SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 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 May 15, 1998 was 1,000.
Page 1 of 28
Exhibit List on Page 22 of 28
<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 Periods Ended March 29, 1998 and March 30, 1997 3
Condensed Consolidated Balance Sheets as of March 29, 1998
and December 28, 1997 4
Condensed Consolidated Statements of Cash Flows - Thirteen
Week Periods Ended March 29, 1998 and March 30, 1997 5
Notes to Condensed Consolidated Financial Statements 6
Foamex Capital Corporation
Balance Sheets as of March 29, 1998 and December 28, 1997 14
Notes to Balance Sheets 15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Part II. Other Information 22
Exhibit List 22
Signatures 28
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
13 Week Periods Ended
March 29, March 30,
1998 1997
(thousands)
NET SALES $ 284,545 $ 194,134
COST OF GOODS SOLD 240,982 157,293
--------- ---------
GROSS PROFIT 43,563 36,841
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 17,766 11,123
--------- ---------
INCOME FROM OPERATIONS 25,797 25,718
INTEREST AND DEBT ISSUANCE EXPENSE 17,675 10,666
OTHER INCOME (EXPENSE), NET (274) 821
--------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 7,848 15,873
PROVISION FOR INCOME TAXES 725 368
--------- ---------
INCOME BEFORE EXTRAORDINARY LOSS 7,123 15,505
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT (3,123) (679)
--------- ---------
NET INCOME $ 4,000 $ 14,826
========= =========
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)
<TABLE>
<CAPTION>
March 29, December 28,
ASSETS 1998 1997
CURRENT ASSETS: (thousands)
<S> <C> <C>
Cash and cash equivalents $ 2,972 $ 8,982
Accounts receivable, net 150,687 138,571
Inventories 112,532 112,094
Accounts receivable, related party 15,970 12,823
Other current assets 45,803 32,519
--------- ---------
Total current assets 327,964 304,989
PROPERTY, PLANT AND EQUIPMENT, NET 206,383 205,705
COST IN EXCESS OF ASSETS ACQUIRED, NET 183,925 184,523
DEBT ISSUANCE COSTS, NET 15,420 18,889
OTHER ASSETS 24,806 21,831
--------- ---------
TOTAL ASSETS $ 758,498 $ 735,937
========= =========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings $ 5,882 $ 6,598
Current portion of long-term debt 4,009 12,161
Accounts payable 115,044 110,640
Accounts payable - related parties 1,598 11,662
Accrued interest 8,029 10,655
Other accrued liabilities 45,338 47,119
--------- ---------
Total current liabilities 179,900 198,835
LONG-TERM DEBT 677,582 726,649
LONG-TERM DEBT - RELATED PARTY 34,000 38,800
OTHER LIABILITIES 30,984 31,076
--------- ---------
Total liabilities 922,466 995,360
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
PARTNERS' EQUITY (DEFICIT):
General partners (127,706) (122,304)
Limited partners -- --
Note receivable from partner (18,608) (16,118)
Investment in General Felt -- (103,121)
Accumulated other comprehensive income (7,859) (8,086)
Other (9,795) (9,794)
--------- ---------
Total partners' equity (deficit) (163,968) (259,423)
--------- ---------
TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT) $ 758,498 $ 735,937
========= =========
</TABLE>
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>
13 Week Periods Ended
March 29, March 30,
1998 1997
OPERATING ACTIVITIES: (thousands)
<S> <C> <C>
Net income $ 4,000 $ 14,826
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 7,588 3,908
Amortization of debt issuance costs, debt discount and
debt premium 247 703
Extraordinary loss on extinguishment of debt 2,857 679
Other operating activities 1,937 227
Changes in operating assets and liabilities (46,164) 1,874
--------- ---------
Net cash provided by (used for) operating activities (29,535) 22,217
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (6,972) (6,817)
Acquisition, net of cash acquired (3,321) --
Purchase of note from partner (2,490) --
Deposit for defeasence of indebtedness (4,809) --
Proceeds from (payments for) note receivable - related party (424) 5,239
--------- ---------
Net cash used for investing activities (18,016) (1,578)
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term borrowings (716) 293
Net proceeds from revolving loans 69,973 --
Proceeds from long-term debt 129,000 500
Repayment of long-term debt (126,827) (9,038)
Repayment of long-term debt - related party (4,800) --
Debt issuance costs (1,149) --
Distributions to partners (20,000) (124)
Transfer of General Felt common stock (3,898) --
Other financing activities (42) (410)
--------- ---------
Net cash provided by (used for) financing activities 41,541 (8,779)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (6,010) 11,860
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 8,982 20,632
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 2,972 $ 32,492
========= =========
</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 March 29, 1998 and the condensed consolidated statements of
operations for the thirteen week periods ended March 29, 1998 and March 30, 1997
and the condensed consolidated statements of cash flows for the thirteen week
periods ended March 29, 1998 and March 30, 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 period ended March 30, 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 Trace Foam LLC of all
of the outstanding common stock of General Felt, in exchange for (i) the
assumption by Trace Foam LLC of $129.0 million of Foamex L.P.'s indebtedness and
(ii) the transfer by Trace Foam 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, Trace Foam 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 Trace Foam 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 Crain, both wholly-owned subsidiaries of Foamex
International and general partners of Foamex L.P., were merged and Crain, as the
6
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2. TRANSFER OF GENERAL FELT INDUSTRIES, INC. (continued)
surviving corporation, subsequently changed its name to FMXI, Inc. Foamex Carpet
will conduct the carpet cushion business previously conducted by General Felt.
