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 June 29, 1997
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 August
8, 1997 was 24,957,680.
Page 1 of 29
Exhibit List on Page 22 of 29
1
<PAGE>
FOAMEX INTERNATIONAL INC.
INDEX
Page
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of Operations - Thirteen
Week and Twenty-Six Week Periods Ended June 29, 1997
and June 30, 1996 3
Condensed Consolidated Balance Sheets as of June 29, 1997
and December 29, 1996 4
Condensed Consolidated Statements of Cash Flows -
Twenty-Six Week Periods Ended June 29, 1997 and June
30, 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Part II. Other Information 21
Exhibit List 22
Signatures 29
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 26 Week Periods Ended
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
(thousands except per share data)
<S> <C> <C> <C> <C>
NET SALES $ 239,887 $ 240,447 $ 469,007 $ 459,578
COST OF GOODS SOLD 195,107 202,280 381,430 385,380
--------- --------- --------- ---------
GROSS PROFIT 44,780 38,167 87,577 74,198
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 16,100 13,752 32,087 27,722
--------- --------- --------- ---------
INCOME FROM OPERATIONS 28,680 24,415 55,490 46,476
INTEREST AND DEBT ISSUANCE EXPENSE 13,474 13,045 27,442 25,948
OTHER INCOME, NET 448 299 1,086 502
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES 15,654 11,669 29,134 21,030
PROVISION FOR INCOME TAXES 6,184 5,064 11,528 8,582
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 9,470 6,605 17,606 12,448
LOSS FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAX BENEFITS -- (38,312) -- (38,018)
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT,
NET OF INCOME TAXES (42,189) -- (42,599) --
--------- --------- --------- ---------
NET INCOME (LOSS) $ (32,719) $ (31,707) $ (24,993) $ (25,570)
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE:
CONTINUING OPERATIONS $ 0.37 $ 0.26 $ 0.68 $ 0.48
DISCONTINUED OPERATIONS -- (1.50) -- (1.47)
EXTRAORDINARY LOSS (1.64) -- (1.64) --
--------- --------- --------- ---------
EARNINGS (LOSS) PER SHARE $ (1.27) $ (1.24) $ (0.96) $ (0.99)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 25,755 25,619 25,908 25,784
========= ========= ========= =========
</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>
ASSETS June 29, 1997 December 29, 1996
CURRENT ASSETS: (thousands)
<S> <C> <C>
Cash and cash equivalents $ 7,362 $ 22,203
Accounts receivable, net 137,101 126,573
Inventories 106,723 102,610
Other current assets 53,083 55,718
--------- ---------
Total current assets 304,269 307,104
PROPERTY, PLANT AND EQUIPMENT, NET 203,105 195,373
COST IN EXCESS OF ASSETS ACQUIRED, NET 81,232 82,471
DEBT ISSUANCE COSTS, NET 18,428 18,628
DEFERRED INCOME TAXES 24,111 --
OTHER ASSETS 16,280 16,270
--------- ---------
TOTAL ASSETS $ 647,425 $ 619,846
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings $ 3,960 $ 3,692
Current portion of long-term debt 9,121 14,505
Accounts payable 78,905 84,930
Accrued interest 3,225 9,012
Other accrued liabilities 62,685 58,384
--------- ---------
Total current liabilities 157,896 170,523
--------- ---------
LONG-TERM DEBT 547,348 483,344
--------- ---------
OTHER LIABILITIES 29,226 24,082
--------- ---------
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 26,908,680 and 26,753,262
shares, respectively; Outstanding 25,098,280 and 25,198,862
shares, respectively 269 267
Additional paid-in capital 85,743 84,579
Retained earnings (accumulated deficit) (146,653) (120,174)
Other (9,481) (9,312)
--------- ---------
(70,122) (44,640)
Common Stock held in treasury, at cost; 1,810,400 shares at
June 29, 1997 and 1,554,400 Shares at December 29, 1996 (16,923) (13,463)
--------- ---------
Total stockholders' equity (deficit) (87,045) (58,103)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 647,425 $ 619,846
========= =========
</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>
26 Week Periods Ended
June 29, June 30,
1997 1996
(thousands)
OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (24,993) $ (25,570)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,815 11,322
Amortization of debt issuance costs and debt discount 6,847 6,765
Extraordinary loss 42,599 --
Loss from discontinued operations -- 38,018
Other operating activities (565) (581)
Changes in operating assets and liabilities, net of discontinued operations (38,334) (15,559)
--------- ---------
Net cash provided by (used for) continuing operations (3,631) 14,395
Net cash provided by discontinued operations -- 7,588
--------- ---------
Net cash provided by (used for) operating activities (3,631) 21,983
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (16,432) (7,798)
Decrease in restricted cash 12,143 --
Other investing activities 35 1,399
Discontinued operations investing activities -- (1,825)
--------- ---------
Net cash used for investing activities (4,254) (8,224)
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from short-term borrowings 256 1,968
Proceeds from revolving loans 49,000 --
Proceeds from long-term debt 453,500 --
Repayments of long-term debt (450,026) (4,721)
Premiums and costs associated with debt extinguishment (42,562) --
Debt issuance costs (14,746) --
Purchase of treasury stock (1,890) (4,861)
Other financing activities (488) 3
Discontinued operations financing activities -- (7,028)
--------- ---------
Net cash used for financing activities (6,956) (14,639)
--------- ---------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (14,841) (880)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 22,203 3,322
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 7,362 $ 2,442
========= =========
</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 29, 1996 has been condensed from the audited
consolidated balance sheet at that date. The condensed consolidated balance
sheet as of June 29, 1997, the condensed consolidated statements of operations
for the thirteen week and twenty-six week periods ended June 29, 1997 and June
30, 1996 and the condensed consolidated statements of cash flows for the
twenty-six week periods ended June 29, 1997 and June 30, 1996 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 twenty-six week periods ended June 30, 1996 and the condensed
consolidated statement of cash flows for the twenty-six week period ended June
30, 1996 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 June 12, 1997, the Company substantially completed a refinancing plan
(the "Refinancing Plan") that included the refinancing of certain long-term
indebtedness to reduce the Company's interest expense and improve financing
flexibility. In connection with the Refinancing Plan, Foamex L.P. purchased
approximately $342.3 million of aggregate principal amount of its public debt
and approximately $116.7 million of aggregate principal amount of Foamex-JPS
Automotive L.P.'s ("FJPS") senior secured discount debentures due 2004 (the
"Discount Debentures") and repaid $5.2 million of term loan borrowings under its
old credit facility. The Company incurred an extraordinary loss on the early
extinguishment of debt associated with the Refinancing Plan of approximately
$42.0 million (net of income taxes). (See Note 5 below for further discussion.)
The Refinancing Plan was funded by $347.0 million of borrowings under a new
$480.0 million credit facility (the "New Credit Facility") and the net proceeds
from the issuance of $150.0 million of 9 7/8% senior subordinated notes due
2007.
In addition, the Company intends to call for redemption on October 1,
1997 approximately $26.0 million of the approximately $30.0 million of
outstanding public debt that was not tendered as part of the Refinancing Plan.
The redemption is expected to be funded with borrowings under the New Credit
Facility. In connection with this redemption, the Company expects to incur an
extraordinary loss on the early extinguishment of debt of approximately $1.6
million (net of income taxes) in the fourth quarter of 1997.
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 1996 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
29, 1996.
