SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1996
Commission file number 0-22624
FOAMEX INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 05-0473908
(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 registrant (1) has 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) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
The number of shares of the registrant's common stock outstanding as of
November 1, 1996 was 25,209,362.
Page 1 of 24
Exhibit List on Page 16 of 24
<PAGE>
FOAMEX INTERNATIONAL INC.
INDEX
Page
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Thirteen Week and Thirty-Nine Week Periods Ended
September 29, 1996 and October 1, 1995 3
Condensed Consolidated Balance Sheets as of September
29, 1996 and December 31, 1995 4
Condensed Consolidated Statements of Cash Flows -
Thirty-Nine Week Periods Ended September 29, 1996
and October 1, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information 16
Exhibit List 16
Signatures 24
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
13 Week Periods Ended 39 Week Periods Ended
September 29, October 1, September 29, October 1,
1996 1995 1996 1995
(thousands except per share data)
<S> <C> <C> <C> <C>
NET SALES $ 236,766 $ 217,036 $ 696,344 $ 651,928
COST OF GOODS SOLD 196,806 186,227 582,186 555,257
--------- --------- --------- ---------
GROSS PROFIT 39,960 30,809 114,158 96,671
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 15,485 15,680 43,207 46,774
--------- --------- --------- ---------
INCOME FROM OPERATIONS 24,475 15,129 70,951 49,897
INTEREST AND DEBT ISSUANCE EXPENSE 13,794 13,142 39,742 39,579
OTHER INCOME, NET 501 289 1,003 1,109
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES 11,182 2,276 32,212 11,427
PROVISION FOR INCOME TAXES 3,826 1,299 12,408 5,052
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 7,356 977 19,804 6,375
--------- --------- --------- ---------
DISCONTINUED OPERATIONS:
OPERATING INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF INCOME TAXES (1,863) (552) (584) 3,034
LOSS ON DISPOSAL OF DISCONTINUED
OPERATIONS, NET OF INCOME TAXES (71,713) -- (111,010) --
--------- --------- --------- ---------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (73,576) (552) (111,594) 3,034
--------- --------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS (66,220) 425 (91,790) 9,409
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
OF DEBT, NET OF INCOME TAXES (403) -- (403) --
--------- --------- --------- ---------
NET INCOME (LOSS) $ (66,623) $ 425 $ (92,193) $ 9,409
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE:
INCOME FROM CONTINUING OPERATIONS $ 0.29 $ 0.04 $ 0.77 $ 0.24
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (2.88) (0.02) (4.33) 0.11
--------- --------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS (2.59) 0.02 (3.56) 0.35
EXTRAORDINARY LOSS (0.02) -- (0.02) --
--------- --------- --------- ---------
EARNINGS (LOSS) PER SHARE $ (2.61) $ 0.02 $ (3.58) $ 0.35
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 25,541 25,950 25,749 26,712
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
3
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
September 29, December 31,
1996 1995
CURRENT ASSETS: (thousands)
<S> <C> <C>
Cash and cash equivalents $ 48,063 $ 3,322
Accounts receivable, net 139,634 113,716
Inventories 90,089 89,952
Other current assets 47,587 48,757
--------- ---------
Total current assets 325,373 255,747
PROPERTY, PLANT AND EQUIPMENT, NET 186,498 183,318
COST IN EXCESS OF ASSETS ACQUIRED, NET 87,757 89,605
DEBT ISSUANCE COSTS, NET 19,953 22,770
NET ASSETS OF DISCONTINUED OPERATIONS 38,184 191,352
OTHER ASSETS 11,338 16,035
--------- ---------
TOTAL ASSETS $ 669,103 $ 758,827
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings $ 5,169 $ 2,199
Current portion of long-term debt 16,237 9,281
Accounts payable 89,630 89,331
Accrued interest 20,368 9,694
Other accrued liabilities 66,529 58,537
--------- ---------
Total current liabilities 197,933 169,042
--------- ---------
LONG-TERM DEBT 497,159 514,954
--------- ---------
OTHER LIABILITIES 42,345 45,448
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock, par value $1.00 per share:
Authorized 5,000,000 shares - none issued
Common Stock, par value $.01 per share:
Authorized 50,000,000 shares
Issued 26,751,262 and 26,715,960
shares, respectively; Outstanding 25,229,362 and
25,786,260 shares, respectively 267 267
Additional paid-in capital 84,258 84,015
Accumulated deficit (129,232) (37,039)
Other (10,671) (10,693)
--------- ---------
(55,358) 39,550
Common Stock held in treasury, at cost;
1,521,900 shares at September 29, 1996 and 929,700
shares at December 31, 1995 (12,956) (7,167)
--------- ---------
Total stockholders' equity (deficit) (68,334) 29,383
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 669,103 $ 758,827
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
4
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
39 Week Periods Ended
September 29, October 1,
1996 1995
(thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (92,193) $ 9,409
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,861 16,902
Amortization of debt issuance costs and debt discount 10,283 9,102
Loss on disposition of discontinued operations 108,622 --
Changes in operating assets and liabilities, net of acquisitions (11,212) (1,238)
Changes in discontinued operations 17,349 2,096
--------- ---------
Net cash provided by operating activities 49,710 36,271
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (14,536) (17,564)
Acquisitions, net of cash acquired -- (7,272)
Proceeds from sale of discontinued operations 45,425 --
Discontinued operations investing activities (4,828) (18,925)
Other investing activities 1,745 1,549
--------- ---------
Net cash provided by (used for) investing activities 27,806 (42,212)
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from short-term borrowings 2,970 312
Net repayments of revolving loans -- (3,000)
Repayments of long-term debt (19,034) (6,997)
Purchase of treasury stock (5,789) (3,547)
Discontinued operations financing activities (12,184) (4,178)
Other financing activities 70 (196)
--------- ---------
Net cash used for financing activities (33,967) (17,606)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 43,549 (23,547)
--------- ---------
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD:
Continuing operations 3,322 40,827
Discontinued operations 2,840 8,272
--------- ---------
TOTAL CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 6,162 49,099
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD:
Continuing operations 48,063 21,535
Discontinued operations 1,648 4,017
--------- ---------
TOTAL CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 49,711 $ 25,552
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
5
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Foamex International Inc.'s (the "Company") condensed consolidated balance
sheet as of December 31, 1995 has been condensed from the audited consolidated
balance sheet at that date and restated for discontinued operations (see Note 2
below). The condensed consolidated balance sheet as of September 29, 1996, the
condensed consolidated statements of operations for the thirteen week and
thirty-nine week periods ended September 29, 1996 and October 1, 1995, and the
condensed consolidated statements of cash flows for the thirty-nine week periods
ended September 29, 1996 and October 1, 1995 have been prepared by the Company
and have not been audited by the Company's independent accountants. Also, the
condensed consolidated statements of operations for the thirteen week and
thirty-nine week periods ended October 1, 1995 and the condensed consolidated
statement of cash flows for the thirty-nine week period ended October 1, 1995
have been restated for discontinued operations (see Note 2 below). In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, considered necessary for a fair presentation of the financial
position, results of operations and cash flows have been included.
On August 28, 1996, the Company entered into an agreement to sell its
partnership interests in JPS Automotive L.P. ("JPS Automotive") (which comprised
the automotive textiles segment of the Company and substantially all of the
assets of JPS Automotive). On August 1, 1996, the Company consummated the sale
of the home comfort products business of Perfect Fit Industries, Inc. ("Perfect
Fit") (which comprised the home comfort products segment of the Company and
substantially all of the assets of Perfect Fit). Accordingly, the accompanying
condensed consolidated financial statements reflects the automotive textiles and
home comfort products business segments as discontinued operations. See Note 2
below for further discussion.
