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 March 30, 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 May 12,
1997 was 25,306,100.
Page 1 of 24
Exhibit List on Page 17 of 24
<PAGE>
FOAMEX INTERNATIONAL INC.
INDEX
Page
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Thirteen Week Periods Ended March 30, 1997
and March 31, 1996 3
Condensed Consolidated Balance Sheets as of March 30,
1997 and December 29, 1996 4
Condensed Consolidated Statements of Cash Flows -
Thirteen Week Periods Ended March 30, 1997
and March 31, 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II. Other Information 17
Exhibit List 17
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
March 30, March 31,
1997 1996
(thousands)
<S> <C> <C>
NET SALES $ 229,120 $ 219,131
COST OF GOODS SOLD 186,323 183,100
--------- ---------
GROSS PROFIT 42,797 36,031
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 15,987 13,970
--------- ---------
INCOME FROM OPERATIONS 26,810 22,061
INTEREST AND DEBT ISSUANCE EXPENSE 13,968 12,903
OTHER INCOME, NET 638 203
--------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES 13,480 9,361
PROVISION FOR INCOME TAXES 5,344 3,518
--------- ---------
INCOME FROM CONTINUING OPERATIONS 8,136 5,843
INCOME FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAXES -- 294
--------- ---------
INCOME BEFORE EXTRAORDINARY LOSS -- 6,137
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
OF DEBT, NET OF INCOME TAXES (410) --
--------- ---------
NET INCOME $ 7,726 $ 6,137
========= =========
EARNINGS (LOSS) PER SHARE:
INCOME FROM CONTINUING OPERATIONS $ 0.31 $ 0.23
INCOME FROM DISCONTINUED OPERATIONS -- 0.01
--------- ---------
INCOME BEFORE EXTRAORDINARY LOSS 0.31 0.24
EXTRAORDINARY LOSS (0.01) --
--------- ---------
EARNINGS PER SHARE $ 0.30 $ 0.24
========= =========
WEIGHTED AVERAGE NUMBER OF SHARE OUTSTANDING 26,060 25,950
========= =========
</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>
March 30, December 29,
ASSETS 1997 1996
CURRENT ASSETS: (thousands)
<S> <C> <C>
Cash and cash equivalents $ 34,001 $ 22,203
Accounts receivable, net 131,108 126,573
Inventories 102,344 102,610
Other current assets 56,544 55,718
--------- ---------
Total current assets 323,997 307,104
PROPERTY, PLANT AND EQUIPMENT, NET 198,653 195,373
COST IN EXCESS OF ASSETS ACQUIRED, NET 81,810 82,471
DEBT ISSUANCE COSTS, NET 17,678 18,628
OTHER ASSETS 16,439 16,270
--------- ---------
TOTAL ASSETS $ 638,577 $ 619,846
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings $ 3,985 $ 3,692
Current portion of long-term debt 9,554 14,505
Accounts payable 85,200 84,930
Accrued interest 19,280 9,012
Other accrued liabilities 62,999 58,384
--------- ---------
Total current liabilities 181,018 170,523
--------- ---------
LONG-TERM DEBT 482,637 483,344
--------- ---------
OTHER LIABILITIES 24,507 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 26,906,500 and 26,753,262
shares, respectively; Outstanding 25,341,100 and
25,198,862 shares, respectively 269 267
Additional paid-in capital 85,728 84,579
Accumulated deficit (112,448) (120,174)
Other (9,496) (9,312)
--------- ---------
(35,947) (44,640)
Common Stock held in treasury, at cost;
1,565,400 shares at March 30, 1997 and 1,554,400
shares at December 29, 1996 (13,638) (13,463)
--------- ---------
Total stockholders' equity (deficit) (49,585) (58,103)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 638,577 $ 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>
13 Week Periods Ended
March 30, March 31,
1997 1996
(thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 7,726 $ 6,137
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 5,361 5,828
Amortization of debt issuance costs and debt discount 3,766 3,336
Income from discontinued operations -- (294)
Extraordinary loss on early extinguishment of debt 410 --
Other operating activities (153) 409
Changes in operating assets and liabilities, net of
discontinued operations 1,790 (1,210)
-------- --------
Net cash provided by continuing operating activities 18,900 14,206
Net cash provided by discontinued operations -- 1,819
-------- --------
Net cash provided by operating activities 18,900 16,025
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (7,426) (3,256)
Decrease in restricted cash 8,356 --
Other investing activities -- 981
Discontinued operations investing activities -- (5,590)
-------- --------
Net cash provided by (used for) investing activities 930 (7,865)
-------- --------
FINANCING ACTIVITIES:
Net proceeds from short-term borrowings 293 1,930
Proceeds from long-term debt 500 --
Repayment of long-term debt (9,230) (2,394)
Purchase of treasury stock (175) (2,458)
Other financing activities 580 (32)
Discontinued operations financing activities -- (784)
-------- --------
Net cash used for financing activities (8,032) (3,738)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 11,798 4,422
