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 28, 1998
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
12, 1998 was approximately 25,014,800.
Page 1 of 27
Exhibit List on Page 20 of 27
<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
28, 1998 and June 29, 1997 3
Condensed Consolidated Balance Sheets as of June 28,
1998 and December 28, 1997 4
Condensed Consolidated Statements of Cash Flows -
Twenty-Six Week Periods Ended June 28, 1998 and June
29, 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Part II. Other Information 20
Exhibit List 20
Signatures 27
<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 28, June 29, June 28, June 29,
1998 1997 1998 1997
(thousands except per share data)
<S> <C> <C> <C> <C>
NET SALES $ 298,479 $ 239,887 $ 612,269 $ 469,007
COST OF GOODS SOLD 241,557 195,107 504,151 381,430
--------- --------- --------- ---------
GROSS PROFIT 56,922 44,780 108,118 87,577
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 20,861 16,100 43,238 32,087
--------- --------- --------- ---------
INCOME FROM OPERATIONS 36,061 28,680 64,880 55,490
INTEREST AND DEBT ISSUANCE EXPENSE 17,531 13,474 35,308 27,442
OTHER INCOME (EXPENSE), NET (1,046) 448 (1,745) 1,086
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 17,484 15,654 27,827 29,134
PROVISION FOR INCOME TAXES 6,993 6,184 11,128 11,528
--------- --------- --------- ---------
INCOME BEFORE EXTAORDINARY LOSS 10,491 9,470 16,699 17,606
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT,
NET OF INCOME TAXES (43) (42,189) (1,917) (42,599)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 10,448 $ (32,719) $ 14,782 $ (24,993)
========= ========= ========= =========
BASIC EARNINGS (LOSS) PER SHARE:
INCOME BEFORE EXTRAORDINARY LOSS $ 0.42 $ 0.37 $ 0.67 $ 0.70
EXTRAORDINARY LOSS -- (1.66) (0.08) (1.69)
--------- --------- --------- ---------
EARNINGS (LOSS) PER SHARE $ 0.42 $ (1.29) $ 0.59 $ (0.99)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES 25,012 25,298 24,977 25,304
========= ========= ========= =========
DILUTED EARNINGS (LOSS) PER SHARE:
INCOME BEFORE EXTRAORDINARY LOSS $ 0.40 $ 0.36 $ 0.64 $ 0.67
EXTRAORDINARY LOSS -- (1.62) (0.07) (1.63)
--------- --------- --------- ---------
EARNINGS (LOSS) PER SHARE $ 0.40 $ (1.26) $ 0.57 $ (0.96)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES 26,124 26,042 26,090 26,086
========= ========= ========= =========
</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>
June 28, December 28,
ASSETS 1998 1997
CURRENT ASSETS: (thousands)
<S> <C> <C>
Cash and cash equivalents $ 18,175 $ 12,044
Accounts receivable, net 182,388 175,684
Inventories 124,080 120,299
Other current assets 77,160 62,901
----------- -----------
Total current assets 401,803 370,928
PROPERTY, PLANT AND EQUIPMENT, NET 230,619 233,435
COST IN EXCESS OF ASSETS ACQUIRED, NET 215,711 218,219
DEBT ISSUANCE COSTS, NET 15,932 18,889
DEFERRED INCOME TAXES 34,168 26,960
OTHER ASSETS 24,364 25,192
----------- -----------
TOTAL ASSETS $ 922,597 $ 893,623
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings $ 7,320 $ 6,598
Current portion of long-term debt 5,117 12,931
Current portion of long-term debt - related party 7,020 --
Accounts payable 103,508 131,689
Accrued interest 10,391 10,716
Other accrued liabilities 64,686 70,513
----------- -----------
Total current liabilities 198,042 232,447
LONG-TERM DEBT 692,479 735,724
LONG-TERM DEBT - RELATED PARTY 97,180 --
OTHER LIABILITIES 34,331 38,871
----------- -----------
Total liabilities 1,022,032 1,007,042
----------- -----------
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 27,003,823 and 25,014,823 shares, respectively;
Outstanding 25,014,823 and 24,919,680 shares, respectively 270 269
Additional paid-in capital 86,769 86,025
Retained earnings (accumulated deficit) (151,109) (164,118)
Accumulated other comprehensive income (6,369) (6,599)
Other (9,794) (9,794)
----------- -----------
(80,233) (94,217)
Common Stock held in treasury, at cost:
1,989,000 shares at June 28, 1998 and December 28, 1997 (19,202) (19,202)
----------- -----------
Total stockholders' equity (deficit) (99,435) (113,419)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 922,597 $ 893,623
=========== ===========
</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 28, June 29,
1998 1997
(thousands)
OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 14,782 $ (24,993)
Adjustments to reconcile net income (loss) to net cash provided
by (used for) operating activities:
Depreciation and amortization 14,299 10,815
Net amortization of debt issuance costs, debt discount
and debt premium 3,202 6,847
Extraordinary loss on early extinguishment of debt 1,579 37
Other operating activities 11,481 (565)
Changes in operating assets and liabilities, net (66,884) (38,334)
--------- ---------
Net cash used for operating activities (21,541) (46,193)
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (14,982) (16,432)
Acquisitions, net of cash acquired (4,399) --
Decrease in restricted cash -- 12,143
Other investing activities (1,467) 35
--------- ---------
Net cash used for investing activities (20,848) (4,254)
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from short-term borrowings 722 256
Net proceeds from revolving loans 82,426 49,000
Proceeds from long-term debt 129,000 453,500
Repayment of long-term debt (132,767) (450,026)
Repayment of Foamex/GFI Note (4,800) --
Debt issuance cost (1,598) (14,746)
Purchase of treasury stock -- (1,890)
Dividends paid (1,246) --
GFI transaction costs (3,898) --
GFI transaction payment to Trace (20,000) --
Other financing activities 681 (488)
--------- ---------
Net cash provided by financing activities 48,520 35,606
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 6,131 (14,841)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 12,044 22,203
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 18,175 $ 7,362
========= =========
</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
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Foamex International Inc.'s (the "Company") condensed consolidated
balance sheet as of December 28, 1997 has been condensed from the audited
consolidated balance sheet at that date. The condensed consolidated balance
sheet as of June 28, 1998, the condensed consolidated statements of operations
for the thirteen week and twenty-six week periods ended June 28, 1998 and June
29, 1997 and the condensed consolidated statements of cash flows for the
twenty-six week periods ended June 28, 1998 and June 29, 1997 have been prepared
by the Company and have not been audited by the Company's independent
accountants. 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.