Also, Trace Foam 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 Trace Foam 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
week period ended March 30, 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
Equity (156,302) (103,121) (259,423)
Statement of Operations:
Net sales $ 229,120 $ (34,986) $ 194,134
Income before extraordinary loss 16,216 (711) 15,505
Net income (loss) 15,537 (711) 14,826
</TABLE>
3. CRAIN ACQUISITION
On December 23, 1997, Foamex International acquired 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 (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.
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 the period presented.
7
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
3. CRAIN ACQUISITION (continued)
13 Week Period Ended
March 30, 1997
(thousands)
Net sales $271,782
========
Income before extraordinary loss $ 12,072
========
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:
March 29, December 28,
1998 1997
(thousands)
Raw materials and supplies $ 70,099 $ 72,071
Work-in-process 16,561 15,406
Finished goods 25,872 24,617
-------- --------
Total $112,532 $112,094
======== ========
5. LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
Long-term debt consists of:
<TABLE>
<CAPTION>
March 29, December 28,
1998 1997
Credit Facility: (thousands)
<S> <C> <C>
Term Loan A $ -- $ 76,700
Term Loan B 83,553 109,725
Term Loan C 75,958 99,750
Term Loan D 110,000 110,000
Revolving credit facility 124,901 54,928
9 7/8% Senior subordinated notes due 2007 150,000 150,000
13 1/2% Senior subordinated notes due 2005 (includes
$13,272 and $13,720 of unamortized debt premiums) 111,272 111,720
9 1/2% Senior secured notes due 2000 4,523 4,523
Industrial revenue bonds 7,000 7,000
Subordinated note payable (net of unamortized
debt discount of $804 and $886) 6,211 6,129
Other 8,173 8,335
-------- --------
681,591 738,810
Less current portion 4,009 12,161
-------- --------
Long-term debt-unrelated parties $677,582 $726,649
======== ========
</TABLE>
8
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
March 29, December 28,
1998 1997
(thousands)
Long-term debt-related party consists of:
Foamex/GFI Note $34,000 $38,800
======= =======
Refinancing Associated with Transfer of General Felt Common Stock
In connection with the transfer of 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 Trace Foam 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,
(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.
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 - $3.9 million; 1999 - $7.3 million; 2000 - $45.5 million; 2001 -
$6.9 million; 2002 - $2.9 million; 2003 - $135.8 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 $8.4 million of proceeds from
notes receivable - related party to repurchase outstanding indebtedness of
approximately $8.0 million, which resulted in an extraordinary loss of
approximately $0.7 million.
7. RELATED PARTY TRANSACTIONS
Effective February 27, 1998, Foamex L.P. entered into the Supply Agreement
(see Note 2) (i) whereby General Felt 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 General Felt 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. During the thirteen week period ended March 29, 1998, Foamex sold
approximately $13.4 million
9
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
7. RELATED PARTY TRANSACTIONS (continued)
to General Felt under the Supply Agreement. Prior to February 27, 1998, Foamex
L.P. has 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 period ended March 29, 1998 and March 30, 1997, Foamex
L.P. sold approximately $18.1 million and $35.3 million, respectively, to
General Felt and purchased from General Felt approximately $0.4 million and $0.4
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 period ended March 29, 1998, Foamex L.P.
received $0.1 million 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 Trace Foam LLC in connection with the transfer
of General Felt. For the period from February 27, 1998 to March 29, 1999, Foamex
L.P. incurred approximately $0.2 million 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 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 March 29, 1998 and March 30, 1997, Foamex L.P.
purchased approximately $15.0 million and $11.6 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 $0.2 million and $0.4 million during the thirteen week periods
ended March 29, 1998 and March 30, 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 March 29, 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 thirteen week period ended March 29, 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 March 29, 1998, Foamex L.P. has
environmental accruals of approximately $3.8 million for environmental matters.