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 22,203 3,322
-------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 34,001 $ 7,744
======== ========
</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 March
30, 1997 and the condensed consolidated statements of operations and the
condensed consolidated statements of cash flows for the thirteen week periods
ended March 30, 1997 and March 31, 1996 have been prepared by the Company and
have not been audited by the Company's independent accountants. Also, the
condensed consolidated statement of operations and the condensed consolidated
statement of cash flows for the thirteen week period ended March 31, 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 April 7, 1997, the Company announced that an evaluation of its capital
structure was initiated with the intention of refinancing certain long-term
indebtedness to reduce the Company's interest expense and improve financing
flexibility. On May 12, 1997, the Company announced a $540.0 million refinancing
plan that includes a $480.0 million credit facility and $150.0 million of senior
subordinated notes. As part of this refinancing plan, Foamex L.P. commenced
tender offers with concurrent consent solicitations for $373.0 million of
aggregate principal amount of its public debt and $116.7 million of aggregate
principal amount of Foamex-JPS Automotive L.P.'s ("FJPS") senior secured
discount debentures due 2004. The refinancing activities are expected to be
completed by the end of the second quarter of 1997. (See Note 5 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 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 the second quarter of 1997. The sale included
substantially all of 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 substantially all
of the net assets of the home comfort products business segment. Accordingly,
the accompanying condensed consolidated statement of operations and the
condensed consolidated statement of cash flows for the thirteen week period
ended March 31, 1996 reflect the home comfort products business segment as
discontinued operations.
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
6
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2. DISCONTINUED OPERATIONS (continued)
of the operating results for the discontinued operations is as follows:
<TABLE>
<CAPTION>
13 Week Period Ended
March 31, 1996 (1)
(thousands)
<S> <C>
Net sales $ 100,081
Gross profit 16,739
Income from operations 8,346
Interest and debt issuance expense 6,963
Other expense (309)
Income from discontinued operations before provision for income taxes 1,074
Provision for income taxes 780
Income from discontinued operations, net of income taxes 294
<FN>
(1) The Company's discontinued operations includes the operations of Perfect
Fit and JPS Automotive.
</FN>
</TABLE>
3. INVENTORIES
Inventories consist of:
March 30, December 29,
1997 1996
(thousands)
Raw materials and supplies $ 56,766 $ 61,559
Work-in-process 15,166 13,453
Finished goods 30,412 27,598
-------- --------
Total $102,344 $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
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
7
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. EARNINGS (LOSS) PER SHARE (continued)
materiality provision and (iii) revising the contingent share provisions and the
supplemental EPS data requirements. Under the provisions of SFAS 128, the
Company would have reported the following net income earnings per share
information:
13 Week Periods Ended
March 30, March 31,
1997 1996
(thousands)
Basic $ 0.31 $ 0.24
======= ==========
Weighted Average Shares Outstanding 25,311 25,718
======= ==========
Fully Diluted $ 0.29 $ 0.24
======= ==========
Weighted Average Shares Outstanding 26,368 25,822
======= ==========
5. LONG-TERM DEBT
Refinancing Plan
On May 12, 1997, the Company announced a refinancing plan designed to
improve its financial and operating flexibility and reduce interest expense. As
part of this refinancing plan, Foamex L.P., a 99% owned subsidiary of the
Company, commenced tender offers with concurrent consent solicitations for a
total of $489.7 million of aggregate principal of public debt, including:
o $104.3 million of aggregate principal 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%;
o $135.9 million of aggregate principal 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%;
o $125.8 million of aggregate principal 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%;
o $7.0 million of aggregate principal 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%; and
o $116.7 million principal amount of the Foamex-JPS Automotive L.P. Senior
Secured Discount Debentures due 2004 for an aggregate consideration of 88%
of principal amount, which represents approximately 116.2% of the projected
accreted value as of June 9, 1997, comprised of a tender price of 86% of
principal amount and a consent fee of 2%.
