                  net                                                                                                         |   |                                   | (13,048 | ) |   |   | (5,684 | ) |
| Net                  cash provided by operating activities                                                                          |   |                                   | 15,989  |   |   |   | 64,860 |   |
|                                                                                                                                |   |                                   |    |   |   |   |   |   |
| Cash                  flows from investing activities:                                                                              |   |                                   |    |   |   |   |   |   |
| Purchases                  of property, plant and equipment                                                                         |   |                                   | (18,202 | ) |   |   | (9,228 | ) |
| Acquisition                  of certain assets of Comfor Products, Inc.                                                             |   |                                   | (13,077 | ) |   |   | - |   |
| Proceeds                  from sale of Sleep Country USA, net                                                                       |   |                                   | -       |   |   |   | 52,743 |   |
| Net                  cash (used in) provided by investing activities                                                                |   |                                   | (31,279 | ) |   |   | 43,515 |   |
|                                                                                                                                |   |                                   |    |   |   |   |   |   |
| Cash                  flows from financing activities:                                                                              |   |                                   |    |   |   |   |   |   |
| Borrowings                  on revolving loan                                                                                       |   |                                   | 15,500  |   |   |   | - |   |
| Borrowings                  on tranche D term loan, net                                                                             |   |                                   | -       |   |   |   | 480,000 |   |
| Repayment                  of tranche C term loan                                                                                   |   |                                   | -       |   |   |   | (369,933 | ) |
| Repayment                  of senior unsecured term loan                                                                            |   |                                   | -       |   |   |   | (140,000 | ) |
| Payments                  of other debt                                                                                             |   |                                   | (522    | ) |   |   | (160 | ) |
| Dividend                  to Simmons Holdco, Inc.                                                                                   |   |                                   | (4,941  | ) |   |   | - |   |
| Excess                  tax benefits from stock-based compensation                                                                  |   |                                   | 27      |   |   |   | - |   |
| Other                                                                                                                               |   |                                   | (1      | ) |   |   | (1,376 | ) |
| Net                  cash provided by (used in) financing activities                                                                |   |                                   | 10,063  |   |   |   | (31,469 | ) |
|                                                                                                                                |   |                                   |    |   |   |   |   |   |
| Net                  effect of exchange rate changes on cash                                                                        |   |                                   | 1,733   |   |   |   | 152 |   |
| Change                  in cash and cash equivalents                                                                                |   |                                   | (3,494  | ) |   |   | 77,058 |   |
| Cash                  and cash equivalents, beginning of period                                                                     |   |                                   | 20,784  |   |   |   | 24,622 |   |
| Cash                  and cash equivalents, end of period                                                                           |   | $                                      | 17,290  |   |   | $ | 101,680 |   |
|                                                                                                                                |   |                                   |    |   |   |   |   |   |
|                                                                                                                                |   |                                   |    |   |   |   |   |   |
| The                  accompanying notes are an integral part of these condensed consolidated                  financial statements. |   |                                   |    |   |   |

----

**Simmons      Company and Subsidiaries**

**Condensed      Consolidated Statement of Changes in Stockholder’s Equity**

|                                                                                                                                                                                         |   |       |   |   |           |   |   |        |   |   |         |   |   | **Accumulated**   |   |   | **Common**                     |   |   |              |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|----------------|--------|--------|-------------|--------|--------|--------------|--------|--------|-------------------|--------|--------|--------------------------------|--------|--------|-------------------|--------|
|                                                                                                                                                                                         |   |       |   |   | **Additional** |   |   |        |   |   | **Other**    |   |   | **Stock**         |   |   | **Total**                      |   |
|                                                                                                                                                                                         |   | **Common** |   |   | **Common**     |   |   | **Paid-In** |   |   | **Retained** |   |   | **Comprehensive** |   |   | **Held                    In** |   |   | **Stockholder's** |   |
|                                                                                                                                                                                         |   | **Shares** |   |   | **Stock**      |   |   | **Capital** |   |   | **Earnings** |   |   | **Income**        |   |   | **Treasury**                   |   |   | **Equity**        |   |
|                                                                                                                                                                                         |   |       |   |   |           |   |   |        |   |   |         |   |   |              |   |   |                           |   |   |              |   |
| **December                    30, 2006 (audited)***                                                                                                                                          |   |       | 100    |   |           | $      | 1      |        |   | $      | 102,843      |   |   | $                 | 51,961 |   |                           | $      | (2,595 | )                 |   | $ | (2,349 | ) |   | $ | 149,861 |   |
| Net                    income                                                                                                                                                                |   |       | -      |   |           |   | -      |        |   |   | -            |   |   |              | 17,735 |   |                           |   | -      |              |   |   | - |   |   |   | 17,735 |   |
| Other                    comprehensive income:                                                                                                                                               |   |       |   |   |           |   |   |        |   |   |         |   |   |              |   |   |                           |   |   |              |   |   |   |   |   |   |   |   |
| Change                    in foreign currency translation                                                                                                                                    |   |       | -      |   |           |   | -      |        |   |   | -            |   |   |              | -      |   |                           |   | 20,205 |              |   |   | - |   |   |   | 20,205 |   |
| Comprehensive                    income                                                                                                                                                      |   |       |   |   |           |   |   |        |   |   |         |   |   |              | 17,735 |   |                           |   | 20,205 |              |   |   | - |   |   |   | 37,940 |   |
| Dividend                    to Simmons Holdco, Inc. (see Note J)                                                                                                                             |   |       | -      |   |           |   | -      |        |   |   | -            |   |   |              | (4,941 | )      |                           |   |   |              |   |   |   |   |   |   | (4,941 | ) |
| Effect                    of FIN 48 adoption (see Note D)                                                                                                                                    |   |       | -      |   |           |   | -      |        |   |   | -            |   |   |              | (2,753 | )      |                           |   | -      |              |   |   | - |   |   |   | (2,753 | ) |
| Purchase                    of treasury stock, at cost                                                                                                                                       |   |       | -      |   |           |   | -      |        |   |   | -            |   |   |              | -      |   |                           |   | -      |              |   |   | (1 | ) |   |   | (1 | ) |
| Non-cash                    stock compensation expense                                                                                                                                       |   |       | -      |   |           |   | -      |        |   |   | 217          |   |   |              | -      |   |                           |   | -      |              |   |   | - |   |   |   | 217 |   |
| Tax                    windfall resulting from restricted stock awards                                                                                                                       |   |       | -      |   |           |   | -      |        |   |   | 27           |   |   |              |   |   |                           |   |   |              |   |   |   |   |   |   | 27 |   |
| Retirement                    of treasury stock                                                                                                                                              |   |       | -      |   |           |   | -      |        |   |   | (2,350       | )      |   |              | -      |   |                           |   | -      |              |   |   | 2,350 |   |   |   | - |   |
| **September                    29, 2007 (unaudited)**                                                                                                                                        |   |       | 100    |   |           | $      | 1      |        |   | $      | 100,737      |   |   | $                 | 62,002 |   |                           | $      | 17,610 |              |   | $ | - |   |   | $ | 180,350 |   |
|                                                                                                                                                                                         |   |       |   |   |           |   |   |        |   |   |         |   |   |              |   |   |                           |   |   |              |   |   |   |   |   |   |   |   |
| *  Recast                    to give effect to the Merger (see Note B)                   |   |       |   |   |           |   |   |        |   |   |
|                                                                                                                                                                                         |   |       |   |   |           |   |   |        |   |   |         |   |   |              |   |   |                           |   |   |              |   |   |   |   |   |   |   |   |
| The                    accompanying notes are an integral part of these condensed consolidated                    financial statements.                                                      |   |       |   |   |           |   |   |        |   |   |         |   |   |

----

**Simmons                  Company and                  Subsidiaries**

**Notes                  to Unaudited Condensed Consolidated Financial                  Statements**

| **A.** | **Basis                of Presentation** |
|--------|------------------------------------------|

*Accounting for Uncertainty      in Income Taxes*

**B.           Merger      and Distribution to Stockholders**

----

**Simmons              Company and              Subsidiaries**

**Notes              to Unaudited Condensed Consolidated Financial              Statements**

**C.           Acquisition      and Disposition**

*2007      Purchase of Certain Assets of Comfor Products, Inc. (“Comfor      Products”)*

