SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1997
Commission file numbers 1-11432; 1-11436
FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 05-0475617
Delaware 22-3182164
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 Columbia Avenue
Linwood, PA 19061
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (610) 859-3000
Indicate by check mark whether the registrants (1) have 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) have been subject to such
filing requirements for the past 90 days. YES X NO
Foamex Capital Corporation meets the conditions set forth in General Instruction
H (1) (a) and (b) of Form 10-Q and is therefore filing this form with the
reduced disclosure format.
The number of shares of Foamex Capital Corporation's common stock outstanding as
of August 8, 1997 was 1,000.
Page 1 of 30
Exhibit List on Page 25 of 30
1
<PAGE>
FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
INDEX
Page
Part I. Financial Information:
Item 1. Financial Statements
Foamex L.P.
Condensed Consolidated Statements of Operations - Thirteen
Week and Twenty-Six Week Periods Ended June 29, 1997
and June 30, 1996 3
Condensed Consolidated Balance Sheets as of June 29, 1997
and December 29, 1996 4
Condensed Consolidated Statements of Cash Flows -
Twenty-Six Week Periods Ended June 29, 1997 and June
30, 1996 5
Notes to Condensed Consolidated Financial Statements 6
Foamex Capital Corporation
Balance Sheets as of June 29, 1997 and December 29, 1996 15
Notes to Balance Sheets 16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
Part II. Other Information 24
Exhibit List 25
Signatures 30
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
13 Week Periods Ended 26 Week Periods Ended
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
(thousands)
<S> <C> <C> <C> <C>
NET SALES $239,887 $240,447 $469,007 $459,578
COST OF GOODS SOLD 195,107 202,280 381,430 385,380
--------- --------- --------- ---------
GROSS PROFIT 44,780 38,167 87,577 74,198
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 15,646 13,526 31,331 27,127
--------- --------- --------- ---------
INCOME FROM OPERATIONS 29,134 24,641 56,246 47,071
INTEREST AND DEBT ISSUANCE EXPENSE 10,805 10,311 21,509 20,724
OTHER INCOME, NET 472 337 1,122 537
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES 18,801 14,667 35,859 26,884
PROVISION FOR INCOME TAXES 2,417 2,699 3,259 3,718
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 16,384 11,968 32,600 23,166
LOSS FROM DISCONTINUED OPERATIONS -- (40,164) -- (39,527)
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT (44,859) -- (45,538) --
--------- --------- --------- ---------
NET INCOME (LOSS) $(28,475) $(28,196) $(12,938) $(16,361)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
3
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
June 29, December 29,
ASSETS 1997 1996
CURRENT ASSETS: (thousands)
Cash and cash equivalents $4,508 $20,968
Accounts receivable, net 136,211 125,847
Inventories 106,723 102,610
Other current assets 45,483 39,495
--------- ---------
Total current assets 292,925 288,920
PROPERTY, PLANT AND EQUIPMENT, NET 190,631 182,427
COST IN EXCESS OF ASSETS ACQUIRED, NET 82,732 83,991
DEBT ISSUANCE COSTS, NET 18,428 14,902
OTHER ASSETS 15,978 15,917
--------- ---------
TOTAL ASSETS $600,694 $586,157
========= =========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings $3,960 $3,692
Current portion of long-term debt 8,351 13,735
Accounts payable 67,659 75,621
Accounts payable to related parties 12,347 8,803
Accrued interest 3,172 8,871
Other accrued liabilities 47,588 41,108
--------- ---------
Total current liabilities 143,077 151,830
--------- ---------
LONG-TERM DEBT 537,951 392,617
--------- ---------
OTHER LIABILITIES 37,883 28,878
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
PARTNERS' EQUITY (DEFICIT):
Partners' capital accounts (107,774) 58,286
Note receivable from partner -- (33,180)
Other (10,443) (12,274)
--------- ---------
Total partners' equity (deficit) (118,217) 12,832
--------- ---------
TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT) $600,694 $586,157
========= =========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
4
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
26 Week Periods Ended
June 29, June 30,
1997 1996
OPERATING ACTIVITIES: (thousands)
<S> <C> <C>
Net income (loss) $(12,938) $(16,361)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 10,301 10,711
Amortization of debt issuance costs and debt discount 1,370 1,433
Extraordinary loss on extinguishment of debt 45,538 --
Loss from discontinued operations -- 39,527
Other operating activities 798 (597)
Changes in operating assets and liabilities (47,256) (19,815)
--------- ---------
Net cash provided by (used for) continuing operations (2,187) 14,898
Net cash used for discontinued operations -- (1,017)
--------- ---------
Net cash provided by (used for) operating activities (2,187) 13,881
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (16,369) (7,798)
Purchase of FJPS senior secured discount debentures (105,829) --
Decrease in restricted cash 12,143 --
Other investing activities 35 1,399
Discontinued operations investing activities -- (900)
--------- ---------
Net cash used for investing activities (110,020) (7,299)
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from short-term borrowings 256 1,976
Proceeds from revolving loans 49,000 --
Proceeds from long-term debt 453,500 --
Repayment of long-term debt (363,392) (4,272)
Premiums and costs associated with debt extinguishment (22,918) --
Debt issuance costs (14,746) --
Distributions to partners (5,949) (2,478)
Other financing activities (4) (8)
--------- ---------
Net cash provided by (used for) financing activities 95,747 (4,782)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (16,460) 1,800
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 20,968 638
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $4,508 $2,438
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
5
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIATED FINANCIAL STATEMENTS (unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Foamex L.P.'s condensed consolidated balance sheet as of December 29,
1996 has been condensed from the audited consolidated balance sheet at that
date. The condensed consolidated balance sheet as of June 29, 1997 and the
condensed consolidated statements of operations for the thirteen week and
twenty-six periods ended June 29, 1997 and June 30, 1996 and the condensed
consolidated statements of cash flows for the twenty-six week periods ended June
29, 1997 and June 30, 1996 have been prepared by Foamex L.P. and subsidiaries
and have not been audited by Foamex L.P.'s independent accountants. Also, the
condensed consolidated statement of operations for the thirteen week and
twenty-six week periods ended June 30, 1996 and the condensed consolidated
statement of cash flows for the twenty-six week period ended June 30, 1996 have
been restated for discontinued operations (see Note 2 below). In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation of the consolidated financial
position, results of operations and cash flows have been included.
On June 12, 1997, Foamex International Inc. ("Foamex International")
substantially completed a refinancing plan (the "Refinancing Plan") that
included the refinancing of certain long-term indebtedness to reduce Foamex
International's interest expense and improve financing flexibility. In
connection with the Refinancing Plan, Foamex L.P. purchased approximately $342.3
million of aggregate principal amount of its public debt and approximately
$116.7 million of aggregate principal amount of Foamex-JPS Automotive L.P.'s
("FJPS") senior secured discount debentures due 2004 (the "Discount Debentures")
and repaid $5.2 million of term loan borrowings under its old credit facility.
Foamex L.P. incurred an extraordinary loss on the early extinguishment of debt
associated with the Refinancing Plan of approximately $44.5 million. (See Note 5
below for further discussion.) The Refinancing Plan was funded by $347.0 million
of borrowings under a new $480.0 million credit facility (the "New Credit
Facility") and the net proceeds from the issuance of $150.0 million of 9 7/8%
senior subordinated notes due 2007.
In addition, Foamex L.P. intends to call for redemption on October 1,
1997 approximately $26.0 million of the approximately $30.0 million of its
outstanding public debt that was not tendered as part of the Refinancing Plan.
The redemption is expected to be funded from the New Credit Facility. In
connection with this redemption, Foamex L.P. is expected to incur an
extraordinary loss on the early extinguishment of debt of approximately $2.6
million in the fourth quarter of 1997.
Upon consummation of the Refinancing Plan on June 12, 1997, FJPS was
merged into Foamex International, which thus became a 98% limited partner of
Foamex L.P. FMXI, Inc. ("FMXI") is a 1% managing general partner of Foamex L.P.
and Trace Foam Company, Inc. ("Trace Foam") is a 1% non-managing general partner
of Foamex L.P. FMXI is a wholly-owned subsidiary of Foamex International.
Certain information and note disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. These condensed
consolidated financial statements should be read in conjunction with Foamex
L.P.'s 1996 consolidated financial statements and notes thereto as set forth in
Foamex L.P.'s Annual Report on Form 10-K for the fiscal year ended December 29,
1996.
2. DISCONTINUED OPERATIONS
During 1996, Foamex L.P. sold the outstanding common stock of Perfect Fit
Industries, Inc. ("Perfect Fit"), a wholly-owned subsidiary, for an adjusted
sale price of approximately $44.2 million. The sale included the net assets of
Foamex L.P.'s home comfort products business segment.
6
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIATED FINANCIAL STATEMENTS (unaudited)
2. DISCONTINUED OPERATIONS (continued)
Foamex L.P.'s condensed consolidated financial statements have been
restated to reflect the discontinuation of the home comfort products business
segment. A summary of the operating results for the discontinued operations is
as follows:
<TABLE>
<CAPTION>
13 Week Period Ended 26 Week Period Ended
June 30, 1996 June 30, 1996
(thousands)
<S> <C> <C>
Net sales $24,935 $50,097
Gross profit 3,815 8,065
Income (loss) from operations (101) 1,123
Interest and debt issuance expense 1,190 2,384
Other expense 348 348
Loss on disposal of discontinued operations (39,297) (39,297)
Loss from discontinued operations
before (benefit) from income taxes (40,936) (40,906)
Benefit for income taxes (772) (1,379)
Loss from discontinued operations,
net of income taxes (40,164) (39,527)
</TABLE>
3. INVENTORIES
The components of inventories consist of:
June 29, December 29,
1997 1996
(thousands)
Raw materials and supplies $59,070 $61,559
Work-in-process 17,305 13,453
Finished goods 30,348 27,598
-------- --------
Total $106,723 $102,610
======== ========
4. RELATED PARTY TRANSACTIONS
In connection with the Refinancing Plan, Foamex L.P. purchased
approximately $116.7 million of aggregate principal amount of Discount
Debentures for approximately $105.8 million including transaction costs of
approximately $0.8 million. Foamex L.P. subsequently distributed the Discount
Debentures to FJPS and FMXI.
