10-Q 1 y42740e10-q.txt SLEEPMASTER L.L.C. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarter ended September 30, 2000. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition from _________ to _________. Commission file number 333-81987 SLEEPMASTER L.L.C. (Exact name of registrant as it appears in its charter) New Jersey 22-3341313 (State or other jurisdiction of (IRS Employer ID Number) incorporation or organization) 2001 Lower Road, Linden, New Jersey 07036-6520 (Address of principal executive offices) (Zip Code) (732) 381-5000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] All of the registrant's voting and nonvoting membership interests are held by affiliates of the registrant. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practical date: Class A common units, no par value - 8,000 units as of November 14, 2000 Class B common units, no par value - 0 units as of November 14, 2000 2 SLEEPMASTER L.L.C. FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2000 INDEX

2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SLEEPMASTER L.L.C. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS) (UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated financial statements. 3 4 SLEEPMASTER L.L.C. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED)

The accompanying notes are an integral part of these condensed consolidated financial statements. 4 5 SLEEPMASTER L.L.C. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)

(1) Depreciation and amortization totaling $6,381 and $2,499 for the nine months ended September 30, 2000 and 1999, respectively. The accompanying notes are an integral part of these condensed consolidated financial statements. 5 6 SLEEPMASTER L.L.C. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements include the accounts of Sleepmaster L.L.C. ("Sleepmaster") and all majority-owned domestic and foreign subsidiaries (the "Company"). All material intercompany transactions and balances have been eliminated. The interim statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position as of September 30, 2000 and the results of its operations and cash flows for the interim periods presented. The condensed consolidated balance sheet data at December 31, 1999 is derived from the audited financial statements which are included in the Company's Form 10-K/A for the year ended December 31, 1999 and which should be read in connection with these financial statements. In accordance with the rules of the Securities and Exchange Commission, these financial statements do not include all disclosures required by generally accepted accounting principles. Operating results for the three and nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2000. Certain reclassifications of previously reported financial information were made to conform to the 2000 presentation. 2. ACQUISITIONS On April 28, 2000, Sleepmaster acquired all the capital stock of Simon Mattress Manufacturing Co. ("Simon")for approximately $42,623,000 in cash. Sleepmaster financed the acquisition using proceeds from a second amended and restated credit facility. On June 30, 2000, Sleepmaster acquired all the capital stock of Crescent Sleep Products Company ("Crescent") for approximately $118,277,000 in cash. Sleepmaster financed the acquisition using proceeds from a third amended and restated credit facility, the issuance of an additional $25,000,000 of senior subordinated notes, and $41,500,000 of equity from a group of investors and certain members of Crescent's management. These acquisitions were accounted for under the purchase method and, accordingly, Simon's and Crescent's results are included in the consolidated financial statements since their respective dates of acquisition. The assets acquired and liabilities assumed have been recorded at their estimated fair values at the dates of acquisition. The excess of the purchase price over the estimated fair values of the net assets acquired has been recorded as goodwill and is being amortized over 40 years. A summary of the purchase price allocations (in thousands) is as follows:

6 7 The following summarized unaudited pro forma financial information (in thousands) for the nine month periods ended September 30, 2000 and 1999 assumes that the acquisitions of Simon and Crescent were consummated on January 1, 1999. This information is not necessarily indicative of the results that the Company would have achieved had these events actually occurred on such dates or of the Company's actual or future results.

The unaudited pro forma income before extraordinary items, for the nine months ended September 30, 2000, includes one-time transaction related expenses for legal and investment banker fees of approximately $2,837,000. 3. INVENTORIES Inventories consist of the following (in thousands):

