I'd like to discuss the retail side later, but I assume there are some easy wins on things like adjustable bases and other private-label stuff that you could do, but first, let's talk about the foundation of how mattresses are made by brand, the main inputs, and the supply chains. We can start with Tempur.

Tempur and Sealy have very different supply chain and production cycles. On the Tempur-Pedic side, there were traditionally only two factories in the US and one in Denmark. Recently, a third factory was completed in Indiana, which will help streamline distribution. On the Tempur-Pedic side, Tempur Sealy produces all the foam themselves, so the main purchases are the chemicals to make the foam and the textiles for the mattress covers. Packaging and other materials are also purchased, but the foam and textiles are the two main items.

Is the pricing agreed upon and fixed when signing these long-term contracts?

It's nearly impossible to fix pricing in the chemical world. However, we agree on a mechanism by which pricing would change and introduce factors to help manage volatility and predictability of material costs. For example, we might use a backward-looking quarterly average to change the price, giving us a month's notice before it changes. We also implement caps to limit how much the price can change per adjustment.

You mentioned Covid, and I was going to ask about it later, but I'll ask now. How did the manufacturing and supply chain organizations handle the surge in demand during Covid? Was there enough spare capacity?

It was a challenging time. Chemicals and inner springs were the most difficult materials to manage. Fabrics and textiles were somewhat easier to handle, as capacity could be increased. Many textile producers could shift their capacity from declining industries to the mattress industry. However, inner springs, foam, and chemicals, which also contributed to foam shortages, were a constant struggle. Foam shortages persisted for at least a year and a half, and we were always trying to get more foam and expedite orders.