SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A-1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1998
Commission file numbers 1-11432; 1-11436
FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 05-0475617
Delaware 22-3182164
- ------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 Columbia Avenue
Linwood, PA 19061
- ------------------------------ ----------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (610) 859-3000
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) have been subject to such
filing requirements for the past 90 days. YES X NO
Foamex L.P. and Foamex Capital Corporation meet the conditions set forth in
General Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this
form with the reduced disclosure format.
The number of shares of Foamex Capital Corporation's common stock outstanding as
of May 15, 1998 was 1,000.
Page 1 of 29
Exhibit List on Page 23 of 29
<PAGE>
FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
INDEX
Page
Part I. Financial Information:
Item 1. Financial Statements
Foamex L.P.
Condensed Consolidated Statements of Operations - Thirteen
Week Periods Ended March 29, 1998 and March 30, 1997 3
Condensed Consolidated Balance Sheets as of March 29, 1998
and December 28, 1997 4
Condensed Consolidated Statements of Cash Flows - Thirteen
Week Periods Ended March 29, 1998 and March 30, 1997 5
Notes to Condensed Consolidated Financial Statements 6
Foamex Capital Corporation
Balance Sheets as of March 29, 1998 and December 28, 1997 15
Notes to Balance Sheets 16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
Part II. Other Information 23
Exhibit List 23
Signatures 29
The Company is filing this Form 10-Q/A-1 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 first quarter of 1998 and changes to the accounting treatment of the GFI
Transaction (as defined). The Company 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 the Company'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)
13 Week Periods Ended
---------------------
March 29, March 30,
1998 1997
--------- ---------
(thousands)
NET SALES $ 298,073 $ 229,120
COST OF GOODS SOLD 253,165 186,323
--------- ---------
GROSS PROFIT 44,908 42,797
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 20,999 15,685
--------- ---------
INCOME FROM OPERATIONS 23,909 27,112
INTEREST AND DEBT ISSUANCE EXPENSE 16,912 10,704
OTHER INCOME (EXPENSE), NET (313) 650
--------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 6,684 17,058
PROVISION FOR INCOME TAXES 1,076 842
--------- ---------
INCOME BEFORE EXTRAORDINARY LOSS 5,608 16,216
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT (3,123) (679)
--------- ---------
NET INCOME $ 2,485 $ 15,537
========= =========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
3
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
March 29, December 28,
ASSETS 1998 1997
--------- ---------
CURRENT ASSETS: (thousands)
<S> <C> <C>
Cash and cash equivalents $ 2,972 $ 9,405
Accounts receivable, net 149,187 174,959
Inventories 111,906 120,299
Accounts receivable, related party 15,970 1,680
Other current assets 45,803 45,874
--------- ---------
Total current assets 325,838 352,217
PROPERTY, PLANT AND EQUIPMENT, NET 207,133 221,274
COST IN EXCESS OF ASSETS ACQUIRED, NET 183,925 219,699
DEBT ISSUANCE COSTS, NET 15,420 18,889
OTHER ASSETS 24,806 21,989
--------- ---------
TOTAL ASSETS $ 757,122 $ 834,068
========= =========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings $ 5,882 $ 6,598
Current portion of long-term debt 4,009 12,161
Accounts payable 115,044 121,147
Accounts payable - related parties 1,598 11,662
Accrued interest 8,029 10,655
Other accrued liabilities 45,463 63,920
--------- ---------
Total current liabilities 180,025 226,143
LONG-TERM DEBT 677,582 726,649
LONG-TERM DEBT - RELATED PARTY 34,000 --
OTHER LIABILITIES 31,525 37,578
--------- ---------
Total liabilities 923,132 990,370
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
PARTNERS' EQUITY (DEFICIT):
General partners (129,748) (122,304)
Limited partners -- --
Note receivable from partner (18,608) (16,118)
Accumulated other comprehensive income (7,859) (8,085)
Other (9,795) (9,795)
--------- ---------
Total partners' equity (deficit) (166,010) (156,302)
--------- ---------
TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT) $ 757,122 $ 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>
13 Week Periods Ended
---------------------
March 29, March 30,
1998 1997
--------- ---------
OPERATING ACTIVITIES: (thousands)
<S> <C> <C>
Net income $ 2,485 $ 15,537
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 7,251 5,055
Amortization of debt issuance costs, debt discount and
debt premium 247 703
Extraordinary loss on extinguishment of debt 2,857 679
Other operating activities 2,142 (83)
Changes in operating assets and liabilities (44,073) (2,416)
--------- ---------
Net cash provided by (used for) operating activities (29,091) 19,475
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (7,115) (7,363)
Acquisition, net of cash acquired (3,321) --
Sale of subsidiaries (8,971) --
Deposit for defeasence of indebtedness (4,809) --
Purchase of note from partner (2,490) --
Decrease in restricted cash -- 8,356
Proceeds from (payments for) note receivable - related party (424) --
Other investing activities (451) --
--------- ---------
Net cash used for investing activities (27,581) 993
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term borrowings (716) 293
Net proceeds from revolving loans 69,973 --
Proceeds from long-term debt 129,000 500
Repayment of long-term debt (126,827) (9,038)
Debt issuance costs (1,149) --
Distributions to partners (20,000) (124)
Other financing activities (42) (410)
--------- ---------
Net cash provided by (used for) financing activities 50,239 (8,779)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (6,433) 11,689
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 9,405 20,968
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 2,972 $ 32,657
========= =========
</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 March 29, 1998 and the
condensed consolidated statements of operations for the thirteen week periods
ended March 29, 1998 and March 30, 1997 and the condensed consolidated
statements of cash flows for the thirteen week periods ended March 29, 1998 and
March 30, 1997 have been prepared by Foamex L.P. and subsidiaries and have not
been audited by Foamex L.P.'s independent accountants. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation of the consolidated financial
position, results of operations and cash flows have been included.
On December 23, 1997, Foamex International Inc. ("Foamex International")
acquired Crain Industries, Inc. ("Crain") pursuant to a merger agreement with
Crain Holdings Corp. for a purchase price of approximately $213.7 million,
including the assumption of debt with a face value of approximately $98.6
million (and an estimated fair value of approximately $112.3 million), Foamex
International then contributed the assets of Crain subject to all of its
liabilities and indebtedness to Foamex L.P. (the "Crain Acquisition"). In
addition, fees and expenses associated with the Crain Acquisition were
approximately $13.2 million. (See Note 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). Upon consummation of the GFI Transaction, Foamex
L.P. recorded an increase in partners' equity (deficit) of approximately $113.2
million associated with the assumption of indebtedness by Trace Foam LLC,
related expenses and fees and other matters. In addition, Foamex L.P. recorded
the $20.0 million distribution to Foamex International as discussed 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 through 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 first quarter
of 1998. As a result, the Company has restated the accompanying 1998
consolidated financial statements to also reflect the fourth quarter adjustments
that relate to the first quarter.