4. INTANGIBLE ASSETS Intangible assets consist of the following (in thousands):

5. DEBT On April 28, 2000, the Company expanded and restated its existing credit facility to provide for an aggregate amount of borrowings of up to $103,875,000, comprising a $33,000,000 revolving credit facility, a $35,875,000 amortizing term loan facility and a $35,000,000 incremental amortizing term loan facility (the "Second Amended and Restated Credit Facility"). The terms of the Second Amended and Restated Credit Facility were substantially equivalent to those of the prior facility. Borrowings under the Second Amended and Restated Credit Facility were used to finance the acquisition of Simon. 7 8 On June 30, 2000, in connection with the acquisition of Crescent, the Company issued an additional $25,000,000 of 13.4% senior subordinated notes due November, 2009. Also on June 30, 2000, the Company entered into a third amended and restated credit agreement to provide for an aggregate amount of borrowings of up to $172,500,000, comprising a $40,000,000 5.5 year revolving credit facility, a 5.5 year Tranche A term loan of $57,500,000 and a 6.5 year Tranche B term loan of $75,000,000 (the "Third Amended and Restated Credit Facility"). This new facility included a letter of credit sublimit of $25,000,000. Similar to the prior credit facility entered into on November 5, 1999, borrowings under this credit facility bear interest at floating rates based on LIBOR or applicable alternative base rates. Sleepmaster financed the acquisition of Crescent using proceeds from the Third Amended and Restated Credit Facility, the issuance of the $25,000,000 senior subordinated notes, and $41,500,000 of equity from a group of investors and certain members of Crescent's management. In connection with the Third Amended and Restated Credit Facility, the company wrote-off unamortized debt issuance costs. One bank included in the syndication of banks which was part of the Second Amended and Restated Credit Facility did not continue in the syndication of banks in connection with the Third Amended and Restated Credit Facility and its debt was extinguished. An extraordinary loss of $208,000, net of the associated income tax benefit, was recorded in connection with this extinguishment during the three months ended June 30, 2000. In accordance with the Emerging Issues Task Force No. 98-14, for banks which continued with the syndication of banks in connection with the Third Amended and Restated Credit Facility, a charge to interest expense of $564,000 to write-off unamortized debt issuance costs was recorded during the three months ended June 30, 2000. At June 30, 2000, the Company was not in compliance with two financial covenants contained in the Third Amended and Restated Credit Facility (1) the Interest Coverage Ratio and (2) the Minimum Consolidated EBITDA. The failure to comply with these covenants constituted an event of default. On September 19, 2000 the lenders granted a waiver for the debt covenant violations and an amendment to the Third Amended and Restated Credit Facility (the "waiver and First Amendment to the Third Amended and Restated Credit Facility" or the "Waiver and Amendment"). The Waiver and Amendment also modified various financial covenants going forward including the two identified above. 6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In December 1999, the staff of the Securities and Exchange Commission issued SAB 101, "Revenue Recognition in Financial Statements," which addressed some of the staff's concerns over the application of Generally Accepted Accounting Principles for revenue recognition. The Company will be required to adopt the Provisions of SAB 101 in the fourth quarter of 2000. The Company does not expect this adoption to have a material effect on the Company's financial position or its results of operations. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133, as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company presently does not have any derivative instruments or hedging activities and, consequently, SFAS No. 133 is not expected to have a material impact on the Company's results of operations, financial position or cash flow. In May 2000 the EITF issued EITF No. 00-10, "Accounting for Shipping and Handling Fees and Costs." The EITF reached a consensus that a seller of goods should classify amounts billed to customers for shipping and handling fees as revenue. Further, recent SEC guidance has suggested that a company should include shipping and handling costs in cost of sales. The Company's current policy is to classify such costs within selling, general and administrative expenses. The Company is currently evaluating its current policy in light of the recent SEC guidance and will adopt EITF 00-10 as required during the fourth quarter of 2000, including the classification of such costs. In the three and nine months ended September 30, 2000 these costs totaled $3.7 million and $8.0 million, respectively, compared to $1.5 million and $3.9 million for the same periods in 1999. It is expected that any reclassification to record amounts billed to customers for shipping and handling fees as revenue will not be significant. 8 9 7. SUPPLEMENTAL CASH FLOW INFORMATION The Company recorded a charge to retained earnings (deficit) of $1,832,000 and $1,821,000 for the nine months ended September 30, 2000 and 1999, respectively, representing the accretion of redeemable cumulative preferred interests at a compounded annual rate of 12%. 8. GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION As of May 18, 1999 and June 30, 2000, Sleepmaster and each of its domestic wholly owned subsidiaries ("Guarantor Subsidiaries") fully and unconditionally guaranteed, on a joint and several basis, the obligation to pay principal and interest with respect to the $115,000,000 of 11% senior subordinated notes due 2009 and the $25,000,000 of 13.4% senior subordinated notes due 2009 (the "Notes"), respectively. The Company generates funds necessary to satisfy its debt service obligations from either its own operations or by cash generated by the operations of its subsidiaries. There are no contractual or legal restrictions that could limit the Company's ability to obtain cash from its subsidiaries for the purpose of meeting its debt service obligations, including the payment of principal and interest on the Notes. Although holders of the Notes will be direct creditors of Sleepmaster's principal direct subsidiaries by virtue of the guarantees, Sleepmaster has a foreign subsidiary ("Non-Guarantor Subsidiary") that is not included among the Guarantor Subsidiaries and such subsidiary will not be obligated with respect to the Notes. As a consequence, the claims of creditors of the Non-Guarantor Subsidiary will effectively have priority with respect to the assets and earnings of this subsidiary over the claims of creditors of Sleepmaster, including the holders of the Notes. The following supplemental condensed consolidating financial statements present: 1. Condensed consolidating balance sheets as of September 30, 2000 and December 31, 1999; condensed consolidating statements of income for the three and nine months ended September 30, 2000 and 1999, respectively; condensed consolidating statements of cash flows for the nine months ended September 30, 2000 and 1999. 2. Sleepmaster, combined Guarantor Subsidiaries and Non-Guarantor Subsidiary with their investments in subsidiaries accounted for using the equity method. 3. Elimination entries necessary to consolidate Sleepmaster and all of its subsidiaries. 9 10 SLEEPMASTER L.L.C. AND SUBSIDIARIES SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME THREE MONTHS ENDED SEPTEMBER 30, 2000 (IN THOUSANDS)

