SECURITIES AND EXCHANGE COMMISSION
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 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 31
Exhibit List on Page 25 of 31
<PAGE>
FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
<TABLE>
<CAPTION>
INDEX
<S> <C>
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 16
Notes to Balance Sheets 17
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 19
Part II. Other Information 25
Exhibit List 25
Signatures 31
</TABLE>
Foamex L.P. is filing this Form 10-Q/A to reflect adjustments to
accounts receivable, inventory and other assets and liabilities during the
fourth quarter of 1998 related to prior periods including, but not limited to,
the second quarter of 1998 and changes to the accounting treatment of the GFI
Transaction (as defined). Foamex L.P. has updated its Management's Discussion
and Analysis of Financial Condition and Results of Operations to reflect only
such adjustments, but has not updated such disclosure to reflect other
developments since the original filing. Reference is made to Foamex L.P.'s
subsequent reports under the Securities Exchange Act of 1934, as amended, which
have been filed with the Securities and Exchange Commission.
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
13 Week Periods Ended 26 Week Periods Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
--------- --------- --------- ---------
(thousands)
<S> <C> <C> <C> <C>
NET SALES $ 273,708 $ 239,887 $ 571,781 $ 469,007
COST OF GOODS SOLD 226,111 195,107 479,276 381,430
--------- --------- --------- ---------
GROSS PROFIT 47,597 44,780 92,505 87,577
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 17,824 15,646 38,823 31,331
RESTRUCTURING AND OTHER CHARGES (CREDITS) (700) -- (700) --
--------- --------- --------- ---------
INCOME FROM OPERATIONS 30,473 29,134 54,382 56,246
INTEREST AND DEBT ISSUANCE EXPENSE 15,568 10,805 32,480 21,509
OTHER INCOME (EXPENSE), NET (306) 472 (619) 1,122
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES 14,599 18,801 21,283 35,859
PROVISION FOR INCOME TAXES 808 2,417 1,884 3,259
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 13,791 16,384 19,399 32,600
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT (72) (44,859) (3,195) (45,538)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 13,719 $ (28,475) $ 16,204 $ (12,938)
========= ========= ========= =========
</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)
<TABLE>
<CAPTION>
June 28, December 28,
ASSETS 1998 1997
--------- ---------
CURRENT ASSETS: (thousands)
<S> <C> <C>
Cash and cash equivalents $ 4,697 $ 9,405
Accounts receivable, net 142,675 174,959
Inventories 115,528 120,299
Accounts receivable, related party 21,021 1,680
Other current assets 52,063 45,874
--------- ---------
Total current assets 335,984 352,217
PROPERTY, PLANT AND EQUIPMENT, NET 208,617 221,274
COST IN EXCESS OF ASSETS ACQUIRED, NET 182,490 219,699
DEBT ISSUANCE COSTS, NET 14,938 18,889
OTHER ASSETS 19,518 21,989
--------- ---------
TOTAL ASSETS $ 761,547 $ 834,068
========= =========
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 96,455 121,147
Accounts payable - related parties 5,756 11,662
Accrued interest 9,931 10,827
Other accrued liabilities 41,219 63,748
--------- ---------
Total current liabilities 165,028 226,143
LONG-TERM DEBT 683,853 726,649
LONG-TERM DEBT - RELATED PARTY 34,000 --
OTHER LIABILITIES 28,976 37,578
--------- ---------
Total liabilities 911,857 990,370
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
PARTNERS' EQUITY (DEFICIT):
General partners (116,542) (122,304)
Limited partners -- --
Notes receivable from partner (16,118) (16,118)
Accumulated other comprehensive income (7,855) (8,085)
Other (9,795) (9,795)
--------- ---------
Total partners' equity (deficit) (150,310) (156,302)
--------- ---------
TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT) $ 761,547 $ 834,068
========= =========
</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>
26 Week Periods Ended
June 28, June 29,
1998 1997
--------- ---------
OPERATING ACTIVITIES: (thousands)
<S> <C> <C>
Net income (loss) $ 16,204 $ (12,938)
Adjustments to reconcile net income (loss) to net cash provided
by (used for) operating activities:
Depreciation and amortization 15,206 10,301
Amortization of debt issuance costs and debt discount (33) 1,370
Extraordinary loss on extinguishment of debt 2,857 22,620
Other operating activities 4,164 798
Changes in operating assets and liabilities (72,420) (47,256)
--------- ---------
Net cash used for operating activities (34,022) (25,105)
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (15,252) (16,369)
Acquisitions, net of cash acquired (3,899) --
Redemption of General Felt (8,971) --
Purchase of FJPS senior secured discount debentures -- (105,829)
Payments for note receivable - related party (424) --
Decrease in restricted cash -- 12,143
Other investing activities (382) 35
--------- ---------
Net cash used for investing activities (28,928) (110,020)
--------- ---------
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)
Debt issuance costs (1,598) (14,746)
Distributions to partners (20,074) (5,949)
Other financing activities 84 (4)
--------- ---------
Net cash provided by financing activities 58,242 118,665
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,708) (16,460)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 9,405 20,968
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 4,697 $ 4,508
========= =========
</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. The condensed consolidated balance sheet as of June 28, 1998 and the
condensed consolidated statements of operations for the thirteen 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 its
subsidiaries and have not been audited by Foamex L.P.'s independent accountants.