6
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2. RESTATEMENT OF FINANCIAL INFORMATION (continued)
The following information reflects the restatement of the accompanying
consolidated financial statements for the reasons discussed above, for the
respective periods noted below:
<TABLE>
<CAPTION>
For the Three Months Ended March 29, 1998
-----------------------------------------
As Previously As
Reported Adjustments Restated
-------- ----------- --------
Statement of Operations:
<S> <C> <C> <C>
Net sales $284,545 $ 13,528 $298,073
Cost of goods sold 240,982 12,183 253,165
---------- -------- ----------
Gross profit 43,563 1,345 44,908
Selling, general and administrative 17,766 3,233 20,999
---------- -------- ----------
Income from operations 25,797 (1,888) 23,909
Interest and debt issuance expense 17,675 (763) 16,912
Other income (expense), net (274) (39) (313)
---------- -------- ----------
Income before provision for income taxes 7,848 (1,164) 6,684
Provision for income taxes 725 351 1,076
---------- -------- ----------
Income before extraordinary loss 7,123 (1,515) 5,608
Extraordinary loss (3,123) - (3,123)
---------- -------- ----------
Net income $ 4,000 $ (1,515) $ 2,485
========== ======== ==========
Cash Flows:
Net cash used for operating activities $(29,535) $ 444 $(29,091)
Net cash used for investing activities (18,016) (9,565) (27,581)
Net cash provided by financing activities 41,541 8,698 50,239
Net cash at beginning of period 8,982 423 9,405
As of March 29, 1998
--------------------
As Previously As
Reported Adjustments Restated
-------- ----------- --------
Balance Sheet:
Current assets $327,964 $(2,126) $325,838
Total assets 758,498 (1,376) 757,122
Current liabilities 179,900 125 180,025
Total liabilities 922,466 666 923,132
Partners' deficit (163,968) (2,042) (166,010)
For the Three Months Ended March 30, 1997
-----------------------------------------
As Previously As
Reported Adjustments Restated
-------- ----------- --------
Statement of Operations:
Net sales $194,134 $34,986 $229,120
Cost of goods sold 157,293 29,030 186,323
---------- -------- ----------
Gross profit 36,841 5,956 42,797
Selling, general and administrative 11,123 4,562 15,685
---------- -------- ----------
Income from operations 25,718 1,394 27,112
Interest and debt issuance expense 10,666 38 10,704
Other income (expense), net 821 (171) 650
---------- -------- ----------
Income before provision for income taxes 15,873 1,185 17,058
Provision for income taxes 368 474 842
---------- -------- ----------
Income before extraordinary loss 15,505 711 16,216
Extraordinary loss (679) - (679)
---------- -------- ----------
Net income $ 14,826 $ 711 $ 15,537
========== ======== ==========
</TABLE>
7
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2. RESTATEMENT OF FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
For the Three Months Ended March 30, 1997
-----------------------------------------
As Previously As
Reported Adjustments Restated
-------- ----------- --------
Cash Flows:
<S> <C> <C> <C>
Net cash provided by operating activities $ 22,217 $(2,742) $ 19,475
Net cash used for investing activities (1,578) 2,571 993
Net increase in cash 11,860 (171) 11,689
Net cash at beginning of period 20,632 336 20,968
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>
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, 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 Trace Foam LLC of all of the outstanding common
stock of General Felt, in exchange for (i) the assumption by Trace Foam LLC of
$129.0 million of Foamex L.P.'s indebtedness and (ii) the transfer by Trace Foam
LLC to Foamex L.P. of a 1% non-managing general partnership interest in Foamex
L.P. As a result, General Felt ceased being a subsidiary of Foamex L.P. and was
relieved from all obligations under Foamex L.P.'s 9 7/8% senior subordinated
notes due 2007 and 13 1/2% senior subordinated notes due 2005. Upon consummation
of the initial transaction, Foamex Carpet Cushion, Inc. ("Foamex Carpet"), a
newly formed wholly owned subsidiary of Foamex International, Foamex
International, Trace Foam LLC, and General Felt entered into an Asset Purchase
Agreement dated February 27, 1998, in which General Felt sold substantially all
of its assets (other than cash, the Foamex/GFI Note and its operating facility
in Pico Rivera, California) to Foamex Carpet in exchange for (i) $20.0 million
in cash and (ii) a promissory note issued by Foamex Carpet to Trace Foam LLC in
the amount of $70.2 million. The $20.0 million cash payment was funded with a
distribution by Foamex L.P 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.
Foamex L.P. originally accounted for the GFI Transaction as a
reorganization of companies under common control (see Note 2). 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 $129.0 million of
debt assumed by Trace Foam 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
8
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
3. GFI TRANSACTION (continued)
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), Foamex International then contributed the assets of Crain,
subject to all its liabilities and indebtedness to Foamex L.P. Fees and expenses
associated with the Crain Acquisition 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
the acquired assets and liabilities have been completed. The pro forma results
listed below are unaudited and assume that the Crain Acquisition occurred at the
beginning of the period presented.
13 Week Period Ended
March 30, 1997
--------------------
(thousands)
Net sales $306,768
========
Income before extraordinary loss $ 12,783
========
The pro forma results are not necessarily indicative of what would have
occurred if the Crain Acquisition had been in effect for the entire periods
presented nor are they necessarily indicative of future consolidated results.
5. INVENTORIES
Inventories consist of:
March 29, December 28,
1998 1997
-------- --------
(thousands)
Raw materials and supplies $ 69,473 $ 75,487
Work-in-process 16,561 15,620
Finished goods 25,872 29,192
-------- --------
Total $111,906 $120,299
======== ========
9
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
6. LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
Long-term debt consists of:
<TABLE>
<CAPTION>
March 29, December 28,
1998 1997
-------- --------
Credit Facility: (thousands)
<S> <C> <C>
Term Loan A $ -- $ 76,700
Term Loan B 83,553 109,725
Term Loan C 75,958 99,750
Term Loan D 110,000 110,000
Revolving credit facility 124,901 54,928
9 7/8% Senior subordinated notes due 2007 150,000 150,000
13 1/2% Senior subordinated notes due 2005 (includes
$13,272 and $13,720 of unamortized debt premiums) 111,272 111,720
9 1/2% Senior secured notes due 2000 4,523 4,523
Industrial revenue bonds 7,000 7,000
Subordinated note payable (net of unamortized
debt discount of $804 and $886) 6,211 6,129
Other 8,173 8,335
-------- --------
681,591 738,810
Less current portion 4,009 12,161
-------- --------
Long-term debt-unrelated parties $677,582 $726,649
======== ========
Long-term debt-related party consists of:
Foamex/GFI Note $ 34,000 $ --
======== ========
</TABLE>
Refinancing Associated with Transfer of General Felt Common Stock
In connection with the transfer of General Felt common stock (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 Trace Foam 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 Senior Secured Notes,
(iii) repay $4.8 million of indebtedness owed to General Felt, (iv) fund the
$20.0 million distribution to Foamex International and (v) pay fees and expenses
of approximately $5.4 million. Also, this amendment increased the availability
under the revolving credit facility from $150.0 million to $200.0 million;
however, $34.5 million of this increase is used for a letter of credit to
support the Foamex/GFI Note.
