**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 June 30, 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** |    |   | **Six                  Months Ended** |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|---------|--------|---------------------------------------|--------|
|                                                                                                                                |   | **June                  30,**       |    |   | **July                  1,**          |   |   | **June                  30,** |   |   | **July                  1,** |   |
|                                                                                                                                |   | **2007**                            |    |   | **2006**                              |   |   | **2007** |   |   | **2006** |   |
|                                                                                                                                |   |                                |    |   |                                  |   |   |   |   |   |   |   |
| Net                  sales                                                                                                          |   | $                                   | 277,871 |   |                                  | $      | 241,202 |   |   | $ | 545,277 |   |   | $ | 477,069 |   |
| Cost                  of products sold                                                                                              |   |                                | 171,787 |   |                                  |   | 132,051 |   |   |   | 331,002 |   |   |   | 268,490 |   |
| Gross                  profit                                                                                                       |   |                                | 106,084 |   |                                  |   | 109,151 |   |   |   | 214,275 |   |   |   | 208,579 |   |
|                                                                                                                                |   |                                |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  expenses:                                                                                                |   |                                |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Selling,                  general and administrative expenses                                                                       |   |                                | 86,109  |   |                                  |   | 81,633 |   |   |   | 170,817 |   |   |   | 152,539 |   |
| Amortization                  of intangibles                                                                                        |   |                                | 1,493   |   |                                  |   | 1,417 |   |   |   | 2,972 |   |   |   | 2,834 |   |
| Licensing                  revenues                                                                                                 |   |                                | (2,121  | )      |                                  |   | (2,012 | ) |   |   | (5,314 | ) |   |   | (4,300 | ) |
|                                                                                                                                |   |                                | 85,481  |   |                                  |   | 81,038 |   |   |   | 168,475 |   |   |   | 151,073 |   |
|                                                                                                                                |   |                                |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  income                                                                                                   |   |                                | 20,603  |   |                                  |   | 28,113 |   |   |   | 45,800 |   |   |   | 57,506 |   |
|                                                                                                                                |   |                                |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense, net                                                                                              |   |                                | 19,258  |   |                                  |   | 24,715 |   |   |   | 37,647 |   |   |   | 43,891 |   |
| Income                  before income taxes                                                                                         |   |                                | 1,345   |   |                                  |   | 3,398 |   |   |   | 8,153 |   |   |   | 13,615 |   |
| Income                  tax expense                                                                                                 |   |                                | 361     |   |                                  |   | 1,337 |   |   |   | 2,756 |   |   |   | 5,121 |   |
| Net                  income                                                                                                         |   |                                | 984     |   |                                  |   | 2,061 |   |   |   | 5,397 |   |   |   | 8,494 |   |
|                                                                                                                                |   |                                |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Other                  comprehensive income:                                                                                        |   |                                |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Foreign                  currency translation adjustment                                                                            |   |                                | 9,981   |   |                                  |   | 71 |   |   |   | 11,235 |   |   |   | 115 |   |
| Comprehensive                  income                                                                                               |   | $                                   | 10,965  |   |                                  | $      | 2,132 |   |   | $ | 16,632 |   |   | $ | 8,609 |   |
|                                                                                                                                |   |                                |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |   |                                |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| The                  accompanying notes are an integral part of these condensed consolidated                  financial statements. |   |

----

**Simmons      Company and Subsidiaries**

**Condensed      Consolidated Balance Sheets**

|                                                                                                                                                                                                                                                                                                          |   | **June                  30,** |          |   | **December                  30,** |      |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------------|--------|-----------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                          |   | **2007**                      |          |   | ** **                        | **2006*** |   |
|                                                                                                                                                                                                                                                                                                          |   | **(Unaudited)**               |          |   |                              |      |   |
| **ASSETS**                                                                                                                                                                                                                                                                                                    |   |                          |          |   |                              |      |   |
| Current                  assets:                                                                                                                                                                                                                                                                              |   |                          |          |   |                              |      |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                                                                    |   | $                             | 17,251        |   |                              | $         | 20,784 |   |
| Accounts                  receivable, less allowances for doubtful receivables, discounts                  and returns of $5,913 and $4,329                                                                                                                                                                   |   |                          | 124,108  |   |                              |      | 92,035 |   |
| Inventories                                                                                                                                                                                                                                                                                                   |   |                          | 33,405        |   |                              |      | 26,718 |   |
| Deferred                  income taxes                                                                                                                                                                                                                                                                        |   |                          | 4,453         |   |                              |      | 3,136 |   |
| Prepaid                  expenses                                                                                                                                                                                                                                                                             |   |                          | 9,016         |   |                              |      | 10,426 |   |
| Other                  current assets                                                                                                                                                                                                                                                                         |   |                          | 10,681        |   |                              |      | 8,997 |   |
| Total                  current assets                                                                                                                                                                                                                                                                         |   |                          | 198,914       |   |                              |      | 162,096 |   |
|                                                                                                                                                                                                                                                                                                          |   |                          |          |   |                              |      |   |   |
| Property,                  plant and equipment, net                                                                                                                                                                                                                                                           |   |                          | 79,174        |   |                              |      | 73,185 |   |
| Goodwill                                                                                                                                                                                                                                                                                                      |   |                          | 536,001       |   |                              |      | 512,818 |   |
| Intangible                  assets, net                                                                                                                                                                                                                                                                       |   |                          | 601,963       |   |                              |      | 592,802 |   |
| Other                  assets                                                                                                                                                                                                                                                                                 |   |                          | 39,116        |   |                              |      | 32,753 |   |
| Total                  assets                                                                                                                                                                                                                                                                                 |   | $                             | 1,455,168     |   |                              | $         | 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**

|                                                                                                                                                                                                                                                                        |   | **June                  30,** |      |   | **December                  30,** |      |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|-----------|--------|-----------------------------------|-----------|
|                                                                                                                                                                                                                                                                        |   | **2007**                      |      |   | ** **                        | **2006*** |   |
|                                                                                                                                                                                                                                                                        |   | **(Unaudited)**               |      |   |                              |      |   |
| **LIABILITIES                  AND STOCKHOLDER'S EQUITY**                                                                                                                                                                                                                   |   |                          |      |   |                              |      |   |
| Current                  liabilities:                                                                                                                                                                                                                                       |   |                          |      |   |                              |      |   |
| Current                  maturities of long-term debt                                                                                                                                                                                                                       |   | $                             | 778       |   |                              | $         | 778 |   |
| Accounts                  payable                                                                                                                                                                                                                                           |   |                          | 77,237    |   |                              |      | 60,318 |   |
| Accrued                  liabilities                                                                                                                                                                                                                                        |   |                          | 81,578    |   |                              |      | 74,594 |   |
| Total                  current liabilities                                                                                                                                                                                                                                  |   |                          | 159,593   |   |                              |      | 135,690 |   |
|                                                                                                                                                                                                                                                                        |   |                          |      |   |                              |      |   |   |
| Non-current                  liabilities:                                                                                                                                                                                                                                   |   |                          |      |   |                              |      |   |   |
| Long-term                  debt                                                                                                                                                                                                                                             |   |                          | 919,486   |   |                              |      | 896,001 |   |
| Deferred                  income taxes                                                                                                                                                                                                                                      |   |                          | 186,515   |   |                              |      | 177,692 |   |
| Other                                                                                                                                                                                                                                                                       |   |                          | 25,649    |   |                              |      | 14,410 |   |
| Total                  liabilities                                                                                                                                                                                                                                          |   |                          | 1,291,243 |   |                              |      | 1,223,793 |   |
|                                                                                                                                                                                                                                                                        |   |                          |      |   |                              |      |   |   |
| Commitments                  and contingencies                                                                                                                                                                                                                              |   |                          |      |   |                              |      |   |   |
|                                                                                                                                                                                                                                                                        |   |                          |      |   |                              |      |   |   |
| Stockholder's                  equity:                                                                                                                                                                                                                                      |   |                          |      |   |                              |      |   |   |
| Common                  stock, $.01 par value: authorized - 1,000 shares; issued - 100                  shares                                                                                                                                                              |   |                          | 1         |   |                              |      | 1 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                                 |   |                          | 100,679   |   |                              |      | 102,843 |   |
| Retained                  earnings                                                                                                                                                                                                                                          |   |                          | 54,605    |   |                              |      | 51,961 |   |
| Accumulated                  other comprehensive income (loss)                                                                                                                                                                                                              |   |                          | 8,640     |   |                              |      | (2,595 | ) |
| Treasury                  stock, at cost                                                                                                                                                                                                                                    |   |                          | -         |   |                              |      | (2,349 | ) |
| Total                  stockholder's equity                                                                                                                                                                                                                                 |   |                          | 163,925   |   |                              |      | 149,861 |   |
| Total                  liabilities and stockholder's equity                                                                                                                                                                                                                 |   | $                             | 1,455,168 |   |                              | $         | 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**