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) (the
"Crain Acquisition"). Subsequent to the acquisition, Foamex International
contributed the assets of Crain, subject to all of its liabilities and
indebtedness, to Foamex L.P. Fees and expenses associated with the Crain
Acquisition were approximately $13.2 million. (See Note 4).
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. RESTATEMENT OF FINANCIAL INFORMATION
The Company originally accounted for the GFI Transaction (as defined, see
Note 3) as a reorganization of companies under common control. As a result, the
1997 and 1998 accompanying consolidated statements of operations were previously
restated to exclude the consolidated operations of General Felt Industries, Inc.
("General Felt"), and partners' equity (deficit) was charged to reflect the net
effect of this transaction as of December 28, 1997. The consolidated balance
sheet as of December 28, 1997 was also 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). Additionally, upon consummation of the GFI Transaction, Foamex L.P.
originally 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. Foamex L.P. also recorded the
$20.0 million distribution to Foamex International as discussed in Note 3.
It was determined during the fourth quarter of 1998 that the GFI
Transaction should have been recorded as a sale to an affiliated party outside
of the consolidated group as opposed to a reorganization of companies under
common control. Had the GFI Transaction been initially accounted for as a sale
to an affiliated party outside of the consolidated group, Foamex L.P.'s balance
sheet and statements of operations and cash flows for 1997 and 1998 would not
have been restated to exclude its investment in and the results of operations of
General Felt for the corresponding periods. As a result, the accompanying
consolidated financial statements have been restated to include the operations
of General Felt in the accompanying balance sheet and the statements of
operations and cash flows of Foamex L.P. for 1997 and in 1998 through the
transaction date of February 27, 1998. In addition, Foamex L.P. identified
certain adjustments to accounts receivable, inventory and other assets and
liabilities during the fourth quarter of 1998 that related to prior periods
including, but not limited to, the second quarter of 1998. As a result, the
Company has also restated the accompanying 1998 consolidated financial
statements to reflect the fourth quarter adjustments that relate to the second
quarter.
The following information reflects the restatement of the accompanying
condensed consolidated financial statements for the reasons discussed above, for
the respective periods noted below:
6
<PAGE>
2. RESTATEMENT OF FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
For the Quarterly Period Ended June 28, 1998
As Previously As
Reported Adjustments Restated
Statement of Operations
<S> <C> <C> <C>
Net sales $ 263,347 $ 10,361 $ 273,708
Cost of goods sold 214,794 11,317 226,111
--------- --------- ---------
Gross profit 48,553 (956) 47,597
Selling, general and administrative 17,030 794 17,824
Restructuring and other charges (credits) -- (700) (700)
--------- --------- ---------
Income (loss) from operations 31,523 (1,050) 30,473
Interest and debt issuance expense 15,818 (250) 15,568
Other income (expense), net (306) -- (306)
--------- --------- ---------
Income (loss) before provision for income taxes 15,399 (800) 14,599
Provision for income taxes 808 -- 808
--------- --------- ---------
Income (loss) before extraordinary loss 14,591 (800) 13,791
Extraordinary loss (72) -- (72)
--------- --------- ---------
Net income (loss) $ 14,519 $ (800) $ 13,719
========= ========= =========
For the Twenty-Six Week Period Ended June 28, 1998
As Previously As
Reported Adjustments Restated
Statement of Operations
Net sales $ 547,892 $ 23,889 $ 571,781
Cost of goods sold 455,776 23,500 479,276
--------- --------- ---------
Gross profit 92,116 389 92,505
Selling, general and administrative 34,796 4,027 38,823
Restructuring and other charges (credits) -- (700) (700)
--------- --------- ---------
Income (loss) from operations 57,320 (2,938) 54,382
Interest and debt issuance expense 33,493 (1,013) 32,480
Other income (expense), net (580) (39) (619)
