Mattress Firm Announces Third Fiscal Quarter Financial Results

  Mattress Firm Announces Third Fiscal Quarter Financial Results

     — Net Sales Increased 18% with 2.9% Comparable Store Sales Growth —

                — EPS grew 18% to $0.55 on an Adjusted Basis —

                           — Opened 40 New Stores —

 — Increases Sales Guidance and Reaffirms EPS Guidance for Fiscal Year 2013 —

Business Wire

HOUSTON -- December 4, 2013

Mattress Firm Holding Corp. (the “Company”) (NASDAQ:MFRM) today announced its
financial results for the third fiscal quarter (13 weeks) ended October 29,
2013. Net sales for the third fiscal quarter increased 17.7% to $326.2
million, reflecting comparable-store sales growth of 2.9% and incremental
sales from new and acquired stores. The Company reported third fiscal quarter
earnings per diluted share (“EPS”) on a generally accepted accounting
principles (“GAAP”) basis of $0.53, and EPS on a non-GAAP adjusted basis,
excluding ERP system implementation costs (“Adjusted”), of $0.55. Diluted EPS
on a GAAP basis and Adjusted basis are reconciled in the table below:

                                                  
Third Fiscal Quarter Reconciliation of GAAP to Adjusted EPS

See “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations
Data” for Notes
                                                       
                           Thirteen Weeks Ended        Thirty-Nine Weeks Ended
                           October     October       October     October
                           30, 2012      29, 2013      30, 2012      29, 2013
GAAP EPS                   $   0.37      $   0.53      $   0.95      $   1.30
Acquisition-related            0.05          -             0.20          0.01
costs (1)
Secondary offering             0.04          -             0.04          -
costs (2)
ERP system
implementation costs          -            0.02         -            0.05
(3)
Adjusted EPS*              $   0.47      $   0.55      $   1.19      $   1.36
                                                                     

* Due to rounding to the nearest cent, totals may not equal the sum of the
lines in the table above.


“As a result of initiatives we recently put in place combined with the early
benefits we are experiencing from a renewed commitment of manufacturer
advertising spend, we successfully drove traffic and comparable store sales
growth in our third fiscal quarter,” stated Steve Stagner, Mattress Firm’s
president and chief executive officer. “We implemented a number of sales
initiatives during the quarter that encouraged our sales associates to improve
their productivity and capture a higher percentage of sales from customers.
While these initiatives resulted in an anticipated reduction in margins, we
experienced a positive momentum shift in comparable store sales toward the end
of the quarter that has continued into our fourth quarter. Furthermore, our
strong pace of organic growth continued as we added 40 new stores to our base
this quarter. We remain focused on our strategy of driving continued sales
growth and building relative market share.”

Third Quarter Financial Summary

  *Net sales for the third fiscal quarter increased 17.7% to $326.2 million,
    reflecting comparable-store sales growth of 2.9% and incremental sales
    from new and acquired stores.
  *Opened 40 new stores and closed six stores bringing the total number of
    Company-operated stores to 1,155 as of the end of the fiscal quarter.
  *Income from operations was $31.8 million. Excluding $1.0 million of ERP
    system implementation costs, Adjusted income from operations was $32.8
    million, representing an increase of $4.8 million, or 17.1%, over Adjusted
    income from operations for the comparable prior year period. Please refer
    to “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations
    Data” for a reconciliation of income from operations to Adjusted income
    from operations and other information.
  *Adjusted operating margin was 10.0% of net sales as compared to 10.1% in
    the same quarter of fiscal 2012, and consisted of a 150 basis-point
    improvement in sales and marketing expense leverage, offset by a 130
    basis-point decline in gross margin and a 30 basis-point decrease from
    general and administrative expense deleverage.
  *Net income was $18.1 million and GAAP EPS was $0.53. Excluding $0.6
    million, net of income taxes, of ERP system implementation costs, Adjusted
    net income was $18.7 million and Adjusted EPS was $0.55, an increase of
    18.1% over Adjusted EPS for the comparable prior year period. Please refer
    to “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations
    Data” for a reconciliation of net income and GAAP EPS to Adjusted net
    income and Adjusted EPS, respectively, and other information.