10 11 SLEEPMASTER L.L.C. AND SUBSIDIARIES SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME THREE MONTHS ENDED SEPTEMBER 30, 1999 (IN THOUSANDS)

11 12 SLEEPMASTER L.L.C. AND SUBSIDIARIES SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 2000 (IN THOUSANDS)

12 13 SLEEPMASTER L.L.C. AND SUBSIDIARIES SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 1999 (IN THOUSANDS)

13 14 SLEEPMASTER L.L.C. AND SUBSIDIARIES SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET SEPTEMBER 30, 2000 (IN THOUSANDS)

14 15 SLEEPMASTER L.L.C. AND SUBSIDIARIES SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 1999 (IN THOUSANDS)

15 16 SLEEPMASTER L.L.C. AND SUBSIDIARIES SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2000 (IN THOUSANDS)

16 17 SLEEPMASTER L.L.C. AND SUBSIDIARIES SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1999 (IN THOUSANDS)

17 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the Company's results of operations and of its liquidity and capital resources should be read in conjunction with the Condensed Consolidated Financial Statements of the Company and the related Notes thereto included elsewhere herein. GENERAL Sleepmaster acquired the stock of Crescent on June 30, 2000, the stock of Simon on April 28, 2000, substantially all of the assets of Adam Wuest on November 5, 1999, substantially all of the assets of Star on May 18, 1999 and the stock of Herr on February 26, 1999. Each of these acquisitions has been accounted for using the purchase method of accounting. The Company's historical results of operations reflect the results of the acquired businesses since their respective dates of acquisition. Therefore, the historical operating results of the Company for the periods presented are not necessarily comparable. QUARTER ENDED SEPTEMBER 30, 2000 AS COMPARED TO QUARTER ENDED SEPTEMBER 30, 1999 Net Sales. Net sales increased 108.0%, or $52.0 million, to $100.1 million for the quarter ended September 30, 2000, from $48.1 million for the quarter ended September 30, 1999. Substantially all of the increase was due to the contribution of net sales from Adam Wuest, acquired on November 5, 1999, Simon acquired on April 28, 2000 and Crescent, acquired on June 30, 2000. The increase in net sales attributable to Adam Wuest, Simon and Crescent in the third quarter of 2000 totaled $51.7 million. Excluding these acquisitions net sales increased by 0.8%, or $0.3 million, for the third quarter of 2000 as compared to the same period in 1999. The decline in sales growth is attributable to the increased competitive environment for the three months ended September 30, 2000 as compared to the same period in 1999. The Company expects this trend to continue in the short term. Cost of Sales. Cost of sales increased 105.4%, or $31.3 million, to $61.0 for the third quarter of 2000, from $29.7 million for the third quarter of 1999. Cost of sales as a percentage of net sales decreased from 61.7% in 1999 to 60.9% in 2000. Margins were favorably impacted by the Company's obtaining volume related cost savings on raw material purchases as a result of the acquisitions. This impact was partially offset by an increase in direct labor costs. Selling, General and Administrative Expenses. Selling, general and administrative expenses ("SG&A") increased 132.9%, or $15.0 million, to $26.2 million for the third quarter of 2000 from $11.2 million for the same period of 1999. The increase in SG&A is primarily attributable to the SG&A associated with the Company's acquisitions of Adam Wuest, Simon and Crescent. SG&A as a percentage of sales increased to 26.2% in the third quarter of 2000 from 23.4% in the third quarter of 1999. The following three factors also contributed to the increase: (1) an increase in selling related costs in an effort to increase the Company's market share (2) increased shipping costs as a result of higher fuel costs in 2000 as compared to 1999 (3) an increase in corporate costs associated with the aforementioned acquisitions. Amortization of Intangibles. Amortization of intangibles increased $1.4 million to $2.0 million for the third quarter of 2000 from $0.6 for the third quarter of 1999. This increase is the result of additional amortization relating to the intangible assets acquired in connection with the acquisitions of Adam Wuest, Simon and Crescent. Interest Expense, Net. Interest expense increased $5.2 million to $8.6 million for the quarter ended September 30, 2000 from $3.4 million for the quarter ended September 30, 1999. A majority of the increase was primarily attributable to the cost of additional debt financing incurred for the acquisitions of Adam Wuest, Simon, and Crescent. Also contributing to the increase was the increase in interest rates which paralleled the Federal Reserve rate increases. 