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 the Company's 1995 consolidated
financial statements and notes thereto as set forth in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995.
2. DISCONTINUED OPERATIONS
On August 28, 1996, the Company entered into an agreement to sell JPS
Automotive to a subsidiary of Collins & Aikman Corporation for $220.0 million,
subject to final adjustments, which includes the assumption of JPS Automotive's
long-term debt. The Company has recorded a loss on disposal of discontinued
operations of approximately $68.9 million including an operating loss of $0.8
million during the phase-out period (net of income tax benefit of $32.7 million)
relating to the sale of JPS Automotive. The Company expects the sale of JPS
Automotive to be consummated prior to December 29, 1996.
On August 1, 1996, the Company completed the sale of the outstanding common
stock of Perfect Fit, a wholly-owned subsidiary, for an adjusted sale price of
approximately $45.4 million, subject to post-closing adjustments. In addition,
Perfect Fit made approximately $2.0 million of payments against its intercompany
loan with Foamex L.P. The sale included substantially all of the net assets of
the home comfort products segment with a net book value of approximately $81.9
million. Actual and estimated transaction expenses related to the sale totaled
approximately $2.0 million. The Company has recorded a loss on disposal of
discontinued operations of approximately $42.1 million including an operating
loss of approximately $1.6 million during the phase-out period (net of income
tax benefits of $0.9 million) relating to the sale of Perfect Fit. A valuation
allowance has been provided for the capital loss relating to the sale of Perfect
Fit since the Company has determined that its future capital gain taxable income
will more likely not be sufficient to fully recognize the deferred tax asset
relating to the capital loss carryforward.
6
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2. DISCONTINUED OPERATIONS (continued)
Summary operating results of the Company's discontinued operations were as
follows:
<TABLE>
<CAPTION>
13 Week Periods Ended 39 Week Periods Ended
September 29, October 1, September 29, October 1,
1996 1995 1996 1995
(thousands)
<S> <C> <C> <C> <C>
Sales $ 36,540 $ 94,880 $ 244,305 $ 310,523
Gross profit 3,842 16,514 38,296 55,290
Income (loss) from operations 729 6,646 17,072 27,440
Interest and debt issuance expense 3,327 7,037 16,905 21,615
Income (loss) from discontinued operations
before income taxes (2,638) (410) (808) 5,628
Provision (benefit) for income taxes (775) 142 (224) 2,594
Income (loss) from discontinued operations,
net of income taxes (1,863) (552) (584) 3,034
</TABLE>
The Company's discontinued operations include the operations of Perfect Fit
through June 1996 and the operations of JPS Automotive through August 1996.
Net assets of the Company's discontinued operations (excluding intercompany
net assets) at September 29, 1996 and December 31, 1995 are as follows:
<TABLE>
<CAPTION>
September 29, December 31,
1996 1995
(thousands)
<S> <C> <C>
Current assets $ 72,402 $ 99,826
Property, plant and equipment, net 114,757 142,863
Cost in excess of assets acquired, net 158,537 202,020
Other assets 8,089 9,675
-------- --------
Total assets 353,785 454,384
-------- --------
Current liabilities 46,056 47,323
Long-term debt 189,781 204,463
Other liabilities 3,999 3,999
-------- --------
Total liabilities 239,836 255,785
-------- --------
Minority interest 7,694 7,247
-------- --------
Net assets 106,255 191,352
Estimated loss from sale of JPS Automotive 68,071 --
-------- --------
Net assets of discontinued operations $ 38,184 $191,352
======== ========
</TABLE>
7
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
3. INVENTORIES
The components of inventories consist of:
September 29, December 31,
1996 1995
(thousands)
Raw materials and supplies $49,774 $49,963
Work-in-process 13,727 14,451
Finished goods 26,588 25,538
------- -------
Total $90,089 $89,952
======= =======
4. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is calculated by dividing net income by the
weighted average shares of common stock outstanding. For 1996, common stock
equivalents have been included in the weighted average shares of common stock
outstanding and amounted to approximately 300,000 shares. For 1995, common stock
equivalents have not been included in the weighted average shares of common
stock outstanding since the effect would be antidilutive.
5. LONG-TERM DEBT
The Company used approximately $12.0 million of the net proceeds from the
sale of Perfect Fit to repay bank term loan borrowings on August 1, 1996. In
addition, on September 23, 1996, Foamex L.P. offered to redeem approximately
$29.8 million of its public debt at 101% of the principal amount using available
proceeds from the Perfect Fit sale. As of October 31, 1996, the date the offer
expired, approximately $11.0 million of Foamex L.P. public debt was tendered for
redemption and has been classified as current in the condensed consolidated
balance sheet as of September 29, 1996. On November 8, 1996, Foamex L.P. issued
a supplemental offer to redeem up to an additional $18.8 million of its public
debt at 101% of the principal amount.
In connection with the sale of JPS Automotive, on October 7, 1996, the
Company solicited from the holders of the Senior Secured Discount Debentures due
2004 (the "Debentures") a waiver of certain provisions of the indenture pursuant
to which the Debentures were issued. As of October 23, 1996, the Company had
received waivers from holders of 100% of the outstanding principal amount of
Debentures.
6. ENVIRONMENTAL MATTERS (TO BE UPDATED)
The Company has reported to appropriate state authorities that it has found
soil and groundwater contamination in excess of state standards at three
facilities and soil contamination in excess of state standards at four other
facilities. The Company 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. As
of September 29, 1996, the Company has environmental accruals of approximately
$1.2 million for the remaining potential remediation costs for these facilities
based on engineering estimates.
Federal regulations require that by 1998 all underground storage tanks
("USTs") be removed or upgraded in most states to meet applicable standards. The
Company, like many other companies engaged in manufacturing, has USTs that will
require removal. Due to the age of many of the Company's approximately twelve
storage tanks, leakage has occurred from a few of these USTs resulting in soil
and possibly groundwater contamination. The Company has accrued costs of $0.5
million based on engineering estimates that the cost of removing the tanks and
remediation costs associated therewith ranges from approximately $0.4 million to
$1.1 million. 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. The Company believes that its USTs do not pose a significant risk
of environmental liability because of the Company's monitoring practices for
USTs and conditional approval for permanent in-place closure for certain USTs.
However, there can be no assurance that such USTs will not result in significant
environmental liability in the future. Foamex L.P. has been designated as a
8
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
6. ENVIRONMENTAL MATTERS (continued)
Potentially Responsible Party ("PRP") by the United States Environmental
Protection Agency (the "EPA") with respect to eleven sites, with an estimated
total liability to Foamex L.P. for the eleven sites of less than approximately
$0.2 million. Estimates of total cleanup costs and fractional allocations of
liability are generally provided by the EPA or the committee of PRP's with
respect to the specified site. In each case, the participation of Foamex L.P. is
considered to be immaterial.
As of September 29, 1996, the recorded environmental liability amounts to
$5.1 million, $1.2 million of which is included in current liabilities. In
addition, the Company has a receivable of $0.6 million, net of an allowance of
approximately $1.0 million relating to potential disagreements regarding the
scope of indemnification for environmental liabilities from the former owners of
Foamex L.P., which is included in current assets. The Company believes that
realization of the receivable established for indemnification is probable.
