Net income for the third quarter was $21.5 million compared to $29.4 million for the comparable period a year ago.

Sealy Corporation's net profit dropped 27% in the fiscal quarter ending August 26, 2007. This despite a nearly 17% increase in units sold. The company cited increased costs associated with new flame retardant standards and price decreases.

"We are continuing to build on our growth and profitability in our specialty portfolio," said David J. McIlquham, Sealy's Chairman and Chief Executive Officer. "We also recognize there are areas within our innerspring business where we must improve our performance."

Sales for the quarter were up 7.5% to $446.4 million from $415.1 million for the comparable period a year earlier on unit volume growth of 16.9%. Partially offsetting this increase was an 8.0% decrease in average unit selling price (AUSP).

The decrease in AUSP is primarily due to a shift in the share of sales coming from the Sealy Posturepedic Reserve beds and strategic pricing actions implemented in the first quarter of fiscal 2007 on selected products such as Sealy Posturepedic TrueForm.

Third quarter gross profit was $179.9 million, compared to $185.2 million in the prior year third quarter. As a percentage of net sales, gross profit was 40.3% compared to 44.6% in the third quarter of fiscal 2006. The decline in gross profit as a percentage of net sales was driven primarily by the addition of $9.5 million of flame retardant materials to our products in the U.S., and the above mentioned product mix changes and pricing actions. On a per unit basis, material costs increased 7.9% in the U.S. compared to the third quarter of fiscal 2006. Partially offsetting the decrease in gross profit were continued improvements in manufacturing efficiencies, including improved labor productivity and yields on raw materials.

Net income for the third quarter was $21.5 million or $0.22 per fully diluted share, compared to $29.4 million or $0.30 per fully diluted share, for the comparable period a year ago. Third quarter 2007 net income includes an income tax benefit resulting from the elimination of federal and state tax exposures due to expiring statutes of limitations. The effective tax rate for the third quarter of 2007 was 19.2% compared to 28.7% in the prior year.