SECURITIES AND EXCHANGE COMMISSION
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 28, 1998
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 L.P. and Foamex Capital Corporation meet 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 12, 1998 was 1,000.
Page 1 of 30
Exhibit List on Page 24 of 30
<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 28, 1998 and June 29, 1997 3
Condensed Consolidated Balance Sheets as of June 28,
1998 and December 28, 1997 4
Condensed Consolidated Statements of Cash Flows -
Twenty-Six Week Periods Ended June 28, 1998 and
June 29, 1997 5
Notes to Condensed Consolidated Financial Statements 6
Foamex Capital Corporation
Balance Sheets as of June 28, 1998 and December 28, 1997 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 24
Signatures 30
<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 28, June 29, June 28, June 29,
1998 1997 1998 1997
(thousands)
<S> <C> <C> <C> <C>
NET SALES $263,347 $199,491 $547,892 $393,625
COST OF GOODS SOLD 214,794 164,876 455,776 322,169
--------- --------- --------- ---------
GROSS PROFIT 48,553 34,615 92,116 71,456
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 17,030 10,631 34,796 21,754
--------- --------- --------- ---------
INCOME FROM OPERATIONS 31,523 23,984 57,320 49,702
INTEREST AND DEBT ISSUANCE EXPENSE 15,818 10,836 33,493 21,502
OTHER INCOME (EXPENSE), NET (306) 750 (580) 1,571
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES 15,399 13,898 23,247 29,771
PROVISION FOR INCOME TAXES 808 481 1,533 849
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 14,591 13,417 21,714 28,922
LOSS FROM DISCONTINUED OPERATIONS -- -- -- --
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT (72) (44,859) (3,195) (45,538)
--------- --------- --------- ---------
NET INCOME (LOSS) $14,519 $(31,442) $18,519 $(16,616)
========= ========= ========= =========
</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 28, December 28,
ASSETS 1998 1997
--------- ---------
CURRENT ASSETS: (thousands)
Cash and cash equivalents $4,697 $8,982
Accounts receivable, net 144,325 138,571
Inventories 116,588 112,094
Accounts receivable, related party 21,021 12,823
Other current assets 52,063 32,519
--------- ---------
Total current assets 338,694 304,989
PROPERTY, PLANT AND EQUIPMENT, NET 207,409 205,705
COST IN EXCESS OF ASSETS ACQUIRED, NET 182,490 184,523
DEBT ISSUANCE COSTS, NET 14,938 18,889
OTHER ASSETS 20,578 21,831
--------- ---------
TOTAL ASSETS $764,109 $735,937
========= =========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings $7,320 $6,598
Current portion of long-term debt 4,347 12,161
Accounts payable 96,455 110,640
Accounts payable - related parties 5,026 11,662
Accrued interest 9,931 10,655
Other accrued liabilities 41,669 47,119
--------- ---------
Total current liabilities 164,748 198,835
LONG-TERM DEBT 683,853 726,649
LONG-TERM DEBT - RELATED PARTY 34,000 38,800
OTHER LIABILITIES 28,976 31,076
--------- ---------
Total liabilities 911,577 995,360
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
PARTNERS' EQUITY (DEFICIT):
General partners (113,699) (122,304)
Limited partners -- --
Notes receivable from partner (16,118) (16,118)
Investment in General Felt -- (103,121)
Accumulated other comprehensive income (7,857) (8,086)
Other (9,794) (9,794)
--------- ---------
Total partners' equity (deficit) (147,468) (259,423)
--------- ---------
TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT) $764,109 $735,937
========= =========
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 28, June 29,
1998 1997
--------- ---------
OPERATING ACTIVITIES: (thousands)
<S> <C> <C>
Net income (loss) $18,519 $(16,616)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 15,502 8,008
Amortization of debt issuance costs and debt discount (33) 1,370
Extraordinary loss on extinguishment of debt 2,857 22,620
Other operating activities 3,959 (1,143)
Changes in operating assets and liabilities (75,250) (37,514)
--------- ---------
Net cash used for operating activities (34,446) (23,275)
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (14,609) (15,366)
Acquisitions, net of cash acquired (3,899) --
Purchase of FJPS senior secured discount debentures -- (105,829)
Proceeds from (payments for) note receivable - related party (424) 9,465
Other investing activities (451) 34
--------- ---------
Net cash used for investing activities (19,383) (111,696)
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from short-term borrowings 722 256
Proceeds from revolving loans 82,426 49,000
Proceeds from long-term debt 129,000 453,500
Repayment of long-term debt (132,318) (363,392)
Repayments of long-term debt - related party (4,800) --
Transfer of General Felt common stock (3,898) --
Debt issuance costs (1,598) (14,746)
Distributions to partners (20,074) (5,949)
Other financing activities 84 28
--------- ---------
Net cash provided by financing activities 49,544 118,697
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,285) (16,274)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 8,982 20,968
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $4,697 $4,694
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
5
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Foamex L.P.'s condensed consolidated balance sheet as of December 28,
1997 has been condensed from the audited consolidated balance sheet at that date
after being restated for the transfer of General Felt Industries, Inc.'s
("General Felt") common stock (see Note 2). The condensed consolidated balance
sheet as of June 28, 1998 and the condensed consolidated statements of
operations for the thirteen week and twenty-six week periods ended June 28, 1998
and June 29, 1997 and the condensed consolidated statements of cash flows for
the twenty-six week periods ended June 28, 1998 and June 29, 1997 have been
prepared by Foamex L.P. and subsidiaries and have not been audited by Foamex
L.P.'s independent accountants. In addition, the condensed consolidated
statement of operations and statement of cash flows for the thirteen week and
twenty-six week periods ended June 29, 1997 have been restated for the transfer
of General Felt common stock (see Note 2). 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 December 23, 1997, Foamex International Inc. ("Foamex International")
acquired Crain Industries, Inc. ("Crain") pursuant to a merger agreement with
Crain Holdings Corp. for a purchase price of approximately $213.7 million,
including the assumption of debt with a face value of approximately $98.6
million (and an estimated fair value of approximately $112.3 million), Foamex
International then contributed the assets of Crain subject to all of its
liabilities and indebtedness to Foamex L.P. (the "Crain Acquisition"). In
addition, fees and expenses associated with the Crain Acquisition were
approximately $13.2 million. (See Note 3).
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 1997 consolidated financial statements and notes thereto as set forth in
Foamex L.P.'s Annual Report on Form 10-K/A for the fiscal year ended December
28, 1997.