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 1997 consolidated financial statements and notes thereto as set forth
in the Company's Annual Report on Form 10-K/A for the fiscal year ended December
28, 1997.
2. CRAIN ACQUISITION
On December 23, 1997, the Company acquired Crain Industries, Inc.
("Crain") pursuant to a merger with Crain Holdings Corp. for a purchase price of
approximately $213.7 million, including the assumption of debt with a face value
of approximately $98.6 million (with an estimated fair value of approximately
$112.3 million) ("Crain Acquisition"). In addition, fees and expenses associated
with the Crain Acquisition were approximately $13.2 million. Crain was a fully
integrated manufacturer, fabricator and distributor of a broad range of flexible
polyurethane foam and foam products sold to a diverse customer base, principally
in the bedding, carpet cushion and furniture markets. The acquisition was funded
by $118.0 million in bank borrowings by Foamex L.P. under a credit facility. The
excess of the purchase price over the estimated fair value of the net assets
acquired was approximately $152.5 million.
The Crain Acquisition was accounted for as a purchase and the operations
of Crain are included in the consolidated statements of operations and cash
flows from the date of acquisition. The cost of the Crain Acquisition has been
allocated on the basis of the fair value of the assets acquired and the
liabilities assumed. The excess of the purchase price over the estimated fair
value of the net assets acquired is being amortized using the straight-line
method over forty years. The allocation of the purchase price for the Crain
Acquisition is based upon preliminary estimates and assumptions and is subject
to revision once appraisals, valuations and other studies of the fair value of
the acquired assets and liabilities have been completed. The pro forma results
listed below are unaudited and assume that the Crain Acquisition occurred at the
beginning of fiscal year 1997.
<TABLE>
<CAPTION>
13 Week Period 26 Week Period
Ended June 29, 1997 Ended June 29, 1997
(thousands, except per share data)
<S> <C> <C>
Net sales $319,312 $626,080
======== ========
Income before extraordinary loss $11,173 $17,001
======== ========
Pro forma basic earnings (loss) per share $0.44 $0.67
======== ========
Pro forma diluted earnings (loss) per share $0.43 $0.65
======== ========
</TABLE>
The pro forma results are not necessarily indicative of what would have
occurred if the Crain Acquisition had been in effect for the entire periods
presented nor are they necessarily indicative of future consolidated results.
6
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. INVENTORIES
Inventories consist of:
June 28, December 28,
1998 1997
(thousands)
Raw materials and supplies $ 79,404 $ 75,487
Work-in-process 16,887 15,620
Finished goods 27,789 29,192
-------- --------
Total $124,080 $120,299
======== ========
4. LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
Long-term debt consists of:
<TABLE>
<CAPTION>
June 28, December 28,
1998 1997
Credit Facility: (thousands)
<S> <C> <C>
Term Loan A $ -- $ 76,700
Term Loan B 83,344 109,725
Term Loan C 75,766 99,750
Term Loan D 109,725 110,000
Revolving credit facility 137,354 54,928
9 7/8% Senior subordinated notes due 2007 150,000 150,000
13 1/2% Senior subordinated notes due 2005 (includes
$12,824 and $13,720 of unamortized debt premium) 110,824 111,720
9 1/2% Senior secured notes due 2000 -- 4,523
Industrial revenue bonds 7,000 7,000
Subordinated note payable (net of unamortized
debt discount of $709 and $1,198) 6,306 6,129
Other 17,277 18,180
-------- --------
697,596 748,655
Less current portion 5,117 12,931
-------- --------
Long-term debt-unrelated parties $692,479 $735,724
======== ========
Long-term debt - related party consists of:
Foamex/GFI Note $ 34,000 $ --
Note payable to Foam Funding LLC 70,200 --
-------- --------
104,200 --
Less current portion - related party 7,020 --
-------- --------
Long-term debt - related party $ 97,180 $ --
======== ========
</TABLE>
7
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY (continued)
Refinancing Associated with Transfer of General Felt Industries, Inc.
("General Felt") Common Stock
In connection with GFI Transaction (Note 8), Foamex L.P. borrowed $129.0
million under a new term loan agreement which was subsequently assumed by Foam
Funding LLC and borrowed $32.0 million under its credit facility ("Credit
Facility"). These borrowings were used to (i) repay approximately $125.1 million
of existing term loans under the Credit Facility and accrued interest thereon of
approximately $0.9 million, (ii) deposit $4.8 million into an escrow account in
order to defease the senior secured notes which were redeemed during June 1998,
(iii) repay $4.8 million of indebtedness owed to General Felt, (iv) fund the
$20.0 million to acquire the net assets of General Felt after the transfer of
the General Felt stock to Foam Funding LLC and (v) pay fees and expenses of
approximately $5.4 million. Also, Foamex L.P. amended the Credit Facility to
increase the availability under the revolving credit facility from $150.0
million to $200.0 million; however, $34.5 million of this increase is used for a
letter of credit to support the Foamex/GFI Note. See Note 8 for further
discussion on the GFI Transaction.