*2006      Purchase of Simmons Canada Inc. (“Simmons Canada”)*

----

**Simmons              Company and              Subsidiaries**

**Notes              to Unaudited Condensed Consolidated Financial              Statements**

|                                                 |   | **Purchase                  Price Allocation** |    |
|------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                 |   | **December                  30, 2006**         |    |   | **Adjustments** |   |   | **September                  29, 2007** |   |
| Current                  assets                      |   | $                                              | 27,279  |   |   | $ | - |   |   | $ | 27,279 |   |
| Property,                  plant and equipment       |   |                                           | 17,773  |   |   |   | - |   |   |   | 17,773 |   |
| Goodwill                                             |   |                                           | 32,828  |   |   |   | 1,064 |   |   |   | 33,892 |   |
| Other                  intangibles                   |   |                                           | 62,802  |   |   |   | - |   |   |   | 62,802 |   |
| Other                  assets                        |   |                                           | 800     |   |   |   | - |   |   |   | 800 |   |
| Total                  assets acquired               |   |                                           | 141,482 |   |   |   | 1,064 |   |   |   | 142,546 |   |
| Current                  liabilities                 |   |                                           | (15,941 | ) |   |   | (1,489 | ) |   |   | (17,430 | ) |
| Non-current                  liabilities             |   |                                           | (12,442 | ) |   |   | 425 |   |   |   | (12,017 | ) |
| Total                  liabilities assumed           |   |                                           | (28,383 | ) |   |   | (1,064 | ) |   |   | (29,447 | ) |
| Purchase                  price net of cash acquired |   | $                                              | 113,099 |   |   | $ | - |   |   | $ | 113,099 |   |
|                                                 |   |                                           |    |   |   |   |   |   |   |   |   |   |

*2006      Sale of Sleep Country USA, LLC*

----

**Simmons              Company and              Subsidiaries**

**Notes              to Unaudited Condensed Consolidated Financial              Statements**

*Pro      Forma Financial Data*

|                        |   | **Quarter**                             |    |   | **Nine                  Months**        |   |
|-----------------------------|--------|-----------------------------------------|---------|--------|-----------------------------------------|--------|
|                        |   | **Ended**                               |    |   | **Ended**                               |   |
|                        |   | **September                  30, 2006** |    |   | **September                  30, 2006** |   |
|                        |   | (Unaudited)                             |    |
| Net                  Sales  |   | $                                       | 280,540 |   |                                    | $      | 781,373 |   |
| Net                  Income |   |                                    | 9,949   |   |                                    |   | 20,583 |   |

**D.            Adoption      of FIN 48**

On      December 31, 2006 (the first day of fiscal year 2007), the Company      adopted FIN 48, which clarifies the accounting for uncertainty in income taxes      recognized in a company’s financial statements in accordance with FASB Statement      109, *Accounting for Income Taxes*.  FIN 48 provides a      comprehensive model for how a company should recognize, measure, present, and      disclose in its financial statements uncertain tax positions that a company      has      taken or expects to take in a tax return.  Under FIN 48, the financial      statements reflect expected future tax consequences of such positions presuming      the taxing authorities’ full knowledge of the position and all relevant facts,      but without considering time values.  FIN 48 requires companies to      accrue interest on the difference between a tax position recognized under FIN      48      and the amount previously taken or expected to be taken in a company’s tax      return.

----

**Simmons              Company and              Subsidiaries**

**Notes              to Unaudited Condensed Consolidated Financial              Statements**

**E.           Inventories**

|                            |   | **September                  29,** |   |   | **December                  30,** |   |
|---------------------------------|--------|------------------------------------|--------|--------|-----------------------------------|--------|
|                            |   | **2007**                           |   |   | **2006**                          |   |
| Raw                  materials  |   | $                                  | 23,019 |   |                              | $      | 17,566 |   |
| Work-in-progress                |   |                               | 1,123  |   |                              |   | 997 |   |
| Finished                  goods |   |                               | 9,439  |   |                              |   | 8,155 |   |
|                            |   | $                                  | 33,581 |   |                              | $      | 26,718 |   |
|                            |   |                               |   |   |                              |   |   |   |

**F.           Goodwill**

|                                                           |   | **Domestic** |    |   | **Canada** |   |   | **Consolidated** |   |
|----------------------------------------------------------------|--------|--------------|---------|--------|------------|--------|--------|------------------|--------|
| Balance                  as of December 30, 2006               |   | $            | 480,790 |   |       | $      | 32,028 |             |   | $ | 512,818 |   |
| Adoption                  of FIN 48 (see Note D)               |   |         | 11,474  |   |       |   | 1,438  |             |   |   | 12,912 |   |
| Tax                  benefit allocated to reduce goodwill      |   |         | (11     | )      |       |   | -      |             |   |   | (11 | ) |
| Canada                  Acquisition adjustments (see Note C)   |   |         | -       |   |       |   | 1,064  |             |   |   | 1,064 |   |
| Purchase                  of certain assets of Comfor Products |   |         | 6,360   |   |       |   | -      |             |   |   | 6,360 |   |
| Foreign                  currency translation adjustment       |   |         | -       |   |       |   | 5,812  |             |   |   | 5,812 |   |
| Balance                  as of September 29, 2007              |   | $            | 498,613 |   |       | $      | 40,342 |             |   | $ | 538,955 |   |
|                                                           |   |         |    |   |       |   |   |             |   |   |   |   |

----

**Simmons              Company and              Subsidiaries**

**Notes              to Unaudited Condensed Consolidated Financial              Statements**

**G.**
**Warranties**

|                                                                   |   | **Quarters                  Ended** |   |   | **Nine                  Months Ended** |   |
|------------------------------------------------------------------------|--------|-------------------------------------|--------|--------|----------------------------------------|--------|
|                                                                   |   | **September                  29,**  |   |   | **September                  30,**     |   |   | **September                  29,** |   |   | **September                  30,** |   |
|                                                                   |   | **2007**                            |   |   | **2006**                               |   |   | **2007** |   |   | **2006** |   |
| Balance                  at beginning of period                        |   | $                                   | 4,008  |   |                                   | $      | 2,943 |   |   | $ | 3,668 |   |   | $ | 3,009 |   |
| Additional                  warranties issued                          |   |                                | 569    |   |                                   |   | 432 |   |   |   | 1,891 |   |   |   | 1,429 |   |
| Accruals                  related to pre-existing                      |   |                                |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
|   warranties                  (including change in estimate) |   |                                | 95     |   |                                   |   | (142 | ) |   |   | 189 |   |   |   | (321 | ) |
| Warranty                  settlements                                  |   |                                | (549   | )      |                                   |   | (357 | ) |   |   | (1,625 | ) |   |   | (1,241 | ) |
| Balance                  at end of period                              |   | $                                   | 4,123  |   |                                   | $      | 2,876 |   |   | $ | 4,123 |   |   | $ | 2,876 |   |
|                                                                   |   |                                |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |

| **H.** | **Long-Term                Debt** |
|--------|-----------------------------------|

|                                                                                                           |   | **September                  29,** |    |   | **December                  30,** |   |
|----------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|--------|-----------------------------------|--------|
|                                                                                                           |   | **2007**                           |    |   | **2006**                          |   |
| Senior                  credit facility:                                                                       |   |                               |    |   |                              |   |
| Revolving                  loan                                                                                |   | $                                  | 15,500  |   |                              | $      | - |   |
| Tranche                  D term loan                                                                           |   |                               | 480,000 |   |                              |   | 480,000 |   |
| Total                  senior credit facility                                                                  |   |                               | 495,500 |   |                              |   | 480,000 |   |
| 7.875%                  senior subordinated notes due 2014                                                     |   |                               | 200,000 |   |                              |   | 200,000 |   |
| 10.0%                  senior discount notes due 2014, net of discount of $52,086 and                  $67,378 |   |                               | 216,914 |   |                              |   | 201,622 |   |
| Other,                  including capital lease obligations                                                    |   |                               | 14,734  |   |                              |   | 15,157 |   |
|                                                                                                           |   |                               | 927,148 |   |                              |   | 896,779 |   |
| Less                  current portion                                                                          |   |                               | (1,178  | )      |                              |   | (778 | ) |
|                                                                                                           |   | $                                  | 925,970 |   |                              | $      | 896,001 |   |
|                                                                                                           |   |                               |    |   |                              |   |   |   |