2. TRANSFER OF GENERAL FELT INDUSTRIES, INC.
On February 27, 1998, Foamex International, Foamex L.P. and certain of
its affiliates completed a series of transactions designed to simplify Foamex
International's corporate structure and to provide future operational
flexibility. Prior to the consummation of these transactions, (i) Foamex L.P.
and Foamex L.P.'s wholly-owned subsidiary, General Felt, entered into a Supply
Agreement and an Administrative Services Agreement (see Note 7), (ii) Foamex
L.P. repaid its outstanding indebtedness to General Felt with $4.8 million in
cash and a $34.0 million principal amount promissory note (the "Foamex/GFI
Note") supported by a $34.5 million letter of credit under the credit facility,
(the "Credit Facility"), (iii) Foamex L.P. contributed to General Felt $9.4
million of outstanding net intercompany payables and intercompany loans with
General Felt, and (iv) Foamex L.P. defeased the $4.5 million outstanding
principal amount of its 9 1/2% senior secured notes due 2000. The initial
transaction resulted in the transfer from Foamex L.P. to Foam Funding LLC of all
of the outstanding common stock of General Felt, in exchange for (i) the
assumption Foam Funding LLC of $129.0 million of Foamex L.P.'s indebtedness and
(ii) the transfer by Foam Funding LLC to Foamex L.P. of a 1% non-managing
general partnership interest in Foamex L.P. As a result, General Felt ceased
being a subsidiary of Foamex L.P. and was relieved from all obligations under
Foamex L.P.'s 9 7/8% senior subordinated notes due 2007 and 13 1/2% senior
subordinated notes due 2005. Upon consummation of the initial transaction,
Foamex Carpet Cushion, Inc. ("Foamex Carpet"), a newly formed wholly-owned
subsidiary of Foamex International, Foamex International, Foam Funding LLC, and
General Felt entered into an Asset Purchase Agreement dated February 27, 1998,
in which General Felt sold substantially all of its assets (other than the
Foamex/GFI Note and its operating facility in Pico Rivera, California) to Foamex
Carpet in exchange for (i) $20.0 million in cash and (ii) a promissory note
issued by Foamex Carpet to Foam Funding LLC in the amount of $70.2 million. The
$20.0 million cash payment was funded with a distribution by Foamex L.P. As part
of these transactions, Foamex Fibers, Inc. ("Foamex Fibers"), a wholly-owned
subsidiary of General Felt, was merged with and into General Felt and Foamex
LLC, a wholly-owned subsidiary of Foamex L.P., was merged with and into Foamex
L.P. In addition, FMXI, Inc. and
6
<PAGE>
2. TRANSFER OF GENERAL FELT INDUSTRIES, INC. (continued)
Crain, both wholly-owned subsidiaries of Foamex International and general
partners of Foamex L.P., were merged and Crain, as the surviving corporation,
subsequently changed its name to FMXI, Inc. Foamex Carpet will conduct the
carpet cushion business previously conducted by General Felt. Also, Foam Funding
LLC has retained ownership of one of General Felt's operating facilities which
is being leased to Foamex Carpet and the $34.0 million Foamex/GFI Note.
These transactions have been reflected as a reorganization of companies
under common control. Accordingly, prior periods have been restated to exclude
the consolidated operations of General Felt and partners' equity (deficit) was
charged to reflect the net effect of these transactions. The consolidated
balance sheet as of December 28, 1997 has been restated to exclude the
consolidated assets and liabilities of General Felt and reflect Foamex L.P.'s
investment in General Felt of approximately $103.1 million as a reduction of
partners' equity (deficit). Upon consummation of these transactions, Foamex L.P.
recorded an increase in partners' equity (deficit) of approximately $113.2
million associated with the assumption of indebtedness by Foam Funding LLC,
related expenses and fees and other matters. In addition, Foamex L.P. recorded
the $20.0 million distribution to Foamex International as discussed above.
In connection with these transactions, the consolidated balance sheet as
of December 28, 1997 and the consolidated statement of operations for the
thirteen and twenty-six week periods ended June 29, 1997 have been restated as
follows:
<TABLE>
<CAPTION>
As previously General As
Reported Felt Restated
Balance Sheet:
<S> <C> <C> <C>
Current assets $352,217 $(47,228) $304,989
Total assets 834,068 (98,131) 735,937
Current liabilities 226,143 (27,308) 198,835
Total liabilities 990,370 4,990 995,360
Partners' equity (deficit) (156,302) (103,121) (259,423)
Statement of Operations:
Thirteen week period:
Net sales $239,887 $(40,396) $199,491
Income before extraordinary loss 16,384 (2,967) 13,417
Net income (loss) (28,475) (2,967) (31,442)
Statement of Operations:
Twenty-six week period:
Net sales $469,007 $(75,382) $393,625
Income before extraordinary loss 32,600 (3,678) 28,922
Net income (loss) (12,938) (3,678) (16,616)
</TABLE>
3. CRAIN ACQUISITION
On December 23, 1997, Foamex International acquired Crain pursuant to a
merger with Crain Holdings Corp. for a purchase price of approximately $213.7
million, including the assumption of debt with a face value of approximately
$98.6 million (with an estimated fair value of approximately $112.3 million),
Foamex International then contributed the assets of Crain, subject to all its
liabilities and indebtedness to Foamex L.P. Fees and expenses associated with
the Crain Acquisition are approximately $13.2 million. The acquisition was
funded by $118.0 million in bank borrowings by Foamex L.P. under the Credit
Facility. The excess of the purchase price over the estimated fair value of the
net assets acquired was approximately $152.5 million.
7
<PAGE>
3. CRAIN ACQUISITION (continued)
The Crain Acquisition was accounted for as a purchase and the operations
of Crain are included in the consolidated statements of operations and cash
flows from the date of acquisition. The cost of the Crain Acquisition has been
allocated on the basis of the fair value of the assets acquired and the
liabilities assumed. The excess of the purchase price over the estimated fair
value of the net assets acquired is being amortized using the straight-line
method over forty years. The allocation of the purchase price for the Crain
Acquisition is based upon preliminary estimates and assumptions and is subject
to revision once appraisals, valuations and other studies of the fair value of
the acquired assets and liabilities have been completed. The pro forma results
listed below are unaudited and assume that the Crain Acquisition occurred at the
beginning of fiscal year 1997.
<TABLE>
<CAPTION>
13 Week Period 26 Week Period
Ended June 29, 1997 Ended June 29, 1997
(thousands, except per share data)
<S> <C> <C>
Net sales $215,519 $419,677
======== ========
Income before extraordinary loss $ 15,153 $ 30,857
======== ========
</TABLE>
The pro forma results are not necessarily indicative of what would have
occurred if the Crain Acquisition had been in effect for the entire periods
presented nor are they necessarily indicative of future consolidated results.
4. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
June 28, December 28,
1998 1997
------------ -----------
(thousands)
<S> <C> <C>
Raw materials and supplies $ 74,313 $ 72,071
Work-in-process 16,704 15,406
Finished goods 25,571 24,617
--------- ---------
Total $116,588 $112,094
======== ========
</TABLE>
8
<PAGE>
5. LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
Long-term debt consists of:
<TABLE>
<CAPTION>
June 28, December 28,
1998 1997
------------ -----------
<S> <C> <C>
Credit Facility: (thousands)
Term Loan A $ - $ 76,700
Term Loan B 83,344 109,725
Term Loan C 75,766 99,750
Term Loan D 109,725 110,000
Revolving credit facility 137,354 54,928
9 7/8% Senior subordinated notes due 2007 150,000 150,000
13 1/2% Senior subordinated notes due 2005 (includes
$12,824 and $13,720 of unamortized debt premium) 110,824 111,720
9 1/2% Senior secured notes due 2000 - 4,523
Industrial revenue bonds 7,000 7,000
Subordinated note payable (net of unamortized
debt discount of $709 and $886) 6,306 6,129
Other 7,881 8,335
--------- ---------
688,200 738,810
Less current portion 4,347 12,161
--------- ---------
Long-term debt-unrelated parties $683,853 $726,649
========= =========
Long-term debt-related party consists of:
Foamex/GFI Note $ 34,000 $ 38,800
========= =========
</TABLE>
Refinancing Associated with Transfer of General Felt Industries, Inc.