For the full fiscal year-to-date:

  *Net sales increased $155.6 million, or 20.8%, to $904.7 million, for the
    three fiscal quarters (thirty-nine weeks) ended October 29, 2013, from
    $749.1 million in the comparable prior year period, reflecting incremental
    sales from new and acquired stores, offset by a comparable-store sales
    decline of 0.5%.
  *The Company opened 121 new stores while closing 23 stores during the first
    three fiscal quarters of fiscal 2013, adding 98 net store units.
  *Net income was $44.3 million for the three fiscal quarters ended October
    29, 2013 and GAAP EPS was $1.30. Excluding $2.0 million, net of income
    taxes, of acquisition-related and ERP system implementation costs,
    adjusted net income was $46.3 million for the three fiscal quarters and
    Adjusted EPS was $1.36. See “Reconciliation of Reported (GAAP) to Adjusted
    Statements of Operations Data” below for a reconciliation of net income as
    reported to adjusted net income.

Acquisitions

With respect to the acquisition of former Mattress Giant stores in May 2012,
the rebranding of the acquired stores was substantially complete by the end of
fiscal 2012. The per store sales results of those stores for the months since
the date of rebranding and for one year thereafter are demonstrated by the
chart accompanying this release.

Following the completion of the third fiscal quarter, on November 13, 2013,
the Company completed the acquisition of a small mattress retailer operating
under the name Mattress People. The acquired business consists of five
mattress specialty stores located in Nebraska and Iowa for a total cash
purchase price of approximately $1.8 million, subject to customary post-close
adjustments. The Company intends to rebrand the acquired stores asMattress
Firm.

Additionally, on November 26, 2013, the Company entered into an agreement to
acquire the assets and operations of Perfect Mattress of Wisconsin, LLC, a
Mattress Firm franchisee, including 39 mattress specialty stores located in
Wisconsin and Illinois, for approximately $6.3 million, subject to customary
adjustments. The closing of the acquisition, which is conditioned on the prior
satisfaction of customary closing conditions, is expected to occur by the end
of the fourth fiscal quarter of 2013 and will be funded by cash reserves and a
$2.0 million seller note that is payable in quarterly installments over one
year.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $15.2 million at the end of the
third fiscal quarter on October 29, 2013. Net cash provided by operating
activities was $30.3 million for the third fiscal quarter. As of October 29,
2013, there were no borrowings outstanding under the revolving portion of the
2012 Senior Credit Facility (as defined in the Company’s filings with the
Securities and Exchange Commission) and approximately $1.4 million in
outstanding letters of credit, with additional borrowing capacity of $98.6
million.

Financial Guidance

The Company is updating its guidance relating to net sales and store growth
for the fiscal year (52 weeks) ending January 28, 2014 (“fiscal year 2013”)
and reaffirming the Adjusted EPS guidance for fiscal year 2013.

                                                        
    Full Fiscal Year Ending January       Prior Guidance       Updated Range
    28, 2014                              Range
    Net sales (in billions)               $1.194 to $1.207     $1.217 to
                                                               $1.224
    New stores                            130 to 140           140 to 150
    Acquired stores                       --                   44
    Net store unit increase               105 to 110           155 to 160
    GAAP EPS                              $1.66 to $1.74       $1.65 to $1.73
    Acquisition-related costs per         $0.01                $0.03
    share
    ERP system implementation costs       $0.07 to $0.09       $0.07
    per share
    Adjusted EPS                          $1.75 to $1.83       $1.75 to $1.83
    Comparable-store sales growth         flat                 flat to low
                                                               single digit
                                                               

Call Information

A conference call to discuss third fiscal quarter results is scheduled for
today, December 4, 2013, at 5:00 p.m. Eastern Time. The call will be hosted by
Steve Stagner, Chief Executive Officer, and Jim Black, Chief Financial
Officer.

The conference call will be accessible by telephone and the internet. To
access the call, participants from within the U.S. may dial (877) 705-6003,
and participants from outside the U.S. may dial (201) 493-6725. Participants
may also access the call via live webcast by visiting the Company’s investor
relations web site at http://www.mattressfirm.com.

The replay of the call will be available from approximately 8:00 p.m. Eastern
Time on December 4, 2013 through midnight Eastern Time on December 18, 2013.
To access the replay, the domestic dial-in number is (877) 870-5176, the
international dial-in number is (858) 384-5517, and the passcode is 13572959.
The archive of the webcast will be available on the Company’s web site for a
limited time.