|                                                                                                                                                             |   | **Six                      Months Ended** |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|---------|
|                                                                                                                                                             |   | **June                      30,**         |    |   | **July                      1,** |   |
|                                                                                                                                                             |   | **2007**                                  |    |   | **2006** |   |
| Cash                      flows from operating activities:                                                                                                       |   |                                      |    |   |   |   |
| Net                      income                                                                                                                                  |   | $                                         | 5,397   |   |   | $ | 8,494 |   |
| Adjustments                      to reconcile net income to net cash provided                      by operating activities:                                 |   |                                      |    |   |   |   |   |   |
| Depreciation                      and amortization                                                                                                               |   |                                      | 14,691  |   |   |   | 14,057 |   |
| Provision                      for bad debts, net                                                                                                                |   |                                      | 1,584   |   |   |   | 868 |   |
| Provision                      for deferred income taxes                                                                                                         |   |                                      | 1,714   |   |   |   | 4,528 |   |
| Non-cash                      interest expense                                                                                                                   |   |                                      | 11,197  |   |   |   | 16,629 |   |
| Non-cash                      stock compensation expense                                                                                                         |   |                                      | 186     |   |   |   | 517 |   |
| Net                      changes in operating assets and liabilities:                                                                                            |   |                                      |    |   |   |   |   |   |
| Accounts                      receivable                                                                                                                         |   |                                      | (31,532 | ) |   |   | (13,330 | ) |
| Inventories                                                                                                                                                      |   |                                      | (5,922  | ) |   |   | 4,209 |   |
| Other                      current assets                                                                                                                        |   |                                      | (137    | ) |   |   | (682 | ) |
| Accounts                      payable                                                                                                                            |   |                                      | 16,484  |   |   |   | 7,366 |   |
| Accrued                      liabilities                                                                                                                         |   |                                      | 4,567   |   |   |   | 1,058 |   |
| Other,                      net                                                                                                                                  |   |                                      | (12,293 | ) |   |   | (2,470 | ) |
| Net                      cash provided by operating activities                                                                                                   |   |                                      | 5,936   |   |   |   | 41,244 |   |
|                                                                                                                                                             |   |                                      |    |   |   |   |   |   |
| Cash                      flows from investing activities:                                                                                                       |   |                                      |    |   |   |   |   |   |
| Purchases                      of property, plant and equipment                                                                                                  |   |                                      | (10,571 | ) |   |   | (5,776 | ) |
| Acquisition                      of certain assets of Comfor Products, Inc.                                                                                      |   |                                      | (12,817 | ) |   |   | - |   |
| Net                      cash used in investing activities                                                                                                       |   |                                      | (23,388 | ) |   |   | (5,776 | ) |
|                                                                                                                                                             |   |                                      |    |   |   |   |   |   |
| Cash                      flows from financing activities:                                                                                                       |   |                                      |    |   |   |   |   |   |
| Borrowings                      on revolving loan                                                                                                                |   |                                      | 13,500  |   |   |   | - |   |
| 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, net                                                                                                                 |   |                                      | (300    | ) |   |   | (106 | ) |
| Payments                      of financing fees                                                                                                                  |   |                                      | -       |   |   |   | (973 | ) |
| Purchase                      of common stock                                                                                                                    |   |                                      | (1      | ) |   |   | (311 | ) |
| Net                      cash provided by (used in) financing activities                                                                                         |   |                                      | 13,199  |   |   |   | (31,323 | ) |
|                                                                                                                                                             |   |                                      |    |   |   |   |   |   |
| Net                      effect of exchange rate changes on cash                                                                                                 |   |                                      | 720     |   |   |   | 115 |   |
| Change                      in cash and cash equivalents                                                                                                         |   |                                      | (3,533  | ) |   |   | 4,260 |   |
| Cash                      and cash equivalents, beginning of period                                                                                              |   |                                      | 20,784  |   |   |   | 24,622 |   |
| Cash                      and cash equivalents, end of period                                                                                                    |   | $                                         | 17,251  |   |   | $ | 28,882 |   |
|                                                                                                                                                             |   |                                      |    |   |   |   |   |   |
|                                                                                                                                                             |   |                                      |    |   |   |   |   |   |
| 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                                                                                                         |   |       | -      |   |           |   | -      |        |   |   | -            |   |   |              | 5,397  |   |                         |   | -      |              |   |   | - |   |   |   | 5,397 |   |
| Other                  comprehensive income:                                                                                        |   |       |   |   |           |   |   |        |   |   |         |   |   |              |   |   |                         |   |   |              |   |   |   |   |   |   |   |   |
| Change                  in foreign currency translation                                                                             |   |       | -      |   |           |   | -      |        |   |   | -            |   |   |              | -      |   |                         |   | 11,235 |              |   |   | - |   |   |   | 11,235 |   |
| Comprehensive                  income                                                                                               |   |       |   |   |           |   |   |        |   |   |         |   |   |              | 5,397  |   |                         |   | 11,235 |              |   |   | - |   |   |   | 16,632 |   |
| 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                                                                                |   |       | -      |   |           |   | -      |        |   |   | 186          |   |   |              | -      |   |                         |   | -      |              |   |   | - |   |   |   | 186 |   |
| Retirement                  of treasury stock                                                                                       |   |       | -      |   |           |   | -      |        |   |   | (2,350       | )      |   |              | -      |   |                         |   | -      |              |   |   | 2,350 |   |   |   | - |   |
| **June                  30, 2007 (unaudited)**                                                                                      |   |       | 100    |   |           | $      | 1      |        |   | $      | 100,679      |   |   | $                 | 54,605 |   |                         | $      | 8,640  |              |   | $ | - |   |   | $ | 163,925 |   |
|                                                                                                                                |   |       |   |   |           |   |   |        |   |   |         |   |   |              |   |   |                         |   |   |              |   |   |   |   |   |   |   |   |
| * 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 Condensed Consolidated Financial          Statements**

**A.           Basis      of Presentation**

*Accounting for      Uncertainty in Income Taxes*

**B.           Merger      and Distribution to Stockholders**

**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 Condensed Consolidated Financial            Statements**

|                                                   |   | **Purchase                    Price Allocation** |    |
|--------------------------------------------------------|--------|--------------------------------------------------|---------|
|                                                   |   | **December                    30, 2006**         |    |   | **Adjustments** |   |   | **June                    30, 2007** |   |
| Current                    assets                      |   | $                                                | 27,279  |   |   | $ | - |   |   | $ | 27,279 |   |
| Property,                    plant and equipment       |   |                                             | 17,773  |   |   |   | - |   |   |   | 17,773 |   |
| Goodwill                                               |   |                                             | 32,828  |   |   |   | 993 |   |   |   | 33,821 |   |
| Other                    intangibles                   |   |                                             | 62,802  |   |   |   | - |   |   |   | 62,802 |   |
| Other                    assets                        |   |                                             | 800     |   |   |   | - |   |   |   | 800 |   |
| Total                    assets acquired               |   |                                             | 141,482 |   |   |   | 993 |   |   |   | 142,475 |   |
| Current                    liabilities                 |   |                                             | (15,941 | ) |   |   | (1,418 | ) |   |   | (17,359 | ) |
| Non-current                    liabilities             |   |                                             | (12,442 | ) |   |   | 425 |   |   |   | (12,017 | ) |
| Total                    liabilities assumed           |   |                                             | (28,383 | ) |   |   | (993 | ) |   |   | (29,376 | ) |
| Purchase                    price net of cash acquired |   | $                                                | 113,099 |   |   | $ | - |   |   | $ | 113,099 |   |
|                                                   |   |                                             |    |   |   |   |   |   |   |   |   |   |

*2006      Sale of Sleep Country USA, LLC ("SCUSA")*

*Pro      Forma Financial Data*

|                          |   | **Quarter**                         |    |   | **Six                    Months**   |   |
|-------------------------------|--------|-------------------------------------|---------|--------|-------------------------------------|--------|
|                          |   | **Ended**                           |    |   | **Ended**                           |   |
|                          |   | **July                    1, 2006** |    |   | **July                    1, 2006** |   |
|                          |   | (Unaudited)                         |    |
| Net                    Sales  |   | $                                   | 254,174 |   |                                | $      | 500,833 |   |
| Net                    Income |   |                                | 3,547   |   |                                |   | 10,634 |   |