Common Stock
In connection with the transfer of General Felt Industries, Inc.
("General Felt") common stock (see Note 2), Foamex L.P. amended its agreements
with lenders under the Credit Facility, which included additional borrowings of
$129.0 million under new term loan agreements that were assumed by Foam Funding
LLC (as discussed in Note 2) and borrowings of $32.0 million under the existing
revolving credit facility. These funds were used to (i) repay approximately
$125.1 million of existing term loans and accrued interest thereon of
approximately $0.9 million, (ii) deposit $4.8 million into an escrow account in
order to defease the senior secured notes during June 1998, (iii) repay $4.8
million of indebtedness owed to General Felt, (iv) fund the $20.0 million
distribution to Foamex International and (v) pay fees and expenses of
approximately $5.4 million. Also, this amendment increased the availability
under the revolving credit facility from $150.0 million to $200.0 million;
however, $34.5 million of this increase is used for a letter of credit to
support the Foamex/GFI Note.
Foamex/GFI Note
In connection with the transfer of General Felt's common stock, Foamex
L.P. entered into the $34.0 million Foamex/GFI Note to settle an existing
intercompany note payable to General Felt. The Foamex/GFI Note matures in March
2000 with interest payable at LIBOR plus an applicable margin. The principal
amount is due upon maturity in March 2000.
9
<PAGE>
5. LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY (continued)
Principal Payments
Principal payments on Foamex L.P.'s long-term debt and long-term debt -
related party for the remainder of 1998 and for the next five years are as
follows: 1998 - $3.1 million; 1999 - $7.3 million; 2000 - $40.9 million; 2001 -
$6.9 million; 2002 - $2.9 million; 2003 - $148.2 million and thereafter - $500.8
million.
6. EARLY EXTINGUISHMENT OF DEBT
In connection with the General Felt transaction, Foamex L.P. incurred an
extraordinary loss on the early extinguishment of debt of approximately $3.1
million. The extraordinary loss is comprised of approximately $2.9 million for
the write-off of debt issuance costs and approximately $0.2 million of
professional fees and other costs.
During 1997, Foamex L.P. used approximately $12.1 million of proceeds
from notes receivable - related party to repurchase outstanding indebtedness of
approximately $11.8 million, which resulted in an extraordinary loss of
approximately $1.0 million.
7. RELATED PARTY TRANSACTIONS
Effective February 27, 1998, Foamex L.P. entered into the Supply
Agreement (see Note 2) (i) whereby Foamex Carpet may purchase from Foamex L.P.
finished prime, rubber and rebond carpet cushion at the lessor of cost plus 4.7%
or fair market value, (ii) Foamex L.P. may purchase from Foamex Carpet nonwoven
textile fiber products at the lessor of cost plus 15% or fair market value, and
(iii) either party may purchase from the other trim foam and other raw materials
and supplies for the lessor of the price paid for such raw materials or fair
market value. Prior to February 27, 1998, Foamex L.P. had sales and purchases
with General Felt based on an established intercompany transfer price which was
adjusted to comply with the transfer pricing regulations of the Internal Revenue
Code, as amended, if necessary. During the thirteen week periods ended June 28,
1998 and June 29, 1997, Foamex L.P. sold approximately $34.9 million and $37.2
million, respectively, to Foamex Carpet and purchased from Foamex Carpet
approximately $0.9 million and $0.4 million, respectively. During the twenty-six
week periods ended June 28, 1998 and June 29, 1997, Foamex L.P. sold
approximately $66.4 million and $72.5 million, respectively, to Foamex Carpet
and purchased from Foamex Carpet approximately $2.6 million and $0.8 million,
respectively.
In connection with the General Felt transaction (see Note 2), Foamex L.P.
and Foamex Carpet entered into a Management Services Agreement whereby Foamex
L.P. will provide certain administrative functions on behalf of Foamex Carpet at
a cost basis. During the thirteen week and twenty-six week periods ended June
28, 1998, Foamex L.P. received $0.5 million and $0.6 million, respectively, for
services provided to Foamex Carpet.
During the thirteen week period ended March 29, 1998, Foamex L.P.
incurred approximately $0.5 million of interest expense on a $38.8 million note
due to General Felt. On February 27, 1998, Foamex L.P. repaid approximately $4.8
million of this note, and the balance was replaced by the Foamex/GFI Note. The
Foamex/GFI Note was retained by Foam Funding LLC in connection with the transfer
of General Felt. During the thirteen week and twenty-six week periods ended June
28, 1998, Foamex L.P. incurred approximately $0.6 million and $0.8 million,
respectively, of interest expense on the Foamex/GFI Note (see Note 2).
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
10
<PAGE>
7. RELATED PARTY TRANSACTIONS (continued)
Agreement are no less favorable than those which Foamex L.P. could have obtained
from an unaffiliated third party. During the twenty-six week periods ended June
28, 1998 and June 29, 1997, Foamex L.P. purchased approximately $15.0 million
and $63.0 million, respectively, of raw materials under the Supply Agreement.
Effective March 30, 1998, Foamex L.P. has discontinued utilizing the Supply
Agreement to purchase its raw materials.
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 $0.3 million and $0.2 million during the thirteen week periods
ended June 28, 1998 and June 29, 1997, respectively and approximately $0.5
million and $0.6 million during the twenty-six week periods ended June 28, 1998
and June 29, 1997, respectively.
On December 11, 1996, Foamex L.P. entered into a Tax Distribution Advance
Agreement, pursuant to which its partners are entitled to obtain advances, in
the aggregate not to exceed $17.0 million, against future distributions under
Foamex L.P.'s tax distribution agreement. As of June 28, 1998, there were $13.6
million of advances to Foamex International under this agreement.
8. ENVIRONMENTAL MATTERS
Foamex L.P. is subject to extensive and changing federal, state, local
and foreign environmental laws and regulations, including those relating to the
use, handling, storage, discharge and disposal of hazardous substances and the
remediation of environmental contamination, and as a result, is from time to
time involved in administrative and judicial proceedings and inquiries relating
to environmental matters. During the twenty-six week period ended June 28, 1998,
expenditures in connection with Foamex L.P.'s compliance with federal, state,
local and foreign environmental laws and regulations did not have a material
adverse effect on Foamex L.P.'s operations, financial position, capital
expenditures or competitive position. As of June 28, 1998, Foamex L.P. has
environmental accruals of approximately $3.6 million for environmental matters.
In addition, as of June 28, 1998 Foamex L.P. has net receivables of
approximately $0.6 million relating to indemnification for environmental
liabilities. Foamex L.P. believes that realization of the receivables
established for indemnification is probable.
The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments") provide
for the establishment of federal emission standards for hazardous air pollutants
including methylene chloride, propylene oxide and TDI, materials used in the
manufacturing of foam. On December 27, 1996, the United States Environmental
Protection Agency (the "EPA") proposed regulations under the 1990 CAA Amendments
that will require manufacturers of slab stock polyurethane foam and foam
fabrication plants to reduce emissions of methylene chloride. Because these
regulations are subject to change prior to finalization, Foamex L.P. cannot
accurately predict the actual cost of their implementation. Foamex L.P. does not
believe implementation of the regulations will require it to make material
expenditures at facilities owned prior to December 23, 1997, due to Foamex
L.P.'s use of alternative technologies which do not utilize methylene chloride
and its ability to shift current production to the facilities which use these
alternative technologies; however, material expenditures may be required at the
facilities formerly operated by Crain. The 1990 CAA Amendments also may result
in the imposition of additional standards regulating air emissions from
polyurethane foam manufacturers, but these standards have not yet been proposed
or promulgated.