8
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT (continued)
The consent solicitations will expire on May 23, 1997 and the tender offers
will expire on June 9, 1997. Holders who tender their securities in the tender
offers will be deemed to have submitted consents in the consent solicitations.
Holders may not deliver consents without tendering their securities. Holders
must tender their securities prior to May 23, 1997 in order to receive the
consent fee. Holders who tender their securities after such date and before the
expiration date of June 9, 1997 will receive the tender price for their
securities, but will not receive the consent fee.
Foamex L.P. also plans to repay all borrowings under the terms of its
existing credit facility outstanding at the closing of the refinancing plan
which is estimated to be $5.2 million. Outstanding term loan borrowings as of
March 30, 1997 is approximately $10.0 million (see Extinguishment of Debt
discussed below).
The Company expects to fund the repurchase with the proceeds of:
o A $480.0 million Foamex L.P. credit facility arranged by a bank lending
group including an estimated $150.0 million revolving credit line. Upon
completion of the refinancing transactions, Foamex L.P. expects to have
approximately $100.0 million available under the revolving credit line.
o A $150.0 million offering of Foamex L.P. senior subordinated notes in the
Rule 144A market.
o Cash on hand.
The Company expects that as a result of its refinancing activities,
assuming no material changes in interest rates and the tendering of
substantially all of the Company's outstanding public debt. Future annualized
interest expense will be reduced by between $8.0 million and $11.0 million as
compared to the interest expense required by the existing indentures and credit
agreements.
The Company expects to complete its refinancing activities by the end of
the second quarter of 1997 and record an extraordinary loss on the early
extinguishment of debt, net of income tax, of between $41.0 million to $47.0
million related to the premiums paid to repurchase the debt, the write-off of
debt issuance costs and additional one-time charges related to the other aspects
of the refinancing plan.
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; the pricing of the credit
agreement and the senior subordinated notes; and the percentage of securities
tendered in the tender offers. In addition, if the refinancing is consummated,
variable rate debt will comprise 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. Also, the amount of the expected extraordinary loss on the early
extinguishment of debt in the second quarter of 1997 will vary based on a
variety of factors, including the percentage of securities tendered in the
tender offers and other factors beyond the Company's control.
Consummation of the tender offers, the consent solicitations, the bank
financing and the senior subordinated note offering are subject to conditions,
several of which are beyond the Company's control, and there can be no assurance
that such transactions will be consummated.
This report shall not constitute an offer to sell or the solicitation of an
offer to buy the securities offered by Foamex L.P. in the private placement
9
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5. LONG-TERM DEBT (continued)
Extinguishment of Debt
During 1997, the Company used approximately $8.4 million of the net
proceeds from the sale of Perfect Fit to repurchase outstanding indebtedness of
approximately $8.0 million. Also, during April 1997, the Company used the
remaining net proceeds from the sale of Perfect Fit to reduce bank term loan
borrowings by approximately $3.8 million.
6. ENVIRONMENTAL MATTERS
As of March 30, 1997, the Company has environmental accruals of
approximately $4.0 million for environmental matters. In addition, as of March
30, 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
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 remaining
clean-up of the site is expected to primarily consist of the disposal of
contaminated soil. Foamex L.P. has contacted the appropriate environmental
authorities but has received no notification from such authorities regarding the
accidental chemical spill including the method of disposal of the contaminated
soil. Foamex L.P. expects to take a charge of at least $0.6 million in the
second quarter of 1997 for the clean-up of the site including the disposal of
the contaminated soil. The actual cost and the timetable of 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 degree of certainty at this time. As of March 30, 1997, the Company has
environmental accruals of approximately $3.1 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 $0.4 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
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 the Company is considered to be immaterial.
10
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
6. ENVIRONMENTAL MATTERS (continued)
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 May 12, 1997, the Company and Trace International Holdings, Inc.
