CLASSIC BRANDS

Testimony of

Mike Zippelli

CEO of Classic Brands, Inc.

and

Dan Dietz

CB0 of Classic Brands, Inc.

Different Price Segments Figure 34 Mattress Industry Market Share by Price Point

Value 2009 2010 2011 2012 2013 2014 2015 2016 2017

<$500 20.1% 22.1% 19.1% 19.1% 17.9% 16.8% 17.5% 16.8% 16.2%

5500-51,000 36.1% 32.4% 33.6% 28.3% 32.5% 29.2% 30.1% 27.7% 29.1%

$1,00042,000 25.4% 26.7% .29.2% 35.2% 30.3% 33.3% 28.5% 28,4% 29.6%

$2,000+ 18.4% 18.8% 18.1% 17.4% 19.3% 20.7% 23.9% 27.1% 25.1%

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Units 2009 2010 2011 2012 2013 2014 2015 2016 2017

:$500 42.6% 46.2% 42.5% 41.2% 40.7% 36.9% 36.1% 38.4% 37.1%

550041.000 39.0% 33.9% 36.7% 33.1% 35.5% 36.1% 40.9% 35.1% 36.1%

51,00042,000 13.8% 14.7% 15.8% 20.1% 17.7% 20.3% 16.5% 19.4% 19.5%

52,0004 4.6% 5,2% 5.0% 5.6% 6.1% 6.7% 6.5% 71% 7.3%

100.0% 1010% 100,0% 100.0% 100,0% 100.0% 100.0% 100.0% 100.0%

Sources: Intematbnal Sleep Products Association and KeyBanc Capital Markets inc.

Emerging brands in this report primarily target the $500-$1„000

price tier, advertising citing the same product quality/

construction as the $17 000-$2,000 beds in a traditional

retail store. However, several brands are targeting $1,000+

price points.

Import brands, like Zinusy have broadened the competition with

<$500 price points.

Source: Bradley B. Thomas & Sameet Desai, Mattress/Bedding: The Emerging E-Commerce Threat, KeyBanc Capital Markets Inc. (July 11, 2018), at 32 (emphasis added).

Roll-Pack System

Source: http://elektroteks.blogspot.com/2016/03/et-ro11-300-mattress-roll-pack-machine.html

Casper

We're now America's

Rated Mattress Brand!'

Shop now

'According to a faadiftg Independent consumer gyubtf

Source: Casper Direct Advertising.

Tuft-Needle's Disruption Thesis Figure 34: High Mark-ups and Retail Coirimissiorks for Premium Mattress Create Opportunity for New OTC Entrants

AVERAGE MATERIAL COST (QUEEN NIATTRESS1

S 1 50

1.-50

T.40

t 5

APPROX. TOTAL $300

- ,f11F3, 714, Niwkur, Kicto

- Market $.300

Retail Markup Si,.500

• Comm sons 5)00

TYPICAL RETAIL PRICE $3,000

• baseu on ntiustry averages for mattrcisnprbi quality

Tuft Needla mArtre!..9,•,,s,

Source: Tuft & Needle

Source: Wedbush, Specialty Retail: Hardlines (Jan. 26, 2017), at 18.

ActivEdge ”.•

Welcome to the comfort ions.

Berld,combonentecorn Act.

Legget and Platt: Late to Offer Rolled Spring Mattress Components

September 2018

CONTRIBUTORS

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GA R't JAMES

ch, s.n., is s Feelanne writer hmed in Chapel Hill. North Candler, He spent more than 10 years with For/lit/Ire Totlay. terthne et CAW goods editor and special pro*. editor. directing the editolial ron• tont or leather Today., Bedding Relay, 00110 Than, Global ikstik. 'rod, led other industry suppiements. sections and haturra. He mho has sened as managing editor for a variety of other b.intee

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I,OObOI,OU Autorranisc Exceolive. Computer Entertainment News and et!isin-

ms'n, ilminms. isms, ssTote Profile of Blue Bell Co. in the Altelist i.e. of Redness, I In can be leeched at arjamealeloOlonalleont or 919-9294197X.