On June 12, 1997, Foamex L.P. distributed its $2.0 million aggregate
principal amount promissory note due from Foamex International to FJPS and FMXI.
Also on June 12, 1997, Foamex L.P. distributed its $56.2 million
aggregate principal amount note, as amended, due 2006 (the "FJPS Note") from
FJPS with an accreted value as of June 12, 1997 of $35.6 million to FJPS and
FMXI. The accretion of the original issue discount of $2.4 million and $3.5
million for the twenty-six week periods ended June 29, 1997 and June 30, 1996,
respectively, was reflected as a direct increase in the FJPS Note and partners'
capital account, and thereby excluded from the condensed consolidated statements
of operations.
7
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIATED FINANCIAL STATEMENTS (unaudited)
4. RELATED PARTY TRANSACTIONS (continued)
In connection with the Refinancing Plan, Foamex L.P. made a cash
distribution of approximately $1.5 million to Trace Foam as a result of Foamex
L.P.'s distribution to FJPS and FMXI of the Discount Debentures, the FJPS Note
and the $2.0 million aggregate principal amount promissory note due from Foamex
International.
On June 12, 1997, a promissory note issued to Foamex L.P. by Trace
International Holdings, Inc.("Trace Holdings") was amended. The amended
promissory note is an extension of a promissory note of Trace Holdings that was
due in July 1997. The aggregate principal amount of the amended promissory note
was increased to approximately $4.9 million and the maturity of the promissory
note was extended. The promissory note is due and payable on demand or, if no
demand is made, on July 7, 2001, and bears interest at 2 3/8% plus three-month
LIBOR, as defined, per annum payable quarterly in arrears. The promissory note
is included in the other component of partners' equity (deficit).
During June 1997, Foamex L.P. and Trace Foam amended their management
services agreement to increase the annual fee from $1.75 million to $3.0
million, plus reimbursement of expenses incurred.
Foamex L.P. has a supply agreement (the "Supply Agreement") with Foamex
International pursuant to which, at the option of Foamex L.P., Foamex
International will purchase certain raw materials, which are necessary for the
manufacture of Foamex L.P.'s products, and resell such materials to Foamex L.P.
at a price equal to net cost plus reasonable out of pocket expenses. Management
believes that the terms of the Supply Agreement are no less favorable than those
which Foamex L.P. could have obtained from an unaffiliated third party. During
the thirteen week periods ended June 29, 1997 and June 30, 1996, Foamex L.P.
purchased approximately $35.3 million and $30.0 million, respectively, of raw
materials under the Supply Agreement. During the twenty-six week periods ended
June 29, 1997 and June 30, 1996, Foamex L.P. purchased approximately $63.0
million and $54.1 million, respectively, of raw materials under the Supply
Agreement. As of June 29, 1997 and December 29, 1996, Foamex L.P. had accounts
payable to Foamex International of approximately $12.3 million and $8.8 million,
respectively, associated with the Supply Agreement.
Foamex L.P. chartered an aircraft (which is owned by a wholly-owned
subsidiary of Foamex International) through a third party and incurred costs of
approximately $0.2 million and $0.3 million during the thirteen week periods
ended June 29, 1997 and June 30, 1996, respectively, and $0.6 million and $0.5
million for the twenty-six week periods ended June 29, 1997 and June 30, 1996,
respectively.
On July 1, 1997, Trace Holdings issued to Foamex L.P. a promissory note
for an aggregate principal amount of $5.0 million. The promissory note is due
and payable on demand or, if no demand is made, on July 7, 2001, and bears
interest at 2 3/8% plus three-month LIBOR, as defined, per annum payable
quarterly in arrears commencing October 1, 1997.
8
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
June 29, December 29,
1997 1996
(thousands)
<S> <C> <C>
9 7/8% senior subordinated notes due 2007 (1) $150,000 $ --
Foamex L.P. term loan facilities (7.95% interest rate
at June 29, 1997) (2) 298,000 --
Foamex L.P. revolving loan (7.65% interest rate
at June 29, 1997) (3) 49,000 --
9 1/2% senior secured notes due 2000 (4) 4,523 106,793
11 1/4% senior notes due 2002 (4) 5,825 141,400
11 7/8% senior subordinated debentures due 2004 (net of
unamortized debt discount of $119 and $769) (4) 20,224 125,056
11 7/8% senior subordinated debentures due 2004, Series B (5) 45 7,000
Industrial revenue bonds (6) 7,000 7,000
Foamex L.P. term loan (8.54% interest rate as of
December 29, 1996) (6) -- 11,000
Subordinated note (net of debt discount of $1,047 and $1,198) (6) 5,968 5,817
Other 5,717 2,286
-------- --------
546,302 406,352
Less current portion 8,351 13,735
-------- --------
Long-term debt $537,951 $392,617
======== ========
</TABLE>
(1) Debt of Foamex L.P. and Foamex Capital Corporation ("FCC") (together the
"Issuers") and guaranteed by General Felt Industries, Inc. ("General
Felt"), Foamex Fibers, Inc. ("Foamex Fibers") and all other current and
future domestic subsidiaries of the Issuers.
(2) Debt of Foamex L.P. and guaranteed by Foamex International, General Felt
and Foamex Fibers.
(3) Debt of Foamex L.P. and General Felt and guaranteed by Foamex International
and Foamex Fibers.
(4) Debt of the Issuers and guaranteed by Foamex International and General
Felt.
(5) Debt of the Issuers and guaranteed by General Felt.
(6) Debt of Foamex L.P.
Term Loans and Revolving Loan
On June 12, 1997, Foamex L.P. entered into the New Credit Facility with a
group of banks that provides for term loans of up to $330.0 million which expire
from June 2003 to June 2006 and up to $150.0 million under a revolving line of
credit which expires in June 2003. In connection with the Refinancing Plan,
Foamex L.P. entered into term loans of $298.0 million and borrowed $49.0 million
under the revolving line of credit.
9
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT (continued)
The term loans are comprised of a (i) term A loan ("Term A") which
provides up to $120.0 million of borrowings of which Foamex L.P. borrowed $88.0
million in connection with the Refinancing Plan, (ii) term B loan ("Term B") of
$110.0 million and (iii) term C loan ("Term C") of $100.0 million. The remaining
$32.0 million available under the Term A is restricted and can only be used by
Foamex L.P. to retire its public debt not tendered in connection with the
Refinancing Plan with such unused availability terminating June 15, 1998.
Borrowings under the New Credit Facility are collateralized by
substantially all of the assets of Foamex L.P., General Felt and Foamex Fibers
on a pari passu basis with the 9 1/2% senior secured notes due 2000, the 11 1/4%
senior notes due 2002 and the industrial revenue bonds (collectively, the
"Notes"); however, the rights of the holders of the applicable issue of Notes to
receive payment upon the disposition of the collateral securing such issue of
Notes has been preserved.
Pursuant to the terms of the New Credit Facility, borrowed funds will
bear interest at a floating rate equal to an applicable margin, as defined, plus
the higher of (i) the base rate of The Bank of Nova Scotia, in effect from time
to time, or (ii) a rate that is equal to 0.5% per annum plus the federal funds
rate in effect from time to time. The applicable margin is determined by a
calculation of the total net debt to EBDAIT ratio, as defined, and can range
from no margin up to 1.125% per annum for Term A and revolving loans, from
0.875% per annum to 1.375% per annum for Term B and from 1.125% per annum to
1.625% per annum for Term C. At the option of Foamex L.P., portions of the
outstanding loans under the New Credit Facility are convertible into LIBOR based
loans which bear interest at a floating rate equal to an applicable margin for
LIBOR based loans, as defined, plus the average LIBOR, as defined. The
applicable margin for LIBOR based loans is a rate that will generally equal the
applicable margin (discussed above) plus 1.0% per annum.
9 7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")
The Senior Subordinated Notes were issued by Foamex L.P. and FCC in a
private placement under Rule 144A of the Securities Act of 1933, as amended, on
June 12, 1997 in connection with the Refinancing Plan. The Senior Subordinated
Notes bear interest at the rate of 9 7/8% per annum payable semiannually on each
June 15 and December 15, commencing December 15, 1997. The Senior Subordinated
Notes mature on June 15, 2007. The Senior Subordinated Notes may be redeemed at
the option of Foamex L.P., in whole or in part, at any time on or after June 15,
2002, initially at 104.938% of their principal amount, plus accrued interest and
liquidated damages, as defined, if any, thereon to the date of redemption and
declining to 100.0% on or after June 15, 2005. In addition, at any time prior to
June 15, 2000, Foamex L.P. may on one or more occasions redeem up to 35.0% of
the initially outstanding principal amount of the Senior Subordinated Notes at a
redemption price equal to 109.875% of the principal amount, plus accrued
interest and liquidated damages, if any, thereon to the date of redemption with
the cash proceeds of one or more Public Equity Offerings, as defined. Upon the
occurrence of a change of control, as defined, each holder of Senior
Subordinated Notes will have the right to require Foamex L.P. to repurchase the
Senior Subordinated Notes at a price equal to 101.0% of the principal amount,
plus accrued interest and liquidated damages, if any, to the date of redemption.
The Senior Subordinated Notes are subordinated in right of payment to all senior
indebtedness and are pari passu in right of payment to two issues of senior
subordinated debentures due 2004 and the subordinated note. The Senior
Subordinated Notes contain certain covenants that will limit, among other
things, the ability of Foamex L.P. (i) to pay distributions or redeem
partnership interests, (ii) to make certain restrictive payments or investments,
(iii) to incur additional indebtedness or issue Preferred Equity Interest, as
defined, (iv) to merge, consolidate or sell all or substantially all of its
assets, or (vi) to enter into certain transactions with affiliates or related
persons. The Senior Subordinated Notes are guaranteed by General Felt and Foamex
Fibers and all other current and future domestic subsidiaries of the Issuers.