Net Sales and Store Unit Information

The components of the net sales increase for the thirteen and thirty-nine
weeks ended October 29, 2013 as compared to the corresponding prior year
period were as follows (in millions):

                         Increase (Decrease) in Net Sales
                           Thirteen Weeks     Thirty-Nine Weeks
                           Ended                Ended
                           October 29, 2013     October 29, 2013
Comparable-store sales     $     7.9            $    (3.6     )
New stores                       35.0                97.4
Acquired stores                  10.1                71.8
Closed stores                   (4.1   )           (10.0    )
                           $     48.9          $    155.6    
                                                              

The composition of net sales by major category of product and services were as
follows (in millions):

               Thirteen Weeks Ended                          Thirty-Nine Weeks Ended
                 October   % of      October   % of        October   % of      October   % of
                 30,                     29,                     30,                     29,
                 2012        Total       2013        Total       2012        Total       2013        Total
Conventional     $ 109.3     39.4  %     $ 151.7     46.5  %     $ 307.2     41.0  %     $ 421.8     46.6  %
mattresses
Specialty          144.8     52.2  %       144.5     44.3  %       378.7     50.6  %       403.5     44.6  %
mattresses
Furniture
and               17.9      6.5   %      24.3      7.5   %      49.2      6.6   %      62.6      6.9   %
accessories
Total
product            272.0     98.1  %       320.5     98.3  %       735.1     98.1  %       887.9     98.1  %
sales
Delivery
service           5.3       1.9   %      5.7       1.7   %      14.0      1.9   %      16.8      1.9   %
revenues
Total net        $ 277.3     100.0 %     $ 326.2     100.0 %     $ 749.1     100.0 %     $ 904.7     100.0 %
sales
                                                                                                           

The activity with respect to the number of Company-operated store units was as
follows:

                                   Thirteen Weeks     Thirty-Nine Weeks
                                     Ended                Ended
                                     October 29, 2013     October 29, 2013
Store units, beginning of period     1,121                1,057
New stores                           40                   121
Closed stores                        (6         )         (23        )
Store units, end of period           1,155               1,155      
                                                                     

Forward-Looking Statements

Certain statements contained in this press release are not based on historical
fact and are “forward-looking statements” within the meaning of applicable
federal securities laws and regulations. In many cases, you can identify
forward-looking statements by terminology such as “may,” “would,” “should,”
“could,” “forecast,” “feel,” “project,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “predict,” “intend,” “potential,” “continue” or the
negative of these terms or other comparable terminology; however, not all
forward-looking statements contain these identifying words. The
forward-looking statements contained in this press release, such as those
relating to our net sales, GAAP and Adjusted EPS and net store unit change for
fiscal year 2013, are subject to various risks and uncertainties, including
but not limited to downturns in the economy; reduction in discretionary
spending by consumers; our ability to execute our key business strategies and
advance our market-level profitability; our ability to profitably open and
operate new stores and capture additional market share; our relationship with
our primary mattress suppliers; our dependence on a few key employees; the
possible impairment of our goodwill or other acquired intangible assets; the
effect of our planned growth and the integration of our acquisitions on our
business infrastructure; the impact of seasonality on our financial results
and comparable-store sales; our ability to raise adequate capital to support
our expansion strategy; our success in pursuing and completing strategic
acquisitions; the effectiveness and efficiency of our advertising
expenditures; our success in keeping warranty claims and comfort exchange
return rates within acceptable levels; our ability to deliver our products in
a timely manner; our status as a holding company with no business operations;
our ability to anticipate consumer trends; risks related to our controlling
stockholder, J.W. Childs Associates, L.P.; heightened competition; changes in
applicable regulations; risks related to our franchises, including our lack of
control over their operation and our liabilities if they default on note or
lease obligations; risks related to our stock and other factors set forth
under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year
ended January 29, 2013 filed with the Securities and Exchange Commission
(“SEC”) on April 1, 2013 and our other SEC filings. Forward-looking statements
relate to future events or our future financial performance and reflect
management’s expectations or beliefs concerning future events as of the date
of this press release. Actual results of operations may differ materially from
those set forth in any forward-looking statements, and the inclusion of a
projection or forward-looking statement in this press release should not be
regarded as a representation by us that our plans or objectives will be
achieved. We do not undertake to publicly update or revise any of these
forward-looking statements, whether as a result of new information, future
events or otherwise.