Although it is possible that new information or future developments could
require the Company to reassess its potential exposure relating to all pending
environmental matters, management believes that, based upon all currently
available information, the resolution of such environmental matters will not
have a material adverse effect on the Company's operations, financial position,
capital expenditures or competitive position. The possibility exists, however,
that new environmental legislation and/or environmental regulations may be
adopted, or other environmental conditions may be found to exist, that may
require expenditures not currently anticipated and that may be material.
7. LITIGATION
As of November 11, 1996, Foamex L.P. and Trace International Holdings Inc.
("Trace Holdings") were two of multiple defendants in actions filed on behalf of
approximately 4,800 persons in various United States federal and state courts
and one Canadian provincial court by recipients of breast implants, some of
which allege substantial damages, but most of which allege unspecified damages
for personal injuries of various types. Five 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 2,600
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
approximately 900 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, management believes
that the disposition of matters that are pending or that may reasonably be
anticipated to be asserted should not have a material adverse effect on either
Foamex L.P.'s or Trace Holdings' consolidated financial position or results of
operations. In addition, Foamex L.P. is also indemnified by Trace Holdings for
any such liabilities relating to foam manufactured prior to the capitalization
of Foamex L.P. in October 1990. Although Trace Holdings has paid Foamex L.P.'s
litigation expenses, pursuant to such indemnification, and management believes
Trace Holdings will be in a position to continue to pay such expenses, there can
be no assurance that Trace Holdings will be able to continue to provide such
9
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
7. LITIGATION (continued)
indemnification. Based on information available at this time with respect to the
potential liability, the Company 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 the Company. 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 the Company.
Foamex L.P. is one of multiple defendants in actions alleging bodily injury
and diminution in property value as a result of alleged violations of Tennessee
hazardous waste regulations at Foamex L.P.'s Morristown, Tennessee facilities.
Recticel Foam Corporation ("RFC") has indemnified Foamex L.P. with respect to
losses arising from certain events, such as this alleged violation, that had
occurred prior to October 2, 1990. Based on information available at this time
with respect to the potential liability, the Company 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
the Company. 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 the Company.
The Company 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 the Company. If management's assessment of the
Company's liability with respect to these actions is incorrect, such actions
could have a material adverse effect on the Company's consolidated financial
position.
8. RELATED PARTY TRANSACTION
On July 7, 1996, Trace Holdings issued to Foamex L.P. a promissory note for
$4.4 million in principal amount plus accrued interest of $0.4 million, which is
an extension of a promissory note of Trace Holdings that was due in July 1996.
The promissory note is due and payable on demand or, if no demand is made, July
7, 1997, and bears interest at 9.5%, payable quarterly in arrears commencing
October 1, 1996. The promissory note is included in other stockholders' equity
(deficit).
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Foamex International Inc. (the "Company") operates in the polyurethane foam
products business segment which consists of its largest subsidiary Foamex L.P.,
together with Foamex L.P.'s wholly-owned subsidiaries, General Felt Industries,
Inc., Foamex Fibers, Inc., Foamex Canada Inc. ("Foamex Canada"), and Foamex
Latin America, Inc. The following discussion should be read in conjunction with
the condensed consolidated financial statements and related notes thereto of the
Company included in this report.
On August 28, 1996, the Company entered into an agreement to sell its
partnership interests in JPS Automotive L.P. ("JPS Automotive") (which comprised
the automotive textiles segment of the Company and substantially all of the
assets of JPS Automotive). The Company expects the sale of JPS Automotive to be
consummated prior to December 29, 1996. On August 1, 1996, the Company
consummated the sale of the home comfort products business of Perfect Fit
Industries, Inc. ("Perfect Fit") (which comprised the home comfort products
segment of the Company and substantially all of the assets of Perfect Fit).
Accordingly, the accompanying condensed consolidated financial statements
reflects the automotive textiles and home comfort products business segments as
discontinued operations. See Note 2 to the condensed consolidated financial
statements for further discussion.
The Company's automotive foam 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, the Company's sales are
sensitive to sales of new and existing homes, changes in personal disposable
income and seasonality. The Company typically experiences two seasonally slow
periods during each year, in early July and in late December, due to scheduled
plant shutdowns and holidays.
13 Week Period Ended September 29, 1996 Compared to 13 Week Period Ended
October 1, 1995
Results of Operations
Net sales for 1996 were $236.8 million as compared to $217.0 million in 1995,
an increase of $19.8 million or 9.1%. Carpet cushion net sales for 1996
increased 13.4% to $77.0 million from $67.9 million in 1995 primarily due to
increased selling prices late in the second quarter of 1996, as well as
increased shipments of certain carpet cushion products. Cushioning foam net
sales for 1996 increased 4.5% to $86.0 million from $82.3 million in 1995
primarily due to an increase in net sales volume from both new and existing
customers using bedding related products, as well as increased selling prices
initiated at the beginning of 1996. Automotive foam net sales for 1996 increased
8.5% to $55.9 million from $51.5 million in 1995 primarily due to a continued
increase in net sales of tri-laminates and composite headliners and increased
selling prices initiated at the beginning of 1996. Technical foam net sales for
1996 increased 17.0% to $17.9 million from $15.3 million for 1995 primarily due
to increased selling prices and increased net sales volume.
Gross profit as a percentage of net sales increased to 16.9% for 1996 from
14.2% in 1995 primarily due to selling price increases and improved material and
production efficiencies.
Income from operations increased to $24.5 million for 1996 from $15.1 million
in 1995 primarily due to improved gross profit margins as discussed above.
Selling, general and administrative expenses were consistent for 1996 and 1995,
however, decreased as a percentage of net sales to 6.5% for 1996 from 7.2% in
1995. This decrease was primarily the result of the restructuring and
operational plans implemented in late 1995.
Income from continuing operations increased to $7.4 million or $0.29 per
share for 1996 as compared to $1.0 million or $0.04 per share in 1995. The
increase is primarily due to the reasons cited above and a decrease in the
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
average weighted shares outstanding resulting from the purchase of treasury
stock offset by an increase in interest and debt issuance expense of $0.7
million. The increase in interest and debt issuance expense is primarily due to
(i) the inclusion in 1996 continuing operations of interest expense on the $29.8
million of public debt that the Company has offered to redeem (see Note 5 to the
condensed consolidated financial statements); whereas for the 1995 period, this
interest expense was allocated to discontinued operations (ii) offset by
favorable results from interest rate swap agreements. The effective income tax
rate for continuing operations decreased to 34.2% for 1996 from 57.1% in 1995
primarily due to the income tax benefit associated with the reversal of income
tax valuation allowances and the relationship of permanent differences for
income tax purposes to income from continuing operations.
The loss from discontinued operations totaling $73.6 million for 1996
primarily relates to the estimated loss on the expected sale of JPS Automotive,
the sale of Perfect Fit which was completed on August 1, 1996, and the operating
loss of both entities for the periods presented. See notes to condensed
consolidated financial statements for further discussion.
The extraordinary loss on early extinguishment of debt of $0.4 million (net
of income tax benefits of $0.3 million) relates to the write-off of debt
issuance costs associated with the early extinguishment of $12.0 million of bank
term loan borrowings.