----

**Simmons              Company and              Subsidiaries**

**Notes            to Condensed Consolidated Financial            Statements**

**D.            Adoption      of FIN 48**

*Accounting for Income Taxes*

**E.           Inventories**

|                            |   | **June                  30,** |   |   | **December                  30,** |   |
|---------------------------------|--------|-------------------------------|--------|--------|-----------------------------------|--------|
|                            |   | **2007**                      |   |   | **2006**                          |   |
| Raw                  materials  |   | $                             | 21,942 |   |                              | $      | 17,566 |   |
| Work-in-progress                |   |                          | 1,169  |   |                              |   | 997 |   |
| Finished                  goods |   |                          | 10,294 |   |                              |   | 8,155 |   |
|                            |   | $                             | 33,405 |   |                              | $      | 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            |   |         | (8      | )      |       |   | -      |             |   |   | (8 | ) |
| Canada                  Acquisition adjustments (see Note C)         |   |         | -       |   |       |   | 993    |             |   |   | 993 |   |
| Purchase                  of certain assets of Comfor Products, Inc. |   |         | 6,017   |   |       |   | -      |             |   |   | 6,017 |   |
| Foreign                  currency translation adjustment             |   |         | -       |   |       |   | 3,269  |             |   |   | 3,269 |   |
| Balance                  as of June 30, 2007                         |   | $            | 498,273 |   |       | $      | 37,728 |             |   | $ | 536,001 |   |
|                                                                 |   |         |    |   |       |   |   |             |   |   |   |   |

----

**Simmons                Company and                Subsidiaries**

**Notes              to Condensed Consolidated Financial              Statements**

**G.**
**Warranties**

|                                                                                                         |   | **Quarters                  Ended** |   |   | **Six                  Months Ended** |   |
|--------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|--------|---------------------------------------|--------|
|                                                                                                         |   | **June                  30,**       |   |   | **July                  1,**          |   |   | **June                  30,** |   |   | **July                  1,** |   |
|                                                                                                         |   | **2007**                            |   |   | **2006**                              |   |   | **2007** |   |   | **2006** |   |
| Balance                  at beginning of period                                                              |   | $                                   | 3,853  |   |                                  | $      | 3,091 |   |   | $ | 3,668 |   |   | $ | 3,009 |   |
| Additional                  warranties issued                                                                |   |                                | 739    |   |                                  |   | 429 |   |   |   | 1,278 |   |   |   | 1,054 |   |
| Accruals                  related to pre-existing warranties (including change in                  estimate) |   |                                | (85    | )      |                                  |   | (136 | ) |   |   | 10 |   |   |   | (236 | ) |
| Warranty                  settlements                                                                        |   |                                | (499   | )      |                                  |   | (441 | ) |   |   | (948 | ) |   |   | (884 | ) |
| Balance                  at end of period                                                                    |   | $                                   | 4,008  |   |                                  | $      | 2,943 |   |   | $ | 4,008 |   |   | $ | 2,943 |   |
|                                                                                                         |   |                                |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |

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

|                                                                                                            |   | **June                  30,** |    |   | **December                  30,** |   |
|-----------------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------|--------|-----------------------------------|--------|
|                                                                                                            |   | **2007**                      |    |   | **2006**                          |   |
| Senior                  credit facility:                                                                        |   |                          |    |   |                              |   |
| Revolving                  loan                                                                                 |   | $                             | 13,500  |   |                              | $      | - |   |
| Tranche                  D term loan                                                                            |   |                          | 480,000 |   |                              |   | 480,000 |   |
| Total                  senior credit facility                                                                   |   |                          | 493,500 |   |                              |   | 480,000 |   |
| 7.875%                  senior subordinated notes due 2014                                                      |   |                          | 200,000 |   |                              |   | 200,000 |   |
| 10.0%                  senior discount notes, due 2014, net of discount of $57,150 and                  $67,378 |   |                          | 211,850 |   |                              |   | 201,622 |   |
| Other,                  including capital lease obligations                                                     |   |                          | 14,914  |   |                              |   | 15,157 |   |
|                                                                                                            |   |                          | 920,264 |   |                              |   | 896,779 |   |
| Less                  current portion                                                                           |   |                          | (778    | )      |                              |   | (778 | ) |
|                                                                                                            |   | $                             | 919,486 |   |                              | $      | 896,001 |   |
|                                                                                                            |   |                          |    |   |                              |   |   |   |

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

----

**Simmons          Company and          Subsidiaries**

**Notes            to Condensed Consolidated Financial            Statements**

| **Quarter                  Ended June 30, 2007**                                    |   |
|-------------------------------------------------------------------------------------|--------|
| (In                  thousands)                                                     |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   | **Domestic** |   |   | **Canada** |   |   | **Eliminations** |   |   | **Totals** |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  sales to external customers                                    |   | $ | 245,070 |   |   | $ | 32,801 |   |   | $ | - |   |   | $ | 277,871 |   |
| Intersegment                  net sales                                             |   |   | 207 |   |   |   | - |   |   |   | (207 | ) |   |   | - |   |
| Adjusted                  EBITDA                                                    |   |   | 27,056 |   |   |   | 6,098 |   |   |   | - |   |   |   | 33,154 |   |
| Depreciation                  and amortization expense                              |   |   | 6,166 |   |   |   | 1,177 |   |   |   | - |   |   |   | 7,343 |   |
| Expenditures                  for long-lived assets                                 |   |   | 6,197 |   |   |   | 147 |   |   |   | - |   |   |   | 6,344 |   |
| Segment                  assets                                                     |   |   | 1,416,674 |   |   |   | 162,891 |   |   |   | (124,397 | ) |   |   | 1,455,168 |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reconciliation                  of net income (loss) to Adjusted EBITDA:            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income (loss)                                                  |   | $ | (826 | ) |   | $ | 1,810 |   |   | $ | - |   |   | $ | 984 |   |
| Depreciation                  and amortization                                      |   |   | 6,166 |   |   |   | 1,177 |   |   |   | - |   |   |   | 7,343 |   |
| Income                  taxes                                                       |   |   | (319 | ) |   |   | 680 |   |   |   | - |   |   |   | 361 |   |
| Interest                  expense, net                                              |   |   | 17,369 |   |   |   | 1,889 |   |   |   | - |   |   |   | 19,258 |   |
| Interest                  income                                                    |   |   | 45 |   |   |   | 52 |   |   |   | - |   |   |   | 97 |   |
| Reorganization                  expense including management severance              |   |   | 1,338 |   |   |   | - |   |   |   | - |   |   |   | 1,338 |   |
| Conversion                  costs associated with meeting new flammability standard |   |   | 1,069 |   |   |   | - |   |   |   | - |   |   |   | 1,069 |   |
| Transaction                  related expenses                                       |   |   | 1,054 |   |   |   | - |   |   |   | - |   |   |   | 1,054 |   |
| Non-cash                  loss on foreign currency contract                         |   |   | - |   |   |   | 490 |   |   |   |   |   |   |   | 490 |   |
| Management                  fees                                                    |   |   | 488 |   |   |   | - |   |   |   | - |   |   |   | 488 |   |
| State                  taxes in lieu of income taxes                                |   |   | 150 |   |   |   | - |   |   |   | - |   |   |   | 150 |   |
| Non-cash                  stock compensation expense                                |   |   | 67 |   |   |   | - |   |   |   | - |   |   |   | 67 |   |
| Other                                                                               |   |   | 455 |   |   |   | - |   |   |   | - |   |   |   | 455 |   |
| Adjusted                  EBITDA                                                    |   | $ | 27,056 |   |   | $ | 6,098 |   |   | $ | - |   |   | $ | 33,154 |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**Simmons              Company and              Subsidiaries**