Foamex Carpet Revolving Credit
Upon consummation of the GFI Transaction, Foamex Carpet Cushion, Inc.
("Foamex Carpet") entered into a credit agreement with the institutions from
time to time party thereto, as issuing banks, and Citicorp USA, Inc. and The
Bank of Nova Scotia, as administrative agents, which provides for up to $20.0
million in revolving credit borrowings. [Add interest rate.]
Foamex/GFI Note
In connection with the transfer of General Felt's common stock, Foamex
L.P. entered into the $34.0 million Foamex/GFI Note to settle an existing
intercompany note payable to General Felt, which was retained by Foam Funding
LLC in connection with the asset purchase agreement for the GFI Transaction (see
Note 8). The Foamex/GFI Note matures in March 2000 with interest payable at
LIBOR plus an applicable margin. The principal amount is due upon maturity in
March 2000.
During the thirteen week and twenty-six week periods ended June 28, 1998,
the Company incurred interest expense of approximately $0.6 million and $0.8
million, respectively.
Note Payable to Foam Funding LLC
In connection with the asset purchase agreement for the GFI Transaction
(see Note 8), the Company entered into a $70.2 million promissory note with Foam
Funding LLC. The note bears interest at a base rate plus 2.0% or at LIBOR plus
3.0%. The note is payable upon demand commencing in March 2000, and if no demand
is made, matures in February 2004.
During the thirteen week and twenty-six week periods ended June 28, 1998,
the Company incurred interest expenses of approximately $1.6 million and $2.1
million, respectively.
Principal Payments
Principal payments the Company's long-term debt and long-term debt -
related party for the remainder of 1998 and for the next five years are as
follows: 1998 - $9.0 million; 1999 - $17.7 million; 2000 - $52.2 million; 2001 -
$17.3 million; 2002 - $17.7 million; 2003 - $159.5; and thereafter - $516.3
million.
8
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. EARLY EXTINGUISHMENT OF DEBT
In connection with the GFI Transaction (see Note 8), the Company incurred
an extraordinary loss on the early extinguishment of debt of approximately $1.9
million (net of income tax benefits of $1.2 million) for the twenty-six week
period ended June 28, 1998. The extraordinary loss is comprised of approximately
$2.9 million for the write-off of debt issuance costs and approximately $0.2
million of professional fees and other costs.
During 1997, 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 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.
6. ENVIRONMENTAL MATTERS
The Company is subject to extensive and changing federal, state, local
and foreign environmental laws and regulations, including those relating to the
use, handling, storage, discharge and disposal of hazardous substances and the
remediation of environmental contamination, and as a result, is from time to
time involved in administrative and judicial proceedings and inquiries relating
to environmental matters. During 1998, expenditures in connection with the
Company's compliance with federal, state, local and foreign environmental laws
and regulations did not have a material adverse effect on the Company's
operations, financial position, capital expenditures or competitive position. As
of June 28, 1998, the Company has accruals of approximately $4.7 million for
environmental matters. In addition, as of June 28, 1998, the Company has net
receivables of approximately $0.6 million relating to indemnification for
environmental liabilities. The Company believes that realization of the net
receivables established for indemnification is probable.
The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments") provide
for the establishment of federal emission standards for hazardous air pollutants
including methylene chloride, propylene oxide and TDI, materials used in the
manufacturing of foam. On December 27, 1996, the United States Environmental
Protection Agency (the "EPA") proposed regulations under the 1990 CAA Amendments
that will require manufacturers of slab stock polyurethane foam and foam
fabrication plants to reduce emissions of methylene chloride. Because these
regulations are subject to change prior to finalization, the Company cannot
accurately predict the actual cost of their implementation. The Company does not
believe implementation of the regulations will require it to make material
expenditures at facilities owned prior to December 23, 1997, due to the
Company's use of alternative technologies which do not utilize methylene
chloride and its ability to shift current production to the facilities, which
use these alternative technologies; however, material expenditures may be
required at the facilities formerly operated by Crain. The 1990 CAA Amendments
also may result in the imposition of additional standards regulating air
emissions from polyurethane foam manufacturers, but these standards have not yet
been proposed or promulgated.
In addition to general regulatory requirements, state laws have results
or will result in more stringent regulations regarding the use and emission of
methylene chloride. Several former Crain facilities have been required to meet
greater restrictions regarding emission limits and/or quantities used of this
chemical.
On April 10, 1997, the Occupational Health and Safety Administration
promulgated new standards governing employee exposure to methylene chloride,
which is used as a blowing agent in some of the Company's manufacturing
processes. The Company does not believe that it will be required to make any
material expenditures to comply with these new standards due to its use of
alternative technologies which do not use methylene chloride and its ability to
shift production to facilities which use these technologies; however, material
expenditures may be required at the facilities formerly operated by Crain.
9
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. ENVIRONMENTAL MATTERS (continued)
The Company has reported to appropriate state authorities that it has
found soil and groundwater contamination in excess of state standards at four
facilities and soil contamination in excess of state standards at three other
facilities. 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 June 28, 1998, the Company has
environmental accruals of approximately $4.1 million for the remaining potential
remediation costs for these facilities based on engineering estimates.