Operating results for 1996 are expected to be influenced by various internal
and external factors. These factors include, among other things, (i) the
implementation of an operational plan to improve the profitability of the foam
products segment, (ii) the completion of the consolidation of thirteen foam
production, fabrication or branch locations, (iii) the potential reduction of
long-term debt with substantially all of the proceeds from the sale of the home
comfort products segment and from the expected sale of the automotive textiles
segment, (iv) additional raw material price increases, if any, by the Company's
chemical suppliers and (v) the Company's success in passing on to its customers
selling price increases to recover previous raw material cost increases.(1)
39 Week Period Ended September 29, 1996 Compared to 39 Week Period Ended
October 1, 1995
Results of Operations
Net sales for 1996 were $696.3 million as compared to $651.9 million in 1995,
an increase of $44.4 million or 6.8%. Carpet cushion net sales for 1996
increased 4.7% to $217.2 million from $207.5 million for 1995 primarily due to
increased selling prices late in the second quarter of 1996 offset by a decrease
in net sales volume during the first quarter of 1996. Cushioning foam net sales
for 1996 increased 7.6% to $252.0 million from $234.2 million in 1995 primarily
due to increased net sales volume from both new and existing customers using
bedding related products, increased selling prices initiated at the beginning of
1996 and the April 1995 acquisition of a company which manufacturers cushioning
products. Automotive foam net sales for 1996 increased 8.0% to $175.2 million
from $162.2 million in 1995 primarily due to a continued increase in net sales
of tri-laminates and composite headliners and increased selling prices initiated
at the beginning of 1996. Technical foam net sales for 1996 increased 8.1% to
$51.9 million from $48.0 million in 1995 primarily due to increased selling
prices and increased net sales volume.
Gross profit as a percentage of net sales increased to 16.4% for 1996 from
14.8% in 1995 primarily due to selling price increases and improved material and
production efficiencies.
Income from operations increased to $71.0 million for 1996 from $49.9 million
in 1995 primarily due an increase in gross profit margins as discussed above and
a decrease in selling, general and administrative expenses of $3.6 million for
1996 as compared to 1995. The decrease in selling, general and administrative
expenses is the result of reductions in salary, traveling and professional
costs.
(1) This paragraph contains forward-looking statements and should be read in
conjunction with the discussion regarding forward-looking statements set
forth on Page 5 of the Company's Annual Report on Form 10-K.
12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Income from continuing operations increased to $19.8 million or $0.77 per
share for 1996 as compared to $6.4 million or $0.24 per share in 1995. The
increase is primarily due to the reasons cited above and a decrease in the
average weighted shares outstanding resulting from the purchase of treasury
stock offset by an increase in interest and debt issuance expense of $0.2
million. The increase in interest and debt issuance expense is primarily due to
(i) the inclusion in 1996 continuing operations of two months of interest
expense on the $29.8 million of public debt that the company has offered to
redeem (see Note 5 to the condensed consolidated financial statements); whereas
for the 1995 period, this interest expense was allocated to discontinued
operations (ii) offset by favorable results from interest rate swap agreements.
The effective income tax rate for continuing operations decreased to 38.5% for
1996 as compared to 44.2% in 1995 primarily due to the income tax benefit
associated with the reversal of income tax valuation allowances and the
relationship of permanent differences for income tax purposes to income from
continuing operations.
The loss from discontinued operations totaling $111.6 million for 1996
primarily relates to the estimated loss on the sale of JPS Automotive, the sale
of Perfect Fit which was completed on August 1, 1996, and the operating loss of
both entities for the periods presented. See notes to condensed consolidated
financial statements for further discussion.
The extraordinary loss on early extinguishment of debt of $0.4 million (net
of income tax benefits of $0.3 million) relates to the write-off of debt
issuance costs associated with the early extinguishment of $12.0 million of bank
term loan borrowings.
Operating results for 1996 are expected to be influenced by various internal
and external factors. These factors include, among other things, (i) the
implementation of an operational plan to improve the profitability of the foam
products segment, (ii) the completion of the consolidation of thirteen foam
production, fabrication or branch locations, (iii) the potential reduction of
long-term debt with substantially all of the proceeds from the sale of the home
comforts products segment and from the expected sale of the automotive textiles
segment, (iv) additional raw material price increases, if any, by the Company's
chemical suppliers and (v) the Company's success in passing on to its customers
selling price increases to recover previous raw material cost increases.(1)
Liquidity and Capital Resources
Liquidity
The Company's operating cash requirements consist principally of working
capital requirements, scheduled payments of principal and interest on
outstanding indebtedness and capital expenditures of the operating subsidiaries.
The Company believes that cash flow from operating activities, cash on hand and
periodic borrowings under Foamex L.P.'s revolving credit agreement, 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. were to fail to comply with any of the covenants contained in the Foamex
L.P. credit facility (the "Foamex L.P. 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 as of September 29, 1996 and expects to be in
compliance with the covenants for the foreseeable future. The ability of Foamex
L.P. to make distributions to the Company is restricted by the terms of its
financing agreement; therefore, the Company is not expected to have access to
the cash flow generated by Foamex L.P. for the foreseeable future.
Cash and cash equivalents increased $43.5 million during 1996 to $48.1
million at September 29, 1996 from $3.3 million at December 31, 1995 primarily
due to the net proceeds received from the sale of Perfect Fit and improved
(1) This paragraph contains forward-looking statements and should be read in
conjunction with the discussion regarding forward-looking statements set
forth on Page 5 of the Company's Annual Report on Form 10-K.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
operating results for 1996 as compared to 1995. Working capital increased $40.7
million during 1996 to $127.4 million at September 29, 1996 from $86.7 million
at December 31, 1995 primarily due to the net proceeds received on the sale of
Perfect Fit and improved results from continuing operations. The net operating
assets and liabilities (comprised of accounts receivable, inventories and
accounts payable) increased $25.8 million to $140.1 million at September 29,
1996 from $114.3 million at December 31, 1995 primarily due to an increase in
accounts receivable. The increase in accounts receivable was primarily due to an
increase in net sales for September 1996 as compared to December 1995.
Inventories and accounts payable as of September 29, 1996 were fairly consistent
with December 31, 1995.
Cash Flow from Operating Activities
Cash flow from operating activities was $49.7 million and $36.3 million for
1996 and 1995, respectively. Cash flow from operating activities increased for
1996 as compared to 1995 primarily due to improved results from continuing
operations and changes in the assets and liabilities of discontinued operations
offset by a use of cash for operating assets and liabilities.
Cash Flow from Investing Activities
During 1996, the Company spent approximately $14.5 million on capital
expenditures and expects to maintain spending for capital expenditures at this
level for the foreseeable future.
On August 1, 1996, the Company consummated the Perfect Fit sale and received
approximately $45.4 million in cash sales proceeds, subject to post-closing
adjustments.
Cash Flow from Financing Activities
As of September 29, 1996, there were no outstanding revolving credit
borrowings under the Foamex L.P. Credit Facility with unused availability of
approximately $33.3 million.
Borrowings by Foamex Canada as of September 29, 1996 were $3.7 million under
a revolving credit agreement with unused availability of approximately $0.8
million.
During the Company used approximately $12.0 million of the net proceeds from
the sale of Perfect Fit to repay bank term loan borrowings.
During the thirty-nine week period ended September 29, 1996, the Company
purchased 592,200 shares of its common stock for an aggregate cost of $5.8
million under programs authorized by the Board of Directors to purchase up to
3.0 million shares of the Company's common stock.