("Trace Holdings") were two of multiple defendants in actions filed on behalf of
approximately 5,000 recipients of breast implants in various United States
federal and state courts and one Canadian provincial court, some of which allege
substantial damages, but most of which allege unspecified damages for personal
injuries of various types. 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 700 residents of
Australia, New Zealand, England, and Ireland. During 1995, the Company and Trace
Holdings were granted summary judgments and dismissed as defendants from all
cases in the federal courts of the United States and the state courts of
California. Appeals for these decisions were withdrawn and the decisions are
final. In addition, two of the cases filed on behalf of 903 foreign plaintiffs
were dismissed on the grounds that the cases could not be brought in the United
States courts. This decision is subject to appeal. The Company 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 the Company or Trace Holdings. Neither the Company nor Trace
Holdings recommended, authorized or approved the use of its foam for these
purposes. While it is not feasible to predict or determine the outcome of these
actions, based on management's present assessment of the merits of pending
claims, after consultation with the general counsel of Trace Holdings, and
without taking into account potential indemnity from the manufacturers of
polyurethane covered breast implants, management believes that the disposition
of matters that are pending or that may reasonably be anticipated to be asserted
should not have a material adverse effect on either the Company's or Trace
Holdings' consolidated financial position or results of operations. In addition,
the Company is also indemnified by Trace Holdings for any such liabilities
relating to foam manufactured prior to October 1990. Although Trace Holdings has
paid the Company's litigation expenses to date pursuant to such indemnification
and management believes Trace Holdings likely will be in a position to continue
to pay such expenses, there can be no absolute assurance that Trace Holdings
will be able to provide such indemnification. Based on information available at
this time with respect to the potential liability, and without taking into
account the indemnification provided by Trace Holdings and the coverage provided
by Trace Holdings' and the Company's liability insurance, 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 the Company'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.
11
<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 Industries, Inc., Foamex Fibers, Inc., 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.
On April 7, 1997, the Company announced that an evaluation of its capital
structure was initiated with the intention of refinancing certain long-term
indebtedness to reduce the Company's interest expense and improve financing
flexibility. On May 12, 1997, the Company announced a refinancing plan designed
to improve its financial and operating flexibility and reduce interest expense.
As part of this refinancing plan, Foamex L.P., a 99% owned subsidiary of the
Company, commenced tender offers with concurrent consent solicitations for a
total of $373.0 million of its aggregate principal of public debt and $116.7
million principal amount of FJPS's public debt. The refinancing plan, including
the tender offers, are subject to conditions, several of which are beyond the
control of the Company, and there can be no assurance that such transactions
will be consummated. (See Note 5 to the condensed consolidated financial
statements for further discussion).
The principal suppliers to the foam industry announced raw material price
increases effective April 1997. The Company is unable to predict whether, or to
what extent, the April 1997 increases or any future increase will be sustained.
The Company believes that if any price increase is sustained in the industry, it
will also be impacted by such increase. 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.
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 statement of operations and the condensed consolidated statement of
cash flows for the thirteen week period ended March 31, 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 an operational plan to improve the Company's
profitability, (ii) the potential recapitalization of the Company, (iii)
additional raw material price increases, if any, by the Company's chemical
suppliers and (iv) the Company's success in passing on to its customers selling
price increases to recover such raw material cost increases.1
13 Week Period Ended March 30, 1997 Compared to 13 Week Period Ended March 31,
1996
Results of Operations
Net sales for the first quarter of 1997 were $229.1 million as compared to
$219.1 million in the first quarter of 1996, an increase of $10.0 million or
4.6%. Carpet cushion net sales for the first quarter of 1997 increased 6.9% to
$67.9 million from $63.5 million in the first quarter of 1996 primarily due to
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. Cushioning foam net sales for the first quarter of 1997 increased 1.8%
to $84.0 million from $82.5 million in the first quarter of 1996 primarily due
to an increase in net sales from both new and existing customers
- --------
1 This paragraph 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.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
of bedding related products. Automotive foam net sales for the first quarter of
1997 increased 6.6% to $59.7 million from $56.0 million in the first quarter of
1996 primarily due to a continued increase in net sales of tri-laminates and
composite headliners and increased selling prices implemented during the first
quarter of 1996. Technical foam net sales for the first quarter of 1997
increased 2.3% to $17.5 million from $17.1 million in the first quarter of 1996
primarily due to increased volume.
Gross profit as a percentage of net sales increased to 18.7% for the first
quarter of 1997 from 16.4% in the first quarter 1996 primarily due to selling
price increases and improved material and production efficiencies which includes
(i) the impact during the first quarter of 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
operational plan in the first quarter of 1997 as compared to the first quarter
of 1996.