Foamex/GFI Note
In connection with the transfer of General Felt's common stock, Foamex
L.P. entered into the $34.0 million Foamex/GFI Note to settle an existing
intercompany note payable to General Felt. The Foamex/GFI Note matures in March
2000 with interest payable at LIBOR plus an applicable margin. The principal
amount is due upon maturity in March 2000.
Principal Payments
Principal payments on Foamex L.P.'s long-term debt and long-term debt -
related party for the remainder of 1998 and for the next five years are as
follows: 1998 - $3.9 million; 1999 - $7.3 million; 2000 - $45.5 million; 2001 -
$6.9 million; 2002 - $2.9 million; 2003 - $135.8 million and thereafter - $500.8
million.
10
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
7. EARLY EXTINGUISHMENT OF DEBT
In connection with the GFI Transaction, Foamex L.P. incurred an
extraordinary loss on the early extinguishment of debt of approximately $3.1
million. The extraordinary loss is comprised of approximately $2.9 million for
the write-off of debt issuance costs and approximately $0.2 million of
professional fees and other costs.
During 1997, Foamex L.P. used approximately $8.4 million of proceeds from
notes receivable - related party to repurchase outstanding indebtedness of
approximately $8.0 million, which resulted in an extraordinary loss of
approximately $0.7 million.
8. RELATED PARTY TRANSACTIONS
Effective February 27, 1998, Foamex L.P. entered into the Supply
Agreement (as defined) (see Note 3) (i) whereby General Felt may purchase from
Foamex L.P. finished prime, rubber and rebond carpet cushion at the lessor of
cost plus 4.7% or fair market value, (ii) Foamex L.P. may purchase from General
Felt nonwoven textile fiber products at the lessor of cost plus 15% or fair
market value, and (iii) either party may purchase from the other trim foam and
other raw materials and supplies for the lessor of the price paid for such raw
materials or fair market value. During the thirteen week period ended March 29,
1998, Foamex sold approximately $13.4 million to General Felt under the Supply
Agreement. Prior to February 27, 1998, Foamex L.P. has sales and purchases with
General Felt based on an established intercompany transfer price which was
adjusted to comply with the transfer pricing regulations of the Internal Revenue
Code, as amended, if necessary. During the thirteen week period ended March 29,
1998 and March 30, 1997, Foamex L.P. sold approximately $18.1 million and $35.3
million, respectively, to General Felt and purchased from General Felt
approximately $0.4 million and $0.4 million, respectively.
In connection with the GFI Transaction (see Note 3), Foamex L.P. and
Foamex Carpet entered into a Management Services Agreement whereby Foamex L.P.
will provide certain administrative functions on behalf of Foamex Carpet at a
cost basis. During the thirteen week period ended March 29, 1998, Foamex L.P.
received $0.1 million for services provided to Foamex Carpet.
On February 27, 1998, Foamex L.P. repaid approximately $4.8 million of an
intercompany note payable with General Felt, and the balance was replaced by the
Foamex/GFI Note. The Foamex/GFI Note was retained by Trace Foam LLC in
connection with the transfer of General Felt. For the period from February 27,
1998 to March 29, 1999, Foamex L.P. incurred approximately $0.2 million of
interest expense on the Foamex/GFI Note (see Note 3).
Foamex L.P. has a supply agreement (the "Supply Agreement") with Foamex
International pursuant to which, at the option of Foamex L.P., Foamex
International will purchase certain raw materials, which are necessary for the
manufacture of Foamex L.P.'s products, and resell such materials to Foamex L.P.
at a price equal to net cost plus reasonable out of pocket expenses. Management
believes that the terms of the Supply Agreement are no less favorable than those
which Foamex L.P. could have obtained from an unaffiliated third party. During
the thirteen-week periods ended March 29, 1998 and March 30, 1997, Foamex L.P.
purchased approximately $15.0 million and $11.6 million, respectively, of raw
materials under the Supply Agreement. Effective March 30, 1998, Foamex L.P. has
discontinued utilizing the Supply Agreement to purchase its raw materials.
Foamex L.P. chartered an aircraft (which is owned by a wholly owned
subsidiary of Foamex International) through a third party and incurred costs of
approximately $0.2 million and $0.4 million during the thirteen week periods
ended March 29, 1998 and March 30, 1997, respectively.
On December 11, 1996, Foamex L.P. entered into a Tax Distribution Advance
Agreement, pursuant to which its partners are entitled to obtain advances, in
the aggregate not to exceed $17.0 million, against future distributions under
Foamex L.P.'s tax distribution agreement. As of March 29, 1998, there were $13.6
million of advances to Foamex International under this agreement.
11
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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 thirteen week period ended March 29, 1998,
expenditures in connection with Foamex L.P.'s compliance with federal, state,
local and foreign environmental laws and regulations did not have a material
adverse effect on Foamex L.P.'s operations, financial position, capital
expenditures or competitive position. As of March 29, 1998, Foamex L.P. has
environmental accruals of approximately $3.8 million for environmental matters.
In addition, as of March 29, 1998 Foamex L.P. has net receivables of
approximately $0.6 million relating to indemnification for environmental
liabilities.
The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments") provide
for the establishment of federal emission standards for hazardous air pollutants
including methylene chloride, propylene oxide and TDI, materials used in the
manufacturing of foam. On December 27, 1996, the United States Environmental
Protection Agency (the "EPA") proposed regulations under the 1990 CAA Amendments
that will require manufacturers of slab stock polyurethane foam and foam
fabrication plants to reduce emissions of methylene chloride. Because these
regulations are subject to change prior to finalization, Foamex L.P. cannot
accurately predict the actual cost of their implementation. Foamex L.P. does not
believe implementation of the regulations will require it to make material
expenditures at facilities owned prior to December 23, 1997, due to Foamex
L.P.'s use of alternative technologies which do not utilize methylene chloride
and its ability to shift current production to the facilities which use these
alternative technologies; however, material expenditures may be required at the
facilities formerly operated by Crain. The 1990 CAA Amendments also may result
in the imposition of additional standards regulating air emissions from
polyurethane foam manufacturers, but these standards have not yet been proposed
or promulgated.
Foamex L.P. has reported to appropriate state authorities that it has
found soil and groundwater contamination in excess of state standards at four
facilities and soil contamination in excess of state standards at three other
facilities. Foamex L.P. has begun remediation and is conducting further
investigations into the extent of the contamination at these facilities and,
accordingly, the extent of the remediation that may ultimately be required. The
actual cost and the timetable of any such remediation cannot be predicted with
any degree of certainty at this time. As of March 29, 1998, Foamex L.P. has
accruals of approximately $3.3 million for the remaining potential remediation
costs for these facilities based on estimates.