Foamex L.P. has reported to appropriate state authorities that it has
found soil and groundwater contamination in excess of state standards at four
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 28, 1998, Foamex L.P. has
environmental accruals of approximately $3.0 million for the remaining potential
remediation costs for these facilities based on estimates.
11
<PAGE>
8. ENVIRONMENTAL MATTERS (continued)
Federal regulations require that by the end of 1998 all underground
storage tanks ("USTs") be removed or upgraded in all states to meet applicable
standards. Foamex L.P. has two 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 $0.1 million for the estimated removal and remediation, if any,
associated with these 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 the 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 EPA with respect to nine sites, with an estimated total liability
to Foamex L.P. for the nine sites of less than approximately $0.5 million.
Estimates of total clean-up 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.
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, including those described herein, 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.
9. LITIGATION
As of August 12, 1998, Foamex L.P. and Trace International Holdings, Inc.
("Trace Holdings") were two of multiple defendants in actions filed on behalf of
approximately 5,000 recipients of breast implants in various United States
federal and state courts and one Canadian provincial court, 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, New Zealand, England, and Ireland. 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. In addition, two of the cases filed on behalf of 903 foreign plaintiffs
were dismissed on the grounds that the cases could not be brought in the United
States courts. This decision is subject to appeal. 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, and
without taking into account potential indemnity from the manufacturers of
polyurethane covered breast implants, 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
12
<PAGE>
9. LITIGATION (continued)
prior to October 1990. Although Trace Holdings has paid Foamex L.P.'s litigation
expenses to date pursuant to such indemnification and management believes Trace
Holdings likely will be in a position to continue to pay such expenses, there
can be no absolute assurance that Trace Holdings will be able to provide such
indemnification. Based on information available at this time with respect to the
potential liability, and without taking into account the indemnification
provided by Trace Holdings and the coverage provided by Trace Holdings' and
Foamex L.P.'s liability insurance, 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.
In November 1997, a complaint was filed in the United States District
Court for the Southern District of Texas alleging that various defendants,
including Crain through the use of the CARDIO(R) process licensed from a third
party, infringed on a patent held by plaintiff. Foamex L.P. is negotiating with
the licensor of the process for the assumption of the defense of the action by
the licensor; however, the action is in the preliminary stages, and there can be
no assurance as to the ultimate outcome of the action.
On or about March 17, 1998, five purported class action lawsuits were
filed in the Delaware Chancery Court, New Castle County, against Foamex
International, directors of Foamex International, Trace Holdings, and individual
officers and directors of Trace Holdings:
Brickell Partners v. Marshall S. Cogan, et al., No. 16260NC;
Mimona Capital v. Salvatore J. Bonanno, et al., No. 16259NC;
Daniel Cohen v. Foamex International Inc., No. 16263;
Eileen Karisinki v. Foamex International Inc., et al., No. 16261NC and
John E. Funky Trust v. Salvatore J. Bonanno, et al., No. 16267.
A sixth purported class action lawsuit, Barnett Stepak v. Foamex
International Inc., et al., No. 16277, was filed on or about March 23, 1998
against the same defendants. The complaints in the six actions allege, among
other things, that the defendants have violated fiduciary and other common law
duties purportedly owed to Foamex International's stockholders in connection
with Trace Holdings proposal to acquire all of the outstanding shares of Foamex
International's common stock. The complaints seek, among other things, class
certification, a declaration that the defendants have breached their fiduciary
duties to the class, preliminary and permanent injunctions barring
implementation of the proposed transaction, rescission of the transaction if
consummated, unspecified compensatory damages, and costs and attorneys' fees.
The parties to the lawsuits entered into a Memorandum of Understanding,
dated June 25, 1998 (the "Memorandum of Understanding"), to settle the
litigation, subject to, inter alia, execution of a definitive Stipulation of
Settlement and approval by the Delaware Chancery Court following notice to the
public stockholders and a hearing. The Memorandum of Understanding provides that
as a result of, among other things, the stockholder litigation and negotiations
among counsel for the parties to the Memorandum of Understanding, a special
meeting of stockholders will be held to vote upon and adopt the Merger Agreement
which provides, among other things, for the public shares of the Company's
common stock to be converted into the right to receive $18.75 in cash, without
interest. The Memorandum of Understanding also acknowledged that the terms of
the Merger have been significantly improved over the terms originally proposed
by Trace Holdings on March 16, 1998, and Foamex International and the individual
director and officer defendants acknowledged that the filing and prosecution of
the stockholder litigation was a factor they took into account in giving fair
consideration to and entering into the Merger, and Trace Holdings acknowledged
that it took into account the desirability of satisfactorily addressing the
claims asserted in the stockholder litigation in agreeing to the increased
consideration to be paid to the public stockholders pursuant to the Merger
Agreement.
13
<PAGE>
9. LITIGATION (continued)
The Memorandum of Understanding also provided for certification of a
class, for settlement purposes only, consisting of the public stockholders, the
dismissal of the stockholder litigation with prejudice and the release by
plaintiffs and all members of the class of all claims and causes of action that
were or could have been asserted against Trace Holdings, Foamex International
and the individual defendants in the stockholder litigation or that arise out of
the matters alleged by plaintiffs. In connection with the proposed settlement,
the plaintiffs intend to apply of an award of attorney's fees and litigation
expenses in an amount not to exceed $925,000, and the defendants have agreed not
to oppose this application. Additionally, Foamex International has agreed to pay
the cost of sending notice of the settlement, if any, to its public
shareholders.
The defendants have denied, and continued to deny, that they have
committed or have threatened to commit any violation of law or breaches of duty
to plaintiffs or the purported class. The defendants have agreed to the proposed
settlement because, among other reasons, such settlement would eliminate the
burden and expenses of further litigation and would facilitate the consummation
of a transaction that they believe to be in the best interests of Foamex
International and the public stockholders.
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.
10. COMPENSATION INCOME
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 ("SFAS No. 130"), "Reporting
Comprehensive Income," which requires disclosure of comprehensive income, as
defined, including comprehensive disclosure in interim financial statements.
Comprehensive income for the thirteen week and twenty-six week periods ended
June 28, 1998 and June 29, 1997 is comprised of the following:
<TABLE>
<CAPTION>
13 Week Period 26 Week Period
Ended June 28, 1998 Ended June 28, 1998
(thousands, except per share data)
<S> <C> <C>
Net income $14,519 $18,519
Foreign currency translation adjustments 3 230
-------- --------
Total comprehensive income $14,522 $18,749
======== ========
13 Week Period 26 Week Period
Ended June 29, 1997 Ended June 29, 1997
(thousands, except per share data)
Net income $(31,442) $(16,616)
Foreign currency translation adjustments 16 (168)
-------- --------
Total comprehensive income $(31,426) $(16,784)
======== ========
</TABLE>
14
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
June 28, December 28,
1998 1997
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 and severally liable 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
connection with the June 1997 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 repurchase.