Interest Rate Swap Agreements
The Company enters into interest rate swaps to lower funding costs and/or to
manage interest costs and exposure to changing interest rates. The Company does
not hold or issue financial instruments for trading purposes. Foamex L.P. has an
interest rate swap agreement with a notional amount of $150.0 million through
June 2000. Under the swap agreement, Foamex L.P. is obligated to make variable
payments based on LIBOR in exchange for fixed payments at a rate of 5.81% per
annum by the swap partner payable semiannually in arrears. Interest expense will
be subject to fluctuations in LIBOR. Foamex L.P. is exposed to credit loss in
the event of nonperformance by the swap partner; however, the occurrence of this
event is not anticipated.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Also, Foamex L.P. has an interest rate swap agreement, as amended, for a
notional amount of $150.0 million through December 1999. Under this agreement,
Foamex L.P. has made variable payments based on LIBOR with a cap of 5.5% and a
floor of 4.75% per annum for the six months ended in June 1995, variable
payments based on LIBOR with a floor of 4.75% per annum for the six months ended
in December 1995 and fixed payments at a rate of 5.81% per annum for the six
months ended in June 1996 and is obligated to make fixed payments at a rate of
5.81% per annum, for the remainder of the agreement, in exchange for variable
payments by the swap partner at the rate of LIBOR plus 0.80% per annum for the
six months ended in June 1995, LIBOR plus 0.72% per annum for the six months
ended in December 1995, LIBOR plus 2.45% per annum for the six months ended in
June 1996, LIBOR plus 2.39% per annum for the six months ended in December 1996,
the lower of 12.34% per annum less LIBOR or 7.34% per annum for the six months
ended in June 1997 and December 1997 and 12.34% per annum less LIBOR for the
remainder of the term of the agreement, payable semiannually in arrears. The
swap partner has the ability to terminate the swap agreement in December 1997.
Foamex L.P. is exposed to credit loss in the event of nonperformance by the swap
partner; however, the occurrence of this event is not anticipated. Interest
expense will be subject to fluctuations in LIBOR. The effect of the two interest
rate swaps described above was a favorable adjustment to interest expense of
$0.9 million and $0.2 million for the thirteen week periods and $2.8 million and
$0.9 million for the thirty-nine week periods ended September 29, 1996 and
October 1, 1995, respectively.
Environmental Matters
The Company is subject to extensive and changing environmental laws and
regulations. Expenditures to date in connection with the Company'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 the Company in connection with
environmental matters as of September 29, 1996 was $5.1 million. In addition, as
of September 29, 1996, the Company has a receivable of $0.6 million, net of $1.0
million allowance relating to potential disagreements regarding the scope of the
indemnification for environmental liabilities from former owners. Although it is
possible that new information or future developments could require the Company
to reassess its potential exposure to all pending environmental matters,
including those described in the footnotes to the Company's condensed
consolidated financial statements, management believes that, based upon all
currently available information, the resolution of all such pending
environmental matters will not have a material adverse effect on the Company'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.
Inflation and Other Matters
There was no significant impact on the Company's operations as a result of
inflation for the periods presented. In some circumstances, market conditions or
customer expectations may prevent the Company from increasing the price of its
products to offset the inflationary pressures that may increase its costs in the
future.
15
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
Reference is made to the description of the legal proceedings
contained in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and in the Company's Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1996 and June 30,
1996.
The information from Notes 6 and 7 of the condensed consolidated
financial statements of the Company as of September 29, 1996
(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 Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1(a) - Restated Certificate of Incorporation of the Company.
3.2(a) - By-laws of the Company.
4.1(b) - Indenture, dated as of June 3, 1993, among Foamex L.P. and FCC, as
joint and several obligors, General Felt, as Guarantor, and Shawmut
Bank, National Association ("Shawmut"), as trustee, relating to
$160,000,000 principal amount of 9 1/2% Senior Secured Notes due
2000, including form of Senior Secured Note.
4.2(a) - First Supplemental Indenture, dated as of November 18, 1993, among
the Company and FCC, as Issuers, General Felt and Perfect Fit, as
Guarantors and Shawmut, as trustee, relating to the Senior Secured
Notes.
4.3(a) - Second Supplemental Indenture, dated as of December 14, 1993, among
the Company and FCC, as Issuers, the Company, General Felt and
Perfect Fit, as Guarantors and Shawmut, as trustee, relating to the
Senior Secured Notes.
4.3.1(u) - Third Supplemental Indenture, dated as of August 1, 1996, by and
among Foamex L.P. and Foamex Capital Corporation, as Issuers, Foamex
International Inc., as parent guarantor, General Felt Industries,
Inc., as guarantor, Perfect Fit Industries, Inc., as withdrawing
guarantor, and Fleet National Bank, as Trustee, relating to the
Senior Secured Notes.
4.4(b) - Company Pledge Agreement, dated as of June 3, 1993, by Foamex L.P.
in favor of Shawmut, as trustee for the holders of the Senior
Secured Notes.
4.5(b) - Company Pledge Agreement, dated as of June 3, 1993, by FCC in favor
of Shawmut, as trustee for the holders of the Senior Secured Notes.
16
<PAGE>
4.6(b) - Subsidiary Pledge Agreement, dated as of June 3, 1993, by General
Felt in favor of Shawmut, as trustee for the holders of the Senior
Secured Notes.
4.7(b) - Company Security Agreement, dated as of June 3, 1993, by Foamex L.P.
and FCC in favor of Shawmut, as trustee for the holders of the
Senior Secured Notes.
4.8(b) - Subsidiary Security Agreement, dated as of June 3, 1993, by General
Felt in favor of Shawmut, as trustee for the holders of the Senior
Secured Notes.
4.9(b) - Collateral Assignment of Patents and Trademarks, dated as of June 3,
1993, by Foamex L.P. in favor of Shawmut, as trustee for the holders
of the Senior Secured Notes.
4.10(b) - Collateral Assignment of Patents and Trademarks, dated as of June 3,
1993, by FCC in favor of Shawmut, as trustee for the holders of the
Senior Secured Notes.
4.11(b) - Collateral Assignment of Patents and Trademarks, dated as of June 3,
1993, by General Felt in favor of Shawmut, as trustee for the
holders of the Senior Secured Notes.
4.12(a) - Pledge Agreement of Perfect Fit, dated November 18, 1993, in
connection with the Senior Secured Notes.
4.13(c) - Indenture, dated as of October 13, 1992, among Foamex L.P., FCC, and
The Connecticut National Bank, as trustee, relating to $150,000,000
principal amount of 11 1/4% Senior Notes due 2002, including form of
Senior Note.
4.14(d) - First Supplemental Indenture, dated as of March 23, 1993, among
Foamex L.P. and FCC, as joint and several obligors, General Felt, as
Guarantor, and Shawmut Bank Connecticut, National Association
(formerly The Connecticut National Bank) ("Shawmut Connecticut"), as
trustee, relating to the Senior Notes.
4.15(a) - Second Supplemental Indenture, dated as of November 18, 1993, among
Foamex L.P. and FCC, as Issuers, General Felt and Perfect Fit, as
Guarantors, and Shawmut Connecticut, as trustee, relating to the
Senior Notes.
4.16(a) - Third Supplemental Indenture, dated as of December 14, 1993, among
Foamex L.P. and FCC, as Issuers, the Company, General Felt and
Perfect Fit, as Guarantors, and Shawmut Connecticut, as trustee,
relating to the Senior Notes.
4.17(m) - Fourth Supplemental Indenture, dated as of October 31, 1994, among
Foamex L.P. and FCC as Issuers, the Company as Parent Guarantor,
General Felt and Perfect Fit as Guarantors, and Shawmut Connecticut,
as Trustee, relating to the Senior Notes.
4.17.1(u) - Fifth Supplemental Indenture, dated as of August 1, 1996, by and
among Foamex L.P. and Foamex Capital Corporation, as Issuers, Foamex
International Inc., as parent guarantor, General Felt Industries,
Inc., as guarantor, Perfect Fit Industries, Inc., as withdrawing
guarantor, and Fleet National Bank, as Trustee, relating to the
Senior Notes.