10
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT (continued)
Foamex L.P. and FCC have filed a registration statement relating to an
exchange offer in which Foamex L.P. and FCC will offer to exchange the Senior
Subordinated Notes issued in the private placement for new notes. The terms of
the new notes will be substantially identical in all respects (including
principal amount, interest rate, maturity and ranking) to the terms of the
Senior Subordinated Notes, except that the new notes will be transferable by
holders thereof without further registration under the Securities Act of 1933,
as amended (except in the case of Senior Subordinated Notes held by affiliates
of the Issuers and for certain other holders), and are not subject to any
covenant regarding registration under the Securities Act of 1933, as amended.
The exchange offer is expected to be consummated during the third quarter of
1997.
Principal payments on Foamex L.P.'s long-term debt for the remainder of
1997 and for the next five years are as follows: 1997 - $4.2 million; 1998 -
$11.9 million; 1999 - $20.9 million; 2000 - $31.3 million; 2001 - $31.3 million;
2002 - $32.7 million; and thereafter - $415.2 million.
Early Extinguishment of Debt - Refinancing Plan
In connection with the Refinancing Plan, Foamex L.P. incurred an
extraordinary loss on the early extinguishment of debt of approximately $44.5
million. The extraordinary loss is comprised of approximately $20.2 million for
premium and consent fee payments, approximately $12.6 million for the write-off
of debt issuance costs and debt discount, approximately $8.2 million for the
loss associated with the effective termination and amendment of the interest
rate swap agreements and approximately $3.5 million of professional fees and
other costs. In connection with the Refinancing Plan, Foamex L.P. repaid $5.2
million in term loan borrowings under its old credit facility and purchased
approximately $459.0 million of aggregate principal amount of public debt
comprised of:
* $99.8 million of aggregate principal amount of its 9 1/2% senior secured
notes due 2000 for an aggregate consideration of 104.193% of principal
plus accrued interest, comprised of a tender price of 102.193% and a
consent fee of 2.0%;
* $130.1 million of aggregate principal amount of its 11 1/4% senior notes
due 2002 for an aggregate consideration of 105.709% of principal plus
accrued interest, comprised of a tender price of 103.709% and a consent
fee of 2.0%;
* $105.5 million of aggregate principal amount of its 11 7/8% senior
subordinated debentures due 2004 for an aggregate consideration of
107.586% of principal plus accrued interest, comprised of a tender price
of 105.586% and a consent fee of 2.0%;
* $6.9 million of aggregate principal amount of its 11 7/8% senior
subordinated debentures, series B due 2004 for an aggregate consideration
of 107.586% of principal plus accrued interest, comprised of a tender
price of 105.586% and a consent fee of 2.0%; and
* $116.7 million of aggregate principal amount of the Discount Debentures
for an aggregate consideration of 90.0% of principal amount, which
represents approximately 121.9% of the accreted book value as of June 12,
1997, comprised of a tender price of 88.0% of principal amount and a
consent fee of 2.0%.
11
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT (continued)
In addition, Foamex L.P. intends to call for redemption on October 1,
1997 approximately $26.0 million of the approximately $30.0 million of its
outstanding public debt that was not tendered as part of the Refinancing Plan.
The redemption is expected to be funded with borrowings under the New Credit
Facility. In connection with the redemption, Foamex L.P. is expected to incur an
extraordinary loss on the early extinguishment of debt of approximately $2.6
million in the fourth quarter of 1997.
Early Extinguishment of Debt - Other
In addition, during 1997 Foamex L.P. incurred extraordinary losses of
approximately $1.0 million associated with the early extinguishment of
approximately $11.8 million of long-term debt funded with approximately $12.1
million of the remaining net proceeds from the sale of Perfect Fit. The
extraordinary loss is comprised of approximately $0.4 million of premium
payments and approximately $0.6 million for the write-off of debt issuance
costs. The long-term debt was comprised of:
* $2.5 million of aggregate principal amount of its 9 1/2% senior secured
notes due 2000.
* $5.5 million of aggregate principal amount of its 11 1/4% senior notes due
2002.
* Bank term loan borrowings of $3.8 million under its old credit facility.
Interest Rate Swaps
Foamex L.P. uses derivative financial instruments to manage interest
expense. All derivative financial instruments are classified as "held for
purposes other than trading". Foamex L.P. does not use derivatives for
speculative purposes.
Interest rate swap agreements are used to manage interest expense by
changing the interest rate characteristics of certain debt instruments to
approximate current market conditions. The amended interest rate swap agreement
matures in June 2007 which is consistent with the underlying debt. The
differential paid or received on interest rate swap agreements is recognized on
an accrual basis as an adjustment to interest and debt issuance expense. Gains
and losses on terminated interest rate swap agreements are amortized and
reflected in interest and debt issuance expense over the remaining term of the
underlying debt.
In connection with the Refinancing Plan, Foamex L.P.'s existing interest
rate swap agreements with a notional amount of $300.0 million were considered to
be effectively terminated since the underlying debt was extinguished. These
interest rate swap agreements had an estimated fair value liability of $8.2
million at the date of the Refinancing Plan which is included in the
extraordinary loss on the early extinguishment of debt. In lieu of a cash
payment for the estimated fair value of the existing interest rate swap
agreements, Foamex L.P. entered into an amendment of the existing interest rate
swap agreements resulting in one interest rate swap agreement with a notional
amount of $150.0 million through June 2007. Accordingly, the $8.2 million fair
value liability has been recorded as a deferred credit which will be amortized
as a reduction in interest and debt issuance expense on a straight-line basis
over the life of the amended interest rate swap agreement. Under the amended
interest rate swap agreement, Foamex L.P. is obligated to make fixed payments of
5.75% per annum through December 1997 and variable payments based on the higher
of LIBOR at the beginning of the period or the end of the period for the
remainder of the agreement, in exchange for fixed payments by the swap partner
at 6.44% per annum for the life of the agreement, payable semiannually in
arrears. The amended interest rate swap agreement can be terminated by either
party in 2002, and annually thereafter, for a cash settlement based on the fair
market
12
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT (continued)
value of the amended interest rate swap agreement. Interest and debt issuance
expense is subject to fluctuations in LIBOR during the term of the swap
agreement except during 1997. Foamex L.P. is exposed to credit loss in the event
of nonperformance by the swap partner; however, the occurrence of this event is
not anticipated. The effect of the interest rate swaps described above was a
favorable adjustment to interest and debt issuance expense of $0.8 million and
$1.1 million for the thirteen week periods ended June 29, 1997 and June 30,
1996, respectively, and $1.7 million and $1.9 million for the twenty-six week
periods ended June 29, 1997 and June 30, 1996, respectively.
6. ENVIRONMENTAL MATTERS
As of June 29, 1997, Foamex L.P. has accruals of approximately $4.2
million for environmental matters. In addition, as of June 29, 1997, Foamex L.P.
has net receivables of approximately $1.0 million relating to indemnification
for environmental liabilities, net of an allowance of approximately $1.0 million
relating to potential disagreements regarding the scope of the indemnification.
Foamex L.P. believes that realization of the net receivables established for
indemnification is probable.
On May 5, 1997, there was an accidental chemical spill at one of Foamex
L.P.'s manufacturing facilities that was contained on site. Foamex L.P. is in
the process of disposing of the contaminated soil which is estimated to cost
approximately $0.4 million. The actual cost and the timetable for the clean-up
of the site cannot be predicted with any degree of certainty at this time;
therefore, there can be no assurance that the clean-up of the site will not
result in a more significant environmental liability in the future.
Foamex L.P. has reported to appropriate state authorities that it has
found soil and groundwater contamination in excess of state standards at four
additional facilities and soil contamination in excess of state standards at
three other facilities. Foamex L.P. has begun remediation and is conducting
further investigations into the extent of the contamination at these facilities
and, accordingly, the extent of the remediation that may ultimately be required.
The actual cost and the timetable of any such remediation cannot be predicted
with any degree of certainty at this time. As of June 29, 1997, Foamex L.P. has
environmental accruals of approximately $3.0 million for the remaining potential
remediation costs for these facilities based on engineering estimates.
Federal regulations require that by 1998 all underground storage tanks
("USTs") be removed or upgraded in most states to meet applicable standards.
Foamex L.P. has six USTs that will require removal or permanent in-place closure
by the end of 1998. Due to the age of these tanks, leakage may have occurred
resulting in soil and possibly groundwater contamination. Foamex L.P. has
accrued approximately $0.3 million for the estimated removal and remediation, if
any, associated with the USTs. However, the full extent of contamination and,
accordingly, the actual cost of such remediation cannot be predicted with any
degree of certainty at this time. Foamex L.P. believes that its USTs do not pose
a significant risk of environmental liability because of Foamex L.P.'s
monitoring practices for USTs and conditional approval for permanent in-place
closure for certain USTs. However, there can be no assurance that such USTs will
not result in significant environmental liability in the future.
Foamex L.P. has been designated as a Potentially Responsible Party
("PRP") by the United States Environmental Protection Agency (the "EPA") with
respect to thirteen sites, with an estimated total liability to Foamex L.P. for
the thirteen sites of less than approximately $0.5 million. Estimates of total
cleanup costs and fractional allocations of liability are generally provided by
the EPA or the committee of PRP's with respect to the specified site. In each
case, the participation of Foamex L.P. is considered to be immaterial.