2. DISCONTINUED OPERATIONS
On December 11, 1996, the Company completed the sale of its partnership
interests in JPS Automotive L.P. ("JPS Automotive") for a sale price of
approximately $220.1 million including $200.1 million of JPS Automotive's
indebtedness. The sale is subject to a post-closing adjustment which is expected
to be finalized during 1997. The sale included the net assets of the automotive
textiles business segment. During 1996, the Company sold the outstanding common
stock of Perfect Fit Industries, Inc. ("Perfect Fit"), a wholly-owned
subsidiary, for an adjusted sale price of approximately $44.2 million. The sale
included the net assets of the home comfort products business segment.
6
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2. DISCONTINUED OPERATIONS (continued)
The Company's condensed consolidated financial statements have been
restated to reflect the discontinuation of the home comfort products and
automotive textile business segments. In addition to the interest and debt
issuance expense of JPS Automotive, interest and debt issuance expense was
allocated to discontinued operations based on the estimated debt to be retired
from the net proceeds from the sale of Perfect Fit and JPS Automotive. A summary
of the operating results for the discontinued operations is as follows:
<TABLE>
<CAPTION>
Thirteen Week Twenty-Six Week
Period Ended Period Ended
June 30, 1996 (1) June 30, 1996 (1)
(thousands)
<S> <C> <C>
Net sales $107,684 $207,765
Gross profit 17,555 34,454
Income from operations 8,130 16,476
Interest and debt issuance expense 6,841 13,804
Loss on disposal of discontinued operations (39,297) (39,297)
Other expense 759 1,068
Loss from discontinued operations before
provision for income taxes (38,767) (37,693)
Provision (benefit) for income taxes (455) 325
Loss from discontinued operations, net of income taxes (38,312) (38,018)
</TABLE>
(1) The Company's discontinued operations includes the operations of Perfect
Fit and JPS Automotive.
3. INVENTORIES
The components of inventories consist of:
June 29, December 29,
1997 1996
(thousands)
Raw materials and supplies $59,070 $61,559
Work-in-process 17,305 13,453
Finished goods 30,348 27,598
-------- --------
Total $106,723 $102,610
======== ========
4. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is calculated by dividing net income by the
weighted average shares of common stock outstanding. Common stock equivalents
have been included in the weighted average shares of common stock outstanding
for 1997 and 1996.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share". SFAS No. 128 specifies new standards designed to improve the earnings
per share ("EPS") information provided in financial statements by simplifying
the existing computational guidelines, revising the disclosure requirements, and
increasing the comparability of EPS data on an international basis. Some of the
changes made to simplify the EPS computations include: (i) eliminating the
7
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. EARNINGS (LOSS) PER SHARE (continued)
presentation of primary EPS and replacing it with basic EPS, with the principal
difference being that common stock equivalents are not considered in computing
basic EPS, (ii) eliminating the modified treasury stock method and the three
percent materiality provision and (iii) revising the contingent share provisions
and the supplemental EPS data requirements. Under the provisions of SFAS No.128,
the Company would have reported the following net loss per share information:
<TABLE>
<CAPTION>
13 Week Periods Ended 26 Week Periods Ended
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
(thousands except per share data)
<S> <C> <C> <C> <C>
Basic loss per share $ (1.29) $ (1.25) $ (0.99) $ (1.00)
======== ======== ======== ========
Weighted average shares outstanding 25,298 25,388 25,304 25,553
======== ======== ======== ========
Fully diluted loss per share $ (1.26) $ (1.24) $ (0.96) $ (1.00)
======== ======== ======== ========
Weighted average shares outstanding 25,872 25,667 26,128 25,694
======== ======== ======== ========
</TABLE>
5. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
June 29, December 29,
1997 1996
(thousands)
<S> <C> <C>
9-7/8% senior subordinated notes due 2007 (1) $150,000 $ --
Foamex L.P. term loans (7.95% interest rate
at June 29, 1997) (2) 298,000 --
Foamex L.P. revolving loan (7.65% interest rate
at June 29, 1997) (3) 49,000 --
9 1/2% senior secured notes due 2000 (4) 4,523 106,793
11 1/4% senior notes due 2002 (4) 5,825 141,400
11 7/8% senior subordinated debentures due 2004 (net of
unamortized debt discount of $119 and $769) (4) 20,224 125,056
Senior secured discount debentures due 2004, Series B
(net of unamortized debt discount of $35,864) (5) -- 80,881
11 7/8% senior subordinated debentures due 2004, Series B (6) 45 7,000
Industrial revenue bonds (7) 7,000 7,000
Foamex L.P. term loan (8.54% interest rate as of
December 29, 1996) (7) -- 11,000
Subordinated note (net of debt discount of $1,047 and $1,198) (7) 5,968 5,817
Other 15,884 12,902
-------- --------
556,469 497,849
Less current portion 9,121 14,505
-------- --------
Long-term debt $547,348 $483,344
======== ========
</TABLE>
8
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT (continued)
(1) Subsidiary debt of Foamex L.P. and Foamex Capital Corporation ("FCC")
(together the "Issuers") and guaranteed by General Felt Industries, Inc.
("General Felt"), Foamex Fibers, Inc. ("Foamex Fibers") and all other
current and future domestic subsidiaries of the Issuers.
(2) Subsidiary debt of Foamex L.P. and guaranteed by the Company, General Felt
and Foamex Fibers.
(3) Subsidiary debt of Foamex L.P. and General Felt and guaranteed by the
Company and Foamex Fibers.
(4) Subsidiary debt of the Issuers and guaranteed by the Company and General
Felt.
(5) Subsidiary debt of FJPS and Foamex-JPS Capital Corporation and guaranteed
by the Company.
(6) Subsidiary debt of the Issuers and guaranteed by General Felt.
(7) Subsidiary debt of Foamex L.P.
Term Loans and Revolving Loan
On June 12, 1997, Foamex L.P. entered into the New Credit Facility with a
group of banks that provides for term loans of up to $330.0 million which expire
from June 2003 to June 2006 and up to $150.0 million under a revolving line of
credit which expires in June 2003. In connection with the Refinancing Plan,
Foamex L.P. entered into term loans of $298.0 million and borrowed $49.0 million
under the revolving line of credit.
The term loans are comprised of a (i) term A loan ("Term A") which
provides up to $120.0 million of borrowings of which Foamex L.P. borrowed $88.0
million in connection with the Refinancing Plan, (ii) term B loan ("Term B") of
$110.0 million and (iii) term C loan ("Term C") of $100.0 million. The remaining
$32.0 million available under the Term A is restricted and can only be used by
Foamex L.P. to retire its public debt not tendered in connection with the
Refinancing Plan with such unused availability terminating June 15, 1998.
Borrowings under the New Credit Facility are collateralized by
substantially all of the assets of Foamex L.P., General Felt and Foamex Fibers
on a pari passu basis with the 9 1/2% senior secured notes due 2000, the 11 1/4%
senior notes due 2002 and the industrial revenue bonds (collectively, the
"Notes"); however, the rights of the holders of the applicable issue of the
Notes to receive payment upon the disposition of the collateral securing such
issue of Notes has been preserved.
Pursuant to the terms of the New Credit Facility, borrowed funds will
bear interest at a floating rate equal to an applicable margin, as defined, plus
the higher of (i) the base rate of The Bank of Nova Scotia, in effect from time
to time, or (ii) a rate that is equal to 0.5% per annum plus the federal funds
rate in effect from time to time. The applicable margin is determined by a
calculation of the total net debt to EBDAIT ratio, as defined, and can range
from no margin up to 1.125% per annum for Term A and revolving loans, from
0.875% per annum to 1.375% per annum for Term B and from 1.125% per annum to
1.625% per annum for Term C. At the option of Foamex L.P., portions of the
outstanding loans under the New Credit Facility are convertible into LIBOR based
loans which bear interest at a floating rate equal to an applicable margin for
LIBOR based loans, as defined, plus the average LIBOR, as defined. The
applicable margin for LIBOR based loans is a rate that will generally equal the
applicable margin (discussed above) plus 1.0% per annum.