Federal regulations require that by the end of 1998 all underground
storage tanks ("USTs") be removed or upgraded in all states to meet applicable
standards. Foamex L.P. has two USTs that will require removal or permanent
in-place closure by the end of 1998. Due to the age of these tanks, leakage may
have occurred resulting in soil and possibly groundwater contamination. Foamex
L.P. has accrued $0.1 million for the estimated removal and remediation, if any,
associated with these USTs. However, the full extent of contamination and,
accordingly, the actual cost of such remediation cannot be predicted with any
degree of certainty at this time. Foamex L.P. believes that its USTs do not pose
a significant risk of environmental liability because of Foamex L.P.'s
monitoring practices for USTs and conditional approval for the permanent
in-place closure for certain USTs. However, there can be no assurance that such
USTs will not result in significant environmental liability in the future.
Foamex L.P. has been designated as a Potentially Responsible Party
("PRP") by the EPA with respect to nine sites, with an estimated total liability
to Foamex L.P. for the nine sites of less than approximately $0.5 million.
Estimates of total clean-up costs and fractional allocations of liability are
generally provided by the EPA or the committee of PRP's with respect to the
specified site. In each case, the participation of Foamex L.P. is considered to
be immaterial.
Although it is possible that new information or future developments could
require Foamex L.P. to reassess its potential exposure relating to all pending
environmental matters, including those described herein, management believes
that, based upon all currently available information, the resolution of such
environmental matters will not have a material adverse effect on Foamex L.P.'s
operations, financial position, capital expenditures or competitive
12
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
9. ENVIRONMENTAL MATTERS (continued)
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 May 15, 1998, Foamex L.P. and Trace International Holdings, Inc.
("Trace Holdings") were two of multiple defendants in actions filed on behalf of
approximately 5,000 recipients of breast implants in various United States
federal and state courts and one Canadian provincial court, some of which allege
substantial damages, but most of which allege unspecified damages for personal
injuries of various types. Three of these cases seek to allege claims on behalf
of all breast implant recipients or other allegedly affected parties, but no
class has been approved or certified by the court. In addition, three cases have
been filed alleging claims on behalf of approximately 700 residents of
Australia, New Zealand, England, and Ireland. During 1995, Foamex L.P. and Trace
Holdings were granted summary judgments and dismissed as defendants from all
cases in the federal courts of the United States and the state courts of
California. Appeals for these decisions were withdrawn and the decisions are
final. In addition, two of the cases filed on behalf of 903 foreign plaintiffs
were dismissed on the grounds that the cases could not be brought in the United
States courts. This decision is subject to appeal. Foamex L.P. believes that the
number of suits and claimants may increase. Although breast implants do not
contain foam, certain silicone gel implants were produced using a polyurethane
foam covering fabricated by independent distributors or fabricators from bulk
foam purchased from Foamex L.P. or Trace Holdings. Neither Foamex L.P. nor Trace
Holdings recommended, authorized or approved the use of its foam for these
purposes. While it is not feasible to predict or determine the outcome of these
actions, based on management's present assessment of the merits of pending
claims, after consultation with the general counsel of Trace Holdings, and
without taking into account potential indemnity from the manufacturers of
polyurethane covered breast implants, management believes that the disposition
of matters that are pending or that may reasonably be anticipated to be asserted
should not have a material adverse effect on either Foamex L.P.'s or Trace
Holdings' consolidated financial position or results of operations. In addition,
Foamex L.P. is also indemnified by Trace Holdings for any such liabilities
relating to foam manufactured prior to October 1990. Although Trace Holdings has
paid Foamex L.P.'s litigation expenses to date pursuant to such indemnification
and management believes Trace Holdings likely will be in a position to continue
to pay such expenses, there can be no absolute assurance that Trace Holdings
will be able to provide such indemnification. Based on information available at
this time with respect to the potential liability, and without taking into
account the indemnification provided by Trace Holdings and the coverage provided
by Trace Holdings' and Foamex L.P.'s liability insurance, Foamex L.P. believes
that the proceedings should not ultimately result in any liability that would
have a material adverse effect on the financial position or results of
operations of Foamex L.P. If management's assessment of Foamex L.P.'s liability
with respect to these actions is incorrect, such actions could have a material
adverse effect on Foamex L.P.
In November 1997, a complaint was filed in the United States District
Court for the Southern District of Texas alleging that various defendants,
including Crain through the use of the CARDIO(R) process licensed from a third
party, infringed on a patent held by plaintiff. Foamex L.P. is negotiating with
the licensor of the process for the assumption of the defense of the action by
the licensor; however, the action is in the preliminary stages, and there can be
no assurance as to the ultimate outcome of the action.
On or about March 17, 1998, five purported class action lawsuits were
filed in the Delaware Chancery Court, New Castle County, against Foamex
International, directors of Foamex International, Trace Holdings, and individual
officers and directors of Trace Holdings:
Brickell Partners v. Marshall S. Cogan, et al., No. 16260NC;
Mimona Capital v. Salvatore J. Bonanno, et al., No. 16259NC;
Daniel Cohen v. Foamex International Inc., No. 16263;
Eileen Karisinki v. Foamex International Inc., et al., No. 16261NC and
John E. Funky Trust v. Salvatore J. Bonanno, et al., No. 16267.
13
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
10. LITIGATION (continued)
A sixth purported class action lawsuit, Barnett Stepak v. Foamex
International Inc., et al., No. 16277, was filed on or about March 23, 1998
against the same defendants. The complaints in the six actions allege, among
other things, that the defendants have violated fiduciary and other common law
duties purportedly owed to Foamex International's stockholders in connection
with Trace Holdings proposal to acquire all of the shares of 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.
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 (SFAS) No. 130, "Reporting Comprehensive
Income," which requires disclosure of comprehensive income, as defined,
including comprehensive disclosure in interim financial statements.
Comprehensive income for the thirteen week periods ended March 29, 1998 and
March 30, 1997 is comprised of the following:
March 29, March 30,
1998 1997
-------- --------
(thousands)
Net income $ 2,485 $ 15,537
Foreign current translation adjustments 227 (184)
-------- --------
Total comprehensive income $ 2,712 $ 15,353
======== ========
14
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly Owned Subsidiary of Foamex L.P.)
BALANCE SHEETS (unaudited)
March 29, December 28,
1998 1997
-------- --------
ASSETS (thousands)
CASH $ 1 $ 1
==== ====
LIABILITIES AND STOCKHOLDER'S EQUITY
COMMITMENTS AND CONTINGENCIES $ -- $ --
---- ----
STOCKHOLDER'S EQUITY:
Common stock, par value $.01 per share;
1,000 shares authorized, issued and outstanding -- --
Additional paid-in capital 1 1
---- ----
TOTAL STOCKHOLDER'S EQUITY $ 1 $ 1
==== ====
The accompanying notes are an integral part of
the balance sheets.