13
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIATED FINANCIAL STATEMENTS (unaudited)
6. ENVIRONMENTAL MATTERS (continued)
Although it is possible that new information or future developments could
require Foamex L.P. to reassess its potential exposure relating to all pending
environmental matters, management believes that, based upon all currently
available information, the resolution of such environmental matters will not
have a material adverse effect on Foamex L.P.'s operations, financial position,
capital expenditures or competitive position. The possibility exists, however,
that new environmental legislation and/or environmental regulations may be
adopted, or other environmental conditions may be found to exist, that may
require expenditures not currently anticipated and that may be material.
7. LITIGATION
As of August 8, 1997, Foamex L.P. and Trace Holdings were two of multiple
defendants in actions filed on behalf of approximately 5,000 persons in various
United States federal and state courts and one Canadian provincial court by
recipients of breast implants, some of which allege substantial damages, but
most of which allege unspecified damages for personal injuries of various types.
Three of these cases seek to allege claims on behalf of all breast implant
recipients or other allegedly affected parties, but no class has been approved
or certified by the court. In addition, three cases have been filed alleging
claims on behalf of approximately 700 residents of Australia and New Zealand.
During 1995, Foamex L.P. and Trace Holdings were granted summary judgments and
dismissed as defendants from all cases in the federal courts of the United
States and the state courts of California. Appeals for these decisions were
withdrawn and the decisions are final. Foamex L.P. believes that the number of
suits and claimants may increase. Although breast implants do not contain foam,
certain silicone gel implants were produced using a polyurethane foam covering
fabricated by independent distributors or fabricators from bulk foam purchased
from Foamex L.P. or Trace Holdings. Neither Foamex L.P. nor Trace Holdings
recommended, authorized or approved the use of its foam for these purposes.
While it is not feasible to predict or determine the outcome of these actions,
based on management's present assessment of the merits of pending claims, after
consultation with the general counsel of Trace Holdings, management believes
that the disposition of matters that are pending or that may reasonably be
anticipated to be asserted should not have a material adverse effect on either
Foamex L.P.'s or Trace Holdings' consolidated financial position or results of
operations. In addition, Foamex L.P. is also indemnified by Trace Holdings for
any such liabilities relating to foam manufactured prior to the capitalization
of Foamex L.P. in October 1990. Although Trace Holdings has paid Foamex L.P.'s
litigation expenses, pursuant to such indemnification, and management believes
Trace Holdings will be in a position to continue to pay such expenses, there can
be no assurance that Trace Holdings will be able to continue to provide such
indemnification. Based on information available at this time with respect to the
potential liability, Foamex L.P. believes that the proceedings should not
ultimately result in any liability that would have a material adverse effect on
the financial position or results of operations of Foamex L.P. If management's
assessment of Foamex L.P.'s liability with respect to these actions is
incorrect, such actions could have a material adverse effect on Foamex L.P.
Foamex L.P. is party to various other lawsuits, both as defendant and
plaintiff, arising in the normal course of business. It is the opinion of
management that the disposition of these lawsuits will not individually or in
the aggregate, have a material adverse effect on the financial position or
results of operations of Foamex L.P. If management's assessment of Foamex L.P.'s
liability with respect to these actions is incorrect, such actions could have a
material adverse effect on Foamex L.P.'s consolidated financial position.
14
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
June 29, December 29,
1997 1996
ASSETS (thousands)
<S> <C> <C>
CASH $1 $1
== ==
LIABILITIES AND STOCKHOLDER'S EQUITY
COMMITMENTS AND CONTINGENCIES $-- $--
-- --
STOCKHOLDER'S EQUITY:
Common stock, par value $.01 per share;
1,000 shares authorized, issued and outstanding -- --
Additional paid-in capital 1 1
-- --
TOTAL STOCKHOLDER'S EQUITY $1 $1
== ==
</TABLE>
The accompanying notes are an integral part of the balance sheets.
15
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS (unaudited)
1. ORGANIZATION
Foamex Capital Corporation ("FCC"), a wholly-owned subsidiary of Foamex
L.P., was formed for the sole purpose of obtaining financing from external
sources.
2. COMMITMENTS AND CONTINGENCIES
FCC is a joint obligor on the following borrowings of Foamex L.P.:
9 7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")
The Senior Subordinated Notes were issued by Foamex L.P. and FCC in a
private placement under Rule 144A of the Securities Act of 1933, as amended, on
June 12, 1997 in connection with the Refinancing Plan. The Senior Subordinated
Notes bear interest at the rate of 9 7/8% per annum payable semiannually on each
June 15 and December 15, commencing December 15, 1997. The Senior Subordinated
Notes mature on June 15, 2007. The Senior Subordinated Notes may be redeemed at
the option of Foamex L.P., in whole or in part, at any time on or after June 15,
2002, initially at 104.938% of their principal amount, plus accrued interest and
liquidated damages, as defined, if any, thereon to the date of redemption and
declining to 100.0% on or after June 15, 2005. In addition, at any time prior to
June 15, 2000, Foamex L.P. may on one or more occasions redeem up to 35.0% of
the initially outstanding principal amount of the Senior Subordinated Notes at a
redemption price equal to 109.875% of the principal amount, plus accrued
interest and liquidated damages, if any, thereon to the date of redemption with
the cash proceeds of one or more Public Equity Offerings, as defined. Upon the
occurrence of a change of control, as defined, each holder of Senior
Subordinated Notes will have the right to require Foamex L.P. to repurchase the
Senior Subordinated Notes at a price equal to 101.0% of the principal amount,
plus accrued interest and liquidated damages, if any, to the date of redemption.
The Senior Subordinated Notes are subordinated in right of payment to all senior
indebtedness and are pari passu in right of payment to two issues of senior
subordinated debentures due 2004 and the subordinated note. The Senior
Subordinated Notes contain certain covenants that will limit, among other
things, the ability of Foamex L.P. (i) to pay distributions or redeem
partnership interests, (ii) to make certain restrictive payments or investments,
(iii) to incur additional indebtedness or issue Preferred Equity Interest, as
defined, (iv) to merge, consolidate or sell all or substantially all of its
assets, or (vi) to enter into certain transactions with affiliates or related
persons. The Senior Subordinated Notes are guaranteed by General Felt and Foamex
Fibers and all current and future domestic subsidiaries of Foamex L.P. and FCC.
Foamex L.P. and FCC have filed a registration statement relating to an
exchange offer in which Foamex L.P. will offer to exchange the Senior
Subordinated Notes issued in the private placement for new notes. The terms of
the new notes will be substantially identical in all respects (including
principal amount, interest rate, maturity and ranking) to the terms of the
Senior Subordinated Notes, except that the new notes will be transferable by
holders thereof without further registration under the Securities Act of 1933,
as amended (except in the case of Senior Subordinated Notes held by affiliates
of the issuers and for certain other holders), and are not subject to any
covenant regarding registration under the Securities Act of 1933, as amended.
The exchange offer is expected to be consummated during the third quarter of
1997.
9 1/2% Senior Secured Notes due 2000 ("Senior Secured Notes")
The Senior Secured Notes were issued on June 3, 1993 and bear interest at the
rate of 9 1/2% per annum payable semiannually on each June 1 and December 1. The
Senior Secured Notes mature on June 1, 2000. The Senior Secured Notes are
collateralized by a first-priority lien on substantially all of the assets of
Foamex L.P. except for receivables,
16
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS (unaudited)
2. COMMITMENTS AND CONTINGENCIES (continued)
real estate and fixtures. The Senior Secured Notes may be redeemed at the option
of Foamex L.P., in whole or in part, at any time on or after June 1, 1998,
initially at 101.583% of their principal amount, plus accrued interest, and
declining to 100.0% on or after June 1, 1999. The Senior Secured Notes have been
guaranteed, on a senior secured basis by General Felt and on a senior unsecured
basis by Foamex International. During 1997 and 1996, Foamex L.P. repurchased
$102.3 million and $9.9 million, respectively, aggregate principal amount of
Senior Secured Notes.
11 1/4% Senior Notes due 2002 ("Senior Notes")
The Senior Notes bear interest at the rate of 11 1/4% per annum payable
semiannually on each April 1 and October 1. The Senior Notes mature on October
1, 2002. The Senior Notes may be redeemed at the option of Foamex L.P., in whole
or in part, at any time on or after October 1, 1997, initially at 104.219% of
their principal amount, plus accrued interest, and declining to 100.0% on or
after October 1, 2000. In October 1994, Foamex L.P. provided certain real
property as collateral for the Senior Notes, with a net book value of $37.8
million at December 29, 1996. The Senior Notes have been guaranteed, on a senior
basis, by General Felt. During 1997 and 1996, Foamex L.P. repurchased $135.6
million and $8.6 million, respectively, aggregate principal amount of Senior
Notes. Foamex L.P. intends to redeem all of the outstanding Senior Notes on
October 1, 1997.
11 7/8% Senior Subordinated Debentures ("Subordinated Debentures")
The Subordinated Debentures bear interest at the rate of 11 7/8% per
annum payable semiannually on each April 1 and October 1. The Subordinated
Debentures mature on October 1, 2004. The Subordinated Debentures may be
redeemed at the option of Foamex L.P., in whole or in part, at any time on or
after October 1, 1997, initially at 105.938% of their principal amount, plus
accrued interest, and declining to 100.0% on or after October 1, 2002. The
Subordinated Debentures are subordinated in right of payment to all senior
indebtedness, including the Senior Secured Notes and the Senior Notes. The
Subordinated Debentures have been guaranteed, on a senior subordinated basis, by
General Felt and rank pari passu in right of payment to the Senior Subordinated
Notes. During 1997 and 1996, Foamex L.P. repurchased $104.9 million and $0.1
million, respectively, aggregate principal amount of Subordinated Debentures.
Foamex L.P. intends to redeem all of the outstanding Subordinated Debentures on
October 1, 1997.