Federal regulations require that by the end of 1998 all underground
storage tanks ("USTs") be removed or upgraded in all states to meet applicable
standards. 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 $0.1 million for the estimated removal and remediation, if
any, associated with these USTs. However, the full extent of contamination and,
accordingly, the actual cost of such remediation cannot be predicted with any
degree of certainty at this time. 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 the permanent
in-place closure for certain USTs. However, there can be no assurance that such
USTs will not result in significant environmental liability in the future.
The Company has been designated as a Potentially Responsible Party
("PRP") by 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, including those described herein, management believes
that, based upon all currently available information, the resolution of such
environmental matters will not have a material adverse effect on 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 12, 1998, 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 these
actions allege substantial damages, but most of these actions allege unspecified
damages for personal injuries of various types. Three of these cases seek to
allege claims on behalf of all breast implant recipients or other allegedly
affected parties, but no class has been approved or certified by the court. In
addition, three cases have been filed alleging claims on behalf of approximately
700 residents of Australia, New Zealand, England, and Ireland. The Company
believes that the number of suits may increase. 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. 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. Foamex L.P. is
indemnified by Trace for any such liabilities relating to foam manufactured
prior to October 1990. Although Trace Holdings has paid Foamex L.P.'s litigation
expenses to date pursuant to such indemnification and the Company believes Trace
Holdings will be in a position to continued to pay such expenses, here can be no
absolute assurance that Trace Holdings will be able to provide such
indemnification in the future. While it is not feasible to predict or determine
the outcome of these actions, based on the Company's present
10
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. LITIGATION (continued)
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. If the Company's assessment of liability with respect to
these actions is incorrect, such actions could have a material adverse effect on
the Company.
In November 1997, a complaint was filed in the United States District
Court for the Southern District of Texas alleging that various defendants,
including Crain through the use of the CARDIO(R) process licensed from a third
party, infringed on a patent held by plaintiff. The Company is negotiating with
the licensor of the process for the assumption of the defense of the action by
the licensor; however, the action is in the preliminary stages and there can be
no assurance as to the ultimate outcome of the action.
On or about March 17, 1998, five purported class action lawsuits were
filed in the Delaware Chancery Court, New Castle County, against the Company,
directors of the Company, Trace Holdings, and individual officers and directors
of Trace Holdings: Brickell Partners v. Marshall S. Cogan, et al., No. 16260NC;
Mimona Capital v. Salvatore J. Bonanno, et al., No. 16259NC; Daniel Cohen v.
Foamex International Inc., No. 16263; Eileen Karisinki v. Foamex International
Inc., et al., No. 16261NC and John E. Funky Trust v. Salvatore J. Bonanno, et
al., No. 16267. A sixth purported class action lawsuit, Barnett Stepak v. Foamex
International Inc., et al., No. 16277, was filed on or about March 23, 1998
against the same defendants. The complaints in the six actions allege, among
other things, that the defendants have violated fiduciary and other common law
duties purportedly owed to the Company's stockholders in connection with Trace
Holdings, proposal to acquire all of the outstanding shares of the Company's
common stock. The complaints sought, among other things, class certification, a
declaration that the defendants have breached their fiduciary duties to the
class, preliminary and permanent injunctions barring implementation of the
proposed transaction, rescission of the transaction if consummated, unspecified
compensatory damages, and costs and attorneys' fees.
The parties to the lawsuits entered into a Memorandum of Understanding,
dated June 25, 1998 (the "Memorandum of Understanding"), to settle the
litigation, subject to, inter alia, execution of a definitive Stipulation of
Settlement and approval by the Delaware Chancery Court following notice to the
public stockholders and a hearing. The Memorandum of Understanding provides that
as a result of, among other things, the stockholder litigation and negotiations
among counsel for the parties to the Memorandum of Understanding, a special
meeting of stockholders will be held to vote upon and adopt the Merger Agreement
which provides, among other things, for the public shares of the Company's
common stock to be converted into the right to receive $18.75 in cash, without
interest. The Memorandum of Understanding also acknowledged that the terms of
the Merger have been significantly improved over the terms originally proposed
by Trace Holdings on March 16, 1998, and the Company and the individual director
and officer defendants acknowledged that the filing and prosecution of the
stockholder litigation was a factor they took into account in giving fair
consideration to and entering into the Merger, and Trace Holdings acknowledged
that it took into account the desirability of satisfactorily addressing the
claims asserted in the stockholder litigation in agreeing to the increased
consideration to be paid to the public stockholders pursuant to the Merger
Agreement.
The Memorandum of Understanding also provided for certification of a
class, for settlement purposes only, consisting of the public stockholders, the
dismissal of the stockholder litigation with prejudice and the release by
plaintiffs and all members of the class of all claims and causes of action that
were or could have been asserted against Trace Holdings, the Company and the
individual defendants in the stockholder litigation or that arise out of the
matters alleged by plaintiffs. In connection with the proposed settlement, the
plaintiffs intend to apply of an award of attorney's fees and litigation
expenses in an amount not to exceed $925,000, and the defendants have agreed not
to oppose this application. Additionally, the Company has agreed to pay the cost
of sending notice of the settlement, if any, to its public shareholders.
11
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. LITIGATION (continued)
The defendants have denied, and continued to deny, that they have
committed or have threatened to commit any violation of law or breaches of duty
to plaintiffs or the purported class. The defendants have agreed to the proposed
settlement because, among other reasons, such settlement would eliminate the
burden and expenses of further litigation and would facilitate the consummation
of a transaction that they believe to be in the best interests of the Company
and the public stockholders.
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 the
Company 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 the Company's assessment of liability with
respect to these actions is incorrect, such actions could have a material
adverse effect on the Company's consolidated financial position.