15
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS (unaudited)
1. ORGANIZATION
Foamex Capital Corporation ("FCC"), a wholly owned subsidiary of Foamex
L.P., was formed for the sole purpose of obtaining financing from external
sources.
2. COMMITMENTS AND CONTINGENCIES
FCC is a joint obligor and severally liable on the following borrowings
of Foamex L.P.:
9 7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")
The Senior Subordinated Notes were issued by Foamex L.P. and FCC in
connection with the June 1997 refinancing plan. The Senior Subordinated Notes
bear interest at the rate of 9 7/8% per annum payable semiannually on each June
15 and December 15, commencing December 15, 1997. The Senior Subordinated Notes
mature on June 15, 2007. The Senior Subordinated Notes may be redeemed at the
option of Foamex L.P., in whole or in part, at any time on or after June 15,
2002, initially at 104.938% of their principal amount, plus accrued interest and
liquidated damages, as defined, if any, thereon to the date of redemption and
declining to 100.0% on or after June 15, 2005. In addition, at any time prior to
June 15, 2000, Foamex L.P. may on one or more occasions redeem up to 35.0% of
the initially outstanding principal amount of the Senior Subordinated Notes at a
redemption price equal to 109.875% of the principal amount, plus accrued
interest and liquidated damages, if any, thereon to the date of redemption with
the cash proceeds of one or more Public Equity Offerings, as defined. Upon the
occurrence of a change of control, as defined, each holder of Senior
Subordinated Notes will have the right to require Foamex L.P. to repurchase the
Senior Subordinated Notes at a price equal to 101.0% of the principal amount,
plus accrued interest and liquidated damages, if any, to the date of repurchase.
Trace Holdings' proposed acquisition of Foamex International would not
constitute such a change of control. The Senior Subordinated Notes are
subordinated in right of payment to all senior indebtedness and are pari passu
in right of payment to the 13 1/2% Senior Subordinated Notes and approximately
$7.0 million subordinated promissory note.
13 1/2% Senior Subordinated Notes due 2005 ("13 1/2% Senior Subordinated
Notes")
The 13 1/2% Senior Subordinated Notes were issued by Foamex L.P. and FCC
in a private placement on December 23, 1997 in connection with the Crain
Acquisition. The 13 1/2% Senior Subordinated Notes bear interest at the rate of
13 1/2% per annum payable semiannually on each February 15 and August 15,
commencing February 15, 1998. The 13 1/2% Senior Subordinated Notes mature on
August 15, 2005. The 13 1/2% Senior Subordinated Notes may be redeemed at the
option of Foamex L.P., in whole or in part, at any time on or after August 15,
2000, initially at 106.75% of their principal amount, plus accrued interest and
liquidated damages, as defined, if any, thereon to the date of redemption and
declining to 100.0% on or after August 15, 2004. Upon the occurrence of a change
of control, as defined, each holder of the 13 1/2% Senior Subordinated Notes
will have the right to require Foamex L.P. to repurchase the 13 1/2% Senior
Subordinated Notes at a price equal to 101.0% of the principal amount, plus
accrued interest and liquidated damages, if any, to the date of repurchase.
Trace Holdings' proposed acquisition of Foamex International would not
constitute such a change of control. The 13 1/2% Senior Subordinated Notes are
subordinated in right of payment to all senior indebtedness and are pari passu
in right of payment to the Senior Subordinated Notes and an approximately $7.0
million of subordinated promissory note.
16
<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 filed a registration statement relating to an exchange
offer in which Foamex L.P. will offer to exchange the 13 1/2% Senior
Subordinated Notes issued in the private placement for new notes. The terms of
the new notes will be substantially identical in all respects (including
principal amount, interest rate, maturity and ranking) to the terms of the 13
1/2% Senior Subordinated Notes, except that the new notes will be transferable
by holders thereof without further registration under the Securities Act of
1933, as amended (except in the case of 13 1/2% Senior Subordinated Notes held
by affiliates of Foamex L.P. and for certain other holders), and are not subject
to any covenant regarding registration under the Securities Act of 1933, as
amended.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Foamex L.P. operates in the flexible polyurethane and foam products
industry. The following discussion should be read in conjunction with the
condensed consolidated financial statements and related notes thereto of Foamex
L.P. included in this report. Certain information in this report contains
forward-looking statements and should be read in conjunction with the discussion
regarding forward-looking statements set forth on page five of Foamex L.P.'s
1997 Annual Report on Form 10-K/A.
During 1997, Foamex L.P.'s products were utilized primarily in five
end-markets; (i) carpet cushion and other carpet products, (ii) cushioning
foams, including bedding products, (iii) furniture products for furniture
manufacturers and distributors, (iv) automotive applications, including trim and
accessories, and (v) specialty and technical applications, including those for
filtration, gasketing and sealing. As a result of the Crain Acquisition, Foamex
L.P. has added a sixth end market: consumer products.
On March 16, 1998, Foamex International announced that its Board of
Directors received an unsolicited buyout proposal from Trace Holdings, Foamex
International's principal stockholder. Trace Holdings proposed to acquire all of
the outstanding common stock of Foamex International not currently owned by
Trace Holdings and its subsidiaries for a cash price of $17.00 per share. Also,
Trace Holdings informed the Board of Directors that financing for the buyout
transaction would be arranged through Donaldson, Lufkin & Jenrette Securities
Corporation and The Bank of Nova Scotia/Scotia Capital Markets. As of March 16,
1998, Trace Holdings and its subsidiaries beneficially owned approximately
11,475,000 shares or approximately 46% of the outstanding common stock of Foamex
International. In response to Trace Holding's offer, Foamex International's
Board of Directors has appointed a special committee to determine the
advisability and fairness of the proposed buyout to Foamex International's
stockholders other than Trace Holdings and its subsidiaries. Trace Holding's
proposed buyout is subject to a number of conditions, including the negotiations
of definitive documents (which are expected to contain customary closing
conditions); the filing of a disclosure statement and other documents with the
Securities and Exchange Commission; regulatory filings; and approval of the
transaction by a majority of Foamex International's stockholders.