Operating income increased to $26.8 million for the first quarter of 1997
from $22.1 million in the first quarter of 1996 primarily due to improved gross
profit margins as discussed above, offset by a $2.0 million increase in selling,
general and administrative expenses for the first quarter of 1997. The increase
in selling, general and administrative expenses is primarily due to increases in
employee compensation and incentives and costs associated with the launching of
new products and international expansion.
Income from continuing operations increased to $8.1 million or $0.31 per
share for the first quarter of 1997 as compared to $5.8 million or $0.23 per
share in the first quarter of 1996. The increase is primarily due to the reasons
cited above, offset by an increase in interest and debt issuance expense of $1.1
million. The increase in interest and debt issuance expense is primarily due to
the inclusion in the first quarter of 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 the first quarter
of 1996, this interest expense was allocated to discontinued operations. Income
from discontinued operations in the first quarter of 1996 represents 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 increased to
39.6% for the first quarter of 1997 from 37.6% in the first quarter of 1996
primarily due to $0.2 million of tax benefits realized by a subsidiary that
files federal income tax returns.
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 $8.0 million of debt.
Liquidity and Capital Resources
Effects of the Refinancing Plan2
Upon consummation of the Company's refinancing plan, Foamex L.P. will
purchase all securities validly tendered in the tender offer, and will repay its
existing credit facility. Foamex L.P. will fund such payments through the
issuance of $150.0 million principal amount of senior subordinated notes in a
private placement, a new credit facility for up to $480.0 million, of which
approximately $380.0 million is expected to be borrowed upon the closing of the
refinancing, and with cash on hand. Consummation of the refinancing plan is
expected to increase the outstanding principal amount of the Company's total
long-term debt by $31.6 million from $492.2 million as
- --------
2 This paragraph 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.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
of March 30, 1997 to $523.8 million on a pro forma basis (assuming all of the
securities are tendered in the tender offers).
The Company expects to complete its refinancing activities by the end of
the second quarter of 1997 and record an extraordinary loss on the early
extinguishment of debt (net of income taxes) of between $41.0 million to $47.0
million in the second quarter of 1997 related to the premiums paid to repurchase
the debt, the write-off of debt issuance costs and additional one-time charges
related to other aspects of the refinancing plan.
The Company expects that as a result of its refinancing activities,
assuming no material changes in interest rates and the tendering of
substantially all of the Company's outstanding public debt. Future annualized
interest expense will be reduced by between $8.0 million and $11.0 million as
compared to the interest expense required by the existing indentures and credit
agreements.
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; the pricing of the credit
agreement and the senior subordinated notes; and the percentage of securities
tendered in the tender offers. In addition, if the refinancing is consummated,
variable rate debt will comprise 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. Also, the amount of the expected extraordinary loss on the early
extinguishment of debt in the second quarter of 1997 will vary based on a
variety of factors, including the percentage of securities tendered in the
tender offers and other factors beyond the Company's control.
Consummation of the tender offers, the consent solicitations, the credit
facility and the senior subordinated notes offering are subject to conditions,
several of which are beyond the Company's control, and there can be no assurance
that such transactions will be consummated. (See Note 5 to the condensed
consolidated financial statements).
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 March 30,
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 increased $11.8 million during the first quarter
of 1997 to $34.0 million at March 30, 1997 from $22.2 million at December 29,
1996 primarily due to $18.9 million of net cash provided by operating activities
offset by $7.4 million of cash used for capital expenditures and $0.2 million
used for the purchase of treasury stock. In addition, the Company utilized
approximately $8.4 million of restricted cash to repurchase long-term debt with
a net book value of approximately $8.0 million. Cash flow from continuing
operating activities increased $4.7 million to $18.9 million for the first
quarter of 1997 as compared to $14.2 million for the first quarter of 1996. Cash
flow from continuing operating activities increased for 1997 as compared to 1996
primarily due to an increase of $1.6 million in income from continuing
operations and a $3.0 million reduction in the use of cash for operating assets
and liabilities.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Working capital increased $6.4 million for the first quarter of 1997 to
$143.0 million at March 30, 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 $4.0 million to
$148.3 million at March 30, 1997 from $144.3 million at December 29, 1996
primarily due to an increase in accounts receivable. The increase in accounts
receivable is primarily due to an increase in net sales for March 1997 as
compared to December 1996. Inventories and account payable were fairly
consistent as compared to December 29, 1996.