18 19 Provision for Income Taxes. The provision for income taxes resulted in an effective tax rate of 86% in the third quarter of 2000 as compared to 42% in the same period in 1999. The increase in the effective tax rate is a result of the significant increase in non-deductible goodwill as a result of the Simon and Crescent acquisitions. NINE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 Net Sales. Net sales increased 80.3%, or $98.0 million, to $220.1 for the nine months ended September 30, 2000, from $122.1 million for the nine months ended September 30, 1999. Substantially all of the increase was attributable to the contribution of net sales from Herr, Star, Adam Wuest, Simon and Crescent, which totalled $95.6 million. Excluding these acquisitions, net sales increased by 3.2%, or $3.2 million, for the nine months ended September 30, 2000 as compared to the same period in 1999. The decline in sales growth is attributable to the increased competitive environment for the three months ended September 30, 2000 as compared to the same period in 1999. The Company expects this trend to continue in the short term. Cost of Sales. Cost of sales increased 78.6%, or $59.6 million, to $135.4 million for the nine months ended September 30, 2000, from $75.8 million for the same period in 1999. Cost of sales as a percentage of net sales decreased slightly from 62.0% in 1999 to 61.5% in 2000. Margins were favorably impacted by the Company's obtaining volume-related cost savings on raw material purchases as a result of the acquisitions. This impact was substantially offset by an increase in direct labor costs. Selling, General and Administrative Expenses. Selling, general and administrative expenses ("SG&A") increased 93.7%, or $27.6 million, to $57.0 million for the nine months ended September 30, 2000 from $29.4 million for the same period of 1999. The increase in SG&A is primarily due to the SG&A associated with the Company's acquisitions of Herr, Star, Adam Wuest, Simon and Crescent. The following three factors also contributed to the increase: (1) an increase in selling related costs in an effort to increase the Company's market share, (2) increased shipping costs as a result of higher fuel cost in 2000 as compared to 1999, (3) an increase in corporate costs associated with the aforementioned acquisitions. Amortization of Intangibles. Amortization of intangibles increased $2.5 million to $3.9 million for the nine months ended September 30, 2000 from $1.4 for the same period of 1999. The increase is the result of additional amortization relating to the intangible assets acquired in connection with the acquisitions. Interest Expense, Net. Interest expense increased $10.6 million to $18.9 million for the nine months ended September 30, 2000 from $8.3 million for the same period in 1999. A majority of the increase was attributable to the cost of additional debt financing incurred for the acquisitions. Also contributing to the increase was the increase in interest rates which paralleled the Federal Reserve rate increases. 19 20 Provision for Income Taxes. The provision for income taxes resulted in an effective tax rate of 62.4% for the nine months ended September 30, 2000, as compared to 42.0% in the same period in 1999. The increase in the effective tax rate resulted from a significant increase in non-deductible goodwill as a result of the Simon and Crescent acquisitions. Extraordinary Items. The extraordinary item recorded in the nine months ended September 30, 2000 consisted of a write-off of unamortized debt issuance costs of $346,000 (pre-tax) and was recorded in connection with the Company's third amended credit facility. The extraordinary item recorded in the nine months ended September 30, 1999 consisted of the payment of $3.6 million in premiums on the redemption of $20 million in aggregate principal amount of Series A and Series B 12% Subordinated Notes and repayment of $69.2 million of borrowings under the Company's former credit facility, together with the write-off of $1.8 million of unamortized debt issuance costs relating to such redemption and repayment on May 18, 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's principal source of cash to fund its liquidity needs is provided by its operating activities and availability under its current credit facility. The Company has funds available under an existing credit facility totaling $21.5 million. Historically the Company has used the proceeds from financing activities for the acquisitions of other Serta licenses. During 1999 and the nine months ended September 30, 2000 the Company acquired five other Serta Companies with funds totaling $260.0 million. The company historically has used cash generated by operations to reinvest in its property, plant and equipment, with the remainder used to repay its credit facilities. Cash and cash equivalents decreased by $0.4 million to $2.4 million as of September 30, 2000 from $2.8 million as of December 31, 1999. The Company generated $24.1 million of net cash from its operations in the nine months ended September 30, 2000 as compared to $11.7 million in the same period in 1999. The increase was primarily attributable to the growth of the business, principally through its acquisitions. Capital expenditures totaled $6.5 million in the nine months ended September 30, 2000 as compared to $2.9 million in the same period in 1999. The increase in capital expenditures was primarily attributable to the building of