Trace Holdings' proposed acquisition of Foamex International may constitute such
a change of control. The Senior Subordinated Notes are subordinated in right of
payment to all senior indebtedness and are pari passu in right of payment to the
13 1/2% Senior Subordinated Notes and approximately $7.0 million subordinated
promissory note.
13 1/2% Senior Subordinated Notes due 2005 ("13 1/2% Senior Subordinated
Notes")
The 13 1/2% Senior Subordinated Notes were issued by Foamex L.P. and FCC
in a private placement on December 23, 1997 in connection with the Crain
Acquisition. The 13 1/2% Senior Subordinated Notes bear interest at the rate of
13 1/2% per annum payable semiannually on each February 15 and August 15,
commencing February 15, 1998. The 13 1/2% Senior Subordinated Notes mature on
August 15, 2005. The 13 1/2% Senior Subordinated Notes may be redeemed at the
option of Foamex L.P., in whole or in part, at any time on or after August 15,
2000, initially at 106.75% 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 August 15, 2004. Upon the occurrence of a change
of control, as defined, each holder of the 13 1/2% Senior Subordinated Notes
will have the right to require Foamex L.P. to repurchase the 13 1/2% 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 repurchase.
Trace Holdings' proposed acquisition of Foamex International may constitute such
a change of control. The 13 1/2% Senior Subordinated Notes are subordinated in
right of payment to all senior indebtedness and are pari passu in right of
payment to the Senior Subordinated Notes and an approximately $7.0 million of
subordinated promissory note.
16
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS (unaudited)
Foamex L.P. has completed a registration statement relating to an
exchange offer in which Foamex L.P. exchanged the 13 1/2% Senior Subordinated
Notes issued in the private placement for new notes. The terms of the new notes
are substantially identical in all respects (including principal amount,
interest rate, maturity and ranking) to the terms of the 13 1/2% Senior
Subordinated Notes, except that the new notes are transferable by holders
thereof without further registration under the Securities Act of 1933, as
amended (except in the case of 13 1/2% Senior Subordinated Notes held by
affiliates of Foamex L.P. and for certain other holders), and are not subject to
any covenant regarding registration under the Securities Act of 1933, as
amended.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Foamex L.P. operates in the flexible polyurethane and advanced polymer
foam products industry. 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 page five of Foamex
L.P.'s 1997 Annual Report on Form 10-K/A.
During 1997, Foamex L.P.'s products were utilized primarily in four
businesses: (i) Foam Products, consisting of cushioning foams, including
bedding, furniture, packaging, health care and foam-based consumer products such
as futons, pillows, mattress pads and juvenile furniture, (ii) Carpet Cushion
Products, consisting of carpet padding and related products, (iii) Automotive
Products, consisting of automotive trim, laminates and other accessories, and
(iv) Technical Products, consisting of reticulated and other specialty foams
used for reservoiring filtration, gasketing and sealing.
On June 25, 1998, Foamex International, Trace Holdings, and Trace Merger
Sub Corp. entered into an Agreement and Plan of Merger (the "Merger Agreement"),
providing for the merger (the "Merger") of Trace Merger Sub Corp. with and into
Foamex International. Upon consummation of the Merger, the holders of the
outstanding shares of Foamex International's common sotck, other than Trace
Holdings and its subsidiaries, will received, in exchange for their shares,
$18.75 per share in cash. Consummation of the Merger is subject to a number of
conditions, many of which are outside the control of Foamex International,
including: (i) the approval and adoption of the Merger Agreement by the
affirmative vote of the holders of a majority of the outstanding shares of
common stock of Foamex International; (ii) the absence of any injunction
preventing consummation of the Merger, (iii) th absence of a material adverse
change in the business of Foamex International's, and (iv) the receipt of
requisite financing.
On April 27, 1998, Foamex International's facility in Orlando, Florida
was damaged by a fire. Foamex International is in the process of repairing the
damages to the facility and supplying local customers from other facilities.
Foamex International believes that it has adequate insurance coverage for
business interruption and damages to the facility associated with the fire.
After considering Foamex International's insurance coverage, Foamex
International does not believe that the fire will have a significant impact on
Foamex International's financial position or operations; however, there can be
no assurance that the fire will not have a significant impact on Foamex
International's financial position or operations.
On February 27, 1998, Foamex International, Foamex L.P. and certain of
its affiliates completed a series of transactions designed to simplify Foamex
International's corporate structure and to provide future operational
flexibility. Prior to the consummation of these transactions, (i) Foamex L.P.
and Foamex L.P.'s wholly-owned subsidiary, General Felt, entered into the Supply
Agreement and the Administrative Services Agreement, (ii) Foamex L.P. repaid its
outstanding indebtedness to General Felt with $4.8 million in cash and the
Foamex/GFI Note supported by a $34.5 million letter of credit under the Credit
Facility, (iii) Foamex L.P. contributed to General Felt $9.4 million of
outstanding net intercompany payables and intercompany loans with General Felt
and (iv) Foamex L.P. defeased the $4.5 million outstanding principal amount of
its 9 1/2% Senior Secured Notes due 2000. The initial transaction resulted in
the transfer from Foamex L.P. to Foam Funding LLC of all of the outstanding
common stock of General Felt, in exchange for (i) the assumption by Foam Funding
LLC of $129.0 million of Foamex L.P.'s indebtedness and (ii) the transfer by
Foam Funding LLC to Foamex L.P. of a 1% non-managing general partnership
interest in Foamex L.P. As a result, each of General Felt and Foamex Fibers
ceased being a subsidiary of Foamex L.P. and was relieved from all obligations
under Foamex L.P.'s 9 7/8% Senior Subordinated Notes and 13 1/2% senior
subordinated notes due 2005. Upon consummation of the initial transaction,
Foamex Carpet, a newly formed wholly-owned subsidiary of Foamex International,
Foamex International, Foam Funding LLC, and General Felt entered into an Asset
Purchase Agreement, pursuant to which General Felt sold substantially all of its
assets (other than the Foamex/GFI Note and its operating facility in Pico
Rivera, California) to Foamex Carpet in exchange for (i) $20.0 million in cash
and (ii) a promissory note issued by Foamex Carpet to Foam Funding LLC in the
amount of $70.2 million. The $20.0 million cash payment was funded with a
distribution by Foamex L.P. As part of these transactions, Foamex Fibers, a
wholly-owned subsidiary of General Felt, was merged with and into General Felt
and Foamex LLC, a wholly-owned subsidiary of Foamex L.P., was merged with and
into Foamex L.P. In addition, FMXI, Inc. and Crain, both wholly-owned
subsidiaries of Foamex International and general partners of Foamex L.P., were
merged and Crain, as the surviving corporation, subsequently changed its name to
FMXI, Inc. Foamex Carpet will conduct the carpet cushion business previously
conducted by General Felt. Also, Foam Funding LLC has retained ownership of one
of General Felt's operating facilities which is being leased to Foamex Carpet
and the Foamex/GFI Note. These transactions have been reflected as a
reorganization of companies under common control.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Accordingly, Foamex L.P.'s consolidated financial statements have been restated
to exclude the consolidated operations of General Felt.