On February 27, 1998, Foamex International, Foamex L.P. and certain of
its affiliates completed a series of transactions designed to simplify 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
the Supply Agreement and the Administrative Services Agreement, (ii) Foamex L.P.
repaid its outstanding indebtedness to General Felt with $4.8 million in cash
and the Foamex/GFI Note supported by a $34.5 million letter of credit under the
Credit Facility, (iii) Foamex L.P. contributed to General Felt $9.4 million of
outstanding net intercompany payables and intercompany loans with General Felt
and (iv) Foamex L.P. defeased the $4.5 million outstanding principal amount of
its 9 1/2% Senior Secured Notes due 2000. The initial transaction resulted in
the transfer from Foamex L.P. to Trace Foam LLC of all of the outstanding common
stock of General Felt, in exchange for (i) the assumption by Trace Foam LLC of
$129.0 million of Foamex L.P.'s indebtedness and (ii) the transfer by Trace Foam
LLC to Foamex L.P. of a 1% non-managing general partnership interest in Foamex
L.P. As a result, each of General Felt and Foamex Fibers ceased being a
subsidiary of Foamex L.P. and was relieved from all obligations under Foamex
L.P.'s 9 7/8% Senior Subordinated Notes and 13 1/2% senior subordinated notes
due 2005. Upon consummation of the initial transaction, Foamex Carpet, a newly
formed wholly owned subsidiary of Foamex International, Foamex International,
Trace Foam LLC, and General Felt entered into an Asset Purchase Agreement,
pursuant to which General Felt sold substantially all of its assets (other than
cash, the Foamex/GFI Note and its operating facility in Pico Rivera, California)
to Foamex Carpet in exchange for (i) $20.0 million in cash and (ii) a promissory
note issued by Foamex Carpet to Trace Foam LLC in the amount of $70.2 million.
The $20.0 million cash payment was funded with a distribution by Foamex L.P. 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.
On December 23, 1997, Foamex International acquired Crain pursuant to a
merger agreement with Crain Holdings for a purchase price of approximately
$213.7 million, including the assumption of debt with a face value of
approximately $98.6 million (and an estimated fair value of approximately $112.3
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
million). Foamex International then contributed the assets of Crain subject to
all of its liabilities and indebtedness to Foamex L.P. In addition, fees and
expenses associated with the Crain Acquisition are approximately $13.2 million.
On April 27, 1998, Foamex L.P.'s facility in Orlando, Florida was damaged
by a fire. Foamex L.P. is in the process of repairing the damages to the
facility and supplying local customers from other facilities. Management
believes that Foamex L.P. has adequate insurance coverage for business
interruption and damages to the facility associated with the fire. After
considering Foamex L.P.'s insurance coverage, Foamex L.P. does not believe that
the fire will have a significant impact on Foamex L.P.'s financial position or
operations; however, there can be no assurance that the fire will not have a
significant impact on Foamex L.P.'s financial position or operations.
Operating results for 1998 are expected to be influenced by various
internal and external factors. These factors include, among other things, (i)
consolidation of the Crain Acquisition, (ii) continued implementation of the
continuous improvement program to improve Foamex L.P.'s profitability, (iii)
additional raw material cost increases, if any, by Foamex L.P.'s chemical
suppliers, (iv) Foamex L.P.'s success in passing on to its customers selling
price increases to recover such raw material cost increases and (v) fluctuations
in interest rates.
13 Week Period Ended March 29, 1998 Compared to 13 Week Period Ended March 30,
1997
Results of Operations
Net sales for the first quarter of 1998 were $298.1 million as compared
to $229.1 million in the first quarter of 1997, an increase of $69.0 million or
30.1%. Carpet cushion products net sales for the first quarter of 1998 decreased
(19.3)% to $54.8 million from $67.9 million in the first quarter of 1997. This
decrease was primarily due to the GFI Transaction which occurred on February 27,
1998 (see Note 3), which resulted in General Felt no longer being included in
Foamex L.P.'s results of operations subsequent to the transaction date. Carpet
cushion products are exclusively sold to Foamex Carpet. Cushioning products net
sales for the first quarter of 1998 increased 86.3% to $97.8 million from $52.5
million in the first quarter of 1997 primarily due to net sales from the Crain
operations and increased volume to our national bedding customers and
fabricators. Furniture products net sales for the first quarter of 1998
increased 36.8% to $43.1 million as compared to net sales of $31.5 million for
the first quarter of 1997 primarily due to net sales from the Crain operations.
Automotive products net sales for the first quarter of 1998 increased 10.0% to
$65.7 million from $59.7 million in the first quarter of 1997 primarily due to
increased volume. Technical products net sales for the first quarter of 1998
increased 20.6% to $21.1 million from $17.5 million in the first quarter of 1997
primarily due to increased net sales volume for felted, gasketing, and sealing
products. Consumer products net sales for the first quarter of 1998 were $15.6
million. The consumer products category was acquired pursuant to the Crain
Acquisition in December 1997.
Gross profit as a percentage of net sales decreased to 15.1% for the
first quarter of 1998 from 18.7% in the first quarter of 1997 primarily due to
the shift in product mix for 1998 as a result of the Crain Acquisition. Crain's
principal product lines, bedding, furniture and carpet cushion, have inherently
lower gross profit margins than Foamex L.P.'s historical gross profit margins.
Also, the gross profit was lower in the first quarter of 1998 since Foamex L.P.
carried the full individual operating costs of both organizations.
Income from operations was $23.9 million for the first quarter of 1998
compared to $27.1 million in the first quarter of 1997 primarily due to the
increase in selling, general and administrative expenses of $5.3 million
primarily due to the Crain Acquisition, offset in part by an increase in gross
profit of $2.2 million due primarily to increased volume resulting from the
Crain Acquisition.
Income before extraordinary loss decreased to $5.6 million for the first
quarter of 1998 as compared to $16.2 million for the first quarter of 1997. The
decrease is primarily due to an approximately $6.2 million increase in interest
and debt issuance expense and $0.8 million of costs associated with the transfer
of General Felt which is included in other income (expense), net. The increase
in interest and debt issuance expense is primarily due to the debt incurred in
connection with the Crain Acquisition offset by the favorable effects of the
June 1997 refinancing plan.
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The extraordinary loss on early extinguishment of debt of approximately
$3.1 million during the first quarter of 1998 primarily relates to the write-off
of debt issuance costs associated with debt extinguished in connection with the
GFI Transaction.
Foamex Capital Corporation ("FCC")
FCC is solely a co-issuer of certain indebtedness of Foamex L.P. and has
no other material operations.
Liquidity and Capital Resources
Foamex L.P.'s operating cash requirements consist principally of working
capital requirements, scheduled payments of principal and interest on
outstanding indebtedness and capital expenditures. Foamex L.P. believes that
cash flow from operating activities, cash on hand and periodic borrowings under
the Credit Facility, if necessary, will be adequate to meet operating cash
requirements. The ability to meet the operating cash requirements of Foamex L.P.
could be impaired if Foamex L.P. was to fail to comply with any of the covenants
contained in the Credit Facility and such noncompliance was not cured by Foamex
L.P. or waived by the lenders. Foamex L.P. was in compliance with the covenants
in the Credit Facility as of March 29, 1998 and expects to be in compliance with
the covenants for the foreseeable future.