During 1997, the Company spent approximately $7.4 million on capital
expenditures and expects to maintain or reduce spending for capital expenditures
for the foreseeable future since significant capital projects (e.g. new Mexico
City facility) are expected to be completed during 1997.
As of March 30, 1997, there were no outstanding revolving credit borrowings
under Foamex L.P.'s existing credit facility with unused availability of
approximately $32.8 million. Borrowings by Foamex Canada Inc. as of March 30,
1997 were $4.0 million under a revolving credit agreement with unused
availability of approximately $0.3 million.
Interest Rate Swaps
Foamex L.P. has interest rate swap agreements with a notional amount of
$300.0 million through December 2001. Under the swap agreements, Foamex L.P. is
obligated to make fixed payments at 5.30% per annum for the twelve months ended
in December 1997 and variable payments based on LIBOR for the remainder of the
agreement, in exchange for fixed payments by the swap partner at 6.0% per annum
for the remainder of the agreement, payable semiannually in arrears. The swap
partner has the ability to terminate the swap agreement after the December 1997
payment if the LIBOR rate Foamex L.P. is to pay for any period thereafter is
equal to or less than 4.50% per annum. Interest expense will be 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 two interest rate swaps described above was a favorable adjustment to
interest expense of $0.9 million and $0.8 million for the thirteen week periods
ended March 30, 1997 and March 31, 1996, respectively.
Environmental Matters
On May 5, 1997, there was an accidental chemical spill at one of the
Company's manufacturing facilities that was contained on site. The remaining
clean-up of the site is expected to primarily consist of the disposal of
contaminated soil. The Company has contacted the appropriate environmental
authorities but has received no notification from such authorities regarding the
accidental chemical spill including the method of disposal of the contaminated
soil. The Company expects to take a charge of at least $0.6 million in the
second quarter of 1997 for the clean-up of the site including the disposal of
the contaminated soil. The actual cost and the timetable of 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 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 March 30, 1997 was approximately $4.0 million. In
addition, as of March 30, 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
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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. 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 will be included in the Company's
consolidated statement of operations as compared to stockholders' equity
(deficit). Large fluctuations in the Mexican Peso exchange rate could have an
adverse impact on the Company's results of operations.
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.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS
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 128, the
Company would have reported the following net income earnings per share
information:
13 Week Periods Ended
March 30, March 31,
1997 1996
(thousands)
Basic $ 0.31 $ 0.24
======= ==========
Weighted Average Shares Outstanding 25,311 25,718
======= ==========
Fully Diluted $ 0.29 $ 0.24
======= ==========
Weighted Average Shares Outstanding 26,368 25,822
======= ==========
16
<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.
The information from Notes 6 and 7 of the condensed consolidated
financial statements of the Company as of March 30, 1997 (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
Foamex Capital Corporation ("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(p) - Third Supplemental Indenture, dated as of August 1, 1996, by
and among the Foamex L.P. and FCC, as Issuers, the Company,
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.
4.4(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.
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.
17
<PAGE>
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(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.
4.13(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.
4.14(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.
4.15(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.
4.16(j) - 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(p) - Fifth Supplemental Indenture, dated as of August 1, 1996, by
and among Foamex L.P. and FCC as guarantor, Perfect Fit, as
withdrawing guarantors, and Fleet, 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.
4.22(p) - Fourth Supplemental Indenture, dated as of August 1, 1996, by
and among Foamex L.P. and FCC, as Issuers, the Company, as
parent, General Felt, as guarantor, Perfect Fit, as
withdrawing guarantor, and Fleet, as trustee relating to the
Senior Subordinated Debentures.
4.23(i) - Indenture, dated as of June 28, 1994, among FJPS and FJCC, as
Issuers, the Company, 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.
4.24(j) - 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.
4.25(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.
18
<PAGE>
4.26(t) - Consent, Waiver and Amendment Agreement, dated December 11,
1996, between FJPS and Foamex L.P.
4.27(p) - Commitment letter, dated July 9, 1996, from The Bank of Nova
Scotia to Foamex Canada Inc.
4.28(p) - Third Amended and Restated Credit Agreement, dated as of July
30, 1996, among Foamex L.P., General Felt, Trace Foam
Company, Inc. ("Trace Foam"), FMXI, Inc. ("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").
4.29(q) - 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 from time to time
parties thereto as Lenders, the parties thereto as issuing
banks and Citibank, N.A. and The Bank of Nova Scotia, as
Administrative Agents.