Non-GAAP Financial Measures

Adjusted EBITDA is defined as net income before income tax expense, interest
income, interest expense, depreciation and amortization (“EBITDA”), without
giving effect to non-cash goodwill and intangible asset impairment charges,
gains or losses on store closings and impairment of store assets, gains or
losses related to the early extinguishment of debt, financial sponsor fees and
expenses, non-cash charges related to stock-based awards and other items that
are excluded by management in reviewing the results of operations. We have
presented Adjusted EBITDA because we believe that the exclusion of these items
is appropriate to provide additional information to investors about our
ongoing operating performance excluding certain non-cash and other items and
to provide additional information with respect to our ability to comply with
various covenants in documents governing our indebtedness and as a means to
evaluate our period-to-period results. In evaluating Adjusted EBITDA, you
should be aware that in the future we may incur expenses that are the same as
or similar to some of the adjustments in this presentation. Our presentation
of Adjusted EBITDA should not be construed to imply that our future results
will be unaffected by any such adjustments. We have provided this information
to analysts, investors and other third parties to enable them to perform more
meaningful comparisons of past, present and future operating results and as a
means to evaluate the results of our ongoing operations. Management also uses
Adjusted EBITDA to determine executive incentive compensation payment levels.
In addition, our compliance with certain covenants under the credit agreement
between our indirect wholly owned subsidiary, Mattress Holding Corp., certain
lenders, and UBS Securities LLC, as sole arranger, bookrunner, and lender, are
calculated based on similar measures and differ from Adjusted EBITDA primarily
by the inclusion of pro forma results for acquired businesses in those similar
measures. Other companies in our industry may calculate Adjusted EBITDA
differently than we do. Adjusted EBITDA is not a measure of performance under
U.S. GAAP and should not be considered as a substitute for net income prepared
in accordance with U.S. GAAP. Adjusted EBITDA has significant limitations as
an analytical tool, and you should not consider it in isolation or as a
substitute for analysis of our results as reported under U.S. GAAP.

The following table contains a reconciliation of our net income determined in
accordance with U.S.GAAP to EBITDA and Adjusted EBITDA for the periods
indicated (in thousands):

                      Thirteen Weeks Ended        Thirty-Nine Weeks Ended
                        October      October        October      October
                        30,            29,            30,            29,
                         2012         2013         2012         2013
Net income              $ 12,456       $ 18,136       $ 32,277       $ 44,268
Income tax expense        8,484          11,117         19,972         27,756
Interest expense,         2,097          2,543          6,385          8,185
net
Depreciation and          6,257          7,687          16,432         21,128
amortization
Intangible assets
and other                (215   )      660          972          1,813
amortization
EBITDA                   29,079       40,143       76,038       103,150
Loss on store
closings and              196            (5     )       267            739
impairment of store
assets
Financial sponsor         12             12             63             36
fees and expenses
Stock-based               651            1,349          1,653          3,203
compensation
Secondary offering        1,935          -              1,935          -
costs
Vendor new store          304            229            937            1,212
funds (a)
Acquisition-related       3,025          8              10,074         458
costs (b)
Other (c)                (132   )      685          (896   )      1,849
Adjusted EBITDA         $ 35,070      $ 42,421      $ 90,071      $ 110,647
                                                                       

        We receive cash payments from certain vendors for each new incremental
        store that we open (“new store funds”). New store funds are initially
        recorded in other noncurrent liabilities when received and are then
        amortized as a reduction of cost of sales over 36 months in our
(a)   financial statements. Historically, we have considered new store funds
        as a component of Adjusted EBITDA when received since new store funds
        are included in cash provided from operations. The adjustment includes
        the amount of new store funds received during the period presented and
        eliminates the non-cash reduction in cost of sales included in our
        results of operations.
        
        Reflects both non-cash effects included in net income related to
        acquisition accounting adjustments made to inventories and other
(b)     acquisition-related cash costs included in net income, such as direct
        acquisition costs and costs related to integration of acquired
        businesses.
        
        Consists of various items that management excludes in reviewing the
(c)     results of operations, including $0.7 million and $1.9 million of ERP
        system implementation costs incurred during the thirteen and
        thirty-nine weeks ended October 29, 2013, respectively.