Cash and cash equivalents decreased $6.4 million during 1998 to $3.0
million at March 29, 1998 from $9.4 million at December 28, 1997 primarily due
to a decrease in operating cash results and an increase of cash used by the
operating assets and liabilities. Working capital increased $19.7 million during
1998 to $145.8 million at March 29, 1998 from $126.1 million at December 28,
1997 primarily due to changes in net operating assets (as discussed below), a
decrease in current portion of long-term debt, a decrease in accrued interest,
and a net increase in other current assets and liabilities. The decrease in
current portion of long-term debt and accrued interest are primarily due to the
assumption of Foamex L.P.'s long-term debt by Trace Foam LLC in connection with
the GFI Transaction. The net increase in other current assets and liabilities is
primarily associated with the timing of payments for prepaid expenses and the
receipt of cash for other receivables. Net operating assets and liabilities
(comprised of accounts receivable, accounts receivables from related parties,
inventories, accounts payable and accounts payable related parties) decreased
$3.7 million during 1998 to $160.4 million at March 29, 1998 from $164.1 million
at December 28, 1997 primarily due to decreases in accounts receivable and
inventory and decreases in accounts payable and accounts payable related party
offset by increases in accounts receivable related party. The decrease in
accounts receivable is primarily due to the GFI Transaction on February 27,
1998. The decrease in accounts payable and account payable related party is
primarily due to the timing of payments and the GFI Transaction on February 27,
1998.
As of March 29, 1998, there were $124.9 million of revolving credit
borrowings under the Credit Facility and approximately $49.5 million associated
with letters of credit outstanding which are supported by the Credit Facility
with unused availability of approximately $25.6 million. Borrowings by Foamex
Canada as of March 29, 1998 were $5.1 million under Foamex Canada's revolving
credit agreement with unused availability of approximately $0.9 million.
Cash flow used for operating activities was $29.1 million for the first
quarter of 1998 as compared to cash provided of $19.5 million for the first
quarter of 1997. This decrease is primarily due to (i) a reduction in operating
results, (ii) cash used for an increase in accounts receivable related party and
other receivables associated with the timing of receipts and (iii) a reduction
in accounts payable and accounts payable related party associated with the
timing of payments.
Cash flow used for investing activities was $27.6 million for the first
quarter of 1998 as compared to cash flow provided of $1.0 million for the first
quarter of 1997 primarily due to (i) $9.0 million in connection with the sale of
certain subsidiaries, (ii) $7.1 million for capital expenditures, (iii) $3.3
million paid in connection with the Crain Acquisition, (iv) $2.5 million to
purchase a note receivable from Foamex International, and (v) $4.8 million
deposit to defease the senior secured notes.
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cash flow provided by financing activities increased to $50.2 million for
the first quarter of 1998 as compared to cash used of $8.8 million for the first
quarter of 1997. This increase is primarily associated with borrowings under the
revolving loans to fund the operations of Crain during the first quarter of 1998
offset by the $20.0 million distribution to Foamex International and other
expenses associated with the GFI Transaction.
Interest Rate Swaps
Foamex L.P. enters into interest rate swaps to lower funding costs and/or
to manage interest costs and exposure to changing interest rates. Foamex L.P.
does not hold or issue financial instruments for trading purposes.
On January 8, 1998, Foamex L.P. entered into an amended interest rate
swap agreement which provides for an interest rate swap agreement with a
notional amount of $150.0 million through June 2002. Under this agreement,
Foamex L.P. is obligated to make fixed payments of 5.78% per annum through
December 1998 and variable payments based on LIBOR at the beginning of each six
month period for the remainder of the agreement, in exchange for fixed payments
by the swap partner at 6.44% per annum for the life of the agreement, payable
semiannually in arrears. The newly amended interest rate swap agreement can be
terminated by the swap partner at the end of each six month period commencing
December 1999.
Foamex L.P. is exposed to credit loss in the event of a nonperformance by
the swap partner; however, the occurrence of this event is not anticipated. The
effect of the interest rate swap agreement was a favorable adjustment to
interest and debt issuance expense of $0.3 million and $0.9 million for the
thirteen week periods ended March 29, 1998 and March 30, 1997, respectively.
Environmental Matters
Foamex L.P. is subject to extensive and changing environmental laws and
regulations. Expenditures to date in connection with Foamex L.P.'s compliance
with such laws and regulations did not have a material adverse effect on
operations, financial position, capital expenditures or competitive position.
The amount of liabilities recorded by Foamex L.P. in connection with
environmental matters as of March 29, 1998 was $3.8 million. In addition, as of
March 29, 1998 Foamex L.P. has net receivables of $0.6 million for
indemnification of environmental liabilities from former owners. Although it is
possible that new information or future developments could require Foamex L.P.
to reassess its potential exposure to all pending environmental matters,
including those described in the footnotes to Foamex L.P.'s consolidated
financial statements, management believes that, based upon all currently
available information, the resolution of all such pending environmental matters
will not have a material adverse effect on Foamex L.P.'s operations, financial
position, capital expenditures or competitive position.
Inflation and Other Matters
There was no significant impact on Foamex L.P.'s operations as a result
of inflation during the periods presented. In some circumstances, market
conditions or customer expectations may prevent Foamex L.P. from increasing the
price of its products to offset the inflationary pressures that may increase its
costs in the future.
Foamex L.P.'s automotive products customers are predominantly automotive
original equipment manufacturers or other automotive suppliers. As such, the
sales of these product lines are directly related to the overall level of
passenger car and light truck production in North America. Also, Foamex L.P.'s
sales are sensitive to sales of new and existing homes, changes in personal
disposable income and seasonality. Foamex L.P. typically experiences two
seasonally slow periods during each year, in early July and in late December,
due to scheduled plant shutdowns and holidays.
21
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Year 2000 Compliance
Foamex L.P. has and will continue to make certain investments in its
software systems and applications to ensure Foamex L. P. is Year 2000 compliant.
Foamex L.P. plans to continue to make modifications to the identified software
during 1998 and test the modifications during 1998. The financial impact to
Foamex L.P. has not been and is not anticipated to be material to its financial
position or results of operation in any given year. New Accounting Standards
New Accounting Standards
Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"),
"Reporting Comprehensive Income," was issued by the Financial Accounting
Standards Board in June 1997. This statement requires all items that must be
recognized under accounting standards as components of comprehensive income to
be reported in a financial statement that is displayed with the same prominence
as other financial statements. Foamex L.P. adopted SFAS No. 130 during the first
quarter of 1998 (see Note 10).
Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
"Disclosures about Segments of an Enterprise and Restated Information," was
issued by the Financial Accounting Standards Board in June 1997. This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected financial
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. Foamex L.P. will
adopt SFAS No. 131 for year end 1998 reporting. Management is evaluating the
impact, if any, the standard will have on Foamex L.P.'s present segment
reporting.
In February 1998 the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pension and Other Postretirement Benefits"
("SFAS No. 132"), which is effective for fiscal years beginning after December
15, 1997. SFAS No. 132 revised the required disclosures about pension and other
postretirement benefit plans. Foamex L.P. plans to adopt SFAS No. 132 in the
fourth quarter of 1998.
22
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to the description of the legal proceedings contained
in the Foamex L.P. Annual Report on Form 10-K/A for the fiscal year
ended December 28, 1997.