4.18(c) - Indenture, dated as of October 13, 1992, among Foamex L.P., FCC and
Shawmut, as trustee, relating to $126,000,000 principal amount of
117/8% Senior Subordinated Debentures due 2004, including form of
Senior Subordinated Debenture.
4.19(d) - First Supplemental Indenture, dated as of March 23, 1993, among
Foamex L.P. and FCC, as joint and several obligors, General Felt, as
Guarantor, and Shawmut, as trustee, relating to the Senior
Subordinated Debentures.
4.20(a) - Second Supplemental Indenture, dated as of November 18, 1993, among
Foamex L.P. and FCC, as Issuers, General Felt and Perfect Fit, as
Guarantors, and Shawmut, as trustee, relating to the Senior
Subordinated Debentures.
4.21(b) - Third Supplemental Indenture, dated as of December 14, 1993, among
Foamex L.P. and FCC, as Issuers, the Company, General Felt and
Perfect Fit, as Guarantors, and Shawmut, as trustee, relating to the
Senior Subordinated Debentures.
4.21.1(u) - Fourth Supplemental Indenture, dated as of August 1, 1996, by and
among Foamex L.P. and Foamex Capital Corporation, as Issuers, Foamex
International Inc., as parent guarantor, General Felt Industries,
Inc., as guarantor, Perfect Fit Industries, Inc., as withdrawing
guarantor, and Fleet National Bank, as Trustee, relating to the
Subordinated Debentures.
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4.22(i) - Indenture, dated as of June 28, 1994, among FJPS and FJCC, as
Issuers, Foamex International Inc., as guarantor, and Shawmut
Connecticut, as trustee, relating to $116,745,000 principal amount
of Senior Secured Discount Debentures due 2004, including form of
Senior Secured Discount Debenture.
4.23(m) - Pledge Agreement, dated as of June 28, 1994, made by FJPS in favor
of Shawmut, as collateral agent for the holders of the Senior
Secured Discount Debentures.
4.24(i) - Senior Note, dated June 28, 1994, in the aggregate principal amount
of $87,943,103.14 due July 1, 2006, executed by FJPS to Foamex L.P.
4.25(m) - Pledge Agreement, dated as of June 28, 1994, among FJPS in favor of
Foamex L.P. to secure its obligations under its Senior Note due
2006.
4.26(m) - Pledge Agreement, dated as of June 28, 1994, made by JPS Automotive
L.P. in favor of Foamex L.P. to secure FJPS's obligations under its
Senior Note due 2006.
4.27(g) - Indenture, between Products Corp. and Shawmut Connecticut, as
Trustee, relating to $180,000,000 principal amount of 111/8% Senior
Notes due 2001 (the "JPS Automotive Senior Notes"), including form
of the JPS Automotive Senior Note.
4.28(j) - First Supplemental Indenture, dated as of October 5, 1994, between
Products Corp., JPS Automotive L.P., and Shawmut Connecticut, as
Trustee, relating to the JPS Automotive Senior Notes due 2001.
4.29(u) - Commitment letter, dated July 9, 1996, from The Bank of Nova
Scotia to Foamex Canada Inc.
4.30(u) - Third Amended and Restated Credit Agreement, dated as of July 30,
1996, among Foamex L.P., General Felt, Trace Foam, FMXI, Citibank,
N.A., The Bank of Nova Scotia, the institutions from time to time
parties thereto as lenders, the institutions parties thereto as
issuing banks and Citibank, N.A. and The Bank of Nova Scotia, as
Administrative Agents (the "Credit Agreement").
4.31(x) - First Amendment to Third Amended and Restated Credit Agreement,
dated September 30, 1996, among Foamex L.P., General Felt, Trace
Foam, FMXI, Citibank, N.A., The Bank of Nova Scotia, the
institutions from time to time parties thereto as lenders, the
institutions parties thereto as issuing banks and Citibank, N.A. and
The Bank of Nova Scotia, as Administrative Agents.
4.32(a) - Guaranties, dated November 18, 1993, executed by each of Foamex
L.P., General Felt, and Perfect Fit, as guarantor, respectively, in
favor of Citibank, N.A., as Administrative Agent, for the ratable
benefit of the lenders and the issuing banks, guaranteeing the
obligations of one another under the Credit Agreement.
4.33(a) - Guaranty, dated November 18, 1993, executed by FCC in favor of
Citibank, N.A., as Administrative Agent, for the ratable benefit of
the lenders and the issuing banks, guaranteeing the obligations of
Foamex L.P., General Felt, and Perfect Fit under the Credit
Agreement.
4.34(i) - Amended and Restated Guaranty, dated as of June 28, 1994, executed
by the Company in favor of Citibank, N.A. and The Bank of Nova
Scotia, as Administrative Agents, for the ratable benefit of the
lenders and the issuing banks under the Credit Agreement.
4.35(t) - First Amendment to Amended and Restated Guaranty, dated June 30,
1995, executed by the Company in favor of Citibank, N.A. and The
Bank of Nova Scotia, as Administrative Agents, for the ratable
benefit of the lenders and the issuing banks under the Credit
Agreement.
4.36(t) - Second Amendment to Amended and Restated Guaranty, dated February
27, 1996, executed by the Company in favor of Citibank, N.A. and The
Bank of Nova Scotia, as Administrative Agents, for the ratable
benefit of the lenders and the issuing banks under the Credit
Agreement.
4.37(a) - Security Agreements, dated November 18, 1993, executed by each of
Foamex L.P., General Felt, Perfect Fit, and FCC, respectively, and
Citibank N.A., as Administrative Agent for the lenders and the
issuing banks under the Credit Agreement.
4.38(i) - Amendatory Agreement, dated as of June 28, 1994, among Foamex
L.P., General Felt, Perfect Fit, FCC, and Citibank, N.A., as
collateral agent under the Credit Agreement.
4.39.1(u) - Amendatory Agreement, dated as of July 30, 1996, among Foamex
L.P., General Felt Industries, Inc., Foamex Capital Corporation, and
Citibank N.A., as collateral agent under the Credit Agreement.
18
<PAGE>
4.40(a) - Intercreditor Agreement, dated as of November 18, 1993, by and
between Citibank, N.A., as Administrative Agent under the Credit
Agreement and Shawmut, as trustee under the Foamex L.P. Senior
Secured Note Indenture.
4.41(j) - Amended and Restated Credit Agreement, dated October 5, 1994, by
and among, Products Corp., JPS Automotive, JPSGP Inc., the
institutions party thereto as Lenders, the institutions party
thereto as Issuing Banks, and Citibank, N.A. and The Bank of Nova
Scotia.
4.42(m) - First Amendment to the Amended and Restated Credit Agreement of
JPS Automotive, dated as of November 11, 1994.
4.43(m) - Second Amendment to the Amended and Restated Credit Agreement of
JPS Automotive, dated as of February 8, 1995.
4.44(s) - Third Amendment to the Amended and Restated Credit Agreement of
JPS Automotive, dated as of February 27, 1996.
4.45.1(u) - Fourth Amendment to the Amended and Restated Credit Agreement of
JPS Automotive, dated as of June 19, 1996.
4.46(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
Rallis.
4.47(a) - Marely Loan Commitment Agreement, dated as of December 14, 1993,
by and between the Company and Marely.
4.48(a) - DLJ Loan Commitment Agreement, dated as of December 14, 1993, by
and between the Company and DLJ Funding.