On December 23, 1997, Foamex International acquired Crain pursuant to a
merger agreement with Crain Holdings for a purchase price of approximately
$213.7 million, including the assumption of debt with a face value of
approximately $98.6 million (and an estimated fair value of approximately $112.3
million). Foamex International then contributed the assets of Crain subject to
all of its liabilities and indebtedness to Foamex L.P. In addition, fees and
expenses associated with the Crain Acquisition are approximately $13.2 million.
On April 27, 1998, Foamex L.P.'s facility in Orlando, Florida was damaged
by a fire. Foamex L.P. is in the process of repairing the damages to the
facility and supplying local customers from other facilities. Management
believes that Foamex L.P. has adequate insurance coverage for business
interruption and damages to the facility associated with the fire. After
considering Foamex L.P.'s insurance coverage, Foamex L.P. does not believe that
the fire will have a significant impact on Foamex L.P.'s financial position or
operations; however, there can be no assurance that the fire will not have a
significant impact on Foamex L.P.'s financial position or operations.
Operating results for 1998 are expected to be influenced by various
internal and external factors. These factors include, among other things, (i)
consolidation of the Crain Acquisition, (ii) continued implementation of the
continuous improvement program to improve Foamex L.P.'s profitability, (iii)
additional raw material cost increases, if any, by Foamex L.P.'s chemical
suppliers, (iv) Foamex L.P.'s success in passing on to its customers selling
price increases to recover such raw material cost increases and (v) fluctuations
in interest rates.
13 Week Period Ended June 28, 1998 Compared to 13 Week Period Ended June 29,
1997
Results of Operations
Net sales for the second quarter of 1998 were $263.3 million as compared
to $199.5 million in the second quarter of 1997, an increase of $63.8 million or
32.0%. Foam Products net sales for the second quarter of 1998 increased to
$141.0 million from $82.6 million in the second quarter of 1997 primarily due to
net sales from the Crain operations and increased volume to our national bedding
customers and fabricators. Carpet Cushion Products net sales for the second
quarter of 1998 decreased 5.0% to $39.9 million from $38.0 million in the second
quarter of 1997 primarily due to the sale of Dalton in October 1997 which
contributed net sales of $13.6 million in 1997 and a reduction in rebond selling
prices as compared to 1997. Automotive Products net sales for the second quarter
of 1998 increased 4.9% to $62.2 million from $59.3 million in the second quarter
of 1997 primarily due to increased volume. Technical Products net sales for the
second quarter of 1998 increased 2.6% to $20.2 million from $19.6 million in the
second quarter of 1997 primarily due to increased net sales volume for felted,
gasketing, and sealing products.
Gross profit as a percentage of net sales increased to 18.4% for the
second quarter of 1998 from 17.4% in the second quarter of 1997 primarily due to
increased purchasing leverage offset by a shift in product mix for 1998 as a
result of the Crain Acquisition. Crain's principal product lines, bedding,
furniture and carpet cushion, have inherently lower gross profit margins than
Foamex International's historical gross profit margins. Also, gross profit
percentage increased in the second quarter of 1998 due to Foamex International's
implementation of restructuring/consolidation programs associated with the Crain
Acquisition.
Income from operations increased to $31.5 million for the second quarter
of 1998 from $24.0 million in the second quarter of 1997 primarily due to the
Crain Acquisition.
Income before extraordinary loss increased to $14.6 million for the
second quarter of 1998 as compared to $13.4 million for the second quarter of
1997. The increase is primarily due to the increase in income from operations
discussed above offset by an increase of approximately $5.0 million in interest
and debt issuance expense and $1.1 million of costs associated with the transfer
of General Felt which is included in other income
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(expense), net. The increase in interest and debt issuance expense is primarily
due to the additional debt incurred in connection with the Crain Acquisition and
the June 1997 refinancing plan.
The extraordinary loss on early extinguishment of debt of approximately
$44.9 million during the second quarter of 1997 primarily relates to debt
extinguished in connection with the June 1997 refinancing plan.
26 Week Period Ended June 28, 1998 Compared to 26 Week Period Ended June 29,
1997
Results of Operations
Net sales for the twenty-six week period ended June 28, 1998 were $547.9
million as compared to $393.6 million for the twenty-six week period ended June
29, 1997, an increase of $154.3 million or 39.2%. Foam Products net sales for
the twenty-six week period ended June 28, 1998 increased to $295.1 million from
$163.3 million for the twenty-six week period ended June 29, 1997 primarily due
to the net sales from the Crain operations and increased volume to our national
bedding customers and fabricators. Carpet Cushion Products net sales for the
twenty-six week period ended June 28, 1998 increased 15.6% to $85.8 million from
$74.2 million for the twenty-six week period ended June 28, 1997 primarily due
to net sales from the Crain operations offset by the sale of Dalton in October
1997 which contributed net sales of $24.3 million in 1997 and reduction of
rebond selling prices as compared to 1997 and product mix. Automotive Products
net sales for the twenty-six week period ended June 28, 1998 increased 5.6% to
$125.7 million from $119.0 million for the twenty-six week period ended June 29,
1997 primarily due to increased volume. Technical Products net sales for the
twenty-six week period ended June 28, 1998 increased 11.1% to $41.3 million from
$37.1 million for the twenty-six week period ended June 29, 1997 primarily due
to increased net sales volume for felted, gasketing, and sealing products.
Gross profit as a percentage of net sales decreased to 16.8% for the
twenty-six week period ended June 28, 1998 from 18.2% in the twenty-six week
period ended June 29, 1997 primarily due to the shift in product mix for 1998 as
a result of the Crain Acquisition. Crain's principal product lines, bedding,
furniture and carpet cushion, have inherently lower gross profit margins than
Foamex International's historical gross profit margins. Also, the gross profit
was lower since Foamex International carried the full individual operating costs
of both organizations throughout the majority of the first quarter of 1998.
Income from operations increased to $57.3 million for the twenty-six week
period ended June 28, 1998 from $49.7 million in the twenty-six week period
ended June 29, 1997 primarily due to the Crain Acquisition.
Income before extraordinary loss decreased to $23.2 million for the
twenty-six week period ended June 28, 1998 as compared to $30.0 million for the
twenty-six week period ended June 29, 1997. The decrease is primarily due the
increase in income from operations, offset by an increase of approximately $12.0
million in interest and debt issuance expense and $2.0 million of costs
associated with the transfer of General Felt which is included in other income
(expense), net. The increase in interest and debt issuance expense is primarily
due to the additional debt incurred in connection with the Crain Acquisition and
the June 1997 refinancing plan.
The extraordinary loss on early extinguishment of debt of approximately
$3.2 million during the twenty-six week period ended June 28, 1998 primarily
relates to the write-off of debt issuance costs with debt extinguishment in
connection with the GFI Transaction and the redemption of the senior secured
notes. The extraordinary loss on early extinguishment of debt of approximately
$45.5 million during the twenty-six week period ended June 29, 1997 primarily
relates to the write-off of debt issuance costs with debt extinguished in
connection with the June 1997 refinancing plan.
Foamex Capital Corporation ("FCC")
FCC is solely a co-issuer of certain indebtedness of Foamex L.P. and has
no other material operations.