9
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT (continued)
9 7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")
The Senior Subordinated Notes were issued by Foamex L.P. and FCC in a
private placement under Rule 144A of the Securities Act of 1933, as amended, on
June 12, 1997 in connection with the 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 redemption.
The Senior Subordinated Notes are subordinated in right of payment to all senior
indebtedness and are pari passu in right of payment to two issues of senior
subordinated debentures due 2004 and the subordinated note. The Senior
Subordinated Notes contain certain covenants that will limit, among other
things, the ability of Foamex L.P. (i) to pay distributions or redeem
partnership interests, (ii) to make certain restrictive payments or investments,
(iii) to incur additional indebtedness or issue Preferred Equity Interest, as
defined, (iv) to merge, consolidate or sell all or substantially all of its
assets or (v) to enter into certain transactions with affiliates or related
persons. The Senior Subordinated Notes are guaranteed by General Felt and Foamex
Fibers and all other current and future domestic subsidiaries of the Issuers.
Foamex L.P. and FCC have filed a registration statement relating to an
exchange offer in which Foamex L.P. and FCC will offer to exchange the 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
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 Senior Subordinated Notes held by affiliates
of the Issuers and for certain other holders), and are not subject to any
covenant regarding registration under the Securities Act of 1933, as amended.
The exchange offer is expected to be consummated during the third quarter of
1997.
Principal payments on the Company's long-term debt for the remainder of
1997 and for the next five years are as follows: 1997 - $4.6 million; 1998 -
$12.7 million; 1999 - $21.6 million; 2000 - $32.1 million; 2001 - $32.0 million;
2002 - $33.5 million; and thereafter - $421.1 million.
Early Extinguishment of Debt - Refinancing Plan
In connection with the Refinancing Plan, the Company incurred an
extraordinary loss on the early extinguishment of debt of approximately $42.0
million (net of income taxes of $25.7 million). The extraordinary loss is
comprised of approximately $39.0 million for premium and consent fee payments,
approximately $16.2 million for the write-off of debt issuance costs and debt
discount, approximately $8.2 million for the loss associated with the effective
termination and amendment of the interest rate swap agreements and approximately
$4.3 million of professional fees and other costs. In connection with the
Refinancing Plan, Foamex L.P. repaid $5.2 million in term loan borrowings under
its old credit facility and purchased approximately $459.0 million of aggregate
principal amount of public debt comprised of:
10
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT (continued)
* $99.8 million of aggregate principal amount of its 9 1/2% senior secured
notes due 2000 for an aggregate consideration of 104.193% of principal plus
accrued interest, comprised of a tender price of 102.193% and a consent fee
of 2.0%;
* $130.1 million of aggregate principal amount of its 11 1/4% senior notes
due 2002 for an aggregate consideration of 105.709% of principal plus
accrued interest, comprised of a tender price of 103.709% and a consent fee
of 2.0%;
* $105.5 million of aggregate principal amount of its 11 7/8% senior
subordinated debentures due 2004 for an aggregate consideration of 107.586%
of principal plus accrued interest, comprised of a tender price of 105.586%
and a consent fee of 2.0%;
* $6.9 million of aggregate principal amount of its 11 7/8% senior
subordinated debentures, series B, due 2004 for an aggregate consideration
of 107.586% of principal plus accrued interest, comprised of a tender price
of 105.586% and a consent fee of 2.0%; and
* $116.7 million of aggregate principal amount of the Discount Debentures due
2004 for an aggregate consideration of 90.0% of principal amount, which
represents approximately 116.2% of the accreted book value as of June 12,
1997, comprised of a tender price of 88.0% and a consent fee of 2.0%.
In addition, the Company intends to call for redemption on October 1,
1997 approximately $26.0 million of the approximately $30.0 million of
outstanding public debt that was not tendered as part of the Refinancing Plan.
The redemption is expected to be funded with borrowings under the New Credit
Facility. In connection with the redemption, the Company expects to incur an
extraordinary loss on the early extinguishment of debt of approximately $1.6
million (net of income taxes) in the fourth quarter of 1997.
Early Extinguishment of Debt - Other
In addition, during 1997 the Company incurred extraordinary losses of
approximately $0.6 million (net of income taxes of $0.4 million) associated with
the early extinguishment of approximately $11.8 million of long-term debt funded
with approximately $12.1 million of the remaining net proceeds from the sale of
Perfect Fit. The extraordinary loss is comprised of approximately $0.4 million
of premium payments and approximately $0.6 million for the write-off of debt
issuance costs. The long-term debt was comprised of:
* $2.5 million of aggregate principal amount of its 9 1/2% senior secured
notes due 2000.
* $5.5 million of aggregate principal amount of its 11 1/4% senior notes due
2002.
* Bank term loan borrowings of $3.8 million under its old credit facility.
Interest Rate Swaps
The Company uses derivative financial instruments to manage interest
expense. All derivative financial instruments are classified as "held for
purposes other than trading". The Company does not use derivatives for
speculative purposes.
11
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT (continued)
Interest rate swap agreements are used to manage interest expense by
changing the interest rate characteristics of certain debt instruments to
approximate current market conditions. The amended interest rate swap agreement
matures in June 2007 which is consistent with the underlying debt. The
differential paid or received on interest rate swap agreements is recognized on
an accrual basis as an adjustment to interest and debt issuance expense. Gains
and losses on terminated interest rate swap agreements are amortized and
reflected in interest and debt issuance expense over the remaining term of the
underlying debt.
In connection with the Refinancing Plan, Foamex L.P.'s existing interest
rate swap agreements with a notional amount of $300.0 million were considered to
be effectively terminated since the underlying debt was extinguished. These
interest rate swap agreements had an estimated fair value liability of $8.2
million at the date of the Refinancing Plan which is included in the
extraordinary loss on the early extinguishment of debt. In lieu of a cash
payment for the estimated fair value of the existing interest rate swap
agreements, Foamex L.P. entered into an amendment of the existing interest rate
swap agreements resulting in one interest rate swap agreement with a notional
amount of $150.0 million through June 2007. Accordingly, the $8.2 million fair
value liability has been recorded as a deferred credit which will be amortized
as a reduction of interest and debt issuance expense on a straight-line basis
over the life of the amended interest rate swap agreement. Under the amended
interest rate swap agreement, Foamex L.P. is obligated to make fixed payments of
5.75% per annum through December 1997 and variable payments based on the higher
of LIBOR at the beginning or the end of the 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 amended
interest rate swap agreement can be terminated by either party in June 2002, and
annually thereafter, for a cash settlement based on the fair market value of the
amended interest rate swap agreement. Interest and debt issuance expense is
subject to fluctuations in LIBOR during the term of the swap agreement except
during 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. The effect of the interest rate swaps described above was a
favorable adjustment to interest and debt issuance expense of $0.8 million and
$1.1 million for the thirteen week periods ended June 29, 1997 and June 30,
1996, respectively, and $1.7 million and $1.9 million for the twenty-six week
periods ended June 29, 1997 and June 30, 1996, respectively.
6. ENVIRONMENTAL MATTERS
As of June 29, 1997, the Company has accruals of approximately $4.2
million for environmental matters. In addition, as of June 29, 1997, the Company
has net receivables of approximately $1.0 million relating to indemnification
for environmental liabilities, net of an allowance of approximately $1.0 million
relating to potential disagreements regarding the scope of the indemnification.
The Company believes that realization of the net receivables established for
indemnification is probable.