**Notes                to Condensed Consolidated Financial                Statements**

| **Six                  Months Ended June 30, 2007**                                 |   |
|-------------------------------------------------------------------------------------|--------|
| (In                  thousands)                                                     |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   | **Domestic** |   |   | **Canada** |   |   | **Eliminations** |   |   | **Totals** |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  sales to external customers                                    |   | $ | 483,072 |   |   | $ | 62,205 |   |   | $ | - |   |   | $ | 545,277 |   |
| Intersegment                  net sales                                             |   |   | 432 |   |   |   | - |   |   |   | (432 | ) |   |   | - |   |
| Adjusted                  EBITDA                                                    |   |   | 60,119 |   |   |   | 9,136 |   |   |   | - |   |   |   | 69,255 |   |
| Depreciation                  and amortization expense                              |   |   | 12,453 |   |   |   | 2,238 |   |   |   | - |   |   |   | 14,691 |   |
| Expenditures                  for long-lived assets                                 |   |   | 10,013 |   |   |   | 558 |   |   |   | - |   |   |   | 10,571 |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reconciliation                  of net income to Adjusted EBITDA:              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income                                                         |   | $ | 3,613 |   |   | $ | 1,784 |   |   | $ | - |   |   | $ | 5,397 |   |
| Depreciation                  and amortization                                      |   |   | 12,453 |   |   |   | 2,238 |   |   |   | - |   |   |   | 14,691 |   |
| Income                  taxes                                                       |   |   | 2,110 |   |   |   | 646 |   |   |   | - |   |   |   | 2,756 |   |
| Interest                  expense, net                                              |   |   | 33,972 |   |   |   | 3,675 |   |   |   | - |   |   |   | 37,647 |   |
| Interest                  income                                                    |   |   | 379 |   |   |   | 85 |   |   |   | - |   |   |   | 464 |   |
| Reorganization                  expense including management severance              |   |   | 1,835 |   |   |   | 123 |   |   |   | - |   |   |   | 1,958 |   |
| Conversion                  costs associated with meeting new flammability standard |   |   | 1,982 |   |   |   | - |   |   |   | - |   |   |   | 1,982 |   |
| Transaction                  related expenses                                       |   |   | 1,639 |   |   |   | - |   |   |   | - |   |   |   | 1,639 |   |
| Management                  fees                                                    |   |   | 953 |   |   |   | - |   |   |   | - |   |   |   | 953 |   |
| Non-cash                  loss on foreign currency contract                         |   |   | - |   |   |   | 585 |   |   |   |   |   |   |   | 585 |   |
| State                  taxes in lieu of income taxes                                |   |   | 280 |   |   |   | - |   |   |   | - |   |   |   | 280 |   |
| Non-cash                  stock compensation expense                                |   |   | 186 |   |   |   | - |   |   |   | - |   |   |   | 186 |   |
| Other                                                                               |   |   | 717 |   |   |   | - |   |   |   | - |   |   |   | 717 |   |
| Adjusted                  EBITDA                                                    |   | $ | 60,119 |   |   | $ | 9,136 |   |   | $ | - |   |   | $ | 69,255 |   |
|                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

**J.           Commitments      and Contingencies**

**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 Condensed Consolidated Financial            Statements**

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

**Supplemental      Consolidating Condensed Statements of Operations**

**For      the Quarter Ended June 30, 2007**

|                                                          |   |           |   |   | **Issuer                  and Guarantors** |   |    |             |   |   |              |   |   |             |   |
|---------------------------------------------------------------|--------|----------------|--------|--------|--------------------------------------------|--------|---------|------------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                                                          |   |           |   |   | **Simmons**                                |   |    |             |   |   |              |   |   |             |   |   |   |   |
|                                                          |   | **Parent**     |   |   | **Bedding**                                |   |    | **Guarantor**    |   |   | **Non-Guarantor** |   |   |             |   |   |   |   |
|                                                          |   | **Guarantors** |   |   | **Company**                                |   |    | **Subsidiaries** |   |   | **Subsidiaries**  |   |   | **Eliminations** |   |   | **Consolidated** |   |
|                                                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |
| Net                  sales                                    |   | $              | -      |   |                                       | $      | (32,671 | )                |   | $      | 275,592           |   |   | $                | 35,157 |   |   | $ | (207 | ) |   | $ | 277,871 |   |
| Cost                  of products sold                        |   |           | -      |   |                                       |   | 699     |             |   |   | 147,562           |   |   |             | 23,733 |   |   |   | (207 | ) |   |   | 171,787 |   |
| Gross                  profit                                 |   |           | -      |   |                                       |   | (33,370 | )                |   |   | 128,030           |   |   |             | 11,424 |   |   |   | - |   |   |   | 106,084 |   |
| Operating                  expenses:                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Selling,                  general and administrative expenses |   |           | 4      |   |                                       |   | 59,170  |             |   |   | 20,769            |   |   |             | 6,166  |   |   |   | - |   |   |   | 86,109 |   |
| Amortization                  of intangibles                  |   |           | -      |   |                                       |   | 738     |             |   |   | 526               |   |   |             | 229    |   |   |   | - |   |   |   | 1,493 |   |
| Intercompany                  fees                            |   |           | -      |   |                                       |   | (98,804 | )                |   |   | 98,046            |   |   |             | 758    |   |   |   | - |   |   |   | - |   |
| Licensing                  revenues                           |   |           | -      |   |                                       |   | (298    | )                |   |   | (1,634            | )      |   |             | (189   | ) |   |   | - |   |   |   | (2,121 | ) |
|                                                          |   |           | 4      |   |                                       |   | (39,194 | )                |   |   | 117,707           |   |   |             | 6,964  |   |   |   | - |   |   |   | 85,481 |   |
| Operating                  income (loss)                      |   |           | (4     | )      |                                       |   | 5,824   |             |   |   | 10,323            |   |   |             | 4,460  |   |   |   | - |   |   |   | 20,603 |   |
| Interest                  expense, net                        |   |           | 5,220  |   |                                       |   | 11,895  |             |   |   | 211               |   |   |             | 1,932  |   |   |   | - |   |   |   | 19,258 |   |
| Income                  from subsidiaries                     |   |           | 6,076  |   |                                       |   | 10,683  |             |   |   | -                 |   |   |             | -      |   |   |   | (16,759 | ) |   |   | - |   |
| Income                  before income taxes                   |   |           | 852    |   |                                       |   | 4,612   |             |   |   | 10,112            |   |   |             | 2,528  |   |   |   | (16,759 | ) |   |   | 1,345 |   |
| Income                  tax expense (benefit)                 |   |           | (132   | )      |                                       |   | (1,464  | )                |   |   | 1,278             |   |   |             | 679    |   |   |   | - |   |   |   | 361 |   |
| Net                  income                                   |   | $              | 984    |   |                                       | $      | 6,076   |             |   | $      | 8,834             |   |   | $                | 1,849  |   |   | $ | (16,759 | ) |   | $ | 984 |   |
|                                                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |

----

**Simmons          Company and          Subsidiaries**

**Notes            to Condensed Consolidated Financial            Statements**

**Supplemental      Consolidating Condensed Statements of Operations**

**For      the Quarter Ended July 1, 2006**

|                                                          |   |           |   |   | **Issuer                  and Guarantors** |   |    |             |   |   |              |   |   |             |   |
|---------------------------------------------------------------|--------|----------------|--------|--------|--------------------------------------------|--------|---------|------------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                                                          |   |           |   |   | **Simmons**                                |   |    |             |   |   |              |   |   |             |   |   |   |   |
|                                                          |   | **Parent**     |   |   | **Bedding**                                |   |    | **Guarantor**    |   |   | **Non-Guarantor** |   |   |             |   |   |   |   |
|                                                          |   | **Guarantors** |   |   | **Company**                                |   |    | **Subsidiaries** |   |   | **Subsidiaries**  |   |   | **Eliminations** |   |   | **Consolidated** |   |
|                                                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |
| Net                  sales                                    |   | $              | -      |   |                                       | $      | (22,487 | )                |   | $      | 261,469           |   |   | $                | 2,220  |   |   | $ | - |   |   | $ | 241,202 |   |
| Cost                  of products sold                        |   |           | -      |   |                                       |   | 862     |             |   |   | 129,484           |   |   |             | 1,705  |   |   |   | - |   |   |   | 132,051 |   |
| Gross                  profit                                 |   |           | -      |   |                                       |   | (23,349 | )                |   |   | 131,985           |   |   |             | 515    |   |   |   | - |   |   |   | 109,151 |   |
| Operating                  expenses:                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Selling,                  general and administrative expenses |   |           | 44     |   |                                       |   | 50,580  |             |   |   | 30,623            |   |   |             | 386    |   |   |   | - |   |   |   | 81,633 |   |
| Amortization                  of intangibles                  |   |           | -      |   |                                       |   | 807     |             |   |   | 610               |   |   |             | -      |   |   |   | - |   |   |   | 1,417 |   |
| Intercompany                  fees                            |   |           | -      |   |                                       |   | (77,558 | )                |   |   | 77,331            |   |   |             | 227    |   |   |   | - |   |   |   | - |   |
| Licensing                  revenues                           |   |           | -      |   |                                       |   | (279    | )                |   |   | (1,557            | )      |   |             | (176   | ) |   |   | - |   |   |   | (2,012 | ) |
|                                                          |   |           | 44     |   |                                       |   | (26,450 | )                |   |   | 107,007           |   |   |             | 437    |   |   |   | - |   |   |   | 81,038 |   |
| Operating                  income (loss)                      |   |           | (44    | )      |                                       |   | 3,101   |             |   |   | 24,978            |   |   |             | 78     |   |   |   | - |   |   |   | 28,113 |   |
| Interest                  expense, net                        |   |           | 4,566  |   |                                       |   | 19,870  |             |   |   | 218               |   |   |             | 61     |   |   |   | - |   |   |   | 24,715 |   |
| Income                  from subsidiaries                     |   |           | 5,823  |   |                                       |   | 21,447  |             |   |   | -                 |   |   |             | -      |   |   |   | (27,270 | ) |   |   | - |   |
| Income                  before income taxes                   |   |           | 1,213  |   |                                       |   | 4,678   |             |   |   | 24,760            |   |   |             | 17     |   |   |   | (27,270 | ) |   |   | 3,398 |   |
| Income                  tax expense (benefit)                 |   |           | (848   | )      |                                       |   | (1,145  | )                |   |   | 3,327             |   |   |             | 3      |   |   |   | - |   |   |   | 1,337 |   |
| Net                  income                                   |   | $              | 2,061  |   |                                       | $      | 5,823   |             |   | $      | 21,433            |   |   | $                | 14     |   |   | $ | (27,270 | ) |   | $ | 2,061 |   |
|                                                          |   |           |   |   |                                       |   |    |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |

----

**Simmons              Company and              Subsidiaries**

**Notes                to Condensed Consolidated Financial                Statements**

**Supplemental      Consolidating Condensed Statements of Operations**

**For      the Six Months Ended June 30, 2007**

|                                                          |   |           |   |   | **Issuer                  and Guarantors** |   |     |             |   |   |              |   |   |             |   |
|---------------------------------------------------------------|--------|----------------|--------|--------|--------------------------------------------|--------|----------|------------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                                                          |   |           |   |   | **Simmons**                                |   |     |             |   |   |              |   |   |             |   |   |   |   |
|                                                          |   | **Parent**     |   |   | **Bedding**                                |   |     | **Guarantor**    |   |   | **Non-Guarantor** |   |   |             |   |   |   |   |
|                                                          |   | **Guarantors** |   |   | **Company**                                |   |     | **Subsidiaries** |   |   | **Subsidiaries**  |   |   | **Eliminations** |   |   | **Consolidated** |   |
|                                                          |   |           |   |   |                                       |   |     |             |   |   |              |   |   |             |   |   |   |   |
| Net                  sales                                    |   | $              | -      |   |                                       | $      | (57,239  | )                |   | $      | 535,814           |   |   | $                | 67,134 |   |   | $ | (432 | ) |   | $ | 545,277 |   |
| Cost                  of products sold                        |   |           | -      |   |                                       |   | 1,327    |             |   |   | 284,220           |   |   |             | 45,887 |   |   |   | (432 | ) |   |   | 331,002 |   |
| Gross                  profit                                 |   |           | -      |   |                                       |   | (58,566  | )                |   |   | 251,594           |   |   |             | 21,247 |   |   |   | - |   |   |   | 214,275 |   |
| Operating                  expenses:                          |   |           |   |   |                                       |   |     |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Selling,                  general and administrative expenses |   |           | (6     | )      |                                       |   | 115,047  |             |   |   | 42,562            |   |   |             | 13,214 |   |   |   | - |   |   |   | 170,817 |   |
| Amortization                  of intangibles                  |   |           | -      |   |                                       |   | 1,477    |             |   |   | 1,052             |   |   |             | 443    |   |   |   | - |   |   |   | 2,972 |   |
| Intercompany                  fees                            |   |           | -      |   |                                       |   | (188,450 | )                |   |   | 186,932           |   |   |             | 1,518  |   |   |   | - |   |   |   | - |   |
| Licensing                  revenues                           |   |           | -      |   |                                       |   | (595     | )                |   |   | (4,365            | )      |   |             | (354   | ) |   |   | - |   |   |   | (5,314 | ) |
|                                                          |   |           | (6     | )      |                                       |   | (72,521  | )                |   |   | 226,181           |   |   |             | 14,821 |   |   |   | - |   |   |   | 168,475 |   |
| Operating                  income                             |   |           | 6      |   |                                       |   | 13,955   |             |   |   | 25,413            |   |   |             | 6,426  |   |   |   | - |   |   |   | 45,800 |   |
| Interest                  expense, net                        |   |           | 10,361 |   |                                       |   | 23,430   |             |   |   | 114               |   |   |             | 3,742  |   |   |   | - |   |   |   | 37,647 |   |
| Income                  from subsidiaries                     |   |           | 13,867 |   |                                       |   | 19,004   |             |   |   | -                 |   |   |             | -      |   |   |   | (32,871 | ) |   |   | - |   |
| Income                  before income taxes                   |   |           | 3,512  |   |                                       |   | 9,529    |             |   |   | 25,299            |   |   |             | 2,684  |   |   |   | (32,871 | ) |   |   | 8,153 |   |
| Income                  tax expense (benefit)                 |   |           | (1,885 | )      |                                       |   | (4,338   | )                |   |   | 8,307             |   |   |             | 672    |   |   |   | - |   |   |   | 2,756 |   |
| Net                  income                                   |   | $              | 5,397  |   |                                       | $      | 13,867   |             |   | $      | 16,992            |   |   | $                | 2,012  |   |   | $ | (32,871 | ) |   | $ | 5,397 |   |
|                                                          |   |           |   |   |                                       |   |     |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |

----

**Simmons              Company and              Subsidiaries**

**Notes                to Condensed Consolidated Financial                Statements**

**Supplemental      Consolidating Condensed Statements of Operations**

**For      the Six Months Ended July 1, 2006**

|                                                          |   |           |   |   | **Issuer                  and Guarantors** |   |     |             |   |   |              |   |   |             |   |
|---------------------------------------------------------------|--------|----------------|--------|--------|--------------------------------------------|--------|----------|------------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                                                          |   |           |   |   | **Simmons**                                |   |     |             |   |   |              |   |   |             |   |   |   |   |
|                                                          |   | **Parent**     |   |   | **Bedding**                                |   |     | **Guarantor**    |   |   | **Non-Guarantor** |   |   |             |   |   |   |   |
|                                                          |   | **Guarantors** |   |   | **Company**                                |   |     | **Subsidiaries** |   |   | **Subsidiaries**  |   |   | **Eliminations** |   |   | **Consolidated** |   |
|                                                          |   |           |   |   |                                       |   |     |             |   |   |              |   |   |             |   |   |   |   |
| Net                  sales                                    |   | $              | -      |   |                                       | $      | (51,740  | )                |   | $      | 524,764           |   |   | $                | 4,045  |   |   | $ | - |   |   | $ | 477,069 |   |
| Cost                  of products sold                        |   |           | -      |   |                                       |   | 1,677    |             |   |   | 263,781           |   |   |             | 3,032  |   |   |   | - |   |   |   | 268,490 |   |
| Gross                  profit                                 |   |           | -      |   |                                       |   | (53,417  | )                |   |   | 260,983           |   |   |             | 1,013  |   |   |   | - |   |   |   | 208,579 |   |
| Operating                  expenses:                          |   |           |   |   |                                       |   |     |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Selling,                  general and administrative expenses |   |           | 67     |   |                                       |   | 93,204   |             |   |   | 58,468            |   |   |             | 800    |   |   |   | - |   |   |   | 152,539 |   |
| Amortization                  of intangibles                  |   |           | -      |   |                                       |   | 1,614    |             |   |   | 1,220             |   |   |             | -      |   |   |   | - |   |   |   | 2,834 |   |
| Intercompany                  fees                            |   |           | -      |   |                                       |   | (155,734 | )                |   |   | 155,346           |   |   |             | 388    |   |   |   | - |   |   |   | - |   |
| Licensing                  revenues                           |   |           | -      |   |                                       |   | (556     | )                |   |   | (3,391            | )      |   |             | (353   | ) |   |   | - |   |   |   | (4,300 | ) |
|                                                          |   |           | 67     |   |                                       |   | (61,472  | )                |   |   | 211,643           |   |   |             | 835    |   |   |   | - |   |   |   | 151,073 |   |
| Operating                  income (loss)                      |   |           | (67    | )      |                                       |   | 8,055    |             |   |   | 49,340            |   |   |             | 178    |   |   |   | - |   |   |   | 57,506 |   |
| Interest                  expense, net                        |   |           | 9,225  |   |                                       |   | 34,148   |             |   |   | 430               |   |   |             | 88     |   |   |   | - |   |   |   | 43,891 |   |
| Income                  from subsidiaries                     |   |           | 15,195 |   |                                       |   | 37,253   |             |   |   | -                 |   |   |             | -      |   |   |   | (52,448 | ) |   |   | - |   |
| Income                  before income taxes                   |   |           | 5,903  |   |                                       |   | 11,160   |             |   |   | 48,910            |   |   |             | 90     |   |   |   | (52,448 | ) |   |   | 13,615 |   |
| Income                  tax expense (benefit)                 |   |           | (2,591 | )      |                                       |   | (4,035   | )                |   |   | 11,695            |   |   |             | 52     |   |   |   | - |   |   |   | 5,121 |   |
| Net                  income                                   |   | $              | 8,494  |   |                                       | $      | 15,195   |             |   | $      | 37,215            |   |   | $                | 38     |   |   | $ | (52,448 | ) |   | $ | 8,494 |   |
|                                                          |   |           |   |   |                                       |   |     |             |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |

----

**Simmons              Company and              Subsidiaries**

**Notes                to Condensed Consolidated Financial                Statements**

**Supplemental      Consolidating Condensed Balance Sheets**

**As      of June 30, 2007**

|                                                                 |   |           |          |   | **Issuer                  and Guarantors** |   |          |           |   |   |              |   |   |             |         |
|----------------------------------------------------------------------|--------|----------------|---------------|--------|--------------------------------------------|--------|---------------|----------------|--------|--------|-------------------|--------|--------|------------------|--------------|
|                                                                 |   |           |          |   | **Simmons**                                |   |          |           |   |   |              |   |   |             |         |   |   |   |
|                                                                 |   | **Parent**     |          |   | **Bedding**                                |   |          | **Subsidiary** |   |   | **Non-Guarantor** |   |   |             |         |   |   |   |
|                                                                 |   | **Guarantors** |          |   | **Company**                                |   |          | **Guarantors** |   |   | **Subsidiaries**  |   |   | **Eliminations** |         |   | **Consolidated** |   |
| **ASSETS**                                                           |   |           |          |   |                                       |   |          |           |   |   |              |   |   |             |         |   |   |   |
| Current                  assets:                                     |   |           |          |   |                                       |   |          |           |   |   |              |   |   |             |         |   |   |   |
| Cash                  and cash equivalents                           |   | $              | -             |   |                                       | $      | 1,751         |           |   | $      | 4,152             |   |   | $                | 11,348       |   |   | $ | - |   |   | $ | 17,251 |   |
| Accounts                  receivable                                 |   |           | -             |   |                                       |   | -             |           |   |   | 97,266            |   |   |             | 26,881       |   |   |   | (39 | ) |   |   | 124,108 |   |
| Inventories                                                          |   |           | -             |   |                                       |   | 438           |           |   |   | 28,180            |   |   |             | 4,787        |   |   |   | - |   |   |   | 33,405 |   |
| Other                                                                |   |           | -             |   |                                       |   | 9,518         |           |   |   | 12,089            |   |   |             | 2,543        |   |   |   | - |   |   |   | 24,150 |   |
| Total                  current assets                                |   |           | -             |   |                                       |   | 11,707        |           |   |   | 141,687           |   |   |             | 45,559       |   |   |   | (39 | ) |   |   | 198,914 |   |
| Property,                  plant and equipment, net                  |   |           | -             |   |                                       |   | 20,204        |           |   |   | 36,648            |   |   |             | 22,322       |   |   |   | - |   |   |   | 79,174 |   |
| Goodwill                  and other intangibles, net                 |   |           | -             |   |                                       |   | 85,819        |           |   |   | 947,797           |   |   |             | 104,348      |   |   |   | - |   |   |   | 1,137,964 |   |
| Other                  assets                                        |   |           | 24,247        |   |                                       |   | 117,468       |           |   |   | 714               |   |   |             | 1,672        |   |   |   | (104,985 | ) |   |   | 39,116 |   |
| Net                  investment in and advances to (from) affiliates |   |           | 351,669  |   |                                       |   | 884,430  |           |   |   | 247,515      |   |   |             | (3,134  | )  |   |   | (1,480,480 | )  |   |   | - |   |
| Total                  assets                                        |   | $              | 375,916       |   |                                       | $      | 1,119,628     |           |   | $      | 1,374,361         |   |   | $                | 170,767      |   |   | $ | (1,585,504 | ) |   | $ | 1,455,168 |   |
|                                                                 |   |           |          |   |                                       |   |          |           |   |   |              |   |   |             |         |   |   |   |   |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDER'S EQUITY**            |   |           |          |   |                                       |   |          |           |   |   |              |   |   |             |         |   |   |   |   |   |   |
| Current                  liabilities:                                |   |           |          |   |                                       |   |          |           |   |   |              |   |   |             |         |   |   |   |   |   |   |   |   |   |
| Current                  maturities of long-term debt                |   | $              | -             |   |                                       | $      | -             |           |   | $      | 200               |   |   | $                | 578          |   |   | $ | - |   |   | $ | 778 |   |
| Accounts                  payable and accrued liabilities            |   |           | 140           |   |                                       |   | 55,626        |           |   |   | 87,036            |   |   |             | 21,045       |   |   |   | (5,032 | ) |   |   | 158,815 |   |
| Total                  current liabilities                           |   |           | 140           |   |                                       |   | 55,626        |           |   |   | 87,236            |   |   |             | 21,623       |   |   |   | (5,032 | ) |   |   | 159,593 |   |
| Long-term                  debt                                      |   |           | 211,851       |   |                                       |   | 693,500       |           |   |   | 12,900            |   |   |             | 81,169       |   |   |   | (79,934 | ) |   |   | 919,486 |   |
| Deferred                  income taxes                               |   |           | -             |   |                                       |   | 15,109        |           |   |   | 178,733           |   |   |             | 13,869       |   |   |   | (21,196 | ) |   |   | 186,515 |   |
| Other                  non-current liabilities                       |   |           | -             |   |                                       |   | 17,069        |           |   |   | 4,639             |   |   |             | 3,941        |   |   |   | - |   |   |   | 25,649 |   |
| Total                  liabilities                                   |   |           | 211,991       |   |                                       |   | 781,304       |           |   |   | 283,508           |   |   |             | 120,602      |   |   |   | (106,162 | ) |   |   | 1,291,243 |   |
| Stockholder's                  equity                                |   |           | 163,925       |   |                                       |   | 338,324       |           |   |   | 1,090,853         |   |   |             | 50,165       |   |   |   | (1,479,342 | ) |   |   | 163,925 |   |
| Total                  liabilities and stockholder's equity          |   | $              | 375,916       |   |                                       | $      | 1,119,628     |           |   | $      | 1,374,361         |   |   | $                | 170,767      |   |   | $ | (1,585,504 | ) |   | $ | 1,455,168 |   |
|                                                                 |   |           |          |   |                                       |   |          |           |   |   |              |   |   |             |         |   |   |   |   |   |   |   |   |   |

----

**Simmons          Company and          Subsidiaries**

**Notes            to Condensed Consolidated Financial            Statements**

**Supplemental      Consolidating Condensed Balance Sheets**

**As      of December 30, 2006**

|                                                                 |   |           |    |   | **Issuer                  and Guarantors** |   |      |           |   |   |              |   |   |             |    |
|----------------------------------------------------------------------|--------|----------------|---------|--------|--------------------------------------------|--------|-----------|----------------|--------|--------|-------------------|--------|--------|------------------|---------|
|                                                                 |   |           |    |   | **Simmons**                                |   |      |           |   |   |              |   |   |             |    |   |   |   |
|                                                                 |   | **Parent**     |    |   | **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 Condensed Consolidated Financial            Statements**