4.49(u) - Promissory Note, dated July 7, 1996, in the aggregate principal
amount of $4,372,516 executed by Trace Holdings to Foamex L.P.
10.1(a) - Registration Rights Agreement, dated as of December 14, 1993, by
and among the Company and GBNY and, for certain limited purposes as
set forth therein, Trace Holdings and Trace Foam.
10.2(a) - Registration Rights Agreement, dated as of December 14, 1993, by
and among the Company and RFC and, for certain limited purposes as
set forth therein, Trace Holdings and Trace Foam.
10.3(a) - Registration Rights Agreement, dated as of December 14, 1993, by
and between the Company and Rallis.
10.4(a) - Registration Rights Agreement, dated as of December 14, 1993, by
and among the Company and DLJ Funding and, for certain limited
purposes as set forth therein, Trace Holdings and Trace Foam.
10.5(a) - Registration Rights Agreement, dated as of December 14, 1993, by
and between the Company and FCD Sub, Inc.
10.6(a) - Registration Rights Agreement, dated as of December 14, 1993, by
and among the Company and Marely and, for certain limited purposes
as set forth therein, Trace Holdings and Trace Foam.
10.7(a) - Registration Rights Agreement, dated as of December 14, 1993, by
and between the Company and Trace Foam.
10.8(a) - Registration Rights Agreement, dated as of December 14, 1993, by
and between the Company and Trace Holdings.
10.9(a) - Registration Rights Agreement, dated as of November 18, 1993, by
and among the Company and the Investors which are signatories
thereto.
10.10(i) - Warrant Registration Rights Agreement, dated as of June 28, 1994,
by and among the Company, DLJ and Smith Barney Inc.
10.11(i) - Senior Secured Discount Debenture Registration Rights Agreement,
dated as of June 28, 1994, among FJPS, FJCC, Holdings, DLJ, and
Smith Barney Inc.
10.12(h) - Warrant Agreement, dated as of June 28, 1994, between the Company
and Shawmut Bank.
10.13(b) - Interest Rate and Currency Exchange Agreement, dated as of June
14, 1993, among Foamex L.P., FCC, and Salomon Brothers Holdings
Company Inc ("Salomon Holdings").
10.14(m) - Swap Agreement, dated as of March 31, 1994, and amended in
November 1994, by and between Foamex L.P., and Citibank, N.A.
10.15(t) - Amended Confirmation Letter Agreement, dated as of February 2,
1996, by and between Foamex L.P. and Citibank, N.A.
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<PAGE>
10.15.1(u)- Amended Confirmation Letter Agreement, dated May 29, 1996, by and
between Foamex L.P. and Citibank, N.A.
10.16(b) - Revised Swap Transaction Letter Agreement, dated as of June 10,
1993, among Foamex L.P., FCC and Salomon Holdings.
10.17(g) - Swap Agreement, dated as of June 30, 1994, by and between JPS
Automotive and Citibank, N.A.
10.18(p) - Revised Swap Transaction Letter Agreement, dated May 11, 1995,
among JPS Automotive Products Corporation, JPS Automotive, and
Citibank, N.A.
10.19(y) - Revised Confirmation of Interest Rate Swap Termination, dated
September 25, 1996, by and between JPS Automotive and Citibank, N.A.
10.20(d) - Reimbursement Agreement, dated as of March 23, 1993, between Trace
Holdings and General Felt.
10.21(d) - Shareholder Agreement, dated December 31, 1992, among Recticel,
s.a., Recticel Holding Noord B.V., Foamex L.P., Beamech Group
Limited, LME-Beamech, Inc., James Brian Blackell, and Prefoam AG
relating to foam technology sharing arrangement.
10.22(e) - Asset Transfer Agreement, dated as of October 2, 1990, between
Trace Holdings and the Foamex L.P. (the "Trace Holdings Asset
Transfer Agreement").
10.23(e) - First Amendment, dated as of December 19, 1991, to the Trace
Holdings Asset Transfer Agreement.
10.24(e) - Amended and Restated Guaranty, dated as of December 19, 1991, made
by Trace Foam in favor of Foamex L.P.
10.25(e) - Asset Transfer Agreement, dated as of October 2, 1990, between RFC
and Foamex L.P. (the "RFC Asset Transfer Agreement").
10.26(e) - First Amendment, dated as of December 19, 1991, to the RFC Asset
Transfer Agreement.
10.27(e) - Schedule 5.03 to the RFC Asset Transfer Agreement (the "5.03
Protocol").
10.28(d) - The 5.03 Protocol Assumption Agreement, dated as of October 13,
1992, between RFC and Foamex L.P.
10.29(d) - Letter Agreement between Trace Holdings and Recticel regarding the
Recticel guaranty, dated as of July 22, 1992.
10.30(i) - Supply Agreement, dated June 28, 1994, between Foamex L.P. and the
Company.
10.31(i) - First Amended and Restated Tax Sharing Agreement, dated as of
December 14, 1993, among Foamex L.P., Trace Foam, FMXI, and the
Company.
10.32(i) - Tax Sharing Agreement, dated as of June 28, 1994, among FJPS and
the Company.
10.33(d) - Trace Foam Management Agreement between Foamex L.P. and Trace
Foam, dated as of October 13, 1992.
10.34(i) - Affirmation Agreement re: Management Agreement, dated as of
December 14, 1993 between Foamex L.P. and Trace Foam.
10.35(r) - Aircraft Purchase Agreement, dated as of August 22, 1995, by and
between Trace Aviation and Foamex Aviation.
10.36(r) - Aircraft Sale, Lease and Operating Agreement, dated as of August
22, 1995, by and between Trace Aviation and Trace Holdings.
10.37(r) - Assumption/Aircraft Security Agreement, dated as of August 22,
1995, by and between Foamex Aviation and the CIT Group/Equipment
Financing, Inc. ("CIT Group").
10.38(r) - Collateral Assignment of Aircraft Leases and Aircraft Use
Agreements, dated as of August 22, 1995, by and between Foamex
Aviation and CIT Group.
10.39(r) - Guaranty by the Company in favor of CIT Group, dated as of August
22, 1995.
10.40(r) - Aviation Guaranty Indemnity Agreement, dated as of August 22,
1995, by and between the Company and Trace Holdings.
10.41(e) - Salaried Incentive Plan of Foamex L.P. and Subsidiaries.
10.42(e) - Trace Holdings 1987 Nonqualified Stock Option Plan.
10.43(e) - Equity Growth Participation Program.
10.44(m) - General Felt Industries, Inc. Retirement Plan for Salaried
Employees, effective as of January 1, 1995.
20
<PAGE>
10.45(e) - Foamex L.P. Salaried Retirement Plan (formerly known as the Foamex
L.P. Products, Inc. Salaried Employee Retirement Plan), as amended,
effective July 1, 1984.
10.46(e) - Foamex L.P. 401(k) Savings Plan dated January 1, 1989.
10.47(q) - Foamex/GFI 401(k) Savings Plan dated July 1, 1995.
10.48(a) - The Company's 1993 Stock Option Plan.
10.49(a) - The Company's Non-Employee Director Compensation Plan.
10.50(s) - Hourly Employees' Pension Plan of JPS Automotive Products Corp.
10.51(s) - Retirement Pension Plan for Employees of JPS Automotive L.P.
10.52(p) - Savings, Investment and Profit Sharing Plan of JPS Automotive
L.P., dated October 6, 1994.
10.53(p) - First Amendment to Savings, Investment and Profit Sharing Plan of
JPS Automotive L.P., dated July 26, 1995.