8. GFI TRANSACTION
On February 27, 1998, the Company and certain of its affiliates completed
a series of transactions designed to simplify the Company's structure and to
provide future operational flexibility. Prior to the consummation of these
transactions, (i) Foamex L.P. and Foamex L.P.'s wholly-owned subsidiary, General
Felt, entered into a supply agreement and an administrative services agreement,
(ii) Foamex L.P. repaid its outstanding indebtedness to General Felt with $4.8
million in cash and the $34.0 million Foamex/GFI Note supported by a $34.5
million letter of credit under the Credit Facility, (iii) Foamex L.P.
contributed to General Felt $9.4 million of outstanding net intercompany
payables and intercompany loans with General Felt and (iv) Foamex L.P. defeased
the $4.5 million outstanding principal amount of its 9 1/2% senior secured notes
due 2000. The initial transaction resulted in the transfer from Foamex L.P. to
Foam Funding LLC of all of the outstanding common stock of General Felt, in
exchange for (i) the assumption by Foam Funding LLC of $129.0 million of Foamex
L.P.'s indebtedness and (ii) the transfer by Foam Funding LLC to Foamex L.P. of
a 1% non-managing general partnership interest in Foamex L.P. As a result,
General Felt ceased being a subsidiary of Foamex L.P. and was relieved from all
obligations under Foamex L.P.'s 9 7/8% senior subordinated notes due 2007 and 13
1/2% senior subordinated notes due 2005. Upon consummation of the initial
transaction, Foamex Carpet, a newly formed wholly-owned subsidiary of the
Company, the Company, Foam Funding LLC, and General Felt entered into an asset
purchase agreement dated February 27, 1998, in which General Felt sold
substantially all of its assets (other than the Foamex/GFI Note and its
operating facility in Pico Rivera, California) to Foamex Carpet in exchange for
(i) $20.0 million in cash and (ii) a promissory note issued by Foamex Carpet to
Foam Funding LLC in the amount of $70.2 million. The $20.0 million cash payment
was funded with a distribution by Foamex L.P. Upon consummation of the
transaction contemplated by the Asset Purchase Agreement, Foamex Carpet entered
into a Credit Agreement with the institutions from time to time party thereto,
as issuing banks, and Citicorp USA, Inc. and The Bank of Nova Scotia, as
administrative agents, which provides for up to $20.0 million in revolving
credit borrowings. Foamex Carpet will conduct the carpet cushion business
previously conducted by General Felt. Also, Foam Funding LLC has retained
ownership of one of General Felt's operating facilities which is being leased to
Foamex Carpet and the $34.0 million Foamex/GFI Note. These transactions have
been reflected as a reorganization of companies under common control.
Accordingly, the net effect resulted to a charge to stockholders' equity
(deficit) of approximately $0.5 million.
12
<PAGE>
FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. EARNINGS (LOSS) PER SHARE
The following table shows the amounts used in computing earnings per
share and the effect on income and the weighted average number of shares of
dilutive potential common stock.
<TABLE>
<CAPTION>
13 Week Period Ended 26 Week Period Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
(thousands, except per share amounts)
<S> <C> <C> <C> <C>
Basic earnings (loss) per share:
Net income (loss) $ 10,448 $(32,719) $ 14,782 $(24,993)
======== ======== ======== ========
Average common stock outstanding 25,012 25,298 24,977 25,304
======== ======== ======== ========
Basic earnings (loss) per share $ 0.42 $ (1.29) $ 0.59 $ (0.99)
======== ======== ======== ========
Diluted earnings (loss) per share:
Net income (loss) available for common stock
and dilutive securities $ 10,448 $(32,719) $ 14,782 $(24,993)
======== ======== ======== ========
Average common stock outstanding 25,012 25,298 24,977 25,304
Additional common shares resulting
from stock options and warrants 1,112 744 1,113 782
-------- -------- -------- --------
Average common stock and dilutive
stock outstanding 26,124 26,042 26,090 26,086
======== ======== ======== ========
Diluted earnings (loss) per share $ 0.40 $ (1.26) $ 0.57 $ (0.96)
======== ======== ======== ========
</TABLE>
10. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 ("SFAS No. 130), "Reporting
Comprehensive Income," which requires disclosure of comprehensive income, as
defined, including comprehensive disclosure in interim financial statements.
Comprehensive income for the thirteen-week and twenty-six week periods ended
June 28, 1998 and June 29, 1997 is comprised of the following:
<TABLE>
<CAPTION>
13 Week Period Ended 26 Week Period Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
(thousands)
<S> <C> <C> <C> <C>
Net income (loss) $ 10,448 $(32,719) $ 14,782 $(24,993)
Foreign currency translation adjustments 3 16 230 (168)
-------- -------- -------- --------
Total comprehensive income $ 10,451 $(32,703) $ 15,012 $(25,163)
======== ======== ======== ========
</TABLE>
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company operates primarily in the flexible polyurethane and advanced
polymer foam products industry. The following discussion should be read in
conjunction with the condensed consolidated financial statements and related
notes thereto of 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 4 and 5 of the Company's 1997 Annual Report on Form 10-K/A.
The Company's products are utilized primarily in four businesses: (i)
Foam Products, consisting of cushioning foams, including bedding, furniture,
packaging, health care and foam-based consumer products such as futons, pillows,
mattress pads and juvenile furniture, (ii) Carpet Cushion Products, consisting
of carpet padding and related products, (iii) Automotive Products, consisting of
automotive trim, laminates and other accessories, and (iv) Technical Products,
consisting of reticulated and other specialty foams used for reservoiring,
filtration, gasketing and sealing.