**Supplemental      Consolidating Condensed Statements of Cash Flows**

**For      the Six Months Ended June 30, 2007**

|                                                                   |   |           |   |   | **Issuer                    and Guarantors** |   |    |           |   |   |              |   |   |             |   |
|------------------------------------------------------------------------|--------|----------------|--------|--------|----------------------------------------------|--------|---------|----------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                                                                   |   |           |   |   | **Simmons**                                  |   |    |           |   |   |              |   |   |             |   |   |   |   |
|                                                                   |   | **Parent**     |   |   | **Bedding**                                  |   |    | **Subsidiary** |   |   | **Non-Guarantor** |   |   |             |   |   |   |   |
|                                                                   |   | **Guarantors** |   |   | **Company**                                  |   |    | **Guarantors** |   |   | **Subsidiaries**  |   |   | **Eliminations** |   |   | **Consolidated** |   |
|                                                                   |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |
| Net                    cash provided by (used in) operating activities |   | $              | 298    |   |                                         | $      | (13,454 | )              |   | $      | 14,441            |   |   | $                | 4,651  |   |   | $ | - |   |   | $ | 5,936 |   |
| Cash                    flows from investing activities:               |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Purchase                    of certain assets of Comfor Products       |   |           | -      |   |                                         |   | (12,817 | )              |   |   | -                 |   |   |             | -      |   |   |   | - |   |   |   | (12,817 | ) |
| Purchase                    of property, plant and equipment, net      |   |           | -      |   |                                         |   | (7,154  | )              |   |   | (2,710            | )      |   |             | (707   | ) |   |   | - |   |   |   | (10,571 | ) |
| Net                    cash used in investing activities               |   |           | -      |   |                                         |   | (19,971 | )              |   |   | (2,710            | )      |   |             | (707   | ) |   |   | - |   |   |   | (23,388 | ) |
| Cash                    flows from financing activities:               |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Borrowings                    on revolving loan                        |   |           | -      |   |                                         |   | 13,500  |           |   |   | -                 |   |   |             | -      |   |   |   | - |   |   |   | 13,500 |   |
| Payment                    of other long-term obligations              |   |           | -      |   |                                         |   | -       |           |   |   | -                 |   |   |             | (300   | ) |   |   | - |   |   |   | (300 | ) |
| Purchase                    of treasury stock                          |   |           | (1     | )      |                                         |   | -       |           |   |   | -                 |   |   |             | -      |   |   |   | - |   |   |   | (1 | ) |
| Receipt                    from (distribution to) affiliates           |   |           | (297   | )      |                                         |   | 11,835  |           |   |   | (13,185           | )      |   |             | 1,647  |   |   |   | - |   |   |   | - |   |
| Net                    cash provided by (used in) financing activities |   |           | (298   | )      |                                         |   | 25,335  |           |   |   | (13,185           | )      |   |             | 1,347  |   |   |   | - |   |   |   | 13,199 |   |
| Net                    effect of exchange rate changes                 |   |           | -      |   |                                         |   | -       |           |   |   | -                 |   |   |             | 720    |   |   |   | - |   |   |   | 720 |   |
| Change                    in cash and cash equivalents                 |   |           | -      |   |                                         |   | (8,090  | )              |   |   | (1,454            | )      |   |             | 6,011  |   |   |   | - |   |   |   | (3,533 | ) |
| Cash                    and cash equivalents:                          |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Beginning                    of period                                 |   |           | -      |   |                                         |   | 9,841   |           |   |   | 5,606             |   |   |             | 5,337  |   |   |   | - |   |   |   | 20,784 |   |
| End                    of period                                       |   | $              | -      |   |                                         | $      | 1,751   |           |   | $      | 4,152             |   |   | $                | 11,348 |   |   | $ | - |   |   | $ | 17,251 |   |
|                                                                   |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |

----

**Simmons          Company and          Subsidiaries**

**Notes            to Condensed Consolidated Financial            Statements**

** Supplemental      Consolidating Condensed Statements of Cash Flows**

**For      the Six Months Ended July 1, 2006**

|                                                                   |   |           |   |   | **Issuer                    and Guarantors** |   |    |           |   |   |              |   |   |             |   |
|------------------------------------------------------------------------|--------|----------------|--------|--------|----------------------------------------------|--------|---------|----------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                                                                   |   |           |   |   | **Simmons**                                  |   |    |           |   |   |              |   |   |             |   |   |   |   |
|                                                                   |   | **Parent**     |   |   | **Bedding**                                  |   |    | **Subsidiary** |   |   | **Non-Guarantor** |   |   |             |   |   |   |   |
|                                                                   |   | **Guarantors** |   |   | **Company**                                  |   |    | **Guarantors** |   |   | **Subsidiaries**  |   |   | **Eliminations** |   |   | **Consolidated** |   |
|                                                                   |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |
| Net                    cash provided by (used in) operating activities |   | $              | 267    |   |                                         | $      | (15,778 | )              |   | $      | 56,456            |   |   | $                | 299    |   |   | $ | - |   |   | $ | 41,244 |   |
| Cash                    flows from investing activities:               |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Purchase                    of property, plant and equipment, net      |   |           | -      |   |                                         |   | (2,446  | )              |   |   | (3,330            | )      |   |             | -      |   |   |   | - |   |   |   | (5,776 | ) |
| Net                    cash used in investing activities               |   |           | -      |   |                                         |   | (2,446  | )              |   |   | (3,330            | )      |   |             | -      |   |   |   | - |   |   |   | (5,776 | ) |
| Cash                    flows from financing activities:               |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Payments                    of senior credit facility, net             |   |           | -      |   |                                         |   | (29,933 | )              |   |   | -                 |   |   |             | -      |   |   |   | - |   |   |   | (29,933 | ) |
| Payment                    of other long-term obligations              |   |           | -      |   |                                         |   | -       |           |   |   | -                 |   |   |             | (106   | ) |   |   | - |   |   |   | (106 | ) |
| Purchase                    of treasury stock                          |   |           | (311   | )      |                                         |   | -       |           |   |   | -                 |   |   |             | -      |   |   |   | - |   |   |   | (311 | ) |
| Payment                    of financing fees                           |   |           | (41    | )      |                                         |   | (932    | )              |   |   | -                 |   |   |             | -      |   |   |   | - |   |   |   | (973 | ) |
| Receipt                    from (distribution to) affiliates           |   |           | 85     |   |                                         |   | 47,785  |           |   |   | (47,212           | )      |   |             | (658   | ) |   |   | - |   |   |   | - |   |
| Net                    cash used in financing activities               |   |           | (267   | )      |                                         |   | 16,920  |           |   |   | (47,212           | )      |   |             | (764   | ) |   |   | - |   |   |   | (31,323 | ) |
| Net                    effect of exchange rate changes                 |   |           | -      |   |                                         |   | -       |           |   |   | -                 |   |   |             | 115    |   |   |   | - |   |   |   | 115 |   |
| Change                    in cash and cash equivalents                 |   |           | -      |   |                                         |   | (1,304  | )              |   |   | 5,914             |   |   |             | (350   | ) |   |   | - |   |   |   | 4,260 |   |
| Cash                    and cash equivalents:                          |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |
| Beginning                    of period                                 |   |           | -      |   |                                         |   | 19,823  |           |   |   | 1,429             |   |   |             | 3,370  |   |   |   | - |   |   |   | 24,622 |   |
| End                    of period                                       |   | $              | -      |   |                                         | $      | 18,519  |           |   | $      | 7,343             |   |   | $                | 3,020  |   |   | $ | - |   |   | $ | 28,882 |   |
|                                                                   |   |           |   |   |                                         |   |    |           |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |

----

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

**Recent      Events**

*Purchase      of Certain Assets of Comfor Products*

*Resignation      of President*

**Results      of Operations**

|                                                              |   | **Quarters                      Ended** |   |   | **Six                      Months Ended** |   |
|-------------------------------------------------------------------|--------|-----------------------------------------|--------|--------|-------------------------------------------|--------|
|                                                              |   | **June                      30,**       |   |   | **July                      1,**          |   |   | **June                      30,** |   |   | **July                      1,** |   |
|                                                              |   | **2007**                                |   |   | **2006**                                  |   |   | **2007** |   |   | **2006** |   |
|                                                              |   |                                    |   |   |                                      |   |   |   |   |   |   |   |
| Net                      sales                                    |   |                                    | 100.0  | %      |                                      |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |
| Cost                      of products sold                        |   |                                    | 61.8   | %      |                                      |   | 54.7 | % |   |   | 60.7 | % |   |   | 56.3 | % |
| Gross                      margin                                 |   |                                    | 38.2   | %      |                                      |   | 45.3 | % |   |   | 39.3 | % |   |   | 43.7 | % |
|                                                              |   |                                    |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| Operating                      expenses:                          |   |                                    |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| Selling,                      general and administrative expenses |   |                                    | 31.0   | %      |                                      |   | 33.8 | % |   |   | 31.3 | % |   |   | 32.0 | % |
| Amortization                      of intangibles                  |   |                                    | 0.5    | %      |                                      |   | 0.6 | % |   |   | 0.5 | % |   |   | 0.6 | % |
| Licensing                      revenues                           |   |                                    | -0.8   | %      |                                      |   | -0.8 | % |   |   | -1.0 | % |   |   | -0.9 | % |
|                                                              |   |                                    | 30.8   | %      |                                      |   | 33.6 | % |   |   | 30.9 | % |   |   | 31.7 | % |
|                                                              |   |                                    |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| Operating                      income                             |   |                                    | 7.4    | %      |                                      |   | 11.7 | % |   |   | 8.4 | % |   |   | 12.1 | % |
|                                                              |   |                                    |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| Interest                      expense, net                        |   |                                    | 6.9    | %      |                                      |   | 10.2 | % |   |   | 6.9 | % |   |   | 9.2 | % |
| Income                      before income taxes                   |   |                                    | 0.5    | %      |                                      |   | 1.4 | % |   |   | 1.5 | % |   |   | 2.9 | % |
| Income                      tax expense                           |   |                                    | 0.1    | %      |                                      |   | 0.6 | % |   |   | 0.5 | % |   |   | 1.1 | % |
| Net                      income                                   |   |                                    | 0.4    | %      |                                      |   | 0.9 | % |   |   | 1.0 | % |   |   | 1.8 | % |
|                                                              |   |                                    |   |   |                                      |   |   |   |   |   |   |   |   |   |   |   |

----

**Quarter      Ended June 30, 2007 as Compared to the Quarter Ended July 1,      2006**

*Net      Sales*

*Gross      Margin*

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

*Amortization      of      Intangibles.*

*Licensing      Revenues. *

*Interest      Expense, Net. *

*Income      Taxes.  *

----

**Six      Months Ended June 30, 2007 as Compared to the Six Months Ended July 1,      2006**

*Net      Sales*

*Gross      Margin*

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

*Amortization      of      Intangibles.*

*Licensing      Revenues. *

*Interest      Expense, Net. *

*Income      Taxes.  *

**Liquidity      and Capital Resources**

|                                                              |   | **Six                  Months Ended** |   |
|-------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                              |   | **June                  30,**         |   |   | **July                  1,** |   |
|                                                              |   | **2007**                              |   |   | **2006** |   |
| Statement                  of Cash Flow Data:                     |   |                                  |   |   |   |   |
| Cash                  flows provided by (used in):                |   |                                  |   |   |   |   |
| Operating                  activities                             |   | $                                     | 5.9    |   |   | $ | 41.2 |   |
| Investing                  activities                             |   |                                  | (23.4  | ) |   |   | (5.8 | ) |
| Financing                  activities                             |   |                                  | 13.2   |   |   |   | (31.3 | ) |
| Net                  effect of exchange rates                     |   |                                  | 0.7    |   |   |   | 0.1 |   |
| Increase                  (decrease) in cash and cash equivalents |   |                                  | (3.5   | ) |   |   | 4.2 |   |
| Cash                  and cash equivalents:                       |   |                                  |   |   |   |   |   |   |
| Beginning                  of period                              |   |                                  | 20.8   |   |   |   | 24.7 |   |
| End                  of period                                    |   | $                                     | 17.3   |   |   | $ | 28.9 |   |
|                                                              |   |                                  |   |   |   |   |   |   |

----

**Six      Months Ended June 30, 2007 as Compared to Six Months Ended July 1,      2006**

*Cash      flows provided by Operating Activities*

*Cash      flows 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 from June 30, 2007                through September 30, 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 5.25:1.00 for June 30, 2007; 5.00:1.00 from September                30, 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. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                        |   | **June                  30, 2007** |   |
|-----------------------------------------------------------------------------|--------|------------------------------------|--------|
| Calculation                  of minimum cash interest coverage ratio:       |   |                               |   |
| Simmons                  Bedding twelve months ended Adjusted EBITDA(1)     |   | $                                  | 150.1  |   |
| Simmons                  Bedding consolidated cash interest expense(2)      |   | $                                  | 53.3   |   |
| Actual                  interest coverage ratio(3)                          |   |                               | 2.82x  |   |
| Minimum                  permitted interest coverage ratio                  |   |                               | 2.15x  |   |
|                                                                        |   |                               |   |   |
| Calculation                  of maximum leverage ratio:                     |   |                               |   |   |
| Simmons                  Company consolidated indebtedness                  |   | $                                  | 920.3  |   |
| Less:                  10% senior discount notes                            |   |                               | 211.9  |   |
| Simmons                  Bedding consolidated indebtedness                  |   |                               | 708.4  |   |
| Less:  Simmons                  Bedding cash and cash equivalents |   |                               | 17.3   |   |
| Simmons                  Bedding net debt                                   |   | $                                  | 691.2  |   |
| Simmons                  Bedding twelve months ended Adjusted EBITDA(1)     |   | $                                  | 150.1  |   |
| Actual                  leverage ratio(4)                                   |   |                               | 4.60x  |   |
| Maximum                  permitted leverage ratio                           |   |                               | 5.25x  |   |

----

| Net                  income                                                         |   | $      | 44.5   |   |
|-------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Depreciation                  and amortization                                      |   |   | 29.3   |   |
| Income                  taxes                                                       |   |   | 22.0   |   |
| Interest                  expense                                                   |   |   | 75.2   |   |
| EBITDA                                                                              |   | $      | 171.0  |   |
|                                                                                |   |   |   |   |
| Pro                  forma effect of SCUSA Disposition(a)                           |   |   | (44.1  | )      |
| Pro                  forma effect of Canada Acquisition(b)                          |   |   | 7.9    |   |
| Pro                  forma effect of ComforPedic Acquisition(c)                     |   |   | 0.5    |   |
| Reorganization                  expenses including management severance             |   |   | 4.3    |   |
| Management                  fees                                                    |   |   | 1.8    |   |
| Transaction                  related expenses                                       |   |   | 3.2    |   |
| Non-cash                  stock compensation expense                                |   |   | 0.4    |   |
| Conversion                  costs associated with meeting new flammability standard |   |   | 2.7    |   |
| State                  taxes in lieu of income taxes                                |   |   | 0.5    |   |
| Other,                  including expenses at Holdings                              |   |   | 1.9    |   |
|                                                                                |   | $      | 150.1  |   |
|                                                                                |   |   |   |   |

| (a)   | This                adjustment removes the EBITDA of SCUSA that is included in our                consolidated EBITDA prior to our disposition of the entity and the                $43.3                million gain recognized on the disposition; and includes the last                twelve                months effect of savings generated from a new dealer agreement                executed in connection with the sale of                 SCUSA. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | This                adjustment includes the EBITDA of Simmons Canada for the twelve months                ended June 30, 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 $2.5 million of unrealized synergies that                management anticipates will be achieved as a result of the Canada                Acquisition. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | This                adjustment includes the EBITDA of Comfor Products for the twelve                months                ended June 30, 2007, as though we purchased the entity as of the                beginning                of the twelve month period. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Simmons                  Company interest expense, net           |   | $      | 73.7   |   |
|------------------------------------------------------------------|--------|--------|--------|--------|
| Less:                  Simmons Company non-cash interest expense |   |   | (20.2  | )      |
| Simmons                  Bedding interest expense, net           |   |   | 53.5   |   |
| Add:                  Simmons Bedding interest income            |   |   | 1.5    |   |
| Simmons                  Bedding gross interest expense          |   |   | 55.0   |   |
| Less:                  Simmons Bedding non-cash interest expense |   |   | (1.7   | )      |
|                                                             |   | $      | 53.3   |   |
|                                                             |   |   |   |   |

----

**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;                and |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| ·   | other                risks and factors identified from time to time in our reports filed                with                the Securities and Exchange Commission                (“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 Commission on Form 10-K on March 23,                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)                    |

----

| By:    | /s/                William S. Creekmuir                               |   |
|--------|-----------------------------------------------------------------------|--------|
|   | William                S. Creekmuir                                   |
|   | Executive                Vice President & Chief Financial Officer |
| Date:  | August                14, 2007                                        |