Adjusted EPS and the other “Adjusted” data provided in this press release are
also considered non-GAAP financial measures. We report our financial results
in accordance with GAAP; however, management believes evaluating our ongoing
operating results may be enhanced if investors have additional non-GAAP basis
financial measures to facilitate year-over-year comparisons. Management
reviews non-GAAP financial measures to assess ongoing operations and considers
them to be effective indicators, for both management and investors, of our
financial performance over time. Our management does not advocate that
investors consider such non-GAAP financial measures in isolation from, or as a
substitute for, financial information prepared in accordance with GAAP. For
more information, please refer to “Reconciliation of Reported (GAAP) to
Adjusted Statements of Operations Data” below.

                                                              
MATTRESS FIRM HOLDING CORP.

Consolidated Balance Sheets

(In thousands, except share amounts)

(unaudited)
                                                                   
                                                   January 29,     October 29,
                                                    2013          2013    
Assets
Current assets:
Cash and cash equivalents                          $ 14,556        $ 15,238
Accounts receivable, net                             26,246          31,381
Inventories                                          63,228          80,039
Deferred income tax asset                            3,710           3,417
Prepaid expenses and other current assets           18,855        19,764  
Total current assets                                 126,595         149,839
Property and equipment, net                          144,612         164,236
Intangible assets, net                               82,479          85,167
Goodwill                                             358,978         360,391
Debt issue costs and other, net                     12,015        11,949  
Total assets                                       $ 724,679      $ 771,582 
                                                                   
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current maturities of            $ 33,930        $ 27,032
long-term debt
Accounts payable                                     64,642          69,529
Accrued liabilities                                  41,106          48,636
Customer deposits                                   8,012         8,948   
Total current liabilities                            147,690         154,145
Long-term debt, net of current maturities            219,069         198,130
Deferred income tax liability                        26,800          31,464
Other noncurrent liabilities                        63,624        71,780  
Total liabilities                                   457,183       455,519 
                                                                   
Commitments and contingencies
                                                                   
Stockholders' equity:
Common stock, $0.01 par value; 120,000,000
shares authorized; 33,795,630 and 33,899,534         338             339
shares issued and outstanding at January 29,
2013 and October 29, 2013, respectively
Additional paid-in capital                           365,083         369,381
Accumulated deficit                                 (97,925 )      (53,657 )
Total stockholders' equity                          267,496       316,063 
Total liabilities and stockholders' equity         $ 724,679      $ 771,582 
                                                                             

                                                                                                                     
MATTRESS FIRM HOLDING CORP.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(unaudited)
                                                                                                                               
                     Thirteen Weeks Ended                                        Thirty-Nine Weeks Ended
                     October 30,    % of      October 29,        % of        October 30,    % of      October 29,      % of
                     2012             Sales       2013               Sales       2012             Sales       2013             Sales
Net sales            $ 277,259        100.0 %     $ 326,233          100.0 %     $ 749,091        100.0 %     $ 904,731        100.0 %
Cost of sales         167,173        60.3  %      200,267         61.4  %      454,299        60.6  %      553,878        61.2  %
Gross profit
from retail            110,086        39.7  %       125,966          38.6  %       294,792        39.4  %       350,853        38.8  %
operations
Franchise fees
and royalty           1,490          0.5   %      1,655           0.5   %      4,022          0.5   %      4,342          0.5   %
income
                      111,576        40.2  %      127,621         39.1  %      298,814        39.9  %      355,195        39.3  %
Operating
expenses:
Sales and
marketing              67,475         24.3  %       74,605           22.9  %       183,167        24.5  %       214,104        23.7  %
expenses
General and
administrative         20,868         7.5   %       21,225           6.5   %       56,746         7.6   %       60,143         6.6   %
expenses
Loss (gain) on
store closings        196            0.1   %      (5         )     0.0   %      267            0.0   %      739            0.1   %
and impairment
of store assets
Total operating       88,539         31.9  %      95,825          29.4  %      240,180        32.1  %      274,986        30.4  %
expenses
Income from           23,037         8.3   %      31,796          9.7   %      58,634         7.8   %      80,209         8.9   %
operations
Other expense:
Interest              2,097          0.8   %      2,543           0.7   %      6,385          0.9   %      8,185          0.9   %
expense, net
Income before          20,940         7.6   %       29,253           9.0   %       52,249         7.0   %       72,024         8.0   %
income taxes
Income tax            8,484          3.1   %      11,117          3.4   %      19,972         2.7   %      27,756         3.1   %
expense
Net income           $ 12,456         4.5   %     $ 18,136          5.6   %     $ 32,277         4.3   %     $ 44,268         4.9   %
                                                                                                                               