On May 5, 1997, there was an accidental chemical spill at one of the
Company's manufacturing facilities that was contained on site. The Company is in
the process of disposing of the contaminated soil which is estimated to cost
approximately $0.4 million. The actual cost and the timetable for the clean-up
of the site cannot be predicted with any degree of certainty at this time;
therefore, there can be no assurance that the clean-up of the site will not
result in a more significant environmental liability in the future.
The Company has reported to appropriate state authorities that it has
found soil and groundwater contamination in excess of state standards at four
additional facilities and soil contamination in excess of state standards at
three 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.
The actual cost and the timetable of any such remediation cannot be predicted
with any
12
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FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
6. ENVIRONMENTAL MATTERS (continued)
degree of certainty at this time. As of June 29, 1997, the Company has
environmental accruals of approximately $3.0 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 has six 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. The Company has
accrued approximately $0.3 million for the estimated removal and remediation, if
any, associated with the 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. 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.
The Company has been designated as a Potentially Responsible Party
("PRP") by the United States Environmental Protection Agency (the "EPA") with
respect to thirteen sites, with an estimated total liability to the Company for
the thirteen 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 the Company is considered to be immaterial.
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 August 8, 1997, Foamex L.P. and Trace International Holdings Inc.
("Trace Holdings") were two of multiple defendants in actions filed on behalf of
approximately 5,000 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. 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 and New Zealand. 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. 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
13
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
7. LITIGATION (continued)
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
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.
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
During June 1997, Foamex L.P. and Trace Foam Company, Inc. ("Trace
Foam") amended their management services agreement to increase the annual fee
from $1.75 million to $3.0 million, plus reimbursement of expenses incurred.
On June 12, 1997, a promissory note issued to Foamex L.P. by Trace
Holdings was amended. The amended promissory note is an extension of a
promissory note of Trace Holdings that was due in July 1997. The aggregate
principal amount of the amended promissory note was increased to approximately
$4.9 million and the maturity of the promissory note was extended. The
promissory note is due and payable on demand or, if no demand is made, on July
7, 2001, and bears interest at 2 3/8% plus three-month LIBOR, as defined, per
annum payable quarterly in arrears. The promissory note is included in the other
components of stockholders' equity (deficit).
In connection with the Refinancing Plan, Foamex L.P. made a cash
distribution of approximately $1.5 million to Trace Foam as a result of Foamex
L.P.'s distribution to FJPS and FMXI, Inc. of the Discount Debentures, a note
with a principal amount of approximately $56.2 million (net of approximately
$20.6 million of original issue discount) due from FJPS and a promissory note in
the aggregate principal amount of $2.0 million due from the Company. The
distribution to Trace Foam reduced retained earnings (accumulated deficit) of
the Company.
On July 1, 1997, Trace Holdings issued to Foamex L.P. a promissory note
for an aggregate principal amount of $5.0 million. The promissory note is due
and payable on demand or, if no demand is made, on July 7, 2001, and bears
interest at 2 3/8% plus three-month LIBOR, as defined, per annum payable
quarterly in arrears commencing October 1, 1997.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company operates in the flexible polyurethane and advanced polymer
foam products industry. The Company's operations are conducted through its
largest subsidiary Foamex L.P., together with Foamex L.P.'s wholly-owned
subsidiaries, General Felt, Foamex Fibers, Foamex Canada Inc., Foamex Latin
America, Inc., and Foamex Asia, 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. 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 pages 3 and 4 of the Company's 1996 Annual Report on Form 10-K.
On June 12, 1997, the Company substantially completed a refinancing plan
(the "Refinancing Plan") which included the repurchase of $342.3 million of
aggregate principal amount of Foamex L.P.'s public debt and $116.7 million of
aggregate principal amount of FJPS's senior secured discount debentures due 2004
and the payment of $5.2 million of Foamex L.P. term loan borrowings under its
old credit facility. The Company incurred an extraordinary loss on the early
extinguishment of debt associated with the Refinancing Plan of approximately
$42.0 million (net of income taxes of approximately $25.7 million). The
Refinancing Plan was funded by $347.0 million of borrowings under a new $480.0
million credit facility (the "New Credit Facility") and the net proceeds from
the issuance of $150.0 million principal amount of 9 7/8% senior subordinated
notes due 2007. See Note 5 to the condensed consolidated financial statements
for further discussion. As a result of the Refinancing Plan, the Company's total
long-term debt increased $63.9 million to $556.5 million. However, the Company
expects the Refinancing Plan to result in interest expense savings of
approximately $3.5 million in the second half of 1997 as compared to the first
half of 1997, and annualized interest expense savings of approximately $8.0
million, as compared to the debt structure prior to the Refinancing Plan,
assuming no material changes in interest rates. The Company's future interest
expense, and the ability to realize the expected savings in interest expense,
will vary based on a variety of factors, including fluctuation in interest rates
in general. As a result of the Refinancing Plan, variable rate debt comprises a
larger percentage of the Company's overall indebtedness than in the past, and as
a result, future fluctuations in interest rates will have a greater impact on
the Company's interest expense than in the past.
In addition, the Company intends to call for redemption on October 1,
1997 approximately $26.0 million of the approximately $30.0 million of
outstanding public debt that was not tendered as part of the Refinancing Plan.
The redemption is expected to be funded with borrowings under the New Credit
Facility. In connection with this redemption, the Company expects to incur an
extraordinary loss on the early extinguishment of debt of approximately $1.6
million (net of income taxes) in the fourth quarter of 1997.
During July 1997, the Company announced the creation of a new senior
management operating committee to simplify the Company's management and
reporting structure and to position the Company to achieve its strategic goals
which include: (i) to focus on its core flexible polyurethane operations in the
automotive, carpet cushion, technical, cushioning and furniture markets
(furniture sales were previously combined with cushioning sales), (ii) to
maximize revenue growth by increasing market share in existing markets,
introducing new and enhanced foam products with higher margins and pursuing
international opportunities and (iii) to continue to lower its cost structure.
The principle suppliers to the foam industry announced raw material cost
increases effective April 1997. The impact of the raw material cost increases
were not significant during the second quarter of 1997. However, the Company
estimates an unfavorable impact for the raw material cost increases, net of sale
price increases to customers of between $1.5 million to $3.0 million during the
third quarter of 1997. There can be no assurance that chemical suppliers will
not increase raw material costs in the future or that the Company will be able
to implement selling price increases to offset any such raw material cost
increases.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
During 1996, the Company sold Perfect Fit and JPS Automotive which
comprised the home comfort products and automotive textile business segments,
respectively, of the Company. Accordingly, the accompanying condensed
consolidated statements of operations for the thirteen week and twenty-six week
periods ended June 30, 1996 and the condensed consolidated statement of cash
flows for the twenty-six week period ended June 30, 1996 reflects the home
comfort products and automotive textile business segments as discontinued
operations. See Note 2 to the condensed consolidated financial statements for
further discussion.
Operating results for 1997 are expected to be influenced by various
internal and external factors. These factors include, among other things, (i)
continued implementation of the continuous improvement program to improve the
Company's profitability, (ii) additional raw material cost increases, if any, by
the Company's chemical suppliers, (iii) the Company's success in passing on to
its customers selling price increases to recover such raw material cost
increases, and (iv) fluctuations in interest rates.