----

**Simmons              Company and              Subsidiaries**

**Notes              to Unaudited Condensed Consolidated Financial              Statements**

**I.**
**Segment      Information**

----

**Simmons            Company and            Subsidiaries**

**Notes            to Unaudited Condensed Consolidated Financial            Statements**

| **Quarter                    Ended September 29, 2007**                                       |   |
|-----------------------------------------------------------------------------------------------|--------|
| (In                    thousands)                                                             |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                          |   | **Domestic** |   |   | **Canada** |   |   | **Eliminations** |   |   | **Totals** |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    sales to external customers                                            |   | $ | 279,540 |   |   | $ | 32,452 |   |   | $ | - |   |   | $ | 311,992 |   |
| Intersegment                    net sales                                                     |   |   | 142 |   |   |   | - |   |   |   | (142 | ) |   |   | - |   |
| Adjusted                    EBITDA                                                            |   |   | 47,185 |   |   |   | 4,658 |   |   |   | - |   |   |   | 51,843 |   |
| Depreciation                    and amortization expense                                      |   |   | 6,270 |   |   |   | 1,256 |   |   |   | - |   |   |   | 7,526 |   |
| Expenditures                    for long-lived assets                                         |   |   | 6,687 |   |   |   | 844 |   |   |   | - |   |   |   | 7,531 |   |
| Segment                    assets                                                             |   |   | 1,439,056 |   |   |   | 177,354 |   |   |   | (133,698 | ) |   |   | 1,482,712 |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reconciliation                    of net income to Adjusted EBITDA:                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    income                                                                 |   | $ | 11,714 |   |   | $ | 624 |   |   | $ | - |   |   | $ | 12,338 |   |
| Depreciation                    and amortization                                              |   |   | 6,270 |   |   |   | 1,256 |   |   |   | - |   |   |   | 7,526 |   |
| Income                    taxes                                                               |   |   | 5,924 |   |   |   | 465 |   |   |   | - |   |   |   | 6,389 |   |
| Interest                    expense, net                                                      |   |   | 18,133 |   |   |   | 1,906 |   |   |   | - |   |   |   | 20,039 |   |
| Interest                    income                                                            |   |   | (274 | ) |   |   | 131 |   |   |   | - |   |   |   | (143 | ) |
| Transaction                    expenses including integration costs                           |   |   | 1,643 |   |   |   | 108 |   |   |   | - |   |   |   | 1,751 |   |
| Non-recurring                    professional service fees                                    |   |   | 1,595 |   |   |   | - |   |   |   | - |   |   |   | 1,595 |   |
| Enterprise resource                    planning ("ERP") system implementation costs |   |   | 805 |   |   |   | - |   |   |   | - |   |   |   | 805 |   |
| Management                    fees                                                            |   |   | 487 |   |   |   | - |   |   |   | - |   |   |   | 487 |   |
| Non-cash                  loss on foreign currency contracts                                  |   |   |                    - |   |   |   | 168 |   |   |   | - |   |   |   | 168 |   |
| Other                                                                                         |   |   | 888 |   |   |   | - |   |   |   | - |   |   |   | 888 |   |
| Adjusted                    EBITDA                                                            |   | $ | 47,185 |   |   | $ | 4,658 |   |   | $ | - |   |   | $ | 51,843 |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**Simmons            Company and            Subsidiaries**

**Notes            to Unaudited Condensed Consolidated Financial            Statements**

| **Nine                  Months Ended September 29, 2007**                           |   |
|-------------------------------------------------------------------------------------|--------|
| (In                  thousands)                                                     |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   | **Domestic** |   |   | **Canada** |   |   | **Eliminations** |   |   | **Totals** |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  sales to external customers                                    |   | $ | 762,613 |   |   | $ | 94,656 |   |   | $ | - |   |   | $ | 857,269 |   |
| Intersegment                  net sales                                             |   |   | 574 |   |   |   | - |   |   |   | (574 | ) |   |   | - |   |
| Adjusted                  EBITDA                                                    |   |   | 107,304 |   |   |   | 13,794 |   |   |   | - |   |   |   | 121,098 |   |
| Depreciation                  and amortization expense                              |   |   | 18,723 |   |   |   | 3,494 |   |   |   | - |   |   |   | 22,217 |   |
| Expenditures                  for long-lived assets                                 |   |   | 16,800 |   |   |   | 1,402 |   |   |   | - |   |   |   | 18,202 |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reconciliation                  of net income to Adjusted EBITDA:                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income                                                         |   | $ | 15,327 |   |   | $ | 2,408 |   |   | $ | - |   |   | $ | 17,735 |   |
| Depreciation                  and amortization                                      |   |   | 18,723 |   |   |   | 3,494 |   |   |   | - |   |   |   | 22,217 |   |
| Income                  taxes                                                       |   |   | 8,034 |   |   |   | 1,111 |   |   |   | - |   |   |   | 9,145 |   |
| Interest                  expense, net                                              |   |   | 52,105 |   |   |   | 5,581 |   |   |   | - |   |   |   | 57,686 |   |
| Interest                  income                                                    |   |   | 105 |   |   |   | 216 |   |   |   |   |   |   |   | 321 |   |
| Transaction                  expenses including integration costs                   |   |   | 3,282 |   |   |   | 108 |   |   |   | - |   |   |   | 3,390 |   |
| Non-recurring                  professional service fees                            |   |   | 2,367 |   |   |   | - |   |   |   | - |   |   |   | 2,367 |   |
| Reorganization                  expense including management severance              |   |   | 1,873 |   |   |   | 123 |   |   |   | - |   |   |   | 1,996 |   |
| Conversion                  costs associated with meeting new flammability standard |   |   | 1,983 |   |   |   | - |   |   |   | - |   |   |   | 1,983 |   |
| Management                  fees                                                    |   |   | 1,440 |   |   |   | - |   |   |   | - |   |   |   | 1,440 |   |
| ERP system                  implementation costs                               |   |   | 885 |   |   |   | - |   |   |   | - |   |   |   | 885 |   |
| Non-cash                  loss on foreign currency contract                         |   |   | - |   |   |   | 753 |   |   |   | - |   |   |   | 753 |   |
| Other                                                                               |   |   | 1,180 |   |   |   | - |   |   |   | - |   |   |   | 1,180 |   |
| Adjusted                  EBITDA                                                    |   | $ | 107,304 |   |   | $ | 13,794 |   |   | $ | - |   |   | $ | 121,098 |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

**J.           Commitments      and Contingencies**

----

**Simmons              Company and              Subsidiaries**

**Notes              to Unaudited Condensed Consolidated Financial              Statements**

**K.           Accounting      Pronouncements**

*Fair Value      Measurements*

*Employers' Accounting for      Defined Benefit Pension and Other Postretirement Plans - An Amendment of FASB      Statements No. 87, 88, 106, and 132R*
*. *

*The Fair Value Option for      Financial Assets and Financial Liabilities - Including an Amendment of FASB      Statement No. 115 *
*Accounting      for Certain Investments in Debt and Equity Securities*

----

**Simmons              Company and              Subsidiaries**

**Notes              to Unaudited Condensed Consolidated Financial              Statements**

| **L.** | **Guarantor                / Non-Guarantor Statements** |
|--------|---------------------------------------------------------|

**Supplemental      Consolidating Condensed Statements of Operations**

**For      the Quarter Ended September 29, 2007**

|                                                            |   |           |   |   | **Issuer                    and Guarantors** |   |    |             |   |   |              |   |   |             |   |
|-----------------------------------------------------------------|--------|----------------|--------|--------|----------------------------------------------|--------|---------|------------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                                                            |   | **Parent**     |   |   | **Simmons                    Bedding**       |   |    | **Guarantor**    |   |   | **Non-Guarantor** |   |   |             |   |   |   |   |
|                                                            |   | **Guarantors** |   |   | **Company**                                  |   |    | **Subsidiaries** |   |   | **Subsidiaries**  |   |   | **Eliminations** |   |   | **Consolidated** |   |
|                                                            |   |           |   |   |                                         |   |    |             |   |   |              |   |   |             |   |   |   |   |
| Net                    sales                                    |   | $              | -      |   |                                         | $      | (28,450 | )                |   | $      | 305,199           |   |   | $                | 35,385 |   |   | $ | (142 | ) |   | $ | 311,992 |   |
| Cost                    of products sold                        |   |           | -      |   |                                         |   | 1,138   |             |   |   | 161,482           |   |   |             | 24,234 |   |   |   | (142 | ) |   |   | 186,712 |   |
| Gross                    profit                                 |   |           | -      |   |                                         |   | (29,588 | )                |   |   | 143,717           |   |   |             | 11,151 |   |   |   | - |   |   |   | 125,280 |   |
|                                                            |   |           |   |   |                                         |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Operating                    expenses:                          |   |           |   |   |                                         |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Selling,                    general and administrative expenses |   |           | 1      |   |                                         |   | 55,025  |             |   |   | 25,601            |   |   |             | 6,815  |   |   |   | - |   |   |   | 87,442 |   |
| Amortization                    of intangibles                  |   |           | -      |   |                                         |   | 739     |             |   |   | 600               |   |   |             | 240    |   |   |   | - |   |   |   | 1,579 |   |
| Intercompany                    fees                            |   |           | -      |   |                                         |   | (67,550 | )                |   |   | 66,686            |   |   |             | 864    |   |   |   | - |   |   |   | - |   |
| Licensing                    revenues                           |   |           | -      |   |                                         |   | (284    | )                |   |   | (2,025            | )      |   |             | (198   | ) |   |   | - |   |   |   | (2,507 | ) |
|                                                            |   |           | 1      |   |                                         |   | (12,070 | )                |   |   | 90,862            |   |   |             | 7,721  |   |   |   | - |   |   |   | 86,514 |   |
|                                                            |   |           |   |   |                                         |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Operating                    income (loss)                      |   |           | (1     | )      |                                         |   | (17,518 | )                |   |   | 52,855            |   |   |             | 3,430  |   |   |   | - |   |   |   | 38,766 |   |
|                                                            |   |           |   |   |                                         |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Interest                    expense, net                        |   |           | 5,132  |   |                                         |   | 12,449  |             |   |   | 502               |   |   |             | 1,956  |   |   |   | - |   |   |   | 20,039 |   |
| Income                    from subsidiaries                     |   |           | 13,688 |   |                                         |   | 29,983  |             |   |   | -                 |   |   |             | -      |   |   |   | (43,671 | ) |   |   | - |   |
| Income                    before income taxes                   |   |           | 8,555  |   |                                         |   | 16      |             |   |   | 52,353            |   |   |             | 1,474  |   |   |   | (43,671 | ) |   |   | 18,727 |   |
| Income                    tax expense (benefit)                 |   |           | (3,783 | )      |                                         |   | (13,672 | )                |   |   | 23,326            |   |   |             | 518    |   |   |   | - |   |   |   | 6,389 |   |
| Net                    income                                   |   | $              | 12,338 |   |                                         | $      | 13,688  |             |   | $      | 29,027            |   |   | $                | 956    |   |   | $ | (43,671 | ) |   | $ | 12,338 |   |
|                                                            |   |           |   |   |                                         |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |

----

**Simmons            Company and            Subsidiaries**

**Notes            to Unaudited Condensed Consolidated Financial            Statements**

**Supplemental      Consolidating Condensed Statements of Operations**

**For      the Quarter Ended September 30, 2006**

|                                                          |   |           |   |   | **Issuer                  and Guarantors** |   |    |             |   |   |              |   |   |             |   |
|---------------------------------------------------------------|--------|----------------|--------|--------|--------------------------------------------|--------|---------|------------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                                                          |   | **Parent**     |   |   | **Simmons                  Bedding**       |   |    | **Guarantor**    |   |   | **Non-Guarantor** |   |   |             |   |   |   |   |
|                                                          |   | **Guarantors** |   |   | **Company**                                |   |    | **Subsidiaries** |   |   | **Subsidiaries**  |   |   | **Eliminations** |   |   | **Consolidated** |   |
|                                                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |
| Net                  sales                                    |   | $              | -      |   |                                       | $      | (18,241 | )                |   | $      | 275,369           |   |   | $                | 2,638  |   |   | $ | - |   |   | $ | 259,766 |   |
| Cost                  of products sold                        |   |           | -      |   |                                       |   | 820     |             |   |   | 139,797           |   |   |             | 1,945  |   |   |   | - |   |   |   | 142,562 |   |
| Gross                  profit                                 |   |           | -      |   |                                       |   | (19,061 | )                |   |   | 135,572           |   |   |             | 693    |   |   |   | - |   |   |   | 117,204 |   |
|                                                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Operating                  expenses:                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Selling,                  general and administrative expenses |   |           | 7      |   |                                       |   | 56,261  |             |   |   | 27,368            |   |   |             | 453    |   |   |   | - |   |   |   | 84,089 |   |
| Gain                  on sale of Sleep Country USA            |   |           | -      |   |                                       |   | -       |             |   |   | (43,834           | )      |   |             | -      |   |   |   | - |   |   |   | (43,834 | ) |
| Amortization                  of intangibles                  |   |           | -      |   |                                       |   | 808     |             |   |   | 578               |   |   |             | -      |   |   |   | - |   |   |   | 1,386 |   |
| Intercompany                  fees                            |   |           | -      |   |                                       |   | (82,961 | )                |   |   | 82,714            |   |   |             | 247    |   |   |   | - |   |   |   | - |   |
| Licensing                  revenues                           |   |           | -      |   |                                       |   | (278    | )                |   |   | (1,716            | )      |   |             | (205   | ) |   |   | - |   |   |   | (2,199 | ) |
|                                                          |   |           | 7      |   |                                       |   | (26,170 | )                |   |   | 65,110            |   |   |             | 495    |   |   |   | - |   |   |   | 39,442 |   |
|                                                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Operating                  income (loss)                      |   |           | (7     | )      |                                       |   | 7,109   |             |   |   | 70,462            |   |   |             | 198    |   |   |   | - |   |   |   | 77,762 |   |
|                                                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense, net                        |   |           | 4,934  |   |                                       |   | 12,862  |             |   |   | 197               |   |   |             | 48     |   |   |   | - |   |   |   | 18,041 |   |
| Income                  from subsidiaries                     |   |           | 43,924 |   |                                       |   | 44,752  |             |   |   | -                 |   |   |             | -      |   |   |   | (88,676 | ) |   |   | - |   |
| Income                  before income taxes                   |   |           | 38,983 |   |                                       |   | 38,999  |             |   |   | 70,265            |   |   |             | 150    |   |   |   | (88,676 | ) |   |   | 59,721 |   |
| Income                  tax expense (benefit)                 |   |           | (2,939 | )      |                                       |   | (4,925  | )                |   |   | 25,581            |   |   |             | 82     |   |   |   | - |   |   |   | 17,799 |   |
| Net                  income                                   |   | $              | 41,922 |   |                                       | $      | 43,924  |             |   | $      | 44,684            |   |   | $                | 68     |   |   | $ | (88,676 | ) |   | $ | 41,922 |   |
|                                                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |

----

**Simmons                Company and                Subsidiaries**

**Notes                to Unaudited Condensed Consolidated Financial                Statements**

**Supplemental      Consolidating Condensed Statements of Operations**

**For      the Nine Months Ended September 29, 2007**

|                                                            |   |           |   |   | **Issuer                    and Guarantors** |   |     |             |   |   |              |   |   |             |    |
|-----------------------------------------------------------------|--------|----------------|--------|--------|----------------------------------------------|--------|----------|------------------|--------|--------|-------------------|--------|--------|------------------|---------|
|                                                            |   | **Parent**     |   |   | **Simmons****Bedding**                       |   |     | **Guarantor**    |   |   | **Non-Guarantor** |   |   |             |    |   |   |   |
|                                                            |   | **Guarantors** |   |   | **Company**                                  |   |     | **Subsidiaries** |   |   | **Subsidiaries**  |   |   | **Eliminations** |    |   | **Consolidated** |   |
|                                                            |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |    |   |   |   |
| Net                    sales                                    |   | $              | -      |   |                                         | $      | (85,689  | )                |   | $      | 841,013           |   |   | $                | 102,519 |   |   | $ | (574 | ) |   | $ | 857,269 |   |
| Cost                    of products sold                        |   |           | -      |   |                                         |   | 2,465    |             |   |   | 445,702           |   |   |             | 70,121  |   |   |   | (574 | ) |   |   | 517,714 |   |
| Gross                    profit                                 |   |           | -      |   |                                         |   | (88,154  | )                |   |   | 395,311           |   |   |             | 32,398  |   |   |   | - |   |   |   | 339,555 |   |
|                                                            |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| Operating                    expenses:                          |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| Selling,                    general and administrative expenses |   |           | (5     | )      |                                         |   | 170,072  |             |   |   | 68,163            |   |   |             | 20,029  |   |   |   | - |   |   |   | 258,259 |   |
| Amortization                    of intangibles                  |   |           | -      |   |                                         |   | 2,216    |             |   |   | 1,652             |   |   |             | 683     |   |   |   | - |   |   |   | 4,551 |   |
| Intercompany                    fees                            |   |           | -      |   |                                         |   | (256,000 | )                |   |   | 253,618           |   |   |             | 2,382   |   |   |   | - |   |   |   | - |   |
| Licensing                    revenues                           |   |           | -      |   |                                         |   | (879     | )                |   |   | (6,390            | )      |   |             | (552    | ) |   |   | - |   |   |   | (7,821 | ) |
|                                                            |   |           | (5     | )      |                                         |   | (84,591  | )                |   |   | 317,043           |   |   |             | 22,542  |   |   |   | - |   |   |   | 254,989 |   |
|                                                            |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| Operating                    income (loss)                      |   |           | 5      |   |                                         |   | (3,563   | )                |   |   | 78,268            |   |   |             | 9,856   |   |   |   | - |   |   |   | 84,566 |   |
|                                                            |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| Interest                    expense, net                        |   |           | 15,493 |   |                                         |   | 35,879   |             |   |   | 616               |   |   |             | 5,698   |   |   |   | - |   |   |   | 57,686 |   |
| Income                    from subsidiaries                     |   |           | 27,555 |   |                                         |   | 48,987   |             |   |   | -                 |   |   |             | -       |   |   |   | (76,542 | ) |   |   | - |   |
| Income                    before income taxes                   |   |           | 12,067 |   |                                         |   | 9,545    |             |   |   | 77,652            |   |   |             | 4,158   |   |   |   | (76,542 | ) |   |   | 26,880 |   |
| Income                    tax expense (benefit)                 |   |           | (5,668 | )      |                                         |   | (18,010  | )                |   |   | 31,633            |   |   |             | 1,190   |   |   |   | - |   |   |   | 9,145 |   |
| Net                    income                                   |   | $              | 17,735 |   |                                         | $      | 27,555   |             |   | $      | 46,019            |   |   | $                | 2,968   |   |   | $ | (76,542 | ) |   | $ | 17,735 |   |
|                                                            |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |

----

**Simmons                  Company and                  Subsidiaries**

**Notes                  to Unaudited Condensed Consolidated Financial                  Statements**

**Supplemental      Consolidating Condensed Statements of Operations**

**For      the Nine Months Ended September 30, 2006**

|                                                            |   |           |   |   | **Issuer                    and Guarantors** |   |     |             |   |   |              |   |   |             |   |
|-----------------------------------------------------------------|--------|----------------|--------|--------|----------------------------------------------|--------|----------|------------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                                                            |   | **Parent**     |   |   | **Simmons****Bedding**                       |   |     | **Guarantor**    |   |   | **Non-Guarantor** |   |   |             |   |   |   |   |
|                                                            |   | **Guarantors** |   |   | **Company**                                  |   |     | **Subsidiaries** |   |   | **Subsidiaries**  |   |   | **Eliminations** |   |   | **Consolidated** |   |
|                                                            |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |   |   |   |   |
| Net                    sales                                    |   | $              | -      |   |                                         | $      | (69,981  | )                |   | $      | 800,133           |   |   | $                | 6,683  |   |   | $ | - |   |   | $ | 736,835 |   |
| Cost                    of products sold                        |   |           | -      |   |                                         |   | 2,497    |             |   |   | 403,578           |   |   |             | 4,976  |   |   |   | - |   |   |   | 411,051 |   |
| Gross                    profit                                 |   |           | -      |   |                                         |   | (72,478  | )                |   |   | 396,555           |   |   |             | 1,707  |   |   |   | - |   |   |   | 325,784 |   |
|                                                            |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Operating                    expenses:                          |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Selling,                    general and administrative expenses |   |           | 74     |   |                                         |   | 149,465  |             |   |   | 85,836            |   |   |             | 1,253  |   |   |   | - |   |   |   | 236,628 |   |
| Gain                    on sale of Sleep Country USA            |   |           | -      |   |                                         |   | -        |             |   |   | (43,834           | )      |   |             | -      |   |   |   | - |   |   |   | (43,834 | ) |
| Amortization                    of intangibles                  |   |           | -      |   |                                         |   | 2,422    |             |   |   | 1,798             |   |   |             | -      |   |   |   | - |   |   |   | 4,220 |   |
| Intercompany                    fees                            |   |           | -      |   |                                         |   | (238,695 | )                |   |   | 238,060           |   |   |             | 635    |   |   |   | - |   |   |   | - |   |
| Licensing                    revenues                           |   |           | -      |   |                                         |   | (834     | )                |   |   | (5,106            | )      |   |             | (558   | ) |   |   | - |   |   |   | (6,498 | ) |
|                                                            |   |           | 74     |   |                                         |   | (87,642  | )                |   |   | 276,754           |   |   |             | 1,330  |   |   |   | - |   |   |   | 190,516 |   |
|                                                            |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Operating                    income (loss)                      |   |           | (74    | )      |                                         |   | 15,164   |             |   |   | 119,801           |   |   |             | 377    |   |   |   | - |   |   |   | 135,268 |   |
|                                                            |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Interest                    expense, net                        |   |           | 14,159 |   |                                         |   | 47,010   |             |   |   | 627               |   |   |             | 136    |   |   |   | - |   |   |   | 61,932 |   |
| Income                    from subsidiaries                     |   |           | 59,119 |   |                                         |   | 82,005   |             |   |   | -                 |   |   |             | -      |   |   |   | (141,124 | ) |   |   | - |   |
| Income                    before income taxes                   |   |           | 44,886 |   |                                         |   | 50,159   |             |   |   | 119,174           |   |   |             | 241    |   |   |   | (141,124 | ) |   |   | 73,336 |   |
| Income                    tax expense (benefit)                 |   |           | (5,530 | )      |                                         |   | (8,960   | )                |   |   | 37,275            |   |   |             | 135    |   |   |   | - |   |   |   | 22,920 |   |
| Net                    income                                   |   | $              | 50,416 |   |                                         | $      | 59,119   |             |   | $      | 81,899            |   |   | $                | 106    |   |   | $ | (141,124 | ) |   | $ | 50,416 |   |
|                                                            |   |           |   |   |                                         |   |     |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |

----

**Simmons                  Company and                  Subsidiaries**

**Notes                  to Unaudited Condensed Consolidated Financial                  Statements**

**Supplemental      Consolidating Condensed Balance Sheets**

**As      of September 29, 2007**

|                                                                 |   |           |    |   | **Issuer                  and Guarantors** |   |      |           |   |   |              |   |   |             |    |
|----------------------------------------------------------------------|--------|----------------|---------|--------|--------------------------------------------|--------|-----------|----------------|--------|--------|-------------------|--------|--------|------------------|---------|
|                                                                 |   | **Parent**     |    |   | **Simmons****Bedding**                     |   |      | **Subsidiary** |   |   | **Non-Guarantor** |   |   |             |    |   |   |   |
|                                                                 |   | **Guarantors** |    |   | **Company**                                |   |      | **Guarantors** |   |   | **Subsidiaries**  |   |   | **Eliminations** |    |   | **Consolidated** |   |
| **ASSETS**                                                           |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |
| Current                  assets:                                     |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |
| Cash                  and cash equivalents                           |   | $              | -       |   |                                       | $      | (832      | )              |   | $      | 2,263             |   |   | $                | 15,859  |   |   | $ | - |   |   | $ | 17,290 |   |
| Accounts                  receivable                                 |   |           | -       |   |                                       |   | 2,487     |           |   |   | 110,555           |   |   |             | 27,797  |   |   |   | (357 | ) |   |   | 140,482 |   |
| Inventories                                                          |   |           | -       |   |                                       |   | 37        |           |   |   | 28,505            |   |   |             | 5,039   |   |   |   | - |   |   |   | 33,581 |   |
| Other                                                                |   |           | -       |   |                                       |   | 11,662    |           |   |   | 10,659            |   |   |             | 2,274   |   |   |   | - |   |   |   | 24,595 |   |
| Total                  current assets                                |   |           | -       |   |                                       |   | 13,354    |           |   |   | 151,982           |   |   |             | 50,969  |   |   |   | (357 | ) |   |   | 215,948 |   |
|                                                                 |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| Property,                  plant and equipment, net                  |   |           | -       |   |                                       |   | 22,583    |           |   |   | 38,425            |   |   |             | 23,217  |   |   |   | - |   |   |   | 84,225 |   |
| Goodwill                  and other intangibles, net                 |   |           | -       |   |                                       |   | 72,764    |           |   |   | 959,854           |   |   |             | 111,189 |   |   |   | - |   |   |   | 1,143,807 |   |
| Other                  assets                                        |   |           | 27,963  |   |                                       |   | 125,264   |           |   |   | 548               |   |   |             | 2,710   |   |   |   | (117,753 | ) |   |   | 38,732 |   |
| Net                  investment in and advances to (from) affiliates |   |           | 369,441 |   |                                       |   | 892,807   |           |   |   | 261,825           |   |   |             | (3,630  | ) |   |   | (1,520,443 | ) |   |   | - |   |
| Total                  assets                                        |   | $              | 397,404 |   |                                       | $      | 1,126,772 |           |   | $      | 1,412,634         |   |   | $                | 184,455 |   |   | $ | (1,638,553 | ) |   | $ | 1,482,712 |   |
|                                                                 |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDER'S EQUITY**            |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |
| Current                  liabilities:                                |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| Current                  maturities of long-term debt                |   | $              | -       |   |                                       | $      | 300       |           |   | $      | 300               |   |   | $                | 578     |   |   | $ | - |   |   | $ | 1,178 |   |
| Accounts                  payable and accrued liabilities            |   |           | 140     |   |                                       |   | 57,370    |           |   |   | 81,385            |   |   |             | 23,180  |   |   |   | (7,813 | ) |   |   | 154,262 |   |
| Total                  current liabilities                           |   |           | 140     |   |                                       |   | 57,670    |           |   |   | 81,685            |   |   |             | 23,758  |   |   |   | (7,813 | ) |   |   | 155,440 |   |
|                                                                 |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| Long-term                  debt                                      |   |           | 216,914 |   |                                       |   | 695,200   |           |   |   | 12,800            |   |   |             | 86,371  |   |   |   | (85,315 | ) |   |   | 925,970 |   |
| Deferred                  income taxes                               |   |           | -       |   |                                       |   | 979       |           |   |   | 202,147           |   |   |             | 15,213  |   |   |   | (24,981 | ) |   |   | 193,358 |   |
| Other                  non-current liabilities                       |   |           | -       |   |                                       |   | 17,778    |           |   |   | 4,937             |   |   |             | 4,879   |   |   |   | - |   |   |   | 27,594 |   |
| Total                  liabilities                                   |   |           | 217,054 |   |                                       |   | 771,627   |           |   |   | 301,569           |   |   |             | 130,221 |   |   |   | (118,109 | ) |   |   | 1,302,362 |   |
| Stockholder's                  equity                                |   |           | 180,350 |   |                                       |   | 355,145   |           |   |   | 1,111,065         |   |   |             | 54,234  |   |   |   | (1,520,444 | ) |   |   | 180,350 |   |
| Total                  liabilities and stockholder's equity          |   | $              | 397,404 |   |                                       | $      | 1,126,772 |           |   | $      | 1,412,634         |   |   | $                | 184,455 |   |   | $ | (1,638,553 | ) |   | $ | 1,482,712 |   |
|                                                                 |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |

----

**Simmons            Company and            Subsidiaries**

**Notes            to Unaudited Condensed Consolidated Financial            Statements**

**Supplemental      Consolidating Condensed Balance Sheets**

**As      of December 30, 2006**

|                                                                 |   |           |    |   | **Issuer                  and Guarantors** |   |      |           |   |   |              |   |   |             |    |
|----------------------------------------------------------------------|--------|----------------|---------|--------|--------------------------------------------|--------|-----------|----------------|--------|--------|-------------------|--------|--------|------------------|---------|
|                                                                 |   | **Parent**     |    |   | **Simmons****Bedding**                     |   |      | **Subsidiary** |   |   | **Non-Guarantor** |   |   |             |    |   |   |   |
|                                                                 |   | **Guarantors** |    |   | **Company**                                |   |      | **Guarantors** |   |   | **Subsidiaries**  |   |   | **Eliminations** |    |   | **Consolidated** |   |
| **ASSETS**                                                           |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |
| Current                  assets:                                     |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |
| Cash                  and cash equivalents                           |   | $              | -       |   |                                       | $      | 9,841     |           |   | $      | 5,606             |   |   | $                | 5,337   |   |   | $ | - |   |   | $ | 20,784 |   |
| Accounts                  receivable                                 |   |           | -       |   |                                       |   | -         |           |   |   | 70,415            |   |   |             | 21,666  |   |   |   | (46 | ) |   |   | 92,035 |   |
| Inventories                                                          |   |           | -       |   |                                       |   | -         |           |   |   | 22,375            |   |   |             | 4,343   |   |   |   | - |   |   |   | 26,718 |   |
| Other                                                                |   |           | -       |   |                                       |   | 9,834     |           |   |   | 9,537             |   |   |             | 3,188   |   |   |   | - |   |   |   | 22,559 |   |
| Total                  current assets                                |   |           | -       |   |                                       |   | 19,675    |           |   |   | 107,933           |   |   |             | 34,534  |   |   |   | (46 | ) |   |   | 162,096 |   |
|                                                                 |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| Property,                  plant and equipment, net                  |   |           | -       |   |                                       |   | 14,599    |           |   |   | 36,687            |   |   |             | 21,899  |   |   |   | - |   |   |   | 73,185 |   |
| Goodwill                  and other intangibles, net                 |   |           | -       |   |                                       |   | 63,899    |           |   |   | 948,464           |   |   |             | 93,257  |   |   |   | - |   |   |   | 1,105,620 |   |
| Other                  assets                                        |   |           | 3,183   |   |                                       |   | 101,074   |           |   |   | 1,220             |   |   |             | 1,134   |   |   |   | (73,858 | ) |   |   | 32,753 |   |
| Net                  investment in and advances to (from) affiliates |   |           | 329,182 |   |                                       |   | 894,615   |           |   |   | 231,935           |   |   |             | (1,487  | ) |   |   | (1,454,245 | ) |   |   | - |   |
| Total                  assets                                        |   | $              | 332,365 |   |                                       | $      | 1,093,862 |           |   | $      | 1,326,239         |   |   | $                | 149,337 |   |   | $ | (1,528,149 | ) |   | $ | 1,373,654 |   |
|                                                                 |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDER'S EQUITY**            |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |
| Current                  liabilities:                                |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| Current                  maturities of long-term debt                |   | $              | -       |   |                                       | $      | -         |           |   | $      | 200               |   |   | $                | 578     |   |   | $ | - |   |   | $ | 778 |   |
| Accounts                  payable and accrued liabilities            |   |           | 194     |   |                                       |   | 54,621    |           |   |   | 66,156            |   |   |             | 14,906  |   |   |   | (965 | ) |   |   | 134,912 |   |
| Total                  current liabilities                           |   |           | 194     |   |                                       |   | 54,621    |           |   |   | 66,356            |   |   |             | 15,484  |   |   |   | (965 | ) |   |   | 135,690 |   |
|                                                                 |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |
| Long-term                  debt                                      |   |           | 201,622 |   |                                       |   | 680,000   |           |   |   | 12,900            |   |   |             | 74,418  |   |   |   | (72,939 | ) |   |   | 896,001 |   |
| Deferred                  income taxes                               |   |           | (19,312 | )      |                                       |   | 13,779    |           |   |   | 170,562           |   |   |             | 12,663  |   |   |   | - |   |   |   | 177,692 |   |
| Other                  non-current liabilities                       |   |           | -       |   |                                       |   | 9,312     |           |   |   | 2,613             |   |   |             | 2,485   |   |   |   | - |   |   |   | 14,410 |   |
| Total                  liabilities                                   |   |           | 182,504 |   |                                       |   | 757,712   |           |   |   | 252,431           |   |   |             | 105,050 |   |   |   | (73,904 | ) |   |   | 1,223,793 |   |
| Stockholder's                  equity                                |   |           | 149,861 |   |                                       |   | 336,150   |           |   |   | 1,073,808         |   |   |             | 44,287  |   |   |   | (1,454,245 | ) |   |   | 149,861 |   |
| Total                  liabilities and stockholder's equity          |   | $              | 332,365 |   |                                       | $      | 1,093,862 |           |   | $      | 1,326,239         |   |   | $                | 149,337 |   |   | $ | (1,528,149 | ) |   | $ | 1,373,654 |   |
|                                                                 |   |           |    |   |                                       |   |      |           |   |   |              |   |   |             |    |   |   |   |   |   |   |   |   |   |

----

**Simmons                Company and                Subsidiaries**

**Notes                to Unaudited Condensed Consolidated Financial                Statements**

**Supplemental      Consolidating Condensed Statements of Cash Flows**

**For      the Nine Months Ended September 29, 2007**

|                                                                   |   |           |   |   | **Issuer                    and Guarantors** |   |    |           |   |   |              |   |   |             |   |
|------------------------------------------------------------------------|--------|----------------|--------|--------|----------------------------------------------|--------|---------|----------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                                                                   |   | **Parent**     |   |   | **Simmons****Bedding**                       |   |    | **Subsidiary** |   |   | **Non-Guarantor** |   |   |             |   |   |   |   |
|                                                                   |   | **Guarantors** |   |   | **Company**                                  |   |    | **Guarantors** |   |   | **Subsidiaries**  |   |   | **Eliminations** |   |   | **Consolidated** |   |
|                                                                   |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |
| Net                    cash provided by (used in) operating activities |   | $              | 167    |   |                                         | $      | (46,711 | )              |   | $      | 53,907            |   |   | $                | 8,626  |   |   | $ | - |   |   | $ | 15,989 |   |
| Cash                    flows from investing activities:               |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Purchase                    of certain assets of Comfor Products       |   |           | -      |   |                                         |   | -       |           |   |   | (13,077           | )      |   |             | -      |   |   |   | - |   |   |   | (13,077 | ) |
| Purchase                    of property, plant and equipment, net      |   |           | -      |   |                                         |   | (10,719 | )              |   |   | (5,927            | )      |   |             | (1,556 | ) |   |   | - |   |   |   | (18,202 | ) |
| Net                    cash used in investing activities               |   |           | -      |   |                                         |   | (10,719 | )              |   |   | (19,004           | )      |   |             | (1,556 | ) |   |   | - |   |   |   | (31,279 | ) |
| Cash                    flows from financing activities:               |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Borrowings                    on revolving loan                        |   |           | -      |   |                                         |   | 15,500  |           |   |   | -                 |   |   |             | -      |   |   |   | - |   |   |   | 15,500 |   |
| Payment                    of other long-term obligations              |   |           | -      |   |                                         |   | -       |           |   |   | -                 |   |   |             | (522   | ) |   |   | - |   |   |   | (522 | ) |
| Dividend                    to Simmons Holdco, Inc.                    |   |           | (4,941 | )      |                                         |   | -       |           |   |   | -                 |   |   |             | -      |   |   |   | - |   |   |   | (4,941 | ) |
| Other                                                                  |   |           | 26     |   |                                         |   | -       |           |   |   | -                 |   |   |             | -      |   |   |   | - |   |   |   | 26 |   |
| Receipt                    from (distribution to) affiliates           |   |           | 4,748  |   |                                         |   | 31,257  |           |   |   | (38,246           | )      |   |             | 2,241  |   |   |   | - |   |   |   | - |   |
| Net                    cash provided by (used in) financing activities |   |           | (167   | )      |                                         |   | 46,757  |           |   |   | (38,246           | )      |   |             | 1,719  |   |   |   | - |   |   |   | 10,063 |   |
| Net                    effect of exchange rate changes                 |   |           | -      |   |                                         |   | -       |           |   |   | -                 |   |   |             | 1,733  |   |   |   | - |   |   |   | 1,733 |   |
| Change                    in cash and cash equivalents                 |   |           | -      |   |                                         |   | (10,673 | )              |   |   | (3,343            | )      |   |             | 10,522 |   |   |   | - |   |   |   | (3,494 | ) |
| Cash                    and cash equivalents:                          |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Beginning                    of period                                 |   |           | -      |   |                                         |   | 9,841   |           |   |   | 5,606             |   |   |             | 5,337  |   |   |   | - |   |   |   | 20,784 |   |
| End                    of period                                       |   | $              | -      |   |                                         | $      | (832    | )              |   | $      | 2,263             |   |   | $                | 15,859 |   |   | $ | - |   |   | $ | 17,290 |   |
|                                                                   |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |

----

**Simmons            Company and            Subsidiaries**

**Notes            to Unaudited Condensed Consolidated Financial            Statements**

** Supplemental      Consolidating Condensed Statements of Cash Flows**

**For      the Nine Months Ended September 30, 2006**

|                                                                 |   |           |   |   | **Issuer                  and Guarantors** |   |    |           |   |   |              |   |   |             |   |
|----------------------------------------------------------------------|--------|----------------|--------|--------|--------------------------------------------|--------|---------|----------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                                                                 |   | **Parent**     |   |   | **Simmons****Bedding**                     |   |    | **Subsidiary** |   |   | **Non-Guarantor** |   |   |             |   |   |   |   |
|                                                                 |   | **Guarantors** |   |   | **Company**                                |   |    | **Guarantors** |   |   | **Subsidiaries**  |   |   | **Eliminations** |   |   | **Consolidated** |   |
|                                                                 |   |           |   |   |                                       |   |    |           |   |   |              |   |   |             |   |   |   |   |
| Net                  cash provided by (used in) operating activities |   | $              | 274    |   |                                       | $      | (15,418 | )              |   | $      | 79,131            |   |   | $                | 873    |   |   | $ | - |   |   | $ | 64,860 |   |
| Cash                  flows from investing activities:               |   |           |   |   |                                       |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Purchase                  of property, plant and equipment, net      |   |           | -      |   |                                       |   | (5,172  | )              |   |   | (4,056            | )      |   |             | -      |   |   |   | - |   |   |   | (9,228 | ) |
| Proceeds                  from sale of SCUSA                         |   |           | -      |   |                                       |   | -       |           |   |   | 52,743            |   |   |             |   |   |   |   |   |   |   |   | 52,743 |   |
| Net                  cash used in investing activities               |   |           | -      |   |                                       |   | (5,172  | )              |   |   | 48,687            |   |   |             | -      |   |   |   | - |   |   |   | 43,515 |   |
| Cash                  flows from financing activities:               |   |           |   |   |                                       |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Payments                  of senior credit facility, net             |   |           | -      |   |                                       |   | (29,933 | )              |   |   | -                 |   |   |             | -      |   |   |   | - |   |   |   | (29,933 | ) |
| Payment                  of other long-term obligations              |   |           | -      |   |                                       |   | -       |           |   |   | -                 |   |   |             | (160   | ) |   |   | - |   |   |   | (160 | ) |
| Other                                                                |   |           | (444   | )      |                                       |   | (932    | )              |   |   | -                 |   |   |             | -      |   |   |   | - |   |   |   | (1,376 | ) |
| Receipt                  from (distribution to) affiliates           |   |           | 170    |   |                                       |   | 125,197 |           |   |   | (123,971          | )      |   |             | (1,396 | ) |   |   | - |   |   |   | - |   |
| Net                  cash used in financing activities               |   |           | (274   | )      |                                       |   | 94,332  |           |   |   | (123,971          | )      |   |             | (1,556 | ) |   |   | - |   |   |   | (31,469 | ) |
| Net                  effect of exchange rate changes                 |   |           | -      |   |                                       |   | -       |           |   |   | -                 |   |   |             | 152    |   |   |   | - |   |   |   | 152 |   |
| Change                  in cash and cash equivalents                 |   |           | -      |   |                                       |   | 73,742  |           |   |   | 3,847             |   |   |             | (531   | ) |   |   | - |   |   |   | 77,058 |   |
| Cash                  and cash equivalents:                          |   |           |   |   |                                       |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Beginning                  of period                                 |   |           | -      |   |                                       |   | 19,823  |           |   |   | 1,429             |   |   |             | 3,370  |   |   |   | - |   |   |   | 24,622 |   |
| End                  of period                                       |   | $              | -      |   |                                       | $      | 93,565  |           |   | $      | 5,276             |   |   | $                | 2,839  |   |   | $ | - |   |   | $ | 101,680 |   |
|                                                                 |   |           |   |   |                                       |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |

----

| **Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Recent      Events**

*Price      Increase on Selective Products    *

**Results      of Operations**

|                                                          |   | **Quarter                  Ended** |   |   | **Nine                  Months Ended** |   |
|---------------------------------------------------------------|--------|------------------------------------|--------|--------|----------------------------------------|--------|
|                                                          |   | **September                  29,** |   |   | **September                  30,**     |   |   | **September                  29,** |   |   | **September                  30,** |   |
|                                                          |   | **2007**                           |   |   | **2006**                               |   |   | **2007** |   |   | **2006** |   |
|                                                          |   |                               |   |   |                                   |   |   |   |   |   |   |   |
| Net                  sales                                    |   |                               | 100.0  | %      |                                   |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |
| Cost                  of products sold                        |   |                               | 59.8   | %      |                                   |   | 54.9 | % |   |   | 60.4 | % |   |   | 55.8 | % |
| Gross                  margin                                 |   |                               | 40.2   | %      |                                   |   | 45.1 | % |   |   | 39.6 | % |   |   | 44.2 | % |
|                                                          |   |                               |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  expenses:                          |   |                               |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,                  general and administrative expenses |   |                               | 28.0   | %      |                                   |   | 32.4 | % |   |   | 30.1 | % |   |   | 32.1 | % |
| Gain                  on sale of Sleep Country USA            |   |                               | -      |   |                                   |   | -16.9 | % |   |   | - |   |   |   | -5.9 | % |
| Amortization                  of intangibles                  |   |                               | 0.5    | %      |                                   |   | 0.5 | % |   |   | 0.5 | % |   |   | 0.6 | % |
| Licensing                  revenues                           |   |                               | -0.8   | %      |                                   |   | -0.8 | % |   |   | -0.9 | % |   |   | -0.9 | % |
|                                                          |   |                               | 27.7   | %      |                                   |   | 15.2 | % |   |   | 29.7 | % |   |   | 25.9 | % |
|                                                          |   |                               |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  income                             |   |                               | 12.4   | %      |                                   |   | 29.9 | % |   |   | 9.9 | % |   |   | 18.4 | % |
|                                                          |   |                               |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense, net                        |   |                               | 6.4    | %      |                                   |   | 6.9 | % |   |   | 6.7 | % |   |   | 8.4 | % |
| Income                  before income taxes                   |   |                               | 6.0    | %      |                                   |   | 23.0 | % |   |   | 3.1 | % |   |   | 10.0 | % |
| Income                  tax expense                           |   |                               | 2.0    | %      |                                   |   | 6.9 | % |   |   | 1.1 | % |   |   | 3.1 | % |
| Net                  income                                   |   |                               | 4.0    | %      |                                   |   | 16.1 | % |   |   | 2.1 | % |   |   | 6.8 | % |
|                                                          |   |                               |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |

----

**Quarter      Ended September 29, 2007 as Compared to the Quarter Ended September 30,      2006**

*Net      Sales*

*Gross      Profit.  *

----

*Selling,      General and Administrative      Expenses (“SG&A”)*

*Amortization      of      Intangibles.*

*Licensing      Revenues. *

*Interest      Expense, Net.*

*Income      Taxes.  *

----

**Nine      Months Ended September 29, 2007 as Compared to the Nine Months Ended September      30, 2006**

*Net      Sales*

*Gross      Profit.  *

*SG&A*

----

*Amortization      of      Intangibles.*

*Licensing      Revenues. *

*Interest      Expense, Net. *

*Income      Taxes.  *

**Liquidity      and Capital Resources**

----

|                                                              |   | **Nine                  Months Ended** |   |
|-------------------------------------------------------------------|--------|----------------------------------------|--------|
|                                                              |   | **September                  29,**     |   |   | **September                  30,** |   |
|                                                              |   | **2007**                               |   |   | **2006** |   |
| Statement                  of Cash Flow Data:                     |   |                                   |   |   |   |   |
| Cash                  flows provided by (used in):                |   |                                   |   |   |   |   |
| Operating                  activities                             |   | $                                      | 16.0   |   |   | $ | 64.9 |   |
| Investing                  activities                             |   |                                   | (31.3  | ) |   |   | 43.5 |   |
| Financing                  activities                             |   |                                   | 10.1   |   |   |   | (31.5 | ) |
| Net                  effect of exchange rates                     |   |                                   | 1.7    |   |   |   | 0.2 |   |
| Increase                  (decrease) in cash and cash equivalents |   |                                   | (3.5   | ) |   |   | 77.1 |   |
| Cash                  and cash equivalents:                       |   |                                   |   |   |   |   |   |   |
| Beginning                  of period                              |   |                                   | 20.8   |   |   |   | 24.6 |   |
| End                  of period                                    |   | $                                      | 17.3   |   |   | $ | 101.7 |   |
|                                                              |   |                                   |   |   |   |   |   |   |

**Nine      Months Ended September 29, 2007 as Compared to Nine Months Ended September      30,      2006**

*Cash      flows provided by Operating Activities*

*Cash      flows provided by (used in) Investing Activities.*

*Cash      flows provided by (used in)      Financing Activities.*

----

**Debt**

*Senior      Credit      Facility*

|                                 |   | **Eurodollar** |   |   | **Base** |   |
|--------------------------------------|--------|----------------|--------|--------|----------|--------|
|                                 |   | **Rate**       |   |   | **Rate** |   |
| Revolving                  loan      |   |           | 2.25   | %      |     |   | 1.25 | % |
| Tranche                  D term loan |   |           | 2.00   | %      |     |   | 1.00 | % |