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF 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
the Credit Facility, if necessary, will be adequate to meet operating cash
requirements. The ability to meet the operating cash requirements of Foamex L.P.
could be impaired if Foamex L.P. was to fail to comply with any of the covenants
contained in the Credit Facility and such noncompliance was not cured by Foamex
L.P. or waived by the lenders. Foamex L.P. was in compliance with the covenants
in the Credit Facility as of June 28, 1998 and expects to be in compliance with
the covenants for the foreseeable future.
Cash and cash equivalents decreased $4.3 million during 1998 to $4.7
million at June 28, 1998 from $9.0 million at December 28, 1997 primarily due to
an increase of cash used by the operating assets and liabilities and cash used
for capital expenditures, offset by increased revolving credit borrowings .
Working capital increased $67.7 million during 1998 to $173.9 million at June
28, 1998 from $106.2 million at December 28, 1997 primarily due to changes in
net operating assets (as discussed below), a decrease in current portion of
long-term debt and a net increase in other current assets and liabilities. The
decrease in current portion of long-term debt is primarily due to the assumption
of Foamex L.P.'s long-term debt by Foam Funding LLC in connection with the
General Felt transaction. The net increase in other current assets and
liabilities is primarily associated with the timing of payments for prepaid
expenses and the receipt of cash for other receivables. Net operating assets and
liabilities (comprised of accounts receivable, accounts receivables from related
parties, inventories, accounts payable and accounts payable related parties)
increased $39.3 million during 1998 to $180.5 million at June 28, 1998 from
$141.2 million at December 28, 1997 primarily due to increases in accounts
receivable, accounts receivable related party, decreases in accounts payable and
accounts receivable related party. The increase in accounts receivable is
primarily due to an increase in net sales for June 1998 as compared to December
1997. The decrease in accounts payable and in account payable related party is
primarily due to the timing of payments.
As of June 28, 1998, there were $137.4 million of revolving credit
borrowings under the Credit Facility and approximately $49.7 million associated
with letters of credit outstanding which are supported by the Credit Facility
with unused availability of approximately $13.0 million. Borrowings by Foamex
Canada as of June 28, 1998 were $4.3 million under Foamex Canada's revolving
credit agreement with unused availability of approximately $1.1 million.
Cash flow used for operating activities was $34.4 million for the
twenty-six week period ended June 28, 1998 as compared to cash used of $23.3
million for the twenty-six week period ended June 29, 1997. This decrease is
primarily due to (i) a reduction in operating cash results, (ii) cash used for
an increase in accounts receivable and other receivables associated with the
timing of receipts and (iii) a reduction in accounts payable and accounts
payable related party associated with the timing of payments.
Cash flow used for investing activities decreased to $19.4 million for
the twenty-six week period ended June 29, 1998 from $111.7 million for the
twenty-six week period ended June 29, 1997 primarily due to the use of $105.8
million of cash during 1997 to purchase the outstanding FJPS discount debentures
in connection with the refinancing plan.
Cash flow provided by financing activities decreased to $49.5 million for
the twenty-six week period ended June 28, 1998 as compared to cash provided of
$118.7 million for the twenty-six week period ended June 29, 1997. The decrease
is due to greater net borrowings during the twenty-six week period ended June
29, 1997 primarily relating to the June 1997 refinancing plan as compared to net
cash borrowings during the twenty-six week period ended June 28, 1998 primarily
for working capital needs and to fund distributions relating to the General Felt
transaction.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Interest Rate Swaps
Foamex L.P. enters into interest rate swaps to lower funding costs and/or
to manage interest costs and exposure to changing interest rates. Foamex L.P.
does not hold or issue financial instruments for trading purposes.
On January 8, 1998, Foamex L.P. entered into an amended interest rate
swap agreement which provides for an interest rate swap agreement with a
notional amount of $150.0 million through June 2002. Under this agreement,
Foamex L.P. is obligated to make fixed payments of 5.78% per annum through
December 1998 and variable payments based on LIBOR at the beginning of each six
month 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 newly amended interest rate swap agreement can be
terminated by the swap partner at the end of each six month period commencing
December 1999.
Foamex L.P. is exposed to credit loss in the event of a nonperformance by
the swap partner; however, the occurrence of this event is not anticipated. The
effect of the interest rate swap agreement was a favorable adjustment to
interest and debt issuance expense of $0.2 million and $0.8 million for the
thirteen week periods ended June 28, 1998 and June 29, 1997, respectively and
$0.4 million and $1.7 million for the twenty-six week periods ended June 28,
1998 and June 29, 1997, 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 did not have a material adverse effect on
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 28, 1998 was $3.6 million. In addition, as of
June 28, 1998 Foamex L.P. has net receivables of $0.6 million for
indemnification of environmental liabilities from former owners. 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 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.
Inflation and Other Matters
There was no significant impact on Foamex L.P.'s operations as a result
of inflation during 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.
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.
Year 2000 Compliance
Foamex L.P. has and will continue to make certain investments in its
software systems and applications to ensure Foamex L. P. is Year 2000 compliant.
Foamex L.P. plans to continue to make modifications to the identified software
during 1998 and test the modifications during 1998. The financial impact to
Foamex L.P. has not been and is not anticipated to be material to its financial
position or results of operation in any given year.
22
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
New Accounting Standards
Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"),
"Reporting Comprehensive Income," was issued by the Financial Accounting
Standards Board in June 1997. This statement requires all items that must be
recognized under accounting standards as components of comprehensive income to
be reported in a financial statement that is displayed with the same prominence
as other financial statements. Foamex L.P. adopted SFAS No. 130 during the first
quarter of 1998 (see Note 10).
Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
"Disclosures about Segments of an Enterprise and Restated Information," was
issued by the Financial Accounting Standards Board in June 1997. This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected financial
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. Foamex L.P. will
adopt SFAS No. 131 for year end 1998 reporting. Management is evaluating the
impact, if any, the standard will have on Foamex L.P.'s present segment
reporting.
In February 1998 the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pension and Other Postretirement Benefits"
("SFAS No. 132"), which is effective for fiscal years beginning after December
15, 1997. SFAS No. 132 revised the required disclosures about pension and other
postretirement benefit plans. Foamex L.P. plans to adopt SFAS No. 132 in the
fourth quarter of 1998.
23
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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/A for the fiscal year
ended December 28, 1997 and in Foamex L.P.'s Quarterly Report for the
fiscal quarter ended June 28, 1998.
The information from Notes 8 and 9 of the condensed consolidated
financial statements of Foamex L.P. and subsidiaries as of June 28,
1998 (unaudited) is incorporated herein by reference.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Securities Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Financial Statement Schedules.
(a) Exhibits
2.1(x) - Transfer Agreement, dated as of February 27, 1998, by and between
Foam Funding LLC ("Foam LLC") and Foamex L.P.
3.1(a) - Certificate of Limited Partnership of Foamex L.P.
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., 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.
3.2.4(v) - Third Amendment to the Partnership Agreement, dated December 23,
1997.
3.2.5(x) - Fourth Amendment to the Partnership Agreement, dated February 27,
1998.
3.3(y) - Certificate of Incorporation of FMXI.
3.4(y) - By-laws of FMXI.
3.5(k) - Certificate of Incorporation of Foamex Capital Corporation
("FCC").
3.6(k) - By-laws of FCC.
4.1.1(d) - Indenture, dated as of June 12, 1997, by and among Foamex L.P.,
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(v) - First Supplemental Indenture, dated as of December 23, 1997,
between Foamex LLC ("FLLC") and The Bank of New York, as trustee,
relating to the 9 7/8% Notes.