4.30(t) - Second Amendment to Third Amended and Restated Credit
Agreement, dated as of November 27, 1996, among Foamex L.P.,
General Felt, Trace Foam, FMXI, Citibank, N.A., The Bank of
Nova Scoria, 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.
4.31(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.
4.32(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.
4.33(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.
4.34(n) - 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.
4.35(n) - 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.
4.36(t) - Third Amendment to Amended and Restated Guaranty, dated
November 27, 1996, executed by the Company in favor of
Citibank, N.A. as Collateral Agent, 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(p) - Amendatory Agreement, dated as of July 30, 1996, among Foamex
L.P., General Felt, FCC, and Citibank, N.A., as collateral
agent under the Credit Agreement.
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(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").
4.42(a) - Marely Loan Commitment Agreement, dated as of December 14,
1993, by and between the Company and Marely s.a. ("Marely").
19
<PAGE>
4.43(a) - DLJ Loan Commitment Agreement, dated as of December 14, 1993,
by and between the Company and DLJ Funding, Inc. ("DLJ
Funding") .
4.44(p) - 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 Funding and Smith Barney
Inc.
10.11(h) - Warrant Agreement, dated as of June 28, 1994, between the
Company and Shawmut.
10.12(t) - Revised Confirmation Letter Agreements, dated as of January
7, 1997, by and between Foamex L.P. and Citibank, N.A.
10.13(t) - Assignment Agreement, dated as of December 16, 1996, among
Foamex L.P., FCC, and Salomon Brothers Holdings Company Inc
("Salomon Holdings").
10.14(d) - Reimbursement Agreement, dated as of March 23, 1993, between
Trace Holdings and General Felt.
10.15(d) - 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.
10.16(e) - Asset Transfer Agreement, dated as of October 2, 1990,
between Trace Holdings and Foamex L.P. (the "Trace Holdings
Asset Transfer Agreement").
10.17(e) - First Amendment, dated as of December 19, 1991, to the Trace
Holdings Asset Transfer Agreement.
10.18(e) - Amended and Restated Guaranty, dated as of December 19, 1991,
made by Trace Foam in favor of Foamex L.P.
10.19(e) - Asset Transfer Agreement, dated as of October 2, 1990,
between RFC and Foamex L.P. (the "RFC Asset Transfer
Agreement").
10.20(e) - First Amendment, dated as of December 19, 1991, to the RFC
Asset Transfer Agreement.
10.21(e) - Schedule 5.03 to the RFC Asset Transfer Agreement (the "5.03
Protocol").
10.22(d) - The 5.03 Protocol Assumption Agreement, dated as of October
13, 1992, between RFC and Foamex L.P.
10.23(d) - Letter Agreement between Trace Holdings and Recticel
regarding the Recticel guaranty, dated as of July 22, 1992.
10.24(i) - Supply Agreement, dated June 28, 1994, between Foamex L.P.
and the Company.
10.25(i) - First Amended and Restated Tax Sharing Agreement, dated as of
December 14, 1993, among Foamex L.P., Trace Foam, FMXI, and
the Company.
20
<PAGE>
10.26(i) - Tax Sharing Agreement, dated as of June 28, 1994, among FJPS
and the Company.
10.27(t) - Tax Distribution Advance Agreement, dated as of December 11,
1996, by and between Foamex L.P. and FJPS.
10.28(d) - Trace Foam Management Agreement between Foamex L.P. and Trace
Foam, dated as of October 13, 1992.
10.29(i) - Affirmation Agreement re: Management Agreement, dated as of
December 14, 1993 between Foamex L.P. and Trace Foam.
10.30(m) - Aircraft Purchase Agreement, dated as of August 22, 1995, by
and between Trace Aviation Corp. ("Trace Aviation") and
Foamex Aviation Inc. ("Foamex Aviation").
10.31(m) - Aircraft Sale, Lease and Operating Agreement, dated as of
August 22, 1995, by and between Trace Aviation and Trace
Holdings.
10.32(m) - Assumption/Aircraft Security Agreement, dated as of August
22, 1995, by and between Foamex Aviation and the CIT
Group/Equipment Financing, Inc. ("CIT Group").
10.33(m) - Collateral Assignment of Aircraft Leases and Aircraft Use
Agreements, dated as of August 22, 1995, by and between
Foamex Aviation and CIT Group.
10.34(m) - Guaranty by the Company in favor of CIT Group, dated as of
August 22, 1995.