On June 25, 1998, the Company, Trace Holdings, and Trace Merger Sub Corp.
entered into an Agreement and Plan of Merger (the "Merger Agreement"), providing
for the merger (the "Merger") of Trace Merger Sub Corp. with and into the
Company. Upon consummation of the Merger, the holders of the outstanding shares
of the Company's common sotck, other than Trace Holdings and its subsidiaries,
will received, in exchange for their shares, $18.75 per share in cash.
Consummation of the Merger is subject to a number of conditions, many of which
are outside the control of the Company, including: (i) the approval and adoption
of the Merger Agreement by the affirmative vote of the holders of a majority of
the outstanding shares of common stock of the Company; (ii) the absence of any
injunction preventing consummation of the Merger, (iii) th absence of a material
adverse change in the business of the Company, and (iv) the receipt of requisite
financing.
On April 27, 1998, the Company's facility in Orlando, Florida was damaged
by a fire. The Company is in the process of repairing the damages to the
facility and supplying local customers from other facilities. The Company
believes that it has adequate insurance coverage for business interruption and
damages to the facility associated with the fire. After considering the
Company's insurance coverage, the Company does not believe that the fire will
have a significant impact on the Company's financial position or operations;
however, there can be no assurance that the fire will not have a significant
impact on the Company's financial position or operations.
On February 27, 1998, the Company and certain of its affiliates completed
a series of transactions designed to simplify the Company's structure and to
provide future operational flexibility. Prior to the consummation of these
transactions, the Company defeased the $4.5 million outstanding principal amount
of its 9 1/2% senior secured notes due 2000. Foamex L.P. settled a $38.8 million
intercompany note payable to General Felt with $4.8 million in cash and the
$34.0 million Foamex/GFI Note supported by a $34.5 million letter of credit
under the Foamex L.P. Credit Facility. The initial transaction resulted in the
transfer from Foamex L.P. to Foam Funding LLC of all of the outstanding common
stock of General Felt, in exchange for (i) the assumption by Foam Funding LLC of
$129.0 million of Foamex L.P.'s indebtedness and (ii) the transfer by Foam
Funding LLC to Foamex L.P. of a 1% non-managing general partnership interest in
Foamex L.P. As a result, General Felt ceased being a subsidiary of Foamex L.P.
and was relieved from all obligations under Foamex L.P.'s 9 7/8% senior
subordinated notes due 2007 and 13 1/2% senior subordinated notes due 2005. Upon
consummation of the initial transaction, Foamex Carpet, a newly formed
wholly-owned subsidiary of the Company, the Company, Foam Funding LLC, and
General Felt entered into an asset purchase agreement dated February 27, 1998,
in which General Felt sold substantially all of its assets (other than the
Foamex/GFI Note and its operating facility in Pico Rivera, California) to Foamex
Carpet in exchange for (i) $20.0 million in cash and (ii) a promissory note
issued by Foamex Carpet to Foam Funding LLC in the amount of $70.2 million. The
$20.0 million cash payment was funded by a distribution by Foamex L.P. Upon
consummation of the transaction contemplated by the asset purchase agreement,
Foamex Carpet entered into a credit agreement with the institutions from time to
time party thereto, as issuing banks, and Citicorp USA, Inc. and The Bank of
Nova Scotia, as administrative agents, which provides for up to $20.0 million in
revolving credit borrowings. Foamex Carpet will conduct the carpet cushion
business previously conducted by General Felt. Also, Foam Funding LLC has
retained ownership of one of General Felt's operating facilities which is being
leased to Foamex Carpet and the $34.0 million Foamex/GFI Note. These
transactions have been reflected as a reorganization of companies under common
control.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
On December 23, 1997, the Company acquired Crain pursuant to a merger
agreement with Crain Holdings Corp. for a purchase price of approximately $213.7
million, including the assumption of debt with a face value of approximately
$98.6 million (and an estimated fair value of approximately $112.3 million). In
addition, fees and expenses associated with the Crain Acquisition are
approximately $13.2 million.
On October 6, 1997, the Company sold substantially all of the net assets
of its needlepunch carpeting, tufted carpeting and artificial grass products
business located at its facilities in Dalton, Georgia ("Dalton"). Dalton's
revenues were $13.6 million and $24.3 million for the thirteen week and
twenty-six week periods ended June 29, 1997.
Operating results for 1998 are expected to be influenced by various
internal and external factors. These factors include, among other things, (i)
consolidation of the Crain Acquisition, (ii) continued implementation of the
continuous improvement program to improve the Company's profitability, (iii)
variability of the Company's raw material costs by the Company's chemical
suppliers and (iv) fluctuations in interest rates.
13 Week Period Ended June 28, 1998 Compared to 13 Week Period Ended June 29,
1997
Results of Operations
Net sales for the second quarter of 1998 were $298.5 million as compared
to $239.9 million in the second quarter of 1997, an increase of $58.6 million or
24.4%. Foam Products net sales for the second quarter of 1998 increased to
$143.7 million from $86.0 million in the second quarter of 1997 primarily due to
net sales from the Crain operations and increased volume to our national bedding
customers and fabricators. Carpet Cushion Products net sales for the second
quarter of 1998 decreased 3.4% to $72.4 million from $75.0 million in the second
quarter of 1997 primarily due to the sale of Dalton in October 1997 which
contributed net sales of $13.6 million in 1997 and a reduction in rebond selling
prices as compared to 1997. Automotive Products net sales for the second quarter
of 1998 increased 4.9% to $62.2 million from $59.3 million in the second quarter
of 1997 primarily due to increased volume. Technical Products net sales for the
second quarter of 1998 increased 2.6% to $20.2 million from $19.6 million in the
second quarter of 1997 primarily due to increased net sales volume for felted,
gasketing, and sealing products.