The information from Notes 8 and 9 of the condensed consolidated
financial statements of Foamex L.P. and subsidiaries as of March 29,
1998 (unaudited) is incorporated herein by reference.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Securities Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Financial Statement Schedules.
(a) Exhibits
2.1(x) - Transfer Agreement, dated as of February 27, 1998, by and
between Trace Foam LLC 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.
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.
23
<PAGE>
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.
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.
24
<PAGE>
4.4.20(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made
by FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.21(r) - Foamex Pledge Agreement, dated as of June 12, 1997, made by
Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.22(w) - First Amendment to Foamex Pledge Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.23(w) - First Amendment to Foamex Security Agreement, dated as of
December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc.,
as Collateral Agent.
4.4.24(w) - First Amendment to Foamex Patent Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.25(w) - First Amendment to Trademark Security Agreement, dated as of
December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc.,
as Collateral Agent.
4.4.26(w) - Acknowledgment of Guaranty by each of the guarantors to a
Guaranty dated June 12, 1997 in favor of Citicorp USA, Inc.
4.4.27(w) - First Amendment to Pledge Agreement, dated as of December 23,
1997, by pledgors in favor of Citicorp USA, Inc.
4.4.28(w) - Crain Industries Guaranty, dated as of December 23, 1997, made
by Crain in favor of Citicorp USA, Inc.
4.4.29(x) - Partnership Pledge Agreement, dated as of February 27, 1998,
made by Foamex International and FMXI in favor of Citicorp USA,
Inc., as Collateral Agent.
4.6(j) - Commitment letter, dated July 9, 1996, from The Bank of Nova
Scotia to Foamex Canada Inc.
4.7(a) - Subordinated Promissory Note, dated as of May 6, 1993, in the
original principal amount of $7,014,864 executed by Foamex L.P. to
John Rallis ("Rallis").
4.8(a) - Marely Loan Commitment Agreement, dated as of December 14, 1993,
by and between Foamex L.P. and Marely s.a. ("Marely").
4.9(a) - DLJ Loan Commitment Agreement, dated as of December 14, 1993, by
and between Foamex L.P. and DLJ Funding, Inc. ("DLJ Funding").
4.10(p) - Promissory Note, dated June 12, 1997, in the aggregate principal
amount of $5,000,000, executed by Trace Holdings to Foamex.
4.10.1(p) - Promissory Note, dated June 12, 1997, in the aggregate principal
amount of $4,794,828, executed by Trace Holdings to Foamex.
4.11.1(x) - Promissory Note of Foamex L.P. in favor of Trace Foam LLC in the
principal amount of $34 million, dated February 27, 1998.
10.1.1(p) - Amendment to Master Agreement, dated as of June 5, 1997, between
Citibank, N.A. and Foamex.
10.1.2(p) - Amended confirmation, dated as of June 13, 1997, between
Citibank, N.A. and Foamex L.P.
10.1.3(w) - Amended confirmation, dated as of February 2, 1998, between
Citibank, N.A. and Foamex L.P.
10.2(h) - Reimbursement Agreement, dated as of March 23, 1993, between
Trace Holdings and General Felt.
10.3(h) - Shareholder Agreement, dated December 31, 1992, among Recticel,
s.a. ("Recticel"), Recticel Holding Noord B.V., Foamex L.P.,
Beamech Group Limited, LME-Beamech, Inc., James Brian Blackwell,
and Prefoam AG relating to foam technology sharing arrangement.
10.4.1(k) - Asset Transfer Agreement, dated as of October 2, 1990, between
Trace Holdings and Foamex (the "Trace Holdings Asset Transfer
Agreement").
10.4.2(k) - First Amendment, dated as of December 19, 1991, to the Trace
Holdings Asset Transfer Agreement.
10.4.3(k) - Amended and Restated Guaranty, dated as of December 19, 1991,
made by Trace Foam in favor of Foamex L.P.
10.5.1(k) - Asset Transfer Agreement, dated as of October 2, 1990, between
RFC and Foamex L.P. (the "RFC Asset Transfer Agreement").
10.5.2(k) - First Amendment, dated as of December 19, 1991, to the RFC Asset
Transfer Agreement.
25
<PAGE>
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.
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.
26
<PAGE>
27 - Amended Financial Data Schedule for the period ended March 29,
1998.
27.1 - Amended Financial Data Schedule for the period ended March 30,
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.
(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.
27
<PAGE>
(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.
28
<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: May 14, 1999 By: /s/ John A. Feenan
-----------------------------
John A. Feenan
Executive Vice President and
Chief Financial Officer
FOAMEX CAPITAL CORPORATION
Date: May 14, 1999 By: /s/ John A. Feenan
-----------------------------
John A. Feenan
Vice President, Treasurer and
Chief Financial Officer
29
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000890080
<NAME> FOAMEX L.P.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Dec-29-1997
<PERIOD-END> Mar-29-1998
<EXCHANGE-RATE> 1
<CASH> 2,972
<SECURITIES> 0
<RECEIVABLES> 149,187
<ALLOWANCES> 0
<INVENTORY> 111,906
<CURRENT-ASSETS> 325,838
<PP&E> 207,133
<DEPRECIATION> 0
<TOTAL-ASSETS> 757,122
<CURRENT-LIABILITIES> 180,025
<BONDS> 711,582
0
0
<COMMON> 0
<OTHER-SE> (166,010)
<TOTAL-LIABILITY-AND-EQUITY> 757,122
<SALES> 298,073
<TOTAL-REVENUES> 298,073
<CGS> 253,165
<TOTAL-COSTS> 253,165
<OTHER-EXPENSES> 20,999
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,912
<INCOME-PRETAX> 6,684
<INCOME-TAX> 1,076
<INCOME-CONTINUING> 5,608
<DISCONTINUED> 0
<EXTRAORDINARY> (3,123)
<CHANGES> 0
<NET-INCOME> 2,485
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000890080
<NAME> FOAMEX L.P.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-28-1997
<PERIOD-START> Dec-30-1996
<PERIOD-END> Mar-30-1997
<EXCHANGE-RATE> 1
<CASH> 9,405
<SECURITIES> 0
<RECEIVABLES> 174,959
<ALLOWANCES> 0
<INVENTORY> 120,299
<CURRENT-ASSETS> 352,217
<PP&E> 221,274
<DEPRECIATION> 0
<TOTAL-ASSETS> 834,068
<CURRENT-LIABILITIES> 226,143
<BONDS> 726,649
0
0
<COMMON> 0
<OTHER-SE> (156,302)
<TOTAL-LIABILITY-AND-EQUITY> 834,068
<SALES> 229,120
<TOTAL-REVENUES> 229,120
<CGS> 186,323
<TOTAL-COSTS> 186,323
<OTHER-EXPENSES> 15,685
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,704
<INCOME-PRETAX> 17,058
<INCOME-TAX> 842
<INCOME-CONTINUING> 16,216
<DISCONTINUED> 0
<EXTRAORDINARY> (679)
<CHANGES> 0
<NET-INCOME> 15,537
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