10.54(a) - Employment Agreement, dated as of May 6, 1993, by and between
Foamex L.P. and Rallis.
10.55(f) - Employment Agreement, dated as of February 1, 1994, by and between
Foamex L.P. and William H. Bundy.
10.56(t) - Employment Agreement, dated as of June 26, 1995, by and between
Foamex L.P. and Salvatore J. Bonanno
10.57(j) - Employment Agreement, dated as of July 22, 1994, by and among the
Company, JPS Automotive, and Jerry Burns.
10.58(n) - Employment Agreement, dated as of August 4, 1994, by and between
the Company, JPS Automotive, and Robert Sparks.
10.59(s) - Employment Agreement, dated as of September 1, 1995 by and between
JPS Automotive and Dean Gaskins.
10.60(o) - Bonus Agreement, dated as of May 7, 1993, between the Company and
Robert Hay.
10.61(a) - Amended and Restated Put Option Agreement, dated as of December
14, 1993, by and between Trace Holdings and Rallis.
10.62(f) - 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.
10.63(g) - Asset Purchase Agreement, dated as of May 25, 1994, by and among
JPS Automotive, JPS Textile Group, Inc., the Company, JPS Auto Inc.,
and JPS Converter & Industrial Corp. ("C&I").
10.64(g) - Services Agreement, by and between JPS Automotive and the Company.
10.65(g) - Dunean Reciprocal Easement Agreement, by and between JPS
Automotive and C&I.
10.66(g) - Supply Agreement, by and among the Company and certain of its
affiliates and JPS Automotive.
10.67(g) - Tax Sharing Agreement, by and among JPS Automotive and its
partners.
10.68(g) - Financing Agreement, dated as June 4, 1993, by and between
NationsBank of North Carolina, N.A. and Cramerton, as amended by the
First Amendment and Correction of Financing Agreement, dated as of
April 28, 1994.
10.69(n) - Second Amendment and Correction of Financing Agreement, dated as
of December 28, 1994, by and between NationsBank of North Carolina,
N.A. and Cramerton.
10.70(s) - Third Amendment to Financing Agreement, dated December 12, 1995,
by and between NationsBank of North Carolina, N.A. and Cramerton.
10.70.1(v) - Fourth Amendment to Financing Agreement, dated June 14, 1996, by
and between NationsBank of North Carolina, N.A. and Cramerton.
10.71(g) - Amended and Restated Agreement of Limited Partnership of Cramerton
Automotive Products, L.P., dated as of December 2, 1991.
10.72(m) - First Amendment to Amended and Restated Agreement of Limited
Partnership of Cramerton Automotive Products, L.P., dated as of June
28, 1994.
10.73(m) - Second Amendment to Amended and Restated Agreement of Limited
Partnership of Cramerton Automotive Products, L.P., dated as of
October 5, 1994.
10.74(g) - Stockholders' Agreement, dated as of December 2, 1991, by and
among Cramerton Management Corp., JPS Group, and Seiren Co., Ltd.
(the "Stockholders' Agreement").
10.75(m) - First Amendment to Stockholders' Agreement, dated as of June 28,
1994.
21
<PAGE>
10.76(w) - Agreement and Plan of Merger, as amended, dated as of June 11,
1996, by and among PFI Subsidiary, Inc., PFI Acquisition Corp., Jody
B. Vitale, Perfect Fit, General Felt and Foamex.
10.77(z) - Equity Purchase Agreement, dated as of August 28, 1996, by and
among JPSGP Inc., Foamex-JPS Automotive L.P., and Collins & Aikman
Products Co.
- -------------------
(a) Incorporated herein by reference to the Exhibit to the Company's
Registration Statement on Form S-1, Registration No. 33-69606.
(b) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex L.P. and FCC on Form S-4, Registration No.
33-65158.
(c) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex L.P., FCC and General Felt on Form S-1,
Registration Nos. 33-60888, 33-60888-01, and 33-60888-02.
(d) Incorporated herein by reference to the Exhibit to the Form 10-K
Statement of Foamex L.P. and FCC for fiscal 1992.
(e) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex L.P. and FCC on Form S-1, Registration Nos.
33-49976 and 33-49976-01.
(f) Incorporated herein by reference to the Exhibit to the Form 10-K of
the Company for fiscal 1993.
(g) Incorporated herein by reference to the Exhibit to JPS Automotive's
Registration Statement on Form S-1, Registration No. 33-75510.
(h) Incorporated by reference to the Exhibit to the Form 10-Q of the
Company for the quarterly period ended July 3, 1994.
(i) Incorporated herein by reference to the Exhibit to the Registration
Statement of FJPS, FJCC, and the Company on Form S-4, Registration
No. 33-82028.
(j) Incorporated herein by reference to the Exhibit to the quarterly
report on Form 10-Q of JPS Automotive and JPS Automotive Products
Corp. for the fiscal quarter ended October 2, 1994.
(k) Incorporated herein by reference to the Exhibit to the quarterly
report on Form 10-Q of Foamex L.P. and FCC, and General Felt for the
fiscal quarter ended October 2, 1994.
(l) Incorporated herein by reference to the Exhibit in the Registration
Statement of the Company on Form S-3, Registration No. 33-85488.
(m) Incorporated herein by reference to the Exhibit to the Form 10-K of
the Company for fiscal 1994.
(n) Incorporated herein by reference to the Exhibit to the Form 10-K of
JPS Automotive for fiscal 1994.
(o) Incorporated herein by reference to the Exhibit to the Form 10-K of
Foamex L.P. for fiscal 1994.
(p) Incorporated herein by reference to the Exhibit to the Form 10-Q of
JPS Automotive for the quarterly period ended July 2, 1995.
22
<PAGE>
(q) Incorporated herein by reference to the Exhibit to the Form 10-Q of
Foamex L.P. for the quarterly period ended July 2, 1995.
(r) Incorporated herein by reference to the Exhibit to the Form 10-Q of
the Company for the quarterly period ended October 1, 1995.
(s) Incorporated herein by reference to the Exhibit to the Form 10-K of
JPS Automotive for fiscal 1995.
(t) Incorporated herein by reference to the Exhibit to the Form 10-K of
Foamex L.P. for fiscal 1995.
(u) Incorporated herein by reference to the Exhibit to the Form 10-Q of
Foamex L.P. for the quarterly period ended June 30, 1996.
(v) Incorporated herein by reference to the Exhibit to the Form 10-Q of
JPS Automotive for the quarterly period ended June 30, 1996.
(w) Incorporated herein by reference to the Exhibit to the Form 8-K of
Foamex L.P. reporting an event which occurred on June 11, 1996.
(x) Incorporated herein by reference to the Exhibit to the Form 10-Q of
Foamex L.P. for the quarterly period ended September 29, 1996.
(y) Incorporated herein by reference to the Exhibit to the Form 10-Q of
JPS Automotive for the quarterly period ended September 29, 1996.
(z) Incorporated herein by reference to the Exhibit to the Form 8-K of
Foamex International reporting an event which occurred on August 28,
1996.
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) The Company filed the following Current Reports on Form 8-K:
Form 8-K reporting an event that occurred on August 1, 1996 (sale of
Perfect Fit including pro forma financial information).
Form 8-K reporting an event that occurred on August 28, 1996
(execution of JPS Automotive Agreement).
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOAMEX INTERNATIONAL INC.
Date: November 11, 1996 By: /s/ Kenneth R. Fuette
------------------------
Kenneth R. Fuette
Chief Financial Officer and
Chief Accounting Officer
24
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