13 Week Period Ended June 29, 1997 Compared to 13 Week Period Ended
June 30, 1996
Results of Operations
Net sales for the second quarter of 1997 were $239.9 million as compared
to $240.4 million in the second quarter of 1996, a decrease of $0.5 million or
0.2%. Carpet cushion products net sales for the second quarter of 1997 decreased
2.4% to $75.0 million from $76.8 million in the second quarter of 1996 primarily
due to decreased net sales volume of certain carpet cushion products resulting
from weak carpet sales and competitive pricing pressure resulting from an excess
supply of trim foam, the primary component of rebond carpet cushion. Cushioning
products net sales for the second quarter of 1997 increased 4.0% to $59.1
million from $56.8 million in the second quarter of 1996 primarily due to an
increase in net sales from both new and existing customers of bedding related
products. Furniture products net sales for the second quarter of 1997 of $26.9
million were consistent as compared to net sales of $26.7 million for the second
quarter of 1996. Automotive products net sales for the second quarter of 1997
decreased 6.4% to $59.3 million from $63.3 million in the second quarter of 1996
primarily due to decreased net sales volume resulting from reduced production of
car and light truck builds during the second quarter of 1997 and the labor
strikes affecting North American automotive production at both Chrysler and
General Motors plants. Technical products net sales for the second quarter of
1997 increased 16.4% to $19.6 million from $16.9 million in the second quarter
of 1996 primarily due to increased net sales volume.
Gross profit as a percentage of net sales increased to 18.7% for the
second quarter of 1997 from 15.9% in the second quarter 1996 primarily due to
improved material and production efficiencies and manufacturing cost containment
which includes (i) favorable raw material efficiencies and (ii) an increased
favorable impact of the 1995 restructuring and operational plans in the second
quarter of 1997 as compared to the second quarter of 1996.
Operating income increased to $28.7 million for the second quarter of
1997 from $24.4 million in the second quarter of 1996 primarily due to improved
gross profit margins as discussed above, offset by a $2.3 million increase in
selling, general and administrative expenses for the second quarter of 1997. The
increase in selling, general and administrative expenses is primarily due to
increases in employee compensation and incentives, research and development
costs, and travel and promotion costs associated with the launching of new
products and international expansion.
Income from continuing operations increased to $9.5 million or $0.37 per
share for the second quarter of 1997 as compared to $6.6 million or $0.26 per
share in the second quarter of 1996. The increase is primarily due to the
reasons cited above, offset by an increase in interest and debt issuance expense
of $0.4 million. The increase in interest and debt issuance expense is primarily
due to the inclusion in the second quarter of 1997 continuing operations of
interest expense on $10.4 million of public debt which was expected to be
retired with the
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
net proceeds from the sale of JPS Automotive; whereas for the second quarter of
1996, this interest expense was allocated to discontinued operations and a
decrease in the favorable impact from the interest rate swap agreements in the
second quarter of 1997 as compared to the second quarter of 1996. Loss from
discontinued operations in the second quarter of 1996 represents the loss on
disposal of Perfect Fit and the operating income of Perfect Fit and JPS
Automotive which were sold during 1996. See Note 2 to the condensed consolidated
financial statements for further discussion. The effective income tax rate for
continuing operations decreased to 39.5% for the second quarter of 1997 from
43.4% in the second quarter of 1996 primarily due to the reduction in permanent
differences and a slight decrease in the effective state income tax rate.
The extraordinary loss on early extinguishment of debt of approximately
$42.2 million (net of income taxes of approximately $25.9 million) relates to
premium and consent fee payments, the write-off of debt issuance costs and other
charges associated with the early extinguishment of approximately $468.0 million
of aggregate principal amount of debt in connection with the Refinancing Plan
and other debt extinguishment. See Note 5 to condensed consolidated financial
statements for further discussion.
26 Week Period Ended June 29, 1997 Compared to 26 Week Period Ended
June 30, 1996
Results of Operations
Net sales for 1997 were $469.0 million as compared to $459.6 million in
1996, an increase of $9.4 million or 2.1%. Carpet cushion products net sales for
1997 increased 1.8% to $142.9 million from $140.3 million in 1996 primarily due
to increased net sales during the first quarter of 1997 which resulted from the
effect of increased selling prices that were initiated late in the second
quarter of 1996 as well as increased shipments of certain carpet cushion
products offset by increased competitive pricing pressure during the second
quarter of 1997 as compared to 1996. Cushioning products net sales for 1997
increased 3.9% to $115.4 million from $111.1 million in 1996 primarily due to an
increase in net sales from both new and existing customers of bedding related
products. Furniture products net sales for 1997 of $54.5 million were consistent
as compared to net sales of $54.9 million for 1996. Automotive products net
sales for 1997 of $119.0 million were consistent with net sales of $119.3
million in 1996 primarily due to increased selling prices implemented during the
first quarter of 1996 offset by reduced net sales volume in 1997 as compared to
1996 due to the decreased net sales volume resulting from reduced production of
car and light truck builds and the labor strikes at both Chrysler and General
Motors plants. Technical products net sales for 1997 increased 9.2% to $37.1
million from $34.0 million in 1996 primarily due to increased net sales volume.
Gross profit as a percentage of net sales increased to 18.7% for 1997
from 16.1% in 1996 primarily due to selling price increases, improved material
and production efficiencies and manufacturing cost containment which includes
(i) the impact during 1997 of the selling prices initiated in 1996 to offset
previous raw material cost increases, (ii) favorable raw material efficiencies
and (iii) an increased favorable impact of the 1995 restructuring and
operational plan in 1997 as compared to 1996.
Operating income increased to $55.5 million for 1997 from $46.5 million
in 1996 primarily due to improved gross profit margins as discussed above,
offset by a $4.4 million increase in selling, general and administrative
expenses for 1997. The increase in selling, general and administrative expenses
is primarily due to increases in employee compensation and incentives, research
and development costs, and travel and promotion costs associated with the
launching of new products and international expansion.
Income from continuing operations increased to $29.1 million or $0.68
per share for 1997 as compared to $21.0 million or $0.48 per share in 1996. The
increase is primarily due to the reasons cited above, offset by an increase in
interest and debt issuance expense of $1.5 million. The increase in interest and
debt issuance expense
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
is primarily due to the inclusion in 1997 continuing operations of interest
expense on $10.4 million of public debt which was expected to be retired with
the net proceeds from the sale of JPS Automotive; whereas for 1996, this
interest expense was allocated to discontinued operations. Loss from
discontinued operations for 1996 represents the loss on disposal of Perfect Fit
and the operating income of Perfect Fit and JPS Automotive which were sold
during 1996. See Note 2 to the condensed consolidated financial statements for
further discussion. The effective income tax rate for continuing operations
decreased to 39.6% for 1997 from 40.8% in 1996 primarily due to a reduction in
permanent differences and a slight decrease in the effective state income tax
rate.
The extraordinary loss on early extinguishment of debt of approximately
$42.6 million (net of income taxes of approximately $26.1 million) relates to
premium and consent fee payments, the write-off of debt issuance costs
associated with the early extinguishment of approximately $476.0 million of
aggregate principal amount of debt in connection with the Refinancing Plan and
other debt extinguishment during 1997. See Note 5 to the condensed consolidated
financial statements for further discussion.
Liquidity and Capital Resources
Liquidity and Capital Resources
The Company's operating cash requirements consist principally of working
capital requirements, scheduled payments of principal and interest on
outstanding indebtedness and capital expenditures. The Company believes that
cash flow from operating activities, cash on hand and periodic borrowings under
revolving credit agreements, if necessary, will be adequate to meet its
operating cash requirements. The ability to meet operating cash requirements
could be impaired if Foamex L.P. were to fail to comply with any of the
covenants contained in its credit agreements or indentures and such
noncompliance was not cured by Foamex L.P. or waived by the lenders or
bondholders. Foamex L.P. was in compliance with such covenants as of June 29,
1997 and expects to be in compliance with such covenants for the foreseeable
future. The ability of Foamex L.P. to make distributions to the Company is
restricted by the terms of its existing financing agreements.