Basic net income     $ 0.37                       $ 0.54                         $ 0.96                       $ 1.31
per common share
Diluted net
income per           $ 0.37                       $ 0.53                         $ 0.95                       $ 1.30
common share
                                                                                                                               
Reconciliation
of
weighted-average
shares
outstanding:
Basic weighted
average shares         33,768,828                   33,878,241                     33,768,828                   33,848,032
outstanding
Effect of
dilutive
securities:
Stock options          93,907                       195,372                        113,592                      186,334
Restricted            4,773                       40,534                       2,742                       38,941
shares
Diluted weighted
average shares        33,867,508                  34,114,147                   33,885,162                  34,073,307
outstanding
                                                                                                                               

                                         
MATTRESS FIRM HOLDING CORP.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)
                                                  
                                                  Thirty-Nine Weeks Ended
                                                  October 30,    October 29,
Cash flows from operating activities:              2012           2013    
Net income                                        $ 32,277         $ 44,268
Adjustments to reconcile net income to cash
flows provided by operating activities:
Depreciation and amortization                       16,432           21,128
Loan fee and other amortization                     1,855            1,630
Deferred income tax expense                         8,613            4,968
Stock-based compensation                            1,653            3,203
Loss on store closings and impairment of            267              739
store assets
Effects of changes in operating assets and
liabilities, excluding business acquisitions:
Accounts receivable                                 (6,887   )       (5,133  )
Inventories                                         (15,219  )       (16,794 )
Prepaid expenses and other current assets           (647     )       (892    )
Other assets                                        (904     )       (2,126  )
Accounts payable                                    22,138           3,929
Accrued liabilities                                 1,837            7,530
Customer deposits                                   134              818
Other noncurrent liabilities                       4,906          7,668   
Net cash provided by operating activities          66,455         70,936  
Cash flows from investing activities:
Purchases of property and equipment                 (50,726  )       (41,340 )
Business acquisitions, net of cash acquired        (51,613  )      (2,042  )
Net cash used in investing activities              (102,339 )      (43,382 )
Cash flows from financing activities:
Proceeds from issuance of debt                      18,000           27,000
Principal payments of debt                          (19,207  )       (54,968 )
Proceeds from exercise of common stock              -                1,312
options
Excess tax benefits associated with                 -                277
stock-based awards
Purchase of vested stock-based awards              -              (493    )
Net cash used in financing activities              (1,207   )      (26,872 )
Net decrease in cash and cash equivalents           (37,091  )       682
Cash and cash equivalents, beginning of            47,946         14,556  
period
Cash and cash equivalents, end of period          $ 10,855        $ 15,238  
                                                                             

                                                                                                                                           
MATTRESS FIRM HOLDING CORP.

Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data

(In thousands, except share and per share amounts)
                                                                                                                                                            
                        Thirteen Weeks Ended
                        October 30, 2012                                                        October 29, 2013
                                    Income                                                              Income                        
                        Income         Before                        Diluted                    Income         Before                        Diluted
                        From           Income         Net            Weighted       Diluted     From           Income         Net            Weighted       Diluted
                        Operations     Taxes          Income         Shares         EPS*        Operations     Taxes          Income         Shares         EPS*
As Reported             $ 23,037       $ 20,940       $ 12,456       33,867,508     $  0.37     $ 31,796       $ 29,253       $ 18,136       34,114,147     $  0.53
% of sales                8.3    %       7.6    %       4.5    %                                  9.7    %       9.0    %       5.6    %
Acquisition-related       3,025          3,025          1,850        -                 0.05       -              -              -            -                 -
costs (1)
Secondary offering        1,935          1,935          1,443        -                 0.04       -              -              -            -                 -
costs (2)
ERP system
implementation           -            -            -           -                -         986          986          605         -                0.02
costs (3)
Total adjustments        4,960        4,960        3,293       -                0.10      986          986          605         -                0.02
As Adjusted             $ 27,997      $ 25,900      $ 15,749      33,867,508     $  0.47     $ 32,782      $ 30,239      $ 18,741      34,114,147       0.55
% of sales                10.1   %       9.3    %       5.7    %                                  10.0   %       9.3    %       5.7    %
                                                                                                                                                            
