1. Tempur Pedic Int’l (TPX)

2. Company Overview Tempur-Pedic International, Inc. engages in the manufacture, marketing, and distribution of advanced visco-elastic products under the TEMPUR and Tempur- Pedic brands worldwide. Its products include pillows, mattresses, and adjustable beds, as well as cushions and other comfort products. The company has sales and distribution operations in the United States, Europe, and Asia Pacific. Tempur-Pedic markets its products through retail, including furniture and specialty stores, as well as department stores internationally; direct response and Internet; chiropractors, medical retailers, and hospitals; and third party distributors. Tempur-Pedic International was founded in 1989 and is headquartered in Lexington, Kentucky.

3. Industry Overview Textile Industrial (Mattress Manufacturers) 10 yr estimate that premium bedding will be 20% of industry sales Premium bedding segment which may prove to be more sensitive to the economic factors that effect the overall bedding industry. Cyclical Industry- mattresses are expensive and subject to infrequent consumer purchases.

4. Industry Overview

5. The Competition/ Competitive Advantages Retail, Wholesale, and Catalog Merchants, as well as Department Stores, chains, and local shop’s. Tough Market with companies like Sealy, Serta, and Simmons. Competition trying to create imitation products. However Tempur just reduced prices on “original bed” to get rid of competition. Select Comfort also has similar niche market. Tempur uses a aggressive direct sales/advertising approach. Tempur Pedic uses their revolutionary viscoelastic material. Visco: resistant to change of shape. Elastic: able to return to its original shape after being forced to change. Company motto - “Changing the way the world sleeps”

6. Growth Prospects Revenue and earnings have shown strong growth –27.7% and 34.9% last year –Compared to the industry 10.8% and 19.2% –Notable Q3 highlights include strong international sales growth of 19%, which was driven primarily by a 25% increase in mattress sales and improved pillow sales. –U.S sales increased 11% on mattress growth of 13%. TPX added 270 net new U.S. furniture retail doors in Q3, and now has presence in over 5,100 locations. –New $340M global credit facility with more favorable terms will enable TPX to repatriate $115M of foreign earnings, resulting in a more balanced and flexible capital structure. TPX also announced the adoption of an $80M share repurchase program, which is clearly positive given the current valuation.

7. Prospects (contd.) Tempur-Pedic Brand Name –Highest quality in memory foam industry –High density and temperature sensitive Overall increase in mattress sales and retail –Medical retailers, chiropractors, hospitals

8. Negatives  Law suit: Tempur-Pedic and some of its executives "failed to disclose or misrepresented" that demand had dropped for Tempur-Pedic's visco-elastic mattresses between April and September 2005  High level of Debt  Company's niche sector faced competition in the form of cheaper offerings from Sealy, Simmons Bedding, and Serta International  Non-conventional product technology, small market cap, single product line, lack of dividend  2 private equity firms control roughly 27% of fully diluted shares. Management holds 5% of diluted shares

9. Our outlook Recommendation: Hold (Speculative) DCF Price Value: $20.56 –Potential for large gains based on competitive positioning and strong growth. However, there are many uncertainties looming.

10. Questions?