10.35(m) - Aviation Guaranty Indemnity Agreement, dated as of August 22,
1995, by and between the Company and Trace Holdings.
10.36(e)(o) - Salaried Incentive Plan of Foamex L.P. and Subsidiaries.
10.37(e)(o) - Trace Holdings 1987 Nonqualified Stock Option Plan.
10.38(e)(o) - Equity Growth Participation Program.
10.39(j)(o) - General Felt Industries, Inc. Retirement Plan for Salaried
Employees, effective as of January 1, 1995.
10.40(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, 1984.
10.41(e)(o) - Foamex L.P. 401(k) Savings Plan dated January 1, 1989.
10.42(l)(o) - Foamex/GFI 401(k) Savings Plan dated July 1, 1995.
10.43(a)(o) - The Company's 1993 Stock Option Plan.
10.44(a)(o) - The Company's Non-Employee Director Compensation Plan.
10.45(a)(o) - Employment Agreement, dated as of May 6, 1993, by and between
Foamex L.P. and Rallis.
10.46(f)(o) - Employment Agreement, dated as of February 1, 1994, by and
between Foamex L.P. and William H. Bundy.
10.47(n)(o) - Employment Agreement, dated as of June 26, 1995, by and
between Foamex L.P. and Salvatore J. Bonanno
10.48(k)(o) - Bonus Agreement, dated as of May 7, 1993, between the Company
and Robert Hay.
10.49(a) - Amended and Restated Put Option Agreement, dated as of
December 14, 1993, by and between Trace Holdings and Rallis.
10.50(f) - Stock Purchase Agreement, dated as of December 23, 1993, by
and between Transformacion de Espumas y Fieltros, S. A. de
C.V., the stockholders which are parties thereto, and Foamex
L.P.
10.51(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.
10.52(r) - 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
L.P.
10.53(s) - Equity Purchase Agreement, dated as of August 28, 1996, by
and among JPSGP Inc., FJPS, and Collins & Aikman Products Co.
10.54(u) - 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.
21 - Subsidiaries of the Registrant.
27 - Financial Data Schedule.
21
<PAGE>
(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 Form 10-K of the
Company for fiscal 1994.
(k) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for fiscal 1994.
(l) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
L.P. for the quarterly period ended July 2, 1995.
(m) Incorporated herein by reference to the Exhibit to the Form 10-Q of the
Company for the quarterly period ended October 1, 1995.
(n) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for fiscal 1995.
(o) A management contract or compensatory plan or arrangement required to be
filed as an Exhibit pursuant to Item 14(C) of this report.
(p) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
L.P. for the quarterly period ended June 30, 1996.
(q) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
L.P. for the quarterly period ended September 29, 1996.
(r) 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.
22
<PAGE>
(s) Incorporated herein by reference to the Exhibit to the Form 8-K of Foamex
International Inc. reporting an event which occurred on August 28, 1996.
(t) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for fiscal 1996.
(u) Incorporated herein by reference to the Exhibit to the Form 8-K of Foamex
International Inc. reporting an event which occurred on December 11, 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:
None.
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: May 15, 1997 By: /s/ Kenneth R. Fuette
------------------------
Kenneth R. Fuette
Chief Financial Officer and
Chief Accounting Officer
24
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000912908
<NAME> FOAMEX INTERNATIONAL INC
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
<EXCHANGE-RATE> 1
<CASH> 34,001
<SECURITIES> 0
<RECEIVABLES> 131,108
<ALLOWANCES> 0
<INVENTORY> 102,344
<CURRENT-ASSETS> 323,997
<PP&E> 198,653
<DEPRECIATION> 0
<TOTAL-ASSETS> 638,577
<CURRENT-LIABILITIES> 181,018
<BONDS> 482,637
0
0
<COMMON> 269
<OTHER-SE> (49,854)
<TOTAL-LIABILITY-AND-EQUITY> 638,577
<SALES> 229,120
<TOTAL-REVENUES> 229,120
<CGS> 186,323
<TOTAL-COSTS> 186,323
<OTHER-EXPENSES> 15,987
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,968
<INCOME-PRETAX> 13,480
<INCOME-TAX> 5,344
<INCOME-CONTINUING> 8,136
<DISCONTINUED> 0
<EXTRAORDINARY> (410)
<CHANGES> 0
<NET-INCOME> 7,726
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0
</TABLE>