In addition, as of March 29, 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.
10
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
8. ENVIRONMENTAL MATTERS (continued)
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 March 29, 1998, Foamex L.P. has
environmental accruals of approximately $3.3 million for the remaining potential
remediation costs for these facilities based on estimates.
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.
11
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
9. LITIGATION
As of May 15, 1998, Foamex L.P. and 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 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 shares of
12
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
9. LITIGATION (continued)
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.
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 (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 periods ended March 29, 1998 and March 30, 1997 is
comprised of the following:
March 29, March 30,
1998 1997
(thousands)
Net income $ 4,000 $ 14,826
Foreign current translation adjustments 227 (184)
-------- --------
Total comprehensive income $ 4,227 $ 14,642
======== ========
13
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
BALANCE SHEETS (unaudited)
March 29, December 28,
1998 1997
ASSETS (thousands)
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
==== ====
The accompanying notes are an integral part of the
balance sheets.
14
<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 would not
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 would not
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.
15
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS (unaudited)
Foamex L.P. has filed a registration statement relating to an exchange
offer in which Foamex L.P. will offer to exchange the 13 1/2% 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 13
1/2% 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 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.
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Foamex L.P. operates in the flexible polyurethane and 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 five
end-markets; (i) carpet cushion and other carpet products, (ii) cushioning
foams, including bedding products, (iii) furniture products for furniture
manufacturers and distributors, (iv) automotive applications, including trim and
accessories, and (v) specialty and technical applications, including those for
filtration, gasketing and sealing. As a result of the Crain Acquisition, Foamex
L.P. has added a sixth end market: consumer products.
On March 16, 1998, Foamex International announced that its Board of
Directors received an unsolicited buyout proposal from Trace Holdings, Foamex
International's principal stockholder. Trace Holdings proposed to acquire all of
the outstanding common stock of Foamex International not currently owned by
Trace Holdings and its subsidiaries for a cash price of $17.00 per share. Also,
Trace Holdings informed the Board of Directors that financing for the buyout
transaction would be arranged through Donaldson, Lufkin & Jenrette Securities
Corporation and The Bank of Nova Scotia/Scotia Capital Markets. As of March 16,
1998, Trace Holdings and its subsidiaries beneficially owned approximately
11,475,000 shares or approximately 46% of the outstanding common stock of Foamex
International. In response to Trace Holding's offer, Foamex International's
Board of Directors has appointed a special committee to determine the
advisability and fairness of the proposed buyout to Foamex International's
stockholders other than Trace Holdings and its subsidiaries. Trace Holding's
proposed buyout is subject to a number of conditions, including the negotiations
of definitive documents (which are expected to contain customary closing
conditions); the filing of a disclosure statement and other documents with the
Securities and Exchange Commission; regulatory filings; and approval of the
transaction by a majority of Foamex International's stockholders.
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 Trace Foam LLC of all of the outstanding common
stock of General Felt, in exchange for (i) the assumption by Trace Foam LLC of
$129.0 million of Foamex L.P.'s indebtedness and (ii) the transfer by Trace Foam
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,
Trace Foam 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 Trace Foam 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,
Trace Foam 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 accounted for as a reorganization of companies under
common control. Accordingly, Foamex L.P.'s consolidated financial statements
have been restated to exclude the consolidated operations of General Felt.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 March 29, 1998 Compared to 13 Week Period Ended March 30,
1997
Results of Operations
Net sales for the first quarter of 1998 were $284.5 million as compared to
$194.1 million in the first quarter of 1997, an increase of $90.4 million or
46.6%. Carpet cushion products net sales for the first quarter of 1998 increased
24.0% to $44.9 million from $36.2 million in the first quarter of 1997. Carpet
cushion products are exclusively sold to Foamex Carpet. Cushioning products net
sales for the first quarter of 1998 increased 86.3% to $97.8 million from $52.5
million in the first quarter of 1997 primarily due to net sales from the Crain
operations and increased volume to our national bedding customers and
fabricators. Furniture products net sales for the first quarter of 1998
increased 39.7% to $39.4 million as compared to net sales of $28.2 million for
the first quarter of 1997 primarily due to net sales from the Crain operations.
Automotive products net sales for the first quarter of 1998 increased 10.0% to
$65.7 million from $59.7 million in the first quarter of 1997 primarily due to
increased volume. Technical products net sales for the first quarter of 1998
increased 20.6% to $21.1 million from $17.5 million in the first quarter of 1997
primarily due to increased net sales volume for felted, gasketing, and sealing
products. Consumer products net sales for the first quarter of 1998 were $15.6
million. The consumer products category was acquired pursuant to the Crain
Acquisition in December 1997.