Cash and cash equivalents decreased $14.8 million during 1997 to $7.4
million at June 29, 1997 from $22.2 million at December 29, 1996 primarily due
to $16.4 million of cash used for capital expenditures, $3.6 million of net cash
used for operating activities and $1.9 million cash used for the purchase of
treasury stock offset by $6.1 million of cash provided from financing activities
after considering the decrease in restricted cash and $1.0 million of cash
provided by the exercise of stock options. The $6.1 million of cash provided by
financing activities consisted of proceeds from long-term debt, revolving loan
and short-term borrowings of $502.8 million and the decrease of restricted cash
of $12.1 million, offset by the repayment of long-term debt of $450.0 million,
and cash used for debt issuance costs of $14.7 million and premium and consent
fee payments and other cash charges associated with the Refinancing Plan and
other debt extinguishment of $44.1 million. Cash flow from continuing operating
activities decreased $18.0 million to a use of $3.6 million of cash for 1997 as
compared to cash provided of $14.4 million for 1996. Cash flow from continuing
operating activities decreased for 1997 as compared to 1996 primarily due to the
use of cash for operating assets offset by an increase of $5.2 million in income
from continuing operations.
Working capital increased $9.8 million for 1997 to $146.4 million at June
29, 1997 from $136.6 million at December 29, 1996. The increase in working
capital is primarily due to improved operating results from continuing
operations. The net operating assets and liabilities (comprised of accounts
receivable, inventories and accounts payable) increased $20.6 million to $164.9
million at June 29, 1997 from $144.3 million at December 29, 1996 primarily due
to increases in accounts receivable and inventories and a decrease in accounts
payable. The increase in accounts receivable is primarily due to an increase in
net sales for June 1997 as compared to
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
December 1996. The increase in inventories is due to increased sales during
1997. The decrease is account payable is due to the timing of payments.
During 1997, the Company spent approximately $16.4 million on capital
expenditures and expects to maintain or reduce spending for capital expenditures
for the foreseeable future since significant capital projects (e.g.
the new Mexico City facility) are expected to be completed during 1997.
As of June 29, 1997, there was approximately $49.0 million outstanding of
revolving credit borrowings under the New Credit Facility with unused
availability of approximately $84.9 million. Borrowings by Foamex Canada Inc. as
of June 29, 1997 were approximately $3.5 million under a revolving credit
agreement with unused availability of approximately $1.0 million. Borrowings by
Foamex Latin America, Inc. as of June 29, 1997 were approximately $0.5 million
under a revolving credit agreement with unused availability of approximately
$1.5 million.
Interest Rate Swaps
In connection with the Refinancing Plan, Foamex L.P.'s existing interest
rate swap agreements with a notional amount of $300.0 million were considered to
be effectively terminated since the underlying debt was extinguished. These
interest rate swap agreements had an estimated fair value liability of $8.2
million at the date of the Refinancing Plan which is included in the
extraordinary loss on the early extinguishment of debt. In lieu of a cash
payment for the estimated fair value of the existing interest rate swap
agreement, Foamex L.P. entered into an amendment of the existing interest rate
swap agreements resulting in one interest rate swap agreement with a notional
amount of $150.0 million through June 2007. Accordingly, the $8.2 million fair
value liability has been recorded as a deferred credit which will be amortized
as a reduction of interest and debt issuance expense on a straight-line basis
over the life of the amended interest rate swap agreement. Under the amended
interest rate swap agreement, Foamex L.P. is obligated to make fixed payments of
5.75% per annum through December 1997 and variable payments based on the higher
of LIBOR at the beginning or the end of the 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 amended
interest rate swap agreement can be terminated by either party in June 2002, and
annually thereafter, for a cash settlement based on the fair market value of the
amended interest rate swap agreement. Interest and debt issuance expense is
subject to fluctuations in LIBOR during the term of the swap agreement except
during 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. The effect of the interest rate swaps described above was a
favorable adjustment to interest and debt issuance expense of $0.8 million and
$1.1 million for the thirteen week periods ended June 29, 1997 and June 30,
1996, respectively, and $1.7 million and $1.9 million for the twenty-six week
periods ended June 29, 1997 and June 30, 1996, 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 have not had a material adverse effect on its
operations, financial position, capital expenditures or competitive position.
The amount of liabilities recorded by the Company in connection with
environmental matters as of June 29, 1997 was approximately $4.2 million. In
addition, as of June 29, 1997 the Company has net receivables of approximately
$1.0 million for indemnification of environmental liabilities from former
owners, net of a $1.0 million allowance relating to potential disagreements
regarding the scope of the indemnification. 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,
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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. Effective in January 1997, the Company's operations in Mexico became
subject to highly inflationary accounting for financial reporting purposes.
Translation adjustments resulting from fluctuations in the exchange rate between
the Mexican Peso and the U.S. dollar are included in the Company's consolidated
statement of operations as compared to stockholders' equity (deficit). The
affect of translation adjustments on the 1997 results of operations have been
insignificant.
The Company'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, 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.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share". SFAS No. 128 specifies new standards designed to improve the earnings
per share ("EPS") information provided in financial statements by simplifying
the existing computational guidelines, revising the disclosure requirements, and
increasing the comparability of EPS data on an international basis. Some of the
changes made to simplify the EPS computations include: (i) eliminating the
presentation of primary EPS and replacing it with basic EPS, with the principal
difference being that common stock equivalents are not considered in computing
basic EPS, (ii) eliminating the modified treasury stock method and the three
percent materiality provision and (iii) revising the contingent share provisions
and the supplemental EPS data requirements. Under the provisions of SFAS No.
128, the Company would have reported the following net loss earnings per share
information:
<TABLE>
<CAPTION>
13 Week Periods Ended 26 Week Periods Ended
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
(thousands except per share data)
<S> <C> <C> <C> <C>
Basic loss per share $(1.29) $(1.25) $(0.99) $(1.00)
====== ====== ====== ======
Weighted average shares outstanding 25,298 25,388 25,304 25,553
====== ====== ====== ======
Fully diluted loss per share $(1.26) $(1.24) $(0.96) $(1.00)
====== ====== ====== ======
Weighted average shares outstanding 25,872 25,667 26,128 25,694
====== ====== ====== ======
</TABLE>
20
<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 29, 1996 and in the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 30, 1997.
The information from Notes 6 and 7 of the condensed consolidated
financial statements of the Company as of June 29, 1997 (unaudited)
is incorporated herein by reference.
Item 2. Changes in Securities
As part of the Refinancing Plan, Foamex L.P. solicited the consent of
holders of the 9 1/2% senior secured notes due 2000, 11 1/4% senior
notes due 2002, 11 7/8% senior subordinated debentures due 2004, 11
7/8% senior subordinated debentures due 2004, series B, and FJPS
senior secured discount debentures due 2004 ("Discount Debentures")
(collectively, the "Notes") to certain proposed amendments to the
indentures (collectively, the "Indentures") governing each issue of
Notes (the "Proposed Amendments"). The Proposed Amendments became
effective upon consummation of the Refinancing Plan on June 12, 1997
(except in the case of the Proposed Amendments for the Discount
Debentures, as all of the outstanding Discount Debentures were
purchased on such date), and (i) eliminated substantially all
restrictive covenants in the Indentures with respect to each issue of
Notes, (ii) eliminated all events of default in the Indentures, other
than nonpayment of principal of, interest on, or redemption payment
with respect to, the Notes and certain bankruptcy events, (iii)
removed certain obligations in connection with the defeasance of the
Notes, and (iv) with respect to the 11 1/4% senior notes due 2002 and
9 1/2% senior secured notes due 2000 provided for the granting of
pari passu liens in the collateral for such Notes with payment
priority preserved for the holders of the Notes.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
a) The Company's Annual Meeting of Stockholders (the "Annual
Meeting") was held on May 22, 1997.