--------- --------- ---------
Income (loss) before provision for income taxes 23,247 (1,964) 21,283
Provision for income taxes 1,533 351 1,884
--------- --------- ---------
Income (loss) before extraordinary loss 21,714 (2,315) 19,399
Extraordinary loss (3,195) -- (3,195)
--------- --------- ---------
Net income (loss) $ 18,519 $ (2,315) $ 16,204
========= ========= =========
Cash Flows
Net cash used for operating activities $ (34,446) $ 424 $ (34,022)
Net cash used for investing activities (19,383) (9,545) (28,928)
Net cash provided by financing activities 49,544 8,698 58,242
--------- --------- ---------
Net decrease in cash and cash equivalents (4,285) (423) (4,708)
As of June 28, 1998
As Previously As
Reported Adjustments Restated
Balance Sheet
Current assets $338,694 $(2,710) $335,984
Total assets 764,109 (2,562) 761,547
Current liabilities 164,748 280 165,028
Total liabilities 911,577 280 911,857
Partners' deficit (147,468) (2,842) (150,310)
</TABLE>
7
<PAGE>
2. RESTATEMENT OF FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
For the Quarterly Period Ended June 29, 1997
As Previously As
Reported Adjustments Restated
Statement of Operations
<S> <C> <C> <C>
Net sales $199,491 $40,396 $239,887
Cost of goods sold 164,876 30,231 195,107
--------- -------- ---------
Gross profit 34,615 10,165 44,780
Selling, general and administrative 10,631 5,015 15,646
---------- --------- ----------
Income from operations 23,984 5,150 29,134
Interest and debt issuance expense 10,836 (31) 10,805
Other income (expense), net 750 (278) 472
------------ ---------- ------------
Income before provision for income taxes 13,898 4,903 18,801
Provision for income taxes 481 1,936 2,417
------------ ---------- -----------
Income before extraordinary loss 13,417 2,967 16,384
Extraordinary loss (44,859) - (44,859)
---------- -------------- ----------
Net income (loss) $ (31,442) $ 2,967 $ (28,475)
========= ========== =========
For the Twenty-Six Week Period Ended June 29, 1997
As Previously As
Reported Adjustments Restated
Statement of Operations
Net sales $393,625 $75,382 $469,007
Cost of goods sold 322,169 59,261 381,430
--------- -------- ---------
Gross profit 71,456 16,121 87,577
Selling, general and administrative 21,754 9,577 31,331
---------- --------- ----------
Income from operations 49,702 6,544 56,246
Interest and debt issuance expense 21,502 7 21,509
Other income (expense), net 1,571 (449) 1,122
----------- ---------- -----------
Income before provision for income taxes 29,771 6,088 35,859
Provision for income taxes 849 2,410 3,259
------------ ---------- -----------
Income before extraordinary loss 28,922 3,678 32,600
Extraordinary loss (45,538) - (45,538)
---------- -------------- ----------
Net income (loss) $ (16,616) $ 3,678 $ (12,938)
========= ========== =========
Cash Flows
Net cash provided by operating activities $ (23,275) $(1,830) $ (25,105)
Net cash used for investing activities (111,696) 1,676 (110,020)
Net cash provided by financing activities 118,697 (32) 118,665
---------- ---------- ---------
Net decrease in cash and cash equivalents (16,274) (186) (16,460)
As of December 28, 1997
As Previously As
Reported Adjustments Restated
Balance Sheet
Current assets $304,989 $47,228 $352,217
Total assets 735,937 98,131 834,068
Current liabilities 198,835 27,308 226,143
Total liabilities 995,360 (4,990) 990,370
Partners' deficit (259,423) 103,121 (156,302)
</TABLE>
8
<PAGE>
3. GFI TRANSACTION
On February 27, 1998, Foamex International, Foamex L.P. and certain of
their affiliates completed a series of transactions designed to simplify the
structure of Foamex International and Foamex L.P. and to provide future
operational flexibility (collectively, the "GFI Transaction"). Prior to the
consummation of these transactions, (i) Foamex L.P. and Foamex L.P.'s wholly
owned subsidiary, General Felt Industries, Inc. ("General Felt"), entered into a
supply agreement and an administrative services agreement (see Note 8), (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 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, 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, 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. to Foamex International. As part of these
transactions, 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.