Gross profit as a percentage of net sales increased to 19.1% for the
second quarter of 1998 from 18.7% in the second quarter of 1997 primarily due to
increased purchasing leverage offset by a shift in product mix for 1998 as a
result of the Crain Acquisition. Crain's principal product lines, bedding,
furniture and carpet cushion, have inherently lower gross profit margins than
the Company's historical gross profit margins. Also, gross profit percentage
increased in the second quarter of 1998 due to the Company's implementation of
restructuring/consolidation programs associated with the Crain Acquisition.
Income from operations increased to $36.1 million for the second quarter
of 1998 from $28.7 million in the second quarter of 1997 primarily due to the
Crain Acquisition.
Income before extraordinary loss increased to $10.5 million for the
second quarter of 1998 as compared to $9.5 million for the second quarter of
1997. The increase is primarily due to the increase in income from operations
discussed above offset by an increase of approximately $4.1 million in interest
and debt issuance expense and $1.0 million of costs associated with the transfer
of General Felt which is included in other income (expense), net. The increase
in interest and debt issuance expense is primarily due to the debt incurred in
connection with the Crain Acquisition offset by the favorable effects of the
June 1997 refinancing plan.
The extraordinary loss on early extinguishment of debt of approximately
$42.2 million (net of income taxes of $25.9 million) during the second quarter
of 1997 primarily relates to debt extinguished in connection with the June 1997
refinancing plan.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
26 Week Period Ended June 28, 1998 Compared to 26 Week Period Ended June 29,
1997
Results of Operations
Net sales for the twenty-six week period ended June 28, 1998 were $612.3
million as compared to $469.0 million for the twenty-six week period ended June
29, 1997, an increase of $143.3 million or 30.6%. Foam Products net sales for
the twenty-six week period ended June 28, 1998 increased to $301.6 million from
$170.0 million for the twenty-six week period ended June 29, 1997 primarily due
to the net sales from the Crain operations. Carpet Cushion Products net sales
for the twenty-six week period ended June 28, 1998 increased 0.6% to $143.7
million from $142.9 million for the twenty-six week period ended June 28, 1997
primarily due to net sales from the Crain operations offset by the sale of
Dalton in October 1997 which contributed net sales of $24.3 million in 1997, to
reduction of rebond selling prices as compared to 1997 and product mix.
Automotive Products net sales for the twenty-six week period ended June 28, 1998
increased 5.6% to $125.7 million from $119.0 million for the twenty-six week
period ended June 29, 1997 primarily due to increased volume. Technical Products
net sales for the twenty-six week period ended June 28, 1998 increased 11.1% to
$41.3 million from $37.1 million for the twenty-six week period ended June 29,
1997 primarily due to increased net sales volume for felted, gasketing, and
sealing products.
Gross profit as a percentage of net sales decreased to 17.7% for the
twenty-six week period ended June 28, 1998 from 18.7% in the twenty-six week
period ended June 29, 1997 primarily due to the shift in product mix for 1998 as
a result of the Crain Acquisition. Crain's principal product lines, bedding,
furniture and carpet cushion, have inherently lower gross profit margins than
the Company's historical gross profit margins. Also, the gross profit was lower
since the Company carried the full individual operating costs of both
organizations throughout 1998.
Income from operations increased to $64.9 million for the twenty-six week
period ended June 28, 1998 from $55.5 million in the twenty-six week period
ended June 29, 1997 primarily due to the Crain Acquisition.
Income before extraordinary loss decreased to $16.7 million for the
twenty-six week period ended June 28, 1998 as compared to $17.6 million for the
twenty-six week period ended June 29, 1997. The decrease is primarily due to an
increase of approximately $7.9 million in interest and debt issuance expense and
$2.0 million of costs associated with the transfer of General Felt which is
included in other income (expense), net. The increase in interest and debt
issuance expense is primarily due to the debt incurred in connection with the
Crain Acquisition offset by the favorable effects of the June 1997 refinancing
plan.
The extraordinary loss on early extinguishment of debt of approximately
$42.6 million (net of income taxes of $26.1 million) during the twenty-six week
period ended June 29, 1997 primarily relates to the write-off of debt issuance
costs with debt extinguished in connection with the June 1997 refinancing plan.
Liquidity and Capital Resources
Liquidity and Capital Resources
The Company is a holding company whose operations are conducted through
two wholly-owned subsidiaries, Foamex L.P. and Foamex Carpet. The liquidity
requirements of the Company consist primarily of the operating cash requirements
of its two principal subsidiaries.
Foamex L.P.'s operating cash requirements consist principally of working
capital requirements, scheduled payments of principal and interest on
outstanding indebtedness and capital expenditures. The Company believes that
cash flow from Foamex L.P.'s operating activities, cash on hand and periodic
borrowings under the Credit Facility, if necessary, will be adequate to meet
Foamex L.P.'s liquidity requirements. The ability to meet such liquidity
requirements could be impaired if Foamex L.P. were to fail to comply with any
covenants contained in the Credit Facility and such noncompliance was not cured
by Foamex L.P. or waived by the lenders. Foamex L.P. was in compliance with the
covenants in the Credit Facility as of June 28, 1998 and the Company expects
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Foamex L.P. 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 financing agreements; therefore, neither the Company nor Foamex
Carpet is expected to have access to the cash flow generated by Foamex L.P. for
the foreseeable future.