Corrections Bedtimes wives to present accurate Infrernation and we take mistakes serioinly. When an mer...cy Obacwht to our attention, we correct the erro•ks me online cation In which the error occurred CBmiTerwthlagatinecorn). We also too a cormakm - typically on ebb page of the impair» or In the News section - htbe.meot print erfition. To report an error. ersait Mery dem Bedtimes acetone drectoc et tnbettPeeoppreducts.ontx or co. 336 500.31316.

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Get your own copy of Bodin:net To subscribe to Etedlimm. vim EledlimesMagerine-corn and dick on Subscribe.

Making history

imur company celebrating• major milestone in its hIstor y? Have you been in I./finest far 25 years? Fifty years? Even 100 years or more? Bediorress profiles companies celebr sting s;gnificent anniversaries. 05 500 have a story to tell, 10/11100 Mary Bost, Bedtimes editorial director, at mbestPnicepprodacts.org. ()cessions? Call 336-500-3816.

Ape you an industry expert? BedTenes welcomes articles written by people meting For mattress manufacturers or supplier companies who harm expertise in particular arm. Some guidelines, • T. articte nerds to address general Industry Iss.sitopics. It shouldn't boa teas seeing

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,trest0i..slaepproducts.org or 336.500.3816.

Source: Legget and Platt Direct Advertising.

2 Sort. Mattress Company

3. Laggett & Platt

4.. Corsicana Bedding Inc.

5_ Elite Foam Inc_

Mattress Firm's Top Unsecured Creditors: Petitioning Companies

TOP 20 UNSECURED CREDITORS (U50)

Unseciete rainiaaLkgsmulizio

Johnny Nguyen 281.872-4533 ustorrierassistanceesimmons.com

Trade Debt.

84,6S5 011

Johnny Nguyen 847-64S-0200

Chief Financial Officer 417-358-8131 iega I IP I EF,Eett corn

Chief Financial Offioar 800-823-4349 2er. _e _Cr211: a , a rr a tress. corn Chief Financial Official 770-683-8271 eitsiPtistefoarn,com

Trade Debt 25.482,757

Trade Debt 11,553,254

TTade Debt. 6,536204

Tiede Debt 5,747284

Source: Pat Holohan, Sara Tapinekis, and Cassidy Luo, "CASE PROFILE: Mattress Firm prepack aims for 60-day Chapter 11 with USD 525m exit

facility, closure of 700 stores," Oct. 5, 2018, citing In re: Mattress Firm Inc., Case No. 18-12241, U.S. Bankruptcy Court for the District of Delaware,

Mattress Firm's Chapter 11 Petition.

Adjusted EPS(6)

Adjusted EBITDA(1)

TEMPUR+SEALY

First Quarter 2018 Highlights

• Total Net Sales Increased 3% Excluding Mattress Firm

• North American Direct Sales Increased Approximately 30%

Three MONTHS ENDED March 31

Net Sales

Net Income

EPS

EBITDAw

Adjusted Net Income(6)

2018 2017 %Change %Change Constant

Currency(6)

$648.0 $722.1 -10.3% -12.2%

23.1 33.9 -31.9% -39.5%

0.42 0.62 -32.3% -40.3%

83.2 86.8 -4.1% -8.9%

$23.1 $52.2 -55.7% -60.7%

0.42 0.96 -56.3% -61.5%

83.2 121.1 -31.3% -34.7%

(in millions, except percentages and per common shore amounts)

17 © 2018 Tempur Sealy International, Inc.

Source: Tempur+Sealy, May 2018 Investor Presentation (May 10, 2018), at 17 (emphasis added).

Tax adjustments

Adjusted net income

(7.6)

23.1

52.2

Tempur's Mattress Firm-Related Charges Adjusted Net Income and Adjusted EPS

Three Months Ended

(in millions, except per share amounts) March 31, 2018 March 31, 2017

GAAP net income (1) 23.1 $ 33.9

Customer termination charges, net 14/ 25.9

Adjusted earnings per common share, diluted 0.42 $ 0.96

Diluted shares outstanding 54.9 54.6

Notes

(1) Net income includes other income of $9.3 million of payments received pursuant to the transition agreements with Mattress Firm, which were entered into during the first quarter of 2017. This other income is not included as an adjustment to adjusted net income. In the fourth quarter of 2016, we spent approximately $13 million to support Mattress Firm with store transitions and product launches. The $9.3 million of payments from Mattress Firm were intended to partially offset that prior investment.