No gain has been recognized on the GFI Transaction. The impact of the GFI
Transaction was an increase in Foamex L.P.'s partners' capital (deficit) of
approximately $10.1 million, a distribution of $20.0 million to Foamex
International and approximately $1.5 million of fees charged to earnings. The
proceeds from the $129.0 million of debt assumed by Foam Funding LLC in the GFI
Transaction was used to repay approximately $125.1 million of term loan
borrowings that was accounted for as an extinguishment of debt which resulted in
an extraordinary loss of approximately $3.2 million. The 1% non-managing general
partnership interest acquired in connection with the GFI Transaction was
accounted for as a redemption of equity. The GFI Transaction used cash of
approximately $10.2 million. The non-cash portion was insignificant.
4. 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). Subsequent to the acquisition, Foamex International contributed
the assets of Crain, subject to all its liabilities and indebtedness, to Foamex
L.P. Fees and expenses associated with the Crain Acquisition were 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
9
<PAGE>
4. CRAIN ACQUISITION (continued)
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 periods presented.
<TABLE>
<CAPTION>
13 Week Period 26 Week Period
Ended June 29, 1997 Ended June 29, 1997
(thousands)
<S> <C> <C>
Net sales $255,915 $495,059
======== ========
Income before extraordinary loss $ 18,120 $ 34,535
========= =========
</TABLE>
The pro forma results are not necessarily indicative of what would have
occurred if the Crain Acquisition had occurred at the beginning of the periods
presented nor are they necessarily indicative of future consolidated results.
5. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
June 28, December 28,
1998 1997
--------- ---------
(thousands)
<S> <C> <C>
Raw materials and supplies $ 73,253 $ 75,487
Work-in-process 16,704 15,620
Finished goods 25,571 29,192
--------- ---------
Total $115,528 $120,299
======== ========
</TABLE>
6. LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
Long-term debt consists of:
<TABLE>
<CAPTION>
June 28, December 28,
1998 1997
-------- --------
Credit Facility: (thousands)
<S> <C> <C>
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 $1,198) 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
======== ========
</TABLE>
10
<PAGE>
6. LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY (continued)
<TABLE>
<CAPTION>
June 28, December 28,
1998 1997
(thousands)
Long-term debt-related party consists of:
<S> <C> <C>
Foamex/GFI Note $ 34,000 $ -
========= =========
</TABLE>
Refinancing Associated with the GFI Transaction
In connection with the GFI Transaction (see Note 3), 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 3) 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 9 1/2% senior secured notes due 2000 which were redeemed
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 GFI Transaction (see Note 3), Foamex L.P. entered
into the $34.0 million Foamex/GFI Note to settle an existing intercompany note
payable to General Felt (see Note 8). 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.
During the thirteen week and twenty-six week periods ended June 28, 1998,
Foamex L.P. incurred interest expense of approximately $0.2 million and $0.8
million, respectively.
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.
7. EARLY EXTINGUISHMENT OF DEBT
In connection with the GFI Transaction (see Note 3), Foamex L.P. incurred
an extraordinary loss on the early extinguishment of debt of approximately $3.1
million in 1998. 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.
8. RELATED PARTY TRANSACTIONS
Effective February 27, 1998, Foamex L.P. and General Felt entered into a
supply agreement that was subsequently assigned to Foamex Carpet (see Note 3)
whereby (i) Foamex Carpet may purchase from Foamex L.P. finished prime, rubber
and rebond carpet cushion at the lesser of cost plus 4.7% or fair market value,
(ii) Foamex
11
<PAGE>
8. RELATED PARTY TRANSACTIONS (continued)
L.P. may purchase from Foamex Carpet nonwoven textile fiber products at the
lesser 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
lesser 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 GFI Transaction (see Note 3), Foamex L.P. and
General Felt entered into an administrative services agreement that was
subsequently assigned to Foamex Carpet (the "Services Agreement"). Pursuant to
the Services Agreement, Foamex L.P. will provide Foamex Carpet administrative
and management services, as defined, at cost plus out-of-pocket expenses. During
the thirteen 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 GFI
Transaction. 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 3).
Foamex L.P. has a 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
this supply 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. discontinued
utilizing this 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 advance agreement. As of June 28, 1998, there
were $13.6 million of advances to Foamex International under this agreement.
9. 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
accruals of
12
<PAGE>
9. ENVIRONMENTAL MATTERS (continued)
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.