11 7/8% Senior Subordinated Debentures, Series B ("Series B Debentures")
The Series B Debentures were issued July 30, 1993, by Foamex L.P. in an
exchange offer to holders of senior subordinated debentures issued in connection
with the acquisition of General Felt on March 23, 1993. The Series B Debentures
have terms substantially similar to the Subordinated Debentures, except that
holders of the Series B Debentures are entitled to receive proceeds from an
asset sale only if any proceeds remain after an offer to repurchase has been
made to the holders of the Subordinated Debentures. The Series B Debentures have
been guaranteed on a senior subordinated basis by General Felt. During 1997,
Foamex L.P. repurchased $6.9 million of Series B Debentures. Foamex L.P. intends
to redeem all of the outstanding Series B Debentures on October 1, 1997.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Foamex L.P. operates in the flexible polyurethane and advanced polymer
foam products industry, together with its wholly-owned subsidiaries, General
Felt Industries, Inc., Foamex Fibers, Inc., Foamex Canada Inc., Foamex Latin
America, Inc., and Foamex Asia, Inc. The following discussion should be read in
conjunction with the condensed consolidated financial statements and related
notes thereto of Foamex L.P. included in this report. Certain information in
this report contains forward-looking statements and should be read in
conjunction with the discussion regarding forward-looking statements set forth
on pages 3 and 4 of Foamex L.P.'s 1996 Annual Report on Form 10-K.
On June 12, 1997, Foamex International substantially completed a
refinancing plan (the "Refinancing Plan") which included the repurchase of
$342.3 million of aggregate principal amount of Foamex L.P.'s public debt and
$116.7 million of aggregate principal amount of FJPS's senior secured discount
debenture due 2004 and the payment of $5.2 million of Foamex L.P. term loan
borrowings under its old credit facility. Foamex L.P. incurred an extraordinary
loss on the early extinguishment of debt associated with the Refinancing Plan of
approximately $44.5 million. The Refinancing Plan was funded by $347.0 million
of borrowings under a new $480.0 million credit facility (the "New Credit
Facility") and the net proceeds from the issuance of $150.0 million of 9 7/8%
senior subordinated notes due 2007. See Note 5 to the condensed consolidated
financial statements for further discussion. As a result of the Refinancing
Plan, Foamex L.P.'s total long-term debt increased $150.1 million to $546.3
million. Foamex L.P. expects the Refinancing Plan to result in increased
interest expense of approximately $2.5 million in the second half of 1997 as
compared to the first half of 1997, and annualized increased interest expense of
approximately $5.0 million, as compared to the debt structure prior to the
Refinancing Plan, assuming no material changes in interest rates. Foamex L.P.'s
future interest expense will vary based on a variety of factors, including
fluctuation in interest rates in general. As a result of the Refinancing Plan,
variable rate debt comprises a larger percentage of Foamex L.P.'s overall
indebtedness than in the past, and as a result, future fluctuations in interest
rates will have a greater impact on Foamex L.P.'s interest expense than in the
past.
In addition, Foamex International intends to call for redemption on
October 1, 1997 approximately $26.0 million of the approximately $30.0 million
of Foamex L.P.'s outstanding public debt that was not tendered as part of the
Refinancing Plan. The redemption is expected to be funded with borrowings under
the New Credit Facility. In connection with this redemption, Foamex L.P. is
expected to incur an extraordinary loss on the early extinguishment of debt of
approximately $2.6 million in the fourth quarter of 1997.
During July 1997, Foamex International announced the creation of a new
senior management operating committee to simplify Foamex L.P.'s management and
reporting structure and to position Foamex L.P. to achieve its strategic goals
which include: (i) to focus on its core flexible polyurethane operations in the
automotive, carpet cushion, technical, cushioning and furniture markets
(furniture sales were previously combined with cushioning sales), (ii) to
maximize revenue growth by increasing market share in existing markets,
introducing new and enhanced foam products with higher margins and pursuing
international opportunities and (iii) to continue to lower its cost structure.
The principle suppliers to the foam industry announced raw material cost
increases effective April 1997. The impact of the raw material cost increases
were not significant during the second quarter of 1997. However, Foamex L.P.
estimates an unfavorable impact for the raw material cost increases, net of sale
price increases to customers of between $1.5 million to $3.0 million during the
third quarter of 1997. There can be no assurance that chemical suppliers will
not increase raw material costs in the future or that Foamex L.P. will be able
to implement selling price increases to offset any such raw material cost
increases.
During 1996, Foamex L.P. sold Perfect Fit which comprised the home
comfort products business segment of Foamex L.P. Accordingly, the accompanying
condensed consolidated statements of operations for the thirteen
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
week and twenty-six week periods ended June 30, 1996 and the condensed
consolidated statement of cash flows for the twenty-six week period ended June
30, 1996 reflects the home comfort products business segment as discontinued
operations. See Note 2 to the condensed consolidated financial statements for
further discussion.
Operating results for 1997 are expected to be influenced by various
internal and external factors. These factors include, among other things, (i)
continued implementation of the continuous improvement program to improve Foamex
L.P.'s profitability, (ii) additional raw material cost increases, if any, by
Foamex L.P.'s chemical suppliers, (iii) Foamex L.P.'s success in passing on to
its customers selling price increases to recover such raw material cost
increases and (iv) fluctuations in interest rates.
13 Week Period Ended June 29, 1997 Compared to 13 Week Period Ended
June 30, 1996
Results of Operations
Net sales for the second quarter of 1997 were $239.9 million as compared
to $240.4 million in the second quarter of 1996, a decrease of $0.5 million or
0.2%. Carpet cushion products net sales for the second quarter of 1997 decreased
2.4% to $75.0 million from $76.8 million in the second quarter of 1996 primarily
due to decreased net sales volume of certain carpet cushion products resulting
from weak carpet sales and competitive pricing pressure resulting from an excess
supply of trim foam, the primary component of rebond carpet cushion. Cushioning
products net sales for the second quarter of 1997 increased 4.0% to $59.1
million from $56.8 million in the second quarter of 1996 primarily due to an
increase in net sales from both new and existing customers of bedding related
products. Furniture products net sales for the second quarter of 1997 of $26.9
million were consistent as compared to net sales of $26.7 million for the second
quarter of 1996. Automotive products net sales for the second quarter of 1997
decreased 6.4% to $59.3 million from $63.3 million in the second quarter of 1996
primarily due to decreased net sales volume resulting from reduced production of
car and light trucks builds during the second quarter of 1997 and the labor
strikes affecting North American automotive production at both Chrysler and
General Motors plants. Technical products net sales for the second quarter of
1997 increased 16.4% to $19.6 million from $16.9 million in the second quarter
of 1996 primarily due to increased net sales volume.
Gross profit as a percentage of net sales increased to 18.7% for the
second quarter of 1997 from 15.9% in the second quarter 1996 primarily due to
improved material and production efficiencies and manufacturing cost containment
which includes (i) favorable raw material efficiencies and (ii) an increased
favorable impact of the 1995 restructuring and operational plan in the second
quarter of 1997 as compared to the second quarter of 1996.
Operating income increased to $29.1 million for the second quarter of
1997 from $24.6 million in the second quarter of 1996 primarily due to improved
gross profit margins as discussed above, offset by a $2.1 million increase in
selling, general and administrative expenses for the second quarter of 1997. The
increase in selling, general and administrative expenses is primarily due to
increases in employee compensation and incentives, research and development
costs, and travel and promotion costs associated with the launching of new
products and international expansion.
Income from continuing operations increased to $16.4 million for the
second quarter of 1997 as compared to $11.7 million for the second quarter of
1996. The increase is primarily due to the reasons cited above, offset by an
increase in interest and debt issuance expense of $0.5 million. The increase in
interest and debt issuance expense is primarily due to a decrease in the
favorable impact from the interest rate swap agreements in the second quarter of
1997 as compared to the second quarter of 1996. Loss from discontinued
operations in the second quarter of 1996 represents the loss on disposal and the
operating loss of Perfect Fit which was sold during 1996. See Note 2 to the
condensed consolidated financial statements for further discussion. The decrease
in the effective income tax rate for continuing operations for the second
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
quarter of 1997 as compared to the second quarter of 1996 is primarily due to a
decrease in pre-tax earnings and the related tax provision of a subsidiary that
files federal income tax returns.
The extraordinary loss on early extinguishment of debt of approximately
$44.9 million primarily relates to premium and consent fee payments, the
write-off of debt issuance costs and other charges associated with the early
extinguishment of approximately $351.3 million of aggregate principal amount of
debt in connection with the Refinancing Plan and other debt extinguishment in
the second quarter of 1997. See Note 5 to condensed consolidated financial
statements for further discussion.
26 Week Period Ended June 29, 1997 Compared to 26 Week Period Ended
June 30, 1996
Results of Operations
Net sales for 1997 were $469.0 million as compared to $459.6 million in
1996, an increase of $9.4 million or 2.1%. Carpet cushion products net sales for
1997 increased 1.8% to $142.9 million from $140.3 million in 1996 primarily due
to increased net sales during the first quarter of 1997 which resulted from the
effect of increased selling prices that were initiated late in the second
quarter of 1996 as well as increased shipments of certain carpet cushion
products offset by increased competitive pricing pressure during the second
quarter of 1997 as compared to 1996. Cushioning products net sales for 1997
increased 3.9% to $115.4 million from $111.1 million in 1996 primarily due to an
increase in net sales from both new and existing customers of bedding related
products. Furniture products net sales for 1997 of $54.5 million were consistent
as compared to net sales of $54.9 million for 1996. Automotive products net
sales for 1997 of $119.0 million were consistent with net sales of $119.3
million in 1996 primarily due to increased selling prices implemented during the
first quarter of 1996 offset by reduced net sales volume in 1997 as compared to
1996 due to the decreased net sales volume resulting from reduced production of
car and light truck builds and the labor strikes at both Chrysler and General
Motors plants. Technical products net sales for 1997 increased 9.2% to $37.1
million from $34.0 million in 1996 primarily due to increased net sales volume.