----

*Senior      Subordinated Notes*

*Senior      Discount Notes*

----

*Debt      Covenants*

| 1)   | A                minimum cash interest coverage ratio, with compliance levels ranging                from                cash interest coverage of no less than 2.15:1.00 at September 29,                2007;                and 2.25:1.00 for December 31, 2007; 2.75:1.00 from March 31, 2008                through                December 31, 2008; and 3.00:1.00 from March 31, 2009 through each                fiscal                quarter thereafter. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2)   | A                maximum leverage ratio, with compliance levels ranging from total                leverage                of no greater than 5.00:1.00 from September 29, 2007 through December                31,                2007; 4.50:1.00 from March 31, 2008 through December 31, 2008; and                4.00:1.00 from March 31, 2009 through each fiscal quarter ending                thereafter. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                        |   | **September                  29, 2007** |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------------|--------|
| Calculation                  of minimum cash interest coverage ratio:       |   |                                    |   |
| Simmons                  Bedding twelve months ended Adjusted EBITDA(1)     |   | $                                       | 154.5  |   |
| Simmons                  Bedding consolidated cash interest expense(2)      |   | $                                       | 54.5   |   |
| Actual                  interest coverage ratio(3)                          |   |                                    | 2.84x  |   |
| Minimum                  permitted interest coverage ratio                  |   |                                    | 2.15x  |   |
|                                                                        |   |                                    |   |   |
| Calculation                  of maximum leverage ratio:                     |   |                                    |   |   |
| Simmons                  Company consolidated indebtedness                  |   | $                                       | 927.1  |   |
| Less:                  10% senior discount notes                            |   |                                    | 216.9  |   |
| Simmons                  Bedding consolidated indebtedness                  |   |                                    | 710.2  |   |
| Less:  Simmons                  Bedding cash and cash equivalents |   |                                    | 17.3   |   |
| Simmons                  Bedding net debt                                   |   | $                                       | 692.9  |   |
| Simmons                  Bedding twelve months ended Adjusted EBITDA(1)     |   | $                                       | 154.5  |   |
| Actual                  leverage ratio(4)                                   |   |                                    | 4.49x  |   |
| Maximum                  permitted leverage ratio                           |   |                                    | 5.00x  |   |

----

| Net                    income                                                         |   | $      | 14.9   |   |
|---------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Depreciation                    and amortization                                      |   |   | 29.0   |   |
| Income                    taxes                                                       |   |   | 10.7   |   |
| Interest                    expense                                                   |   |   | 76.6   |   |
| EBITDA                                                                                |   | $      | 131.2  |   |
|                                                                                  |   |   |   |   |
| Transaction                    related expenses including integration costs           |   |   | 5.1    |   |
| Reorganization                    expenses including management severance             |   |   | 4.3    |   |
| Pro                    forma effect of Canada Acquisition(a)                          |   |   | 3.2    |   |
| Conversion                    costs associated with meeting new flammability standard |   |   | 2.7    |   |
| Non-recurring                    professional service fees                            |   |   | 2.3    |   |
| Management                    fees                                                    |   |   | 1.9    |   |
| ERP                  implementation costs                                             |   |   | 0.9    |   |
| State                    taxes in lieu of income taxes                                |   |   | 0.5    |   |
| Pro                    forma effect of ComforPedic Acquisition(b)                     |   |   | 0.4    |   |
| Non-cash                    stock compensation expense                                |   |   | 0.4    |   |
| Other                                                                                 |   |   | 1.6    |   |
| Adjusted                    EBITDA                                                    |   | $      | 154.5  |   |
|                                                                                  |   |   |   |   |

| (a)   | This                adjustment includes the EBITDA of Simmons Canada for the twelve months                ended September 29, 2007, not already reflected in our consolidated                EBITDA, as though we purchased the entity as of the beginning of                the                twelve month period and also includes $1.3 million of unrealized                synergies                that management anticipates will be achieved as a result of the Canada                Acquisition. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | This                adjustment includes the EBITDA of Comfor Products for the twelve                months                ended September 29, 2007, as though we purchased the entity as of                the                beginning of the twelve month                period. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Simmons                  Company interest expense, net           |   | $      | 75.7   |   |
|------------------------------------------------------------------|--------|--------|--------|--------|
| Less:                  Simmons Company non-cash interest expense |   |   | (20.4  | )      |
| Simmons                  Bedding interest expense, net           |   |   | 55.3   |   |
| Add:                  Simmons Bedding interest income            |   |   | 0.9    |   |
| Simmons                  Bedding gross interest expense          |   |   | 56.2   |   |
| Less:                  Simmons Bedding non-cash interest expense |   |   | (1.8   | )      |
|                                                             |   | $      | 54.5   |   |
|                                                             |   |   |   |   |

| (3)   | Represents                ratio of Adjusted EBITDA to consolidated cash interest                expense. |
|-----------------|----------------------------------------------------------------------------------------------------------|

| (4)   | Represents                ratio of consolidated indebtedness less cash and cash equivalents                toAdjusted EBITDA. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------|

**Seasonality/Other**

**Accounting      Pronouncements**

**Forward      Looking Statements**

*“Safe      Harbor” statement under the Private Securities Litigation Reform Act of 1995.*

----

| ·   | competitive                pricing pressures in the bedding                industry; |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | legal                and regulatory requirements; |
|--------------------|---------------------------------------------------|

| ·   | the                success of our new products and the future costs to roll out such                products; |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| ·   | our                relationships with and viability of our major                suppliers; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | fluctuations                in costs of our raw materials; |
|--------------------|------------------------------------------------------------|

| ·   | our                relationship with significant customers and                licensees; |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | our                ability to increase prices on our products and the effect of these                price                increases on our unit sales; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an                increase in our return rates and warranty                claims; |
|--------------------|------------------------------------------------------------------------------------|

| ·   | our                labor relations; |
|--------------------|-------------------------------------|

| ·   | departure                of our key personnel; |
|--------------------|------------------------------------------------|

| ·   | encroachments                on our intellectual property; |
|--------------------|------------------------------------------------------------|

| ·   | our                product liability claims; |
|--------------------|----------------------------------------------|

| ·   | our                level of indebtedness; |
|--------------------|-------------------------------------------|

| ·   | interest                rate risks; |
|--------------------|-------------------------------------|

| ·   | foreign                currency exchange rate risks; |
|--------------------|------------------------------------------------------|

| ·   | compliance                with covenants in our debt                agreements; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | our                future acquisitions; |
|--------------------|-----------------------------------------|

| ·   | our                ability to successfully integrate Simmons Canada and ComforPedic                into our                operations; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our                ability to achieve the expected benefits from any personnel                realignments; |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| ·   | our                  ability to successfully implement our new enterprise resource planning                  system; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

| ·   | other                risks and factors identified from time to time in our reports filed                with                the SEC. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

----

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

**Market      Risk**

**Foreign      Currency Exposures**

**Interest      Rate Risk**

----

**Commodity      Price Risk**

**Item      4.                                Internal      Controls and Procedures**

----

|                                                                                                                                                                                                                                                                                                                                          |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PART                II                -                                           OTHER                INFORMATION** |
|                                                                                                                                                                                                                                                                                                                                          |
| **Item                1.                        Legal                Proceedings**                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                          |
| See                paragraph 1 of Note J to the                Unaudited Condensed Consolidated Financial Statements, Part 1, Item                1                included herein.                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                          |
| **Item                1A.  Risk Factors**                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                          |
|            There                were no material changes to the Company’s risk factors outlined in its                annual report filed with the SEC on Form 10-K/A on September 6,                2007.                                                                  |
|                                                                                                                                                                                                                                                                                                                                          |
| **Item                2.                        Unregistered                Sales of Equity Securities and Use of Proceeds**                                                                                          |
|                                                                                                                                                                                                                                                                                                                                          |
| None                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                          |
| **Item                3.  Defaults Upon Senior Securities**                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                          |
| None                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                          |
| **Item                4.                        Submission                of Matters to a Vote of Security Holders**                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                          |
| None                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                          |
| **Item                5.                        Other                Information**                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                          |
| None                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                          |
| **Item                6.                        Exhibits**                                                                                                                                                            |

| 31.1   | Chief                Executive Officer Certification of the Type Described in Rule 13a                - 14(a)                and Rule 15d - 14(a) |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   |
| 31.2   | Chief                Financial Officer Certification of the Type Described in Rule 13a                - 14(a)                and Rule 15d - 14(a) |
|   |
| 32.1   | Certification                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (furnished                herewith)                    |
|   |
| 32.2   | Certification                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (furnished                herewith)                    |

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| By:    | /s/                William S. Creekmuir                               |   |
|--------|-----------------------------------------------------------------------|--------|
|   | William                S. Creekmuir                                   |
|   | Executive                Vice President & Chief Financial Officer |
| Date:  | November                13, 2007                                      |

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