                        Thirty-Nine Weeks Ended
                        October 30, 2012                                                        October 29, 2013
                                      Income                                                                Income                        
                        Income         Before                        Diluted                    Income         Before                        Diluted
                        From           Income         Net            Weighted       Diluted     From           Income         Net            Weighted       Diluted
                        Operations     Taxes          Income         Shares         EPS*        Operations     Taxes          Income         Shares         EPS*
As Reported             $ 58,634       $ 52,249       $ 32,277       33,885,162     $  0.95     $ 80,209       $ 72,024       $ 44,268       34,073,307     $  1.30
% of sales                7.8    %       7.0    %       4.3    %                                  8.9    %       8.0    %       4.9    %
Acquisition-related       10,074         10,074         6,679        -                 0.20       450            450            276          -                 0.01
costs (1)
Secondary offering        1,935          1,935          1,443        -                 0.04       -              -              -            -
costs (2)
ERP system
implementation           -            -            -           -                -         2,831        2,831        1,736       -                0.05
costs (3)
Total adjustments        12,009       12,009       8,122       -                0.24      3,281        3,281        2,012       -                0.06
As Adjusted             $ 70,643      $ 64,258      $ 40,399      33,885,162     $  1.19     $ 83,490      $ 75,305      $ 46,280      34,073,307     $  1.36
% of sales                9.4    %       8.6    %       5.4    %                                  9.2    %       8.3    %       5.1    %

*Due to rounding to the nearest cent, totals may not equal the sum of the lines in the table above.
_____________________________

(1)On May 2, 2012, we acquired all of the equity interests of MGHC Holding
Corporation (“Mattress Giant”), including 181 mattress specialty retail
stores. On September 25, 2012, we acquired the leasehold interests, store
assets, distribution center assets and related inventories, and assumption of
certain liabilities of Mattress XPress,Inc. and Mattress XPress of
Georgia,Inc. (collectively, “Mattress X-Press”), including 34 mattress
specialty retail stores. On December 11, 2012, we acquired the assets and
operations of Factory Mattress & Water Bed Outlet of Charlotte, Inc.
(“Mattress Source”), including 27 mattress specialty retail stores. On June
14, 2013, we acquired the assets and operations of Olejo, Inc., an online
retailer primarily focused on mattresses and bedding-related products.
Acquisition-related costs, consisting of direct transaction costs and
integration costs are included in the results of operations as incurred.
During the thirteen weeks ended October 30, 2012 we incurred approximately
$3.0 million of acquisition-related costs. During the thirty-nine weeks ended
October 30, 2012 and October 29, 2013, we incurred approximately $10.1 million
and $0.5 million of acquisition-related costs, respectively.

(2) Reflects $1.9 million of costs borne by us in connection with a secondary
offering of shares of common stock by certain of our selling shareholders
which was completed in October 2012.

(3) Reflects implementation costs included in the results of operations as
incurred, consisting primarily of training-related costs in connection with
the roll-out of the Microsoft Dynamics AX for Retail Enterprise Resource
Planning system (“ERP system”). During the thirteen and thirty-nine weeks
ended October 29, 2013, we incurred approximately $1.0 million and $2.8
million of ERP system implementation costs, respectively.

Our “As Adjusted” data is considered a non-U.S. GAAP financial measure and is
not in accordance with, or preferable to, “As Reported,” or GAAP financial
data. However, we are providing this information as we believe it facilitates
year-over-year comparisons for investors and financial analysts.

About Mattress Firm

Houston-based Mattress Firm is a high growth specialty retailer, recognized as
the nation's leading bedding specialty retailer, offering a broad selection of
both traditional and specialty mattresses, bedding accessories and related
products from leading manufacturers. With more than 1,300 company-operated and
franchised stores across 31 states, Mattress Firm has the largest geographic
footprint in the United States among multi-brand mattress specialty retailers.
Mattress Firm offers customers comfortable store environments, guarantees on
price, comfort and service, and highly-trained sales professionals. More
information is available at http://www.mattressfirm.com. Mattress Firm’s
website is not part of this press release.

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Contact:

Investor Relations:
Brad Cohen, 713-343-3652
ir@mattressfirm.com
or
Media:
Sari Martin, 203-682-8345
mattressfirm@icrinc.com