b) Proxies for the Annual Meeting were solicited pursuant to
Regulation 14 under the Securities Exchange Act of 1934, as
amended. There were no solicitations in opposition to management's
nominees listed in the proxy statement. All of the nominees listed
in the proxy statement were elected.
c) The following matters were voted upon at the Annual Meeting:
21
<PAGE>
1) The election of seven directors. The number of votes cast for and
withheld for each such nominee was as set forth below:
Nominees For Withheld
Salvatore J. Bonanno 20,663,255 262,141
Marshall S. Cogan 20,663,255 262,141
Etienne Davignon 20,663,255 262,141
Andrea Farace 20,663,255 262,141
Robert J. Hay 20,663,255 262,141
Stuart J. Hershon 20,663,255 262,141
John V. Tunney 20,663,255 262,141
2) Ratification of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the year ending December 28, 1997. The
votes were as follows:
For Against Abstain
20,904,701 7,275 13,420
d) As part of the Refinancing Plan, Foamex L.P. solicited the consent
of holders of Notes to the Proposed Amendments. See Part II, Item
2 above. The vote on the Proposed Amendments was conducted based
on the outstanding principal amount of the Notes and was as
follows:
<TABLE>
<CAPTION>
Issue of Notes For Against Abstain
<S> <C> <C> <C>
9 1/2% senior secured notes due 2000 $ 99,770,000 $0 $0
11 1/4% senior notes due 2002 $130,085,000 $0 $0
11 7/8% senior subordinated
debentures due 2004 $105,482,000 $0 $0
11 7/8% senior subordinated
discount debentures due 2004 $ 6,955,000 $0 $0
Discount Debentures $116,745,000 $0 $0
</TABLE>
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
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 and Trace Foam, as general
partners, and Foamex International, as a limited
partner (the "Partnership Agreement").
3.2.2(b) - First Amendment to the Partnership Agreement, dated
June 28, 1994.
3.3(a) - Certificate of Incorporation of FMXI.
3.4(a) - By-laws of FMXI.
3.5(k) - Certificate of Incorporation of Foamex Capital
Corporation.
3.6(k) - By-laws of Foamex Capital Corporation.
3.7(g) - Certificate of Incorporation of General Felt
Industries, Inc.
3.8(g) - By-laws of General Felt Industries, Inc.
3.9(q) - Certificate of Incorporation of Foamex Fibers, Inc.
22
<PAGE>
3.10(q) - By-laws of Foamex Fibers, Inc.
4.1.1(d) - Indenture, dated as of June 12, 1997, by and among
Foamex L.P., Foamex Capital Corporation, 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(d) - Registration Rights Agreement, dated as of June 12,
1997, by and among Foamex L.P., Foamex Capital
Corporation, General Felt Industries, Inc., Foamex
Fibers, Inc. and all future direct or indirect domestic
subsidiaries of Foamex L.P. or Foamex Capital
Corporation, and Donaldson, Lufkin & Jenrette
Securities Corporation, Salomon Brothers Inc. and
Scotia Capital Markets, as Initial Purchasers.
4.2.1(e) - Indenture, dated as of June 3, 1993, among Foamex L.P.
and Foamex Capital Corporation, as joint and several
obligors, General Felt Industries, Inc., 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 the form
of Senior Secured Notes.
4.2.2(a) - First Supplemental Indenture, dated as of November 18,
1993, among Foamex International and FCC, as Issuers,
General Felt and Perfect Fit, as Guarantors and
Shawmut, as trustee, relating to the Senior Secured
Notes.
4.2.3(a) - Second Supplemental Indenture, dated as of December 14,
1993, among Foamex L.P. and FCC, as Issuers, Foamex
International, General Felt and Perfect Fit, as
Guarantors and Shawmut, as trustee, relating to the
Senior Secured Notes.
4.2.4(f) - Third Supplemental Indenture, dated as of August 1,
1996, by and among Foamex L.P. and FCC, as Issuers,
Foamex International, as parent guarantor, General
Felt, as guarantor, Perfect Fit, as withdrawing
guarantor, and Fleet National Bank ("Fleet"), as
trustee, relating to the Senior Secured Notes.
4.2.5(c) - Fourth Supplemental Indenture, dated as of May 28,
1997, by and among Foamex and FCC, as Issuers, FII, as
Parent Guarantor, General Felt, as Guarantor, and
Fleet, as trustee.
4.2.6(e) - 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.
4.2.7(q) - Amendment No. 1 to Company (Foamex L.P.) Pledge
Agreement, dated June 12, 1997.
4.2.8(e) - 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.
4.2.9(q) - Amendment No. 1 to Company (FCC) Pledge Agreement,
dated June 12, 1997.
4.2.10(e) - 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.
4.2.11(q) - Amendment No. 1 to Subsidiary (GFI) Pledge Agreement,
dated June 12, 1997.
4.2.12(e) - 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.
4.2.13(q) - Amendment No. 1 to Company Security Agreement, dated
June 12, 1997 (Foamex L.P. and FCC).
4.2.14(e) - 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.
4.2.15(q) - Amendment No. 1 to Subsidiary Security Agreement, dated
June 12, 1997 (General Felt).
4.2.16(e) - 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.
4.2.17(q) - Amendment No. 1 to Collateral Assignment of Patents and
Trademarks (Foamex L.P.), dated June 12, 1997.
4.2.18(e) - 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.
4.2.19(q) - Amendment No. 1 to Collateral Assignment of Patents and
Trademarks (FCC), dated June 12, 1997.
4.2.20(e) - 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.
23
<PAGE>
4.2.21(q) - Amendment No.1 to Collateral Assignment of Patents and
Trademarks (GFI), dated June 12, 1997.
4.2.22(q) - Amended and Restated Receivables Security Agreement, by
and among Fleet National Bank, Citicorp USA, Inc. and
The Bank of Nova Scotia, dated as of June 12, 1997.
4.2.23(q) - Intercreditor Agreement by and among Fleet National
Bank, Citicorp, USA, Inc. and the Bank of Nova Scotia,
dated as of June 12, 1997 (re: Senior Secured Notes).
4.3.1(g) - 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
113% Senior Notes due 2002, including form of Senior
Note.
4.3.2(h) - 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.
4.3.3(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.
4.3.4(a) - Third Supplemental Indenture, dated as of December 14,
1993, among Foamex L.P. and FCC, as Issuers, Foamex
International, General Felt and Perfect Fit, as
Guarantors and Shawmut Connecticut, as trustee,
relating to the Senior Notes.
4.3.5(i) - Fourth Supplemental Indenture, dated as of October 31,
1994, among Foamex L.P. and FCC as Issuers, Foamex
International as Parent Guarantor, General Felt and
Perfect Fit, as Guarantors and Shawmut Connecticut, as
Trustee, relating to the Senior Notes.
4.3.6(j) - Fifth Supplemental Indenture, dated as of August 1,
1996, by and among Foamex L.P. and FCC, as issuers,
Foamex International as Parent Guarantor, General Felt,
as guarantors, Perfect Fit, as withdrawing guarantor,
and Fleet National Bank, as trustee, relating to the
Senior Notes.
4.3.7(c) - Sixth Supplemental Indenture, dated as of May 28, 1997,
by and among Foamex and FCC, as Issuers, Foamex
International, as Parent Guarantor, GFI, as Guarantor,
and Fleet, as Trustee.
4.3.8(q) - Intercreditor Agreement by and among Fleet National
Bank, Citicorp USA, Inc. and The Bank of Nova Scotia,
dated as of June 12, 1997 (re: Senior Notes).