Gross profit as a percentage of net sales increased to 18.7% for 1997
from 16.1% in 1996 primarily due to selling price increases and improved
material and production efficiencies and manufacturing cost containment which
includes (i) the impact during 1997 of the selling prices initiated in 1996 to
offset previous raw material cost increases, (ii) favorable raw material
efficiencies and (iii) an increased favorable impact of the 1995 restructuring
and operational plan in 1997 as compared to 1996.
Operating income increased to $56.2 million for 1997 from $47.1 million
in 1996 primarily due to improved gross profit margins as discussed above,
offset by a $4.2 million increase in selling, general and administrative
expenses for the second quarter of 1997. The increase in selling, general and
administrative expenses is primarily due to increases in employee compensation
and incentives, research and development costs, and travel and promotion costs
associated with the launching of new products and international expansion.
Income from continuing operations increased to $32.6 million for 1997 as
compared to $23.2 million in 1996. The increase is primarily due to the reasons
cited above. Loss from discontinued operations for 1996 represents the loss on
disposal and the operating loss of Perfect Fit which was sold during 1996. See
Note 2 to the condensed consolidated financial statements for further
discussion. The decrease in the effective income tax rate for continuing
operations for 1997 as compared to 1996 is primarily due to a decrease in
pre-tax earnings and the related tax provision of a subsidiary that files
federal income tax returns.
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The extraordinary loss on early extinguishment of debt of approximately
$45.5 million relates to premium and consent fee payments, the write-off of debt
issuance costs and other charges associated with the early extinguishment of
approximately $359.3 million of aggregate principal amount of debt in connection
with the Refinancing Plan and other debt extinguishment during 1997. See Note 5
to the condensed consolidated financial statements for further discussion.
Foamex Capital Corporation ("FCC")
FCC is solely a co-issuer of certain indebtedness of Foamex L.P. has no
other material operations.
Liquidity and Capital Resources
Foamex L.P.'s operating cash requirements consist principally of working
capital requirements, scheduled payments of principal and interest on
outstanding indebtedness and capital expenditures. Foamex L.P. believes that
cash flow from operating activities, cash on hand and periodic borrowings under
revolving credit agreements, if necessary, will be adequate to meet its
operating cash requirements. The ability to meet operating cash requirements
could be impaired if Foamex L.P. were to fail to comply with any of the
covenants contained in its credit agreements or indentures and such
noncompliance was not cured by Foamex L.P. or waived by the lenders or
bondholders. Foamex L.P. was in compliance with such covenants as of June 29,
1997 and expects to be in compliance with such covenants for the foreseeable
future.
Cash and cash equivalents decreased $16.5 million during 1997 to $4.5
million at June 29, 1997 from $21.0 million at December 29, 1996 primarily due
to $16.4 million of cash used for capital expenditures, $5.9 million of cash
distributions and $2.2 million of net cash used for operating activities offset
by $8.1 million of cash provided from financing activities after considering the
decrease in restricted cash and the purchase of the Discount Debentures. The
$8.1 million of cash provided by financing activities consisted of proceeds from
long-term debt, revolving loan and short-term borrowings of $502.8 million and
the decrease of restricted cash of $12.1 million, offset by the repayment of
long-term debt of $363.4 million, $105.8 million of cash used for the purchase
of the Discount Debentures, and cash used for debt issuance costs of $14.7
million and premium and consent fee payments and other cash charges associated
with the Refinancing Plan and other debt extinguishment of $22.9 million. Cash
flow from continuing operating activities decreased $17.1 million to a use of
$2.2 million of cash for 1997 as compared to cash provided of $14.9 million for
1996. Cash flow from continuing operating activities decreased for 1997 as
compared to 1996 primarily due to the use of cash for operating assets offset by
an increase of $9.4 million in income from continuing operations.
Working capital increased $12.7 million for 1997 to $149.8 million at
June 29, 1997 from $137.1 million at December 29, 1996. The increase in working
capital is primarily due to improved operating results from continuing
operations. The net operating assets and liabilities (comprised of accounts
receivable, inventories and accounts payable) increased $18.9 million to $162.9
million at June 29, 1997 from $144.0 million at December 29, 1996 primarily due
to an increase in accounts receivable and inventories and a decrease in accounts
payable. The increase in accounts receivable is primarily due to an increase in
net sales for June 1997 as compared to December 1996. The increase in
inventories is due to increased sales during 1997. The decrease in accounts
payable is primarily due to the timing of payments.
During 1997, Foamex L.P. spent approximately $16.4 million on capital
expenditures and expects to maintain or reduce spending for capital expenditures
for the foreseeable future since significant capital projects (e.g. the new
Mexico City facility) are expected to be completed during 1997.
21
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
As of June 29, 1997, there was approximately $49.0 million of outstanding
revolving credit borrowings under the New Credit Facility with unused
availability of approximately $84.9 million. Borrowings by Foamex Canada Inc. as
of June 29, 1997 were approximately $3.5 million under a revolving credit
agreement with unused availability of approximately $1.0 million. Borrowings by
Foamex Latin America, Inc. as of June 29, 1997 were approximately $0.5 million
under a revolving credit agreement with unused availability of approximately
$1.5 million.
Interest Rate Swaps
In connection with the Refinancing Plan, Foamex L.P.'s existing interest
rate swap agreements with a notional amount of $300.0 million were considered to
be effectively terminated since the underlying debt was extinguished. These
interest rate swap agreements had an estimated fair value liability of $8.2
million at the date of the Refinancing Plan which is included in the
extraordinary loss on the early extinguishment of debt. In lieu of a cash
payment for the estimated fair value of the existing interest rate swap
agreements, Foamex L.P. entered into an amendment of the existing interest rate
swap agreements resulting in one interest rate swap agreement with a notional
amount of $150.0 million through June 2007. Accordingly, the $8.2 million fair
value liability has been recorded as a deferred credit which will be amortized
as a reduction in interest and debt issuance expense on a straight-line basis
over the life of the amended interest rate swap agreement. Under the amended
interest rate swap agreement, Foamex L.P. is obligated to make fixed payments of
5.75% per annum through December 1997 and variable payments based on the higher
of LIBOR at the beginning of the period or the end of the period for the
remainder of the agreement, in exchange for fixed payments by the swap partner
at 6.44% per annum for the life of the agreement, payable semiannually in
arrears. The amended interest rate swap agreement can be terminated by either
party in June 2002, and annually thereafter, for a cash settlement based on the
fair market value of the amended interest rate swap agreement. Interest and debt
issuance expense is subject to fluctuations in LIBOR during the term of the swap
agreement except during 1997. Foamex L.P. is exposed to credit loss in the event
of nonperformance by the swap partner; however, the occurrence of this event is
not anticipated. The effect of the interest rate swaps described above was a
favorable adjustment to interest and debt issuance expense of $0.8 million and
$1.1 million for the thirteen week periods ended June 29, 1997 and June 30,
1996, respectively, and $1.7 million and $1.9 million for the twenty-six week
periods ended June 29, 1997 and June 30, 1996, respectively.
Environmental Matters
Foamex L.P. is subject to extensive and changing environmental laws and
regulations. Expenditures to date in connection with Foamex L.P.'s compliance
with such laws and regulations have not had a material adverse effect on its
operations, financial position, capital expenditures or competitive position.
The amount of liabilities recorded by Foamex L.P. in connection with
environmental matters as of June 29, 1997 was approximately $4.2 million. In
addition, as of June 29, 1997, Foamex L.P. has net receivables of approximately
$1.0 million for indemnification of environmental liabilities from former
owners, net of a $1.0 million allowance relating to potential disagreements
regarding the scope of the indemnification. Although it is possible that new
information or future developments could require Foamex L.P. to reassess its
potential exposure to all pending environmental matters, including those
described in the footnotes to Foamex L.P.'s condensed consolidated financial
statements, management believes that, based upon all currently available
information, the resolution of all such pending environmental matters will not
have a material adverse effect on Foamex L.P.'s operations, financial position,
capital expenditures or competitive position.
The possibility exists, however, that new environmental legislation
and/or environmental regulations may be adopted, or other environmental
conditions may be found to exist, that may require expenditures not currently
anticipated and that may be material.
22
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Inflation and Other Matters
There was no significant impact on Foamex L.P.'s operations as a result
of inflation for the periods presented. In some circumstances, market conditions
or customer expectations may prevent Foamex L.P. from increasing the price of
its products to offset the inflationary pressures that may increase its costs in
the future. Effective in January 1997, Foamex L.P.'s operations in Mexico became
subject to highly inflationary accounting for financial reporting purposes.
Translation adjustments resulting from fluctuations in the exchange rate between
the Mexican Peso and the U.S. dollar are included in Foamex L.P.'s consolidated
statement of operations as compared to partners' equity (deficit). The affect of
translations adjustments on the 1997 results of operations have been
insignificant.
Foamex L.P.'s automotive products customers are predominantly automotive
original equipment manufacturers or other automotive suppliers. As such, the
sales of these product lines are directly related to the overall level of
passenger car and light truck production in North America. Also, Foamex L.P.'s
sales are sensitive to sales of new and existing homes, changes in personal
disposable income and seasonality. Foamex L.P. typically experiences two
seasonally slow periods during each year, in early July and in late December,
due to scheduled plant shutdowns and holidays.
23
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to the description of the legal proceedings contained
in the Foamex L.P. Annual Report on Form 10-K for the fiscal year ended
December 29, 1996 and in Foamex L.P.'s Quarterly Report for the fiscal
quarter ended March 30, 1997.
The information from Notes 6 and 7 of the condensed consolidated
financial statements of Foamex L.P. and subsidiaries as of June 29,
1997 (unaudited) is incorporated herein by reference.
Item 2. Changes in Securities.