2 In the first uarter of 2017, we recorded $25.9 million of net charges related to the termination of the relationshi with Mattress Firm. Cost of sales included $11.5 million of charges related to the write-off of customer-unique inventory and product obligations. Operating expenses included $14.4 million of net charges, which included a write-off of $17.2 million for customer incentives and marketing assets, $5.8 million of employee-related costs and $0.7 million of professional fees. These charges were offset by $9.3 million of benefit related to the change in estimate associated with performance-based stock compensation that is no longer probable of payout following the Mattress Firm termination.

(3) Tax adjustments represent adjustments associated with the aforementioned items and other discrete income tax events.

For additional information regarding the calculations above please refer to the Company's quarterly report on Form 1041 for the period ended March 31, 2018.

Source: Tempur+Sealy, May 2018 Investor Presentation (May 10, 2018), at 32 (emphasis added).

( 1 1 .7%—::1 _ _ _ „,

$3,330 $3,291

(23

52,475

$3,214

Mattress Firm Bankruptcy Business Update — Overview

Status quo financial performance has been challenged as a result of unanticipated impact of strategy implemented since 2016

OVERVIEW REVENUE (SfV1)

• Execution challenges of long-term strategic initiatives

disrupted FY17 and FY18E results:

— Accelerated rebranding of over 1,300 legacy Sleepy's

and Sleep Train stores

— Change in key suppliers

— Insufficient presence in the high-end ("$2,500+)

market segment

— Ineffective brand marketing

• Execution of store rebranding exercise led to

oversaturation of stores in certain areas

FY15 FY16 FY17 FY 113E

) Same store sales

CORPORATE EBITDA ($N1)1

_ -

$241 $251

EBITDA margin

Source: Unaudited management i on and business plan (September 2018) 1 2015 and 2018 represent Adjusted 880715.4 exducEng one-time and non-recurring items

Illik

2 Corporate Eed7D4 fess Store/warehouse amortization corresponds to EBYTDA. StoreAvarehouse arnarrizanon resulting in EarrOA of 4.183m

Source: Mattress Firm, Mattress Firm Materials (Oct. 5, 2018), at 4 (emphasis added).

4131

FY15 FY16 FY17 FV1SE

charges of .5.52rn for Fri8E MATTREssFIRM-

Different Price Segments Figure 34 Mattress industry Market Share by Price Point

Value 2009 2010 2011 2012 2013 2014 2015 2016 2017

',SSE 20.1%

19.1% 19.1% 17.9% 16.8% 17.5% 16.8% 16.2% 550041.000 36.1% 32.4% 33.6% 28.3% 32.5% 29.2% 30.1% 27.7% 29.1%

51 00042,000 25.4%

29.2% 35.2% 30.3% 33.3% 28.5% 28.4% 29.6% S2,000+ 18.4% 18.8% 18.1%, 17.4% 19.3% 20.7% 23.9% 27.1% 25.1%

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Units 2009 2010 2011 2012 2013 2014 2015 2016 2017

1500 42.6% 46.2% 42.5% 41.2% 40.7% 36.9% 36.1% 38.4% 37.1% 550041.000 39.0% 33.9% 36.7% 33.1% 35.5% 36.1% 40.9% 35.1% 36.1%

51,00042,000 13.8% 14.7% 15.8% 20.1% 17.7% 20.3% 16.5% 19.4% 19.5% 52,000+ 4.6% 5.2% 5.0% 5.6% 6.1% 6.7% 6.5% 7.1% 7.3%

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Sources.' international Sleep Products A s.sociaton and KeyBanc Capital Markets

Emerging brands in this report primarily target the $500-$1,000

price tier, advertising citing the same product quality/

construction as the $1,000-$2,000 beds in a traditional

retail store. However, several brands are targeting $1,000+

price points.

Import brands, like Zinus, have broadened the competition with

<$500 price points.

Source: Bradley B. Thomas & Sanneet Desai, Mattress/Bedding: The Emerging E-Commerce Threat, KeyBanc Capital Markets Inc. (July 11, 2018), at 32 (emphasis added).