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
accruals of approximately $3.0 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.
10. 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
13
<PAGE>
10. LITIGATION (continued)
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, there can
be no 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. Foamex L.P. is not a party to such suit.
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
14
<PAGE>
10. LITIGATION (continued)
stockholders will be held to vote upon and adopt a proposed merger (the
"Merger") and the related merger agreement (the "Merger Agreement") which
provides, among other things, for the public shares of Foamex International'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.
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 not a party to such
suit.
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.
11. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 "Reporting Comprehensive Income,"
which requires disclosure of comprehensive income, as defined, including
comprehensive disclosure in interim financial statements. Comprehensive income
for the respective periods presented below is comprised of the following:
<TABLE>
<CAPTION>
13 Week Period 26 Week Period
Ended June 28, 1998 Ended June 28, 1998
(thousands)
<S> <C> <C>
Net income $ 13,719 $ 16,204
Foreign currency translation adjustments 3 230
-------- --------
Total comprehensive income $ 13,722 $ 16,434
======== ========
13 Week Period 26 Week Period
Ended June 29, 1997 Ended June 29, 1997
(thousands)
Net income (loss) $(28,475) $(12,938)
Foreign currency translation adjustments 16 (168)
-------- --------
Total comprehensive income (loss) $(28,459) $(13,106)
======== ========
</TABLE>
15
<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.
16
<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.
17
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS (unaudited)
2. COMMITMENTS AND CONTINGENCIES (continued)
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.
18
<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, 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 stock, 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, and (iv) the receipt of
requisite financing.
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. Foamex L.P.
believes that it 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.
On February 27, 1998, Foamex International, Foamex L.P. and certain of
their affiliates completed a series of transactions designed to simplify Foamex
International's and Foamex L.P.'s structures and to provide future operational
flexibility (collectively, the "GFI Transaction"). Prior to the consummation of
these transactions, (i) Foamex L.P. and Foamex L.P.'s wholly owned subsidiary,
General Felt Industries, Inc. ("General Felt"), entered into a supply agreement
and an 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, 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, 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. to Foamex
International. As part of these transactions, FMXI, Inc. and Crain Industries,
Inc. ("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.
19
<PAGE>
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 (and an estimated fair value of approximately $112.3
million) (the "Crain Acquisition"). 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 were
approximately $13.2 million.
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 $273.7 million as compared
to $239.9 million in the second quarter of 1997, an increase of $33.8 million or
14.1%. 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 national bedding
customers and fabricators. Carpet Cushion Products net sales for the second
quarter of 1998 decreased 35.8% to $50.3 million from $78.4 million in the
second quarter of 1997. This decrease was primarily due to (i) the GFI
Transaction which occurred on February 27, 1998 (see Note 3), which resulted in
approximately $15.0 million of the decrease due to General Felt no longer being
included in Foamex L.P.'s results of operations subsequent to the transaction
date, (ii) the sale of Dalton in October 1997 which contributed net sales of
$13.6 million in 1997, and (iii) reductions 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 of laminated products. Technical Products net sales for
the second quarter of 1998 increased 3.1% 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 decreased to 17.4% for the
second quarter of 1998 from 18.7% in the second quarter of 1997. This decrease
was 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 L.P.'s historical gross profit margins.
Income from operations increased to $30.5 million for the second quarter
of 1998 from $29.1 million in the second quarter of 1997 primarily due to the
Crain Acquisition in December 1997, offset by the GFI Transaction in February
1998.
Income before extraordinary loss decreased to $13.8 million for the
second quarter of 1998 as compared to $16.4 million for the second quarter of
1997. The decrease is primarily due to the increase in income from operations of
$1.3 million discussed above, offset by an increase of approximately $4.8
million in interest and debt issuance expense and $1.1 million of costs
associated with the GFI Transaction 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 during the second
quarter of 1997 of approximately $44.9 million primarily related to debt
extinguished in connection with the June 1997 refinancing plan.
20
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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 $571.8
million as compared to $469.0 million for the twenty-six week period ended June
29, 1997, an increase of $102.8 million or 21.9%. Foam Products net sales for
the twenty-six week period ended June 28, 1998 increased to $293.6 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 national
bedding customers and fabricators. Carpet Cushion Products net sales for the
twenty-six week period ended June 28, 1998 decreased 25.7% to $111.2 million
from $149.6 million for the twenty-six week period ended June 28, 1997. This
decrease was primarily due to (i) an aggregate decrease of $74.3 million in
connection with the GFI Transaction in February 1998 and the sale of Dalton in
October 1997, (ii) reductions in rebond selling prices as compared to 1997 and
(iii) product mix. These decreases were offset by increases in net sales from
the Crain Acquisition in December 1997. 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 11.3% 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 16.2% for the
twenty-six week period ended June 28, 1998 from 18.7% 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 L.P.'s historical gross profit margins. Also, the gross profit was lower
since Foamex L.P. carried the full individual operating costs of both
organizations throughout the majority of the first quarter of 1998.