As part of the Refinancing Plan, Foamex L.P. solicited the consent of
holders of the 9 1/2% senior secured notes due 2000, 11 1/4% senior
notes due 2002, 11 7/8% senior subordinated debentures due 2004, 11
7/8% senior subordinated debentures due 2004, series B, and FJPS senior
secured discount debentures due 2004 ("Discount Debentures")
(collectively, the "Notes") to certain proposed amendments to the
indentures (collectively, the "Indentures") governing each issue of
Notes (the "Proposed Amendments"). The Proposed Amendments became
effective upon consummation of the Refinancing Plan on June 12, 1997
(except in the case of the Proposed Amendments for the Discount
Debentures, as all of the outstanding Discount Debentures were
purchased on such date), and (i) eliminated substantially all
restrictive covenants in the Indentures with respect to each issue of
Notes, (ii) eliminated all events of default in the Indentures, other
than nonpayment of principal of, interest on, or redemption payment
with respect to, the Notes and certain bankruptcy events, (iii) removed
certain obligations in connection with the defeasance of the Notes, and
(iv) with respect to the 11 1/4% senior notes due 2002 and 9 1/2%
senior secured notes due 2000 provided for the granting of pari passu
liens in the collateral for such Notes with payment priority preserved
for the holders of the Notes.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
As part of the Refinancing Plan, Foamex L.P. solicited the consent of
holders of Notes to the Proposed Amendments. See Part II, Item 2 above.
The vote on the Proposed Amendments was conducted based on the
outstanding principal amount of the Notes and was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Issue of Notes For Against Abstain
9 1/2% senior secured notes due 2000 $ 99,770,000 $0 $0
11 1/4% senior notes due 2002 $130,085,000 $0 $0
11 7/8% senior subordinated
debentures due 2004 $105,482,000 $0 $0
11 7/8% senior subordinated
discount debentures due 2004 $ 6,955,000 $0 $0
Discount Debentures $116,745,000 $0 $0
</TABLE>
24
<PAGE>
Item 5. Other Information.
None.
Item 6. Exhibits and Financial Statement Schedules.
(a) Exhibits
3.1(a) - Certificate of Limited Partnership of Foamex L.P. ("Foamex")
3.2.1(a) - Fourth Amended and Restated Agreement of Limited Partnership
of Foamex L.P., dated as of December 14, 1993, by and among
FMXI Inc. ("FMXI") and Trace Foam Company, Inc. ("Trace
Foam"), as general partners, and Foamex L.P. Inc. ("Foamex
L.P."), as a limited partner (the "Partnership Agreement").
3.2.2(b) - First Amendment to the Partnership Agreement, dated June 28,
1994.
3.2.3(c) - Second Amendment to the Partnership Agreement, dated June
12, 1997.
3.3(a) - Certificate of Incorporation of FMXI.
3.4(a) - By-laws of FMXI.
3.5(k) - Certificate of Incorporation of Foamex Capital Corporation
("FCC").
3.6(k) - By-laws of FCC.
3.7(g) - Certificate of Incorporation of General Felt Industries,
Inc. ("General Felt").
3.8(g) - By-laws of General Felt.
3.9(p) - Certificate of Incorporation of Foamex Fibers, Inc. ("Foamex
Fibers")
3.10(p) - By-laws of Foamex Fibers.
4.1.1(d) - Indenture, dated as of June 12, 1997, by and among Foamex,
FCC, the Subsidiary Guarantors and The Bank of New York, as
Trustee, relating to $150,000,000 principal amount of 9 7/8%
Senior Subordinated Notes due 2007, including the form of
Senior Subordinated Note and Subsidiary Guarantee.
4.1.2(d) - Registration Rights Agreement, dated as of June 12, 1997, by
and among Foamex, FCC, General Felt, Foamex Fibers, and all
future direct or indirect domestic subsidiaries of Foamex or
FCC, and Donaldson, Lufkin & Jenrette Securities
Corporation, Salomon Brothers Inc. and Scotia Capital
Markets, as Initial Purchasers.
4.2.1(e) - Indenture, dated as of June 3, 1993, among Foamex and FCC,
as joint and several obligors, General Felt, as Guarantor,
and Shawmut Bank, National Association ("Shawmut"), as
trustee, relating to $160,000,000 principal amount of 9 1/2%
Senior Secured Notes due 2000, including the form of Senior
Secured Note.
4.2.2(a) - First Supplemental Indenture, dated as of November 18, 1993,
among Foamex and FCC, as Issuers, General Felt and Perfect
Fit Industries, Inc. ("Perfect Fit"), as Guarantors and
Shawmut, as trustee, relating to the Senior Secured Notes.
4.2.3(a) - Second Supplemental Indenture, dated as of December 14,
1993, among Foamex and FCC, as Issuers, Foamex L.P., General
Felt and Perfect Fit, as Guarantors and Shawmut, as trustee,
relating to the Senior Secured Notes.
4.2.4(f) - Third Supplemental Indenture, dated as of August 1, 1996, by
and among Foamex L.P. and FCC, as Issuers, Foamex L.P., as
parent guarantor, General Felt, as guarantor, Perfect Fit,
as withdrawing guarantor, and Fleet National Bank ("Fleet"),
as trustee relating to the Senior Secured Notes.
4.2.5(c) - Fourth Supplemental Indenture, dated as of May 28, 1997, by
and among Foamex and FCC, as Issuers, Foamex L.P., as Parent
Guarantor, General Felt, as Guarantor, and Fleet, as
Trustee.
4.2.6(e) - Company Pledge Agreement, dated as of June 3, 1993, by
Foamex in favor of Shawmut, as trustee for the holders of
the Senior Secured Notes.
4.2.7(p) - Amendment No. 1 to Company (Foamex L.P.) Pledge Agreement,
dated June 12, 1997.
4.2.8(e) - Company Pledge Agreement, dated as of June 3, 1993, by FCC
in favor of Shawmut, as trustee for the holders of the
Senior Secured Notes.
25
<PAGE>
4.2.9(p) - Amendment No. 1 to Company (FCC) Pledge Agreement, dated
June 12, 1997.
4.2.10(e) - Subsidiary Pledge Agreement, dated as of June 3, 1993, by
General Felt in favor of Shawmut, as trustee for the holders
of the Senior Secured Notes.
4.2.11(p) - Amendment No. 1 to Subsidiary (General Felt) Pledge
Agreement, dated June 12, 1997.
4.2.12(e) - Company Security Agreement, dated as of June 3, 1993, by
Foamex and FCC in favor of Shawmut, as trustee for the
holders of the Senior Secured Notes.
4.2.13(p) - Amendment No. 1 to Company Security Agreement, dated June
12, 1997 (Foamex and FCC).
4.2.14(e) - Subsidiary Security Agreement, dated as of June 3, 1993, by
General Felt in favor of Shawmut, as trustee for the holders
of the Senior Secured Notes.
4.2.15(p) - Amendment No. 1 to Subsidiary Security Agreement, dated June
12, 1997 (General Felt).
4.2.16(e) - Collateral Assignment of Patents and Trademarks, dated as of
June 3, 1993, by Foamex L.P. in favor of Shawmut, as trustee
for the holders of the Senior Secured Notes.
4.2.17(p) - Amendment No. 1 to Collateral Assignment of Patents and
Trademarks (Foamex), dated June 12, 1997.
4.2.18(e) - Collateral Assignment of Patents and Trademarks, dated as of
June 3, 1993, by FCC in favor of Shawmut, as trustee for the
holders of the Senior Secured Notes.
4.2.19(p) - Amendment No. 1 to Collateral Assignment of Patents and
Trademarks (FCC), dated June 12, 1997.
4.2.20(e) - Collateral Assignment of Patents and Trademarks, dated as of
June 3, 1993, by General Felt in favor of Shawmut, as
trustee for the holders of the Senior Secured Notes.
4.2.21(p) - Amendment No.1 to Collateral Assignment of Patents and
Trademarks (General Felt), dated June 12, 1997.
4.2.22(p) - Amended and Restated Receivables Security Agreement, by and
among Fleet National Bank, Citicorp USA, Inc. and The Bank
of Nova Scotia, dated as of June 12, 1997.
4.2.23(p) - Intercreditor Agreement by and among Fleet, Citicorp USA,
Inc., and The Bank of Nova Scotia, dated as of June 12,
1997,
4.3.1(g) - Indenture, dated as of October 13, 1992, among Foamex, FCC,
and The Connecticut National Bank, as trustee, relating to
$150,000,000 principal amount of 113% Senior Notes due 2002,
including form of Senior Note.
4.3.2(h) - First Supplemental Indenture, dated as of March 23, 1993,
among Foamex and FCC, as joint and several obligors, General
Felt, as Guarantor, and Shawmut, as trustee, relating to the
Senior Notes.
4.3.3(a) - Second Supplemental Indenture, dated as of November 18,
1993, among Foamex and FCC, as Issuers, General Felt and
Perfect Fit, as Guarantors, and Shawmut, as trustee,
relating to the Senior Notes.
4.3.4(a) - Third Supplemental Indenture, dated as of December 14, 1993,
among Foamex L.P. and FCC, as Issuers, Foamex L.P., General
Felt and Perfect Fit, as Guarantors, and Shawmut, as
trustee, relating to the Senior Notes.
4.3.5(i) - Fourth Supplemental Indenture, dated as of October 31, 1994,
among Foamex and FCC as Issuers, Foamex L.P. as Parent
Guarantor, General Felt and Perfect Fit, as Guarantors and
Shawmut, as Trustee, relating to the Senior Notes.
4.3.6(j) - Fifth Supplemental Indenture, dated as of August 1, 1996, by
and among Foamex and FCC, as issuers, Foamex L.P. as Parent
Guarantor, General Felt, as Issuers, Foamex L.P., as Parent
Guarantor, General Felt, as guarantor, Perfect Fit, as
withdrawing guarantor, and Fleet, as trustee relating to the
Senior Notes.
4.3.7(c) - Sixth Supplemental Indenture, dated as of May 28, 1997, by
and among Foamex and FCC, as Issuers, Foamex L.P., as Parent
Guarantor, GFI, as Guarantor, and Fleet, as Trustee.