a new facility located in California. The Company expects that capital expenditures at all existing facilities will be approximately $10.0 million in 2000. Management believes that annual capital expenditures limitations under its current credit facility will not significantly inhibit Sleepmaster from meeting its capital needs. The Company's management projected an approximately $2.8 million of capital expenditures in the fourth quarter of 2000, most of which can be attributed to the new California plant. Management believes that the capital expenditure limitations under its Credit Facility will not impact its current business plan. On April 28, 2000, Sleepmaster amended and restated its existing credit facility to provide for borrowings of up to $103,875,000, comprising a $33,000,000 revolving credit facility, a $35,875,000 amortizing term loan facility and a $35,000,000 incremental amortizing term loan facility (the "Second Amended and Restated Credit Facility"). The terms of the Second Amended and Restated Credit Facility were substantially equivalent to those of the prior facility. On June 30, 2000, the Company issued an additional $25,000,000 of 13.4% senior subordinated notes due November 2009. Sleepmaster used the proceeds of the senior subordinated notes to acquire all the capital stock of Crescent. Also on June 30, 2000, in connection with the acquisition of Crescent, the Company entered into a third amended and restated credit agreement to provide for an aggregate amount of borrowings of up to $172,500,000, comprising a $40,000,000 5.5 year revolving credit facility, a 5.5 year Tranche A term loan of $57,500,000 and a 6.5 year Tranche B term loan of $75,000,000 (the "Third Amended and Restated Credit Facility"). Similar to the prior credit facility, the revolving credit facility includes a sublimit for letters of credit. This new facility includes a letter of credit sublimit of $25,000,000. At June 30, 2000, the Company had approximately $17.4 million available under its revolving credit facility with letters of credit issued totaling approximately $18.6 million. 20 21 Management believes that cash flows generated from operations, together with its borrowing capacity, are sufficient to support the Company's operations and general business and liquidity requirements for the foreseeable future. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk from fluctuations in interest rates, which could impact its consolidated financial position, results of operations and cash flows. The Company manages its exposure to market risk through its regular operating and financing activities. The Company does not use derivative financial instruments for speculative or trading purposes and does not maintain such instruments that may expose the Company to significant market risk. The Company's earnings are sensitive to changes in short-term interest rates as a result of its borrowings under the amended and restated credit facility. The Company also manages its portfolio of fixed-rate debt to reduce its exposure to interest rate changes. The fair value of the Company's fixed-rate long-term debt is sensitive to interest rate changes. Interest rate changes would result in gains or losses in the fair value of this debt due to differences between market interest rates and rates at the inception of the obligation. Management does not foresee nor expect any significant changes in its exposure to interest rate fluctuations, or in how such exposure is managed in the near future. FORWARD LOOKING STATEMENTS AND RISK FACTORS This document contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although the Company believes its plans are based upon reasonable assumptions as of the current date, it can give no assurance that such expectations can be attained. Factors that could cause actual results to differ materially from the Company's expectations include; general business and economic conditions; competitive factors; raw materials availability and pricing; fluctuations in demand; and retention and availability of qualified employees. 21 22 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is, from time to time, a party to litigation arising in the normal course of business, most of which involves claims for personal injury and property damage incurred in connection with its operations. Management believes that none of these actions will have a material adverse effect on the financial position, results of operations or cash flows, of the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27.1 Financial Data Schedule. (b) Reports on Form 8-K: Report on Form 8-K/A, filed September 13, 2000, concerning the Company's acquisition of Crescent Sleep Products Company. Report on Form 8-K/A, filed on July 12, 2000, concerning the Company's acquisition of Simon Mattress Manufacturing Company. 22 23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Linden, State of New Jersey. SLEEPMASTER L.L.C. By: /s/ Charles Schweitzer -------------------------------------- President and Chief Executive Officer Dated: November 14, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.

SLEEPMASTER LLC 10-Q