Income from operations decreased to $54.4 million for the twenty-six week
period ended June 28, 1998 from $56.2 million in the twenty-six week period
ended June 29, 1997 primarily due to the Crain Acquisition in December 1997,
offset by the GFI Transaction in February 1998.
Income before extraordinary loss decreased to $19.4 million for the
twenty-six week period ended June 28, 1998 as compared to $32.6 million for the
twenty-six week period ended June 29, 1997. The decrease is primarily due the
decrease in income from operations of $1.9 million discussed above, an increase
of approximately $11.0 million in interest and debt issuance expense and $1.9
million of costs associated with the GFI Transaction 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
related to the write-off of debt issuance costs with debt extinguishment in
connection with the GFI Transaction and the redemption during June 1998 of the 9
1/2% senior secured notes due 2000. 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.
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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 $4.7 million during 1998 to $4.7
million at June 28, 1998 from $9.4 million at December 28, 1997 primarily due to
an increase in cash used by the operating assets and liabilities offset by
increased revolving credit borrowings. Working capital increased $44.9 million
during 1998 to $171.0 million at June 28, 1998 from $126.1 million at December
28, 1997 primarily due to changes in net operating assets, a decrease in current
portion of long-term debt, an increase in other current assets and a decrease in
other accrued 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 GFI Transaction. The increase in other current assets
is primarily associated with the timing of payments for prepaid expenses and the
receipt of cash for other receivables. The decrease in other accrued liabilities
is primarily due to the transfer of General Felt's accrued liabilities to Foam
Funding LLC in connection with the GFI Transaction in February 1998, and the
timing of payments of accrued liabilities during the current quarterly period.
Net operating assets (comprised of accounts receivable, accounts receivables
from related parties, inventories, accounts payable and accounts payable related
parties) increased $12.9 million during 1998 to $177.0 million at June 28, 1998
from $164.1 million at December 28, 1997 primarily due to increases in accounts
receivable related party of $19.3 million and decreases in accounts payable and
accounts payable related party of $30.6 million, offset by decreases in accounts
receivable of $32.3 million and inventory of $4.8 million. The decreases in
accounts receivable and inventory are primarily due to the GFI Transaction in
February 1998. The decrease in accounts payable and in accounts 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 $34.0 million for the
twenty-six week period ended June 28, 1998 as compared to cash flow used of
$25.1 million for the twenty-six week period ended June 29, 1997. This decrease
is primarily due to changes in the components of working capital (discussed
above), including a reduction in accounts payable and accounts payable related
party of $30.6 million associated with the timing of payments.
Cash flow used for investing activities decreased to $28.9 million for
the twenty-six week period ended June 29, 1998 from $110.0 million for the
twenty-six week period ended June 29, 1997. Cash flows used for investing
activities in 1998 included $9.0 million paid in connection with the GFI
Transaction. Cash flow used for investing activities in 1997 included the use of
$105.8 million of cash during 1997 to purchase the outstanding FJPS discount
debentures in connection with the June 1997 refinancing plan.
Cash flow provided by financing activities decreased to $58.2 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 related to the June 1997 refinancing plan as compared to net
borrowings during the twenty-six week period ended June 28, 1998 primarily for
working capital needs and to fund distributions relating to the GFI Transaction.
22
<PAGE>
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.
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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 11).
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.
24
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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 on Form
10-Q/A for the fiscal quarter end June 28, 1998.
The information from Notes 9 and 10 of the accompanying 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.
28
<PAGE>
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 - Amended Financial Data Schedule for the twenty-six week period
ended June 28, 1998.
27.1 - Amended Financial Data Schedule for the twenty-six week period
ended June 27, 1997.
- ----------------------------
(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.
29
<PAGE>
(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.
30
<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 13, 1999 By: /s/ George L. Karpinski
------------------------
Vice President
FOAMEX CAPITAL CORPORATION
Date: August 13, 1999 By: /s/ George L. Karpinski
------------------------
Vice President
31
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