4.3.8(p) - Intercreditor Agreement by and among Fleet, Citicorp USA,
Inc. and The Bank of Nova Scotia, dated as of June 12, 1997.
26
<PAGE>
4.4.1(g) - Indenture, dated as of October 13, 1992, among Foamex, FCC
and Shawmut, as trustee, relating to $126,000,000 principal
amount of 11f% Senior Subordinated Debentures due 2004,
including form of Senior Subordinated Debenture.
4.4.2(h) - First Supplemental Indenture, dated as of March 23, 1993,
among Foamex L.P. and FCC, as joint and several obligors,
General Felt, as guarantor, and Shawmut, as trustee,
relating to the Senior Subordinated Debentures.
4.4.3(a) - Second Supplemental Indenture, dated as of November 18,
1993, among Foamex and FCC, as Issuers, General Felt and
Perfect Fit, as Guarantors, and Shawmut, as trustee,
relating to the Senior Subordinated Debentures.
4.4.4(e) - Third Supplemental Indenture, dated as of December 14, 1993,
among Foamex L.P. and FCC, as Issuers, Foamex L.P., General
Felt and Perfect Fit, as Guarantors, and Shawmut, as
trustee, relating to the Senior Subordinated Debentures.
4.4.5(j) - Fourth Supplemental Indenture, dated as of August 1, 1996,
among Foamex L.P. and FCC, as Issuers, Foamex L.P., as
Parent Guarantor, General Felt, as Guarantor, Perfect Fit,
as withdrawing guarantor, and Fleet, as trustee, relating to
the Senior Subordinated Debentures.
4.4.6(c) - Fifth Supplemental Indenture, dated as of May 28, 1997, by
and among Foamex and FCC, as Issuers, Foamex L.P., as Parent
Guarantor, General Felt, as Guarantor, and Fleet, as
Trustee.
4.5(d) - Credit Agreement, dated as of June 12, 1997, by and among
Foamex, General Felt, Trace Foam, FMXI, the institutions
from time to time party thereto as lenders, the institutions
from time to time party thereto as issuing banks, and
Citicorp USA, Inc. and The Bank of Nova Scotia, as
Administrative Agents.
4.6(j) - Commitment letter, dated July 9, 1996, from The Bank of Nova
Scotia to Foamex Canada Inc.
4.7(a) - Subordinated Promissory Note, dated as of May 6, 1993, in
the original principal amount of $7,014,864 executed by
Foamex L.P. to John Rallis ("Rallis").
4.8(a) - Marely Loan Commitment Agreement, dated as of December 14,
1993, by and between Foamex L.P. and Marely s.a. ("Marely").
4.9(a) - DLJ Loan Commitment Agreement, dated as of December 14,
1993, by and between Foamex L.P. and DLJ Funding, Inc. ("DLJ
Funding").
4.10(p) - Promissory Note, dated June 12, 1997, in the aggregate
principal amount of $5,000,000, executed by Trace Holdings
to Foamex.
4.10.1(p) - Promissory Note, dated June 12, 1997, in the aggregate
principal amount of $4,794,828, executed by Trace Holdings
to Foamex.
10.1.1(p) - Amendment to Master Agreement, dated as of June 5, 1997,
between Citibank, N.A. and Foamex.
10.1.2(p) - Amended confirmation, dated as of June 13, 1997, between
Citibank, N.A. and Foamex.
10.2(h) - Reimbursement Agreement, dated as of March 23, 1993, between
Trace Holdings and General Felt.
10.3(h) - Shareholder Agreement, dated December 31, 1992, among
Recticel, s.a. ("Recticel"), Recticel Holding Noord B.V.,
Foamex L.P., Beamech Group Limited, LME-Beamech, Inc., James
Brian Blackwell, and Prefoam AG relating to foam technology
sharing arrangement.
10.4.1(k) - Asset Transfer Agreement, dated as of October 2, 1990,
between Trace Holdings and Foamex (the "Trace Holdings Asset
Transfer Agreement").
10.4.2(k) - First Amendment, dated as of December 19, 1991, to the Trace
Holdings Asset Transfer Agreement.
10.4.3(k) - Amended and Restated Guaranty, dated as of December 19,
1991, made by Trace Foam in favor of Foamex L.P.
10.5.1(k) - Asset Transfer Agreement, dated as of October 2, 1990,
between RFC and Foamex L.P. (the "RFC Asset Transfer
Agreement").
10.5.2(k) - First Amendment, dated as of December 19, 1991, to the RFC
Asset Transfer Agreement.
10.5.3(k) - Schedule 5.03 to the RFC Asset Transfer Agreement (the "5.03
Protocol").
27
<PAGE>
10.5.4(h) - The 5.03 Protocol Assumption Agreement, dated as of October
13, 1992, between RFC and Foamex L.P.
10.5.5(h) - Letter Agreement between Trace Holdings and Recticel
regarding the Recticel Guaranty, dated as of July 22, 1992.
10.6(l) - Supply Agreement, dated June 28, 1994, between Foamex L.P.
and Foamex L.P.
10.7.1(l) - First Amended and Restated Tax Sharing Agreement, dated as
of December 14, 1993, among Foamex, Trace Foam, FMXI and
Foamex L.P.
10.7.2(d) - First Amendment to Amended and Restated Tax Sharing
Agreement of Foamex, dated as of June 12, 1997, by and among
Foamex, Foamex L.P., FMXI, Inc. and Trace Foam.
10.8.1(m) - Tax Distribution Advance Agreement, dated as of December 11,
1996, by and between Foamex and Foamex-JPS Automotive.
10.8.2(d) - Amendment No. 1 to Tax Distribution Advance Agreement, dated
as of June 12, 1997, by and between Foamex L.P. and Foamex.
10.9.1(h) - Trace Foam Management Agreement between Foamex and Trace
Foam, dated as of October 13, 1992.
10.9.2(l) - Affirmation Agreement re: Management Agreement, dated as of
December 14, 1993, between Foamex and Trace Foam.
10.9.3(d) - First Amendment to Management Agreement, dated as of June
12, 1997, by and between Foamex and Trace Foam.
10.10.1(k) - Salaried Incentive Plan of Foamex and Subsidiaries.
10.10.2(k) - Trace Holdings 1987 Nonqualified Stock Option Plan.
10.10.3(k) - Equity Growth Participation Program.
10.10.4(k)(o) - General Felt Industries, Inc. Retirement Plan for Salaried
Employees, effective as of January 1, 1995.
10.10.5(e)(o) - Foamex L.P. Salaried Retirement Plan (formerly known as the
Foamex L.P. Products, Inc. Salaried Employee Retirement
Plan), as amended, effective July 1, 1994.
10.10.6(n) - Foamex/General Felt 401(k) Savings Plan dated July 1, 1995.
10.10.7(a) - Foamex L.P.'s 1993 Stock Option Plan.
10.10.8(a) - Foamex L.P.'s Non-Employee Director Compensation Plan.
10.11.1(o) - Employment Agreement, dated as of February 1, 1994, by and
between Foamex L.P. and William H. Bundy.
10.11.2(q) - Employment Agreement, dated as of July 26, 1995, by and
between Foamex L.P. and Salvatore J. Bonanno.
10.12(a) - Warrant Exchange Agreement, dated as of December 14, 1993,
by and between Foamex L.P. and Marely.
10.13(a) - Warrant Exchange Agreement, dated as of December 14, 1993,
by and between Foamex L.P. and DLJ Funding.
10.14(o) - Stock Purchase Agreement, dated as of December 23, 1993, by
and between Transformacion de
27 - Financial Data Schedule.
- ----------------------------
(a) Incorporated herein by reference to the Exhibit to Foamex L.P.'s
Registration Statement on Form S-1, Registration No. 33-69606.
(b) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
for the fiscal year ended January 1, 1995.
(c) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex reporting an event that occurred May 28, 1997.
28
<PAGE>
(d) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex reporting an event that occurred June 12, 1997.
(e) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex and FCC on Form S-4, Registration No. 33-65158.
(f) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
for the quarterly period ended June 30, 1996.
(g) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex, FCC and General Felt on Form S-1, Registration Nos.
33-60888, 33-60888-01, and 33-60888-02.
(h) Incorporated herein by reference to the Exhibit to the Form 10-K Statement
of Foamex and FCC for fiscal 1992.
(i) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for fiscal 1994.
(j) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
for the quarterly period ended September 30, 1996.
(k) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex and FCC on Form S-1, Registration Nos. 33-49976 and
33-49976-01.
(l) Incorporated herein by reference to the Exhibit to the Registration
Statement of FJPS, FJCC and Foamex L.P. on Form S-4, Registration No.
33-82028.
(m) Incorporated herein by reference to the Exhibit to the Annual Report on
Form 10-K of Foamex for the fiscal year ended December 29, 1996.
(n) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
for the quarterly period ended July 2, 1995.
(o) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for fiscal 1993.
(p) Incorporated herein by reference to the Exhibit in the Registration
Statement of Foamex on Form S-4, Registration No. 333-30291.
(q) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for the fiscal year ended December 31, 1995.
Certain instruments defining the rights of security holders have been
excluded herefrom in accordance with Item 601(b)(4)(iii) of Regulation S-K. The
registrant hereby agrees to furnish a copy of any such instrument to the
Commission upon request.
(b) Foamex L.P. filed the following Current Reports on Form 8-K:
Form 8-K reporting an event that occurred on May 29, 1997.
Form 8-K reporting an event that occurred on June 12, 1997.
29
<PAGE>
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
FOAMEX L.P.
By: FMXI, INC.
General Partner
Date: August 13, 1997 By:/s/ Kenneth R. Fuette
Kenneth R. Fuette
Chief Financial Officer
FOAMEX CAPITAL CORPORATION
Date: August 13, 1997 By:/s/ Kenneth R. Fuette
Kenneth R. Fuette
Chief Financial Officer
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