Gross profit as a percentage of net sales decreased to 15.3% for the first
quarter of 1998 from 19.0% in the first quarter of 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 L.P.'s historical gross profit margins.
Also, the gross profit was lower in the first quarter of 1998 since Foamex L.P.
carried the full individual operating costs of both organizations.
Income from operations was $25.8 million for the first quarter of 1998
compared to $25.7 million in the first quarter of 1997 primarily due to the
Crain Acquisition (discussed above) offset by an increase in selling, general
and administrative expenses primarily due to the Crain Acquisition.
Income before extraordinary loss decreased to $7.1 million for the first
quarter of 1998 as compared to $15.5 million for the first quarter of 1997. The
decrease is primarily due to approximately $7.0 million increase in interest and
debt issuance expense and $0.8 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
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
the debt incurred in connection with the Crain Acquisition offset by the
favorable effects of the June 1997 refinancing plan.
The extraordinary loss on early extinguishment of debt of approximately
$3.1 million during the first quarter of 1998 primarily relates to the write-off
of debt issuance costs associated with debt extinguished in connection with the
transfer of General Felt.
Foamex Capital Corporation ("FCC")
FCC is solely a co-issuer of certain indebtedness of Foamex L.P. and 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
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 March 29, 1998 and expects to be in compliance with
the covenants for the foreseeable future.
Cash and cash equivalents decreased $6.0 million during 1998 to $3.0
million at March 29, 1998 from $9.0 million at December 28, 1997 primarily due
to a decrease in operating cash results and an increase of cash used by the
operating assets and liabilities. Working capital increased $41.9 million during
1998 to $148.1 million at March 29, 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, a decrease in accrued interest,
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 Trace Foam LLC in connection with the General Felt
transaction. The decrease in accrued interest and the net increase in other
current assets and liabilities is primarily associated with the timing of
payments for interest and 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 $21.3 million during
1998 to $162.5 million at March 29, 1998 from $141.2 million at December 28,
1997 primarily due to increases in accounts receivable, accounts receivable
related party, and a decrease in accounts payable related party offset by an
increase in accounts payable. The increase in accounts receivable is primarily
due to an increase in net sales for March 1998 as compared to December 1997. The
increase in accounts payable and the decrease in account payable related party
is primarily due to the timing of payments.
As of March 29, 1998, there were $124.9 million of revolving credit
borrowings under the Credit Facility and approximately $49.5 million associated
with letters of credit outstanding which are supported by the Credit Facility
with unused availability of approximately $25.6 million. Borrowings by Foamex
Canada as of March 29, 1998 were $5.1 million under Foamex Canada's revolving
credit agreement with unused availability of approximately $0.9 million.
Cash flow used for operating activities was $29.5 million for the first
quarter of 1998 as compared to cash provided of $22.2 million for the first
quarter of 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 increased to $18.0 million for the
first quarter of 1998 from $1.6 million for the first quarter of 1997 primarily
due to (i) $3.3 million paid in connection with the Crain Acquisition, (ii) $2.5
million to purchase a note receivable from Foamex International, and (iii) $4.8
million
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
deposit to defease the senior secured notes offset by the receipt of $5.2
million on a note receivable from General Felt in 1997.
Cash flow provided by financing activities increased to $41.5 million for
the first quarter of 1998 as compared to cash used of $8.8 million for the first
quarter of 1997. This increase is primarily associated with borrowings under the
revolving loans to fund the operations of Crain during the first quarter of 1998
offset by the $20.0 million distribution to Foamex International and other
expenses associated with the GFI Transaction.
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 $0.3 million and $0.9 million for the
thirteen week periods ended March 29, 1998 and March 30, 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 March 29, 1998 was $3.8 million. In addition, as of
March 29, 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.
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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.
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.
21
<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/A for the
fiscal year ended December 28, 1997.
The information from Notes 8 and 9 of the condensed consolidated
financial statements of Foamex L.P. and subsidiaries as of March 29,
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
Trace Foam LLC ("Trace 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.
22
<PAGE>
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.
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<PAGE>
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.
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 Trace 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").
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<PAGE>
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").
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.
25
<PAGE>
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.
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.
26
<PAGE>
(p) Incorporated herein by reference to the Exhibit in the Registration
Statement of Foamex on Form S-4, Registration No. 333-30291.
(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.
27
<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: June 11, 1998 By: /s/ R. Allen Baker
---------------------------
R. Allen Baker
Vice President and
Chief Accounting Officer
FOAMEX CAPITAL CORPORATION
Date: June 11, 1998 By: /s/ R. Allen Baker
---------------------------
R. Allen Baker
Vice President and
Chief Accounting Officer
28
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