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4.1.3(x) - Second Supplemental Indenture, dated as of February 27, 1998,
among Foamex L.P. and FCC, as joint and several obligors, General
Felt Industries, Inc. ("General Felt"), Foamex Fibers, Inc.
("Foamex Fibers"), and FLLC, as withdrawing guarantors, and The
Bank of New York, as trustee, relating to the 9 7/8% Notes.
4.2.1(v) - Indenture, dated as of December 23, 1997, by and among Foamex
L.P., FCC, the Subsidiary Guarantors, Crain Holdings Corp., as
Intermediate obligator, and The Bank of New York, as trustee,
relating to $98,000,000 principal amount of 13 1/2% Senior
Subordinated Notes due 2005 (the "13 1/2% Notes"), including the
form of Senior Subordinated Note and Subsidiary Guarantee.
4.2.2(x) - First Supplemental Indenture, dated as of February 27, 1998,
among Foamex L.P. and FCC, as joint and several obligors, General
Felt, Foamex Fibers and FLLC, as withdrawing guarantors, Crain
Industries, Inc., as withdrawing intermediate obligor, and The
Bank of New York, as trustee, relating to the 13 1/2% Notes.
4.3(x) - Discharge of Indenture, dated as of February 27, 1998, by and
among Foamex L.P., General Felt, Foamex International Inc.
("Foamex International") and State Street Bank and Trust Company,
as trustee, relating to the 9 1/2% Senior Secured Notes due 2000.
4.4.1(x) - Credit Agreement, dated as of June 12, 1997, as amended and
restated as of February 27, 1998, by and among Foamex L.P., and
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.
4.4.2(x) - Second Amended and Restated Foamex International Guaranty, dated
as of February 27, 1998, made by Foamex International in favor of
Citicorp USA, Inc., as Collateral Agent.
4.4.3(x) - Amended and Restated Partnership Guaranty, dated as of February
27, 1998, made by FMXI in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.4(p) - Foamex Guaranty, dated as of June 12, 1997, made by Foamex L.P.
in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.5(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Latin America, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.6(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.7(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by FCC in
favor of Citicorp USA, Inc., as Collateral Agent.
4.4.8(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.9(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Asia, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.10(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.11(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Latin America, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.12(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Asia, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.13(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.14(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.15(p) - Foamex Security Agreement, dated as of June 12, 1997, made by
Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.16(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Latin America, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.17(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
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4.4.18(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.19(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Asia, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.20(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.21(r) - Foamex Pledge Agreement, dated as of June 12, 1997, made by
Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.22(w) - First Amendment to Foamex Pledge Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.23(w) - First Amendment to Foamex Security Agreement, dated as of
December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc.,
as Collateral Agent.
4.4.24(w) - First Amendment to Foamex Patent Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.25(w) - First Amendment to Trademark Security Agreement, dated as of
December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc.,
as Collateral Agent.
4.4.26(w) - Acknowledgment of Guaranty by each of the guarantors to a
Guaranty dated June 12, 1997 in favor of Citicorp USA, Inc.
4.4.27(w) - First Amendment to Pledge Agreement, dated as of December 23,
1997, by pledgors in favor of Citicorp USA, Inc.
4.4.28(w) - Crain Industries Guaranty, dated as of December 23, 1997, made by
Crain in favor of Citicorp USA, Inc.
4.4.29(x) - Partnership Pledge Agreement, dated as of February 27, 1998, made
by Foamex International and FMXI in favor of Citicorp USA, Inc.,
as Collateral Agent.
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.
4.11.1(x) - Promissory Note of Foamex L.P. in favor of Foam LLC in the
principal amount of $34 million, dated February 27, 1998.
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 L.P.
10.1.3(w) - Amended confirmation, dated as of February 2, 1998, between
Citibank, N.A. and Foamex L.P.
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.
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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").
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 International.
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.
10.7.3(w) - Second Amendment to Amended and Restated Tax Sharing Agreement of
Foamex L.P., dated as of December 23, 1997, by and among Foamex
L.P., Foamex International, FMXI, and Trace Foam.
10.7.4(y) - Third Amendment to Amended and Restated Tax Sharing Agreement of
Foamex L.P., dated as of February 27, 1998, by and between Foamex
L.P., Foamex International and FMXI.
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(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.
10.10.5(u)- Foamex L.P. 401(k) Savings Plan effective October 1, 1997.
10.10.6(a)- Foamex L.P.'s 1993 Stock Option Plan.
10.10.7(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.
10.12(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 Espumas y Fieltros, S.A., the
stockholders which are parties thereto, and Foamex L.P.
10.15.1(r)- Asset Purchase Agreement, dated as of August 29, 1997, by and
among General Felt, Foamex L.P., Bretlin, Inc. and The Dixie
Group.
10.15.2(s)- Addendum to Asset Purchase Agreement, dated as of October 1,
1997, by and among General Felt, Foamex L.P., Bretlin, Inc. and
The Dixie Group.
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10.16.1(x)- Supply Agreement, dated as of February 27, 1998, by and between
Foamex L.P. and General Felt (as assigned to Foamex Carpet).
10.16.2(x)- Administrative Services Agreement, dated as of February 27, 1998,
by and between Foamex L.P. and General Felt (as assigned to
Foamex Carpet).
10.17.1(w)- Joint Venture Agreement between Hua Kee Company Limited and
Foamex Asia, Inc., dated July 8, 1997.
10.17.2(w)- Loan Agreement between Hua Kee Company Limited and Foamex Asia,
Inc., dated July 8, 1997.
27 - Financial Data Schedule for the period ended March 29, 1998.
- ----------------------------
(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.
(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) Intentionally omitted.
(g) Intentionally omitted.
(h) Incorporated herein by reference to the Exhibit to the Form 10-K Statement
of Foamex and FCC for fiscal 1992.
(i) Intentionally omitted.
(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) Intentionally omitted.
(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.
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(q) Intentionally omitted.
(r) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex L.P. reporting an event that occurred on August 29, 1997.
(s) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex L.P. reporting an event that occurred on October 6, 1997.
(t) Intentionally omitted.
(u) Incorporated by reference to the Exhibit to the Form 10-Q of Foamex L.P.
for the quarterly period ended September 28, 1997.
(v) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex L.P., Foamex Capital Corporation and Foamex
International reporting an event that occurred December 23, 1997.
(w) Incorporated herein by reference to the Exhibit in the Registration
Statement of Foamex L.P. and FCC on Form S-4, Registration No. 333-45733.
(x) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex International reporting an event that occurred on February 27, 1998.
(y) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
International for fiscal 1997.
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/A, dated March 9, 1998, providing pro forma financial
information relating to the acquisition of Crain Industries, Inc.
Form 8-K, dated February 28, 1998, reporting the General Felt
Transaction.
Form 8-K/A, dated May 12, 1998, reporting the restated financial
statements of Foamex L.P. relating to the General Felt
transaction.
29
<PAGE>
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 17, 1998 By: /s/ John A. Feenan
----------------------------
John A. Feenan
Executive Vice President and
Chief Financial Officer
FOAMEX CAPITAL CORPORATION
Date: August 17, 1998 By: /s/ John A. Feenan
----------------------------
John A. Feenan
Executive Vice President and
Chief Financial Officer
30
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