4.4.1(g) - 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.
4.4.2(h) - 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.
4.4.3(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.
4.4.4(e) - Third Supplemental Indenture, dated as of December 14,
1993, among Foamex L.P. and FCC, as Issuers, Foamex
International, General Felt and Perfect Fit, as
Guarantors and Shawmut, as trustee, relating to the
Senior Subordinated Debentures.
4.4.5(j) - Fourth Supplemental Indenture, dated as of August 1,
1996, among Foamex L.P. and FCC, as Issuers, Foamex
International, as Parent Guarantor, General Felt, as
Guarantor, Perfect Fit, as withdrawing guarantor, and
Fleet, as trustee, relating to the Senior Subordinated
Debentures.
4.4.6(c) - Fifth Supplemental Indenture, dated as of May 29, 1997,
by and among Foamex and FCC, as Issuers, Foamex
International, as Parent Guarantor, General Felt, as
Guarantor, and Fleet, as Trustee.
4.5(d) - Credit Agreement, dated as of June 12, 1997, by and
among Foamex L.P., General Felt Industries, Inc., Trace
Foam Company, Inc., FMXI, Inc., 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.
24
<PAGE>
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 International and
Marely s.a. ("Marely").
4.9(a) - DLJ Loan Commitment Agreement, dated as of December 14,
1993, by and between Foamex International and DLJ
Funding, Inc. ("DLJ Funding").
4.10(q) - Promissory Note, dated June 12, 1997, in the aggregate
principal amount of $5,000,000, executed by Trace
Holdings to Foamex L.P.
4.10.1(q) - Promissory Note, dated June 12, 1997, in the aggregate
principal amount of $4,794,828, executed by Trace
Holdings to Foamex L.P.
10.1.1(q) - Amendment to Master Agreement, dated as of June 5,
1997, between Citibank, N.A. and Foamex.
10.1.2(q) - Amended confirmation, dated as of June 13, 1997,
between Citibank, N.A. and Foamex.
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 Blackell, 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 the Foamex L.P. (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.
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 L.P., Trace Foam,
FMXI and Foamex International.
10.7.2(d) - First Amendment to Amended and Restated Tax Sharing
Agreement of Foamex L.P., dated as of June 12, 1997, by
and among Foamex L.P., Foamex International Inc., FMXI,
Inc. and Trace Foam Company, Inc.
10.8.1(m) - Tax Distribution Advance Agreement, dated as of
December 11, 1996, by and between Foamex L.P. and
Foamex-JPS Automotive L.P.
10.8.2(d) - Amendment No. 1 to Tax Distribution Advance Agreement,
dated as of June 12, 1997, by and between Foamex
International and Foamex L.P.
10.9.1(h) - Trace Foam Management Agreement between Foamex L.P. 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 L.P. and Trace
Foam.
10.9.3(d) - First Amendment to Management Agreement, dated as of
June 12, 1997, by and between Foamex L.P. and Trace
Foam.
10.10.1(k) - Salaried Incentive Plan of Foamex L.P. and
Subsidiaries.
10.10.2(k) - Trace Holdings 1987 Nonqualified Stock Option Plan.
10.10.3(k) - Equity Growth Participation Program.
10.10.4(k)(o) - General Felt Industries, Inc. Retirement Plan for
Salaried Employees, effective as of January 1, 1995.
25
<PAGE>
10.10.5(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.
10.10.6(n) - Foamex/General Felt 401(k) Savings Plan dated July 1,
1995.
10.10.7(a) - Foamex International's 1993 Stock Option Plan.
10.10.8(a) - Foamex International'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.
10.11.2(r) - Employment Agreement, dated as of July 26, 1995, by and
between Foamex L.P. and Salvatore J. Bonanno.
10.12(a) - Warrant Exchange Agreement, dated as of December 14,
1993, by and between Foamex International and Marely.
10.13(a) - Warrant Exchange Agreement, dated as of December 14,
1993, by and between Foamex International and DLJ
Funding.
10.14(o) - Stock Purchase Agreement, dated as of December 23,
1993, by and among Transformacion de Espumas y
Fieltros, S.A., the stockholders which are parties
thereto, and Foamex L.P.
10.15.1(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.
10.15.2(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.
10.15.3(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 herein, Trace
Holdings and Trace Foam.
10.15.4(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.
10.15.5(a) - Registration Rights Agreement, dated as of December 14,
1993, by and between the Company and Trace Foam.
10.15.6(a) - Registration Rights Agreement, dated as of December 14,
1993, by and between the Company and Trace Holdings.
10.16(k) - Warrant Agreement, dated as of June 29, 1994, between
the Company and Shawmut.
10.17.1(p) - Aircraft Purchase Agreement, dated as of August 22,
1995, by and between Trace Aviation Corp. ("Trace
Aviation") and Foamex Aviation Inc. ("Foamex
Aviation").
10.17.2(p) - Aircraft Sale, Lease and Operating Agreement, dated as
of August 22, 1995, by and between Trace Aviation and
Trace Holdings.
10.17.3(p) - Assumption/Aircraft Security Agreement, dated as of
August 22, 1995, by and between Foamex Aviation and the
CIT Group/Equipment Financing, Inc. ("CIT Group").
10.17.4(p) - Collateral Assignment of Aircraft Leases and Aircraft
Use Agreements, dated as of August 22, 1995, by and
between Foamex Aviation and CIT Group.
10.17.5(p) - Guaranty by the Company in favor of CIT Group, dated as
of August 22, 1995.
10.17.6(p) - Aviation Guaranty Indemnity Agreement, dated as of
August 22, 1995, by and between the Company and Trace
Holdings.
10.18.1 - Equity Purchase Agreement, dated as of August 28, 1996,
by and among JPSGP Inc., FJPS, and Collins & Aikman
Products Co.
10.18.2 - Amendment No. 1 to Equity Purchase Agreement, by and
among JPSGP Inc., FJPS, the Company and Collins and
Aikman Products Co., dated as of December 11, 1996.
27 - Financial Data Schedule.
- ---------------------------------
(a) Incorporated herein by reference to the Exhibit to Foamex International'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
L.P. for the fiscal year ended January 1, 1995.
26
<PAGE>
(c) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex L.P. reporting an event that occurred May 29, 1997.
(d) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex L.P. reporting an event that occurred June 12, 1997.
(e) 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.
(f) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
L.P. for the quarterly period ended June 30, 1996.
(g) 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.
(h) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
International for fiscal 1994.
(i) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
L.P. for the quarterly period ended September 30, 1996.
(j) Incorporated herein by reference to the Exhibit to the Form 10-K Statement
of Foamex L.P. and FCC for fiscal 1992.
(k) 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.
(l) Incorporated herein by reference to the Exhibit to the Registration
Statement of FJPS, FJCC and Foamex International 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 L.P. for the fiscal year ended December 29, 1996.
(n) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
L.P. for the quarterly period ended July 2, 1995.
(o) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
International for fiscal 1993.
(p) Incorporated herein by reference to the Exhibit to Form 10-Q of the Company
for the quarterly period ended October 1, 1995.
(q) Incorporated herein by reference to the Exhibit in the Registration
Statement of Foamex L.P. on Form S-4, Registration No. 333-30291
(r) Incorporated herein by reference to the Exhibit to Form 10-K of Foamex L.P.
for the fiscal year ended December 31, 1995.
27
<PAGE>
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 May 28, 1997.
Form 8-K reporting an event that occurred on June 12, 1997.
28
<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: August 13, 1997 By:/s/ Kenneth R. Fuette
Kenneth R. Fuette
Chief Financial Officer
29
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<NAME> FOAMEX INTERNATIONAL INC
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0
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