Foamex Carpet'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 Foamex Carpet's operating activities, cash on hand and periodic
borrowings under Foamex Carpet's credit facility (the "Foamex Carpet Credit
Facility"), if necessary, will be adequate to meet Foamex Carpet's liquidity
requirements. The ability to meet such liquidity requirements could be impaired
if Foamex Carpet were to fail to comply with any covenants contained in the
Foamex Carpet Credit Facility and such noncompliance was not cured by Foamex
Carpet or waived by the lenders. Foamex Carpet was in compliance with the
covenants in the Foamex Carpet Credit Facility as of June 28, 1998 and the
Company expects Foamex Carpet to be in compliance with such covenants for the
foreseeable future. The ability of Foamex Carpet to make distributions to the
Company is restricted by the terms of its financing agreements; therefore,
neither the Company nor Foamex L.P. is expected to have access to the cash flow
generated by Foamex Carpet for the foreseeable future.
Cash and cash equivalents increased $6.2 million during 1998 to $18.2
million at June 28, 1998 from $12.0 million at December 28, 1997 primarily due
to increased borrowings offset by cash used for capital expenditures, the Crain
Acquisition and an increase of cash used by the operating assets and
liabilities. Working capital increased $65.3 million during 1998 to $203.8
million at June 28, 1998 from $138.5 million at December 28, 1997 primarily due
to the increase in operating net assets (as discussed below) and a net increase
in other current assets and liabilities. The net increase in other current
assets and liabilities is primarily associated with the timing of payments for
interest and prepaid expenses and the receipt of cash for other receivables. Net
operating assets and liabilities (comprised of accounts receivable, inventories
and accounts payable) increased $38.7 million during 1998 to $203.0 million at
June 28, 1998 from $164.3 million at December 28, 1997 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 1998 as compared to December 1997. The decrease in accounts
payable is primarily due to the timing of payments.
As of June 28, 1998, there were $137.4 million of revolving credit
borrowings under the Credit Facility and approximately $49.7 million associated
with letters of credit outstanding which are supported by the Credit Facility
with unused availability of approximately $13.0 million. As of June 28, 1998,
Foamex Carpet Credit Facility had unused availability of approximately $19.1
million. Borrowings by Foamex Canada, Inc. as of June 28, 1998 were $4.3 million
under Foamex Canada Inc.'s revolving credit agreement with unused availability
of approximately $1.0 million.
Cash flow used for operating activities was $21.5 million for the
twenty-six weeks ended June 28, 1998 as compared to cash used of $46.2 million
for the twenty-six weeks ended June 29, 1997. This decrease is primarily due to
$42.6 million of cash used during 1997 for premiums and repayment penalties
associated with the June 1997 refinancing plan offset by (i) cash used for the
increase in accounts receivable and other receivables associated with the timing
of receipts and (ii) a reduction in accounts payable associated with the timing
of payments.
Cash flow used for investing activities increased to $20.8 million for
the twenty-six week period ended June 28, 1998 from cash used of $4.3 million
for the twenty-six week period ended June 29, 1997 primarily due to (i) $4.4
million paid in connection with the Crain Acquisition offset by the use of $12.1
million of restricted cash in 1997 to repaid long-term debt.
Cash flow provided by financing activities increased to $48.5 million for
the twenty-six week period ended June 28, 1998 as compared to cash provided of
$35.6 million for the twenty-six week period ended June 29, 1997. This is
primarily associated with borrowings under the revolving loans to fund the
operations of Crain during the twenty-six week period ended June 28, 1998 offset
by the $28.6 million used to fund the GFI Transaction.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Interest Rate Swaps
The Company enters into interest rate swaps to lower funding costs and/or
to manage interest costs and exposure to changing interest rates. The Company
does not hold or issue financial instruments for trading purposes.
On January 8, 1998, the Company entered into an amended interest rate
swap agreement, which provides for an interest rate swap agreement with a
notional amount of $150.0 million through June 2002. Under this agreement, the
Company is obligated to make fixed payments of 5.78% per annum through December
1998 and variable payments based on LIBOR at the beginning of each six month
period for the remainder of the agreement, in exchange for fixed payments by the
swap partner at 6.44% per annum for the life of the agreement, payable
semiannually in arrears. The newly amended interest rate swap agreement can be
terminated by the swap partner at the end of each six month period commencing
December 1999.
The Company is exposed to credit loss in the event of a nonperformance by
the swap partner; however, the occurrence of this event is not anticipated. The
effect of the interest rate swap agreement was a favorable adjustment to
interest and debt issuance expense of $0.2 million and $0.8 million for the
thirteen week periods ended June 28, 1998 and June 29, 1997, respectively and
$0.4 million and $1.7 million for the twenty-six week periods ended June 28,
1998 and June 29, 1997, respectively.
Environmental Matters
The Company is subject to extensive and changing environmental laws and
regulations. Expenditures to date in connection with the Company's compliance
with such laws and regulations did not have a material adverse effect on
operations, financial position, capital expenditures or competitive position.
The amount of liabilities recorded by the Company in connection with
environmental matters as of June 28, 1998 was $4.7 million. In addition, as of
June 28, 1998, the Company has net receivables of approximately $0.6 million for
indemnification of environmental liabilities from former owners, net of
approximately $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 consolidated financial statements,
the Company 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.
Inflation and Other Matters
There was no significant impact on the Company's operations as a result
of inflation during 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.
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.
Year 2000 Compliance
The Company has and will continue to make certain investments in its
software systems and applications to ensure the Company is Year 2000 compliant.
The Company plans to continue to make modifications to the identified software
during 1998 and test the changes during 1998. The financial impact to the
Company has not been and is not anticipated to be material to its financial
position or results of operations in any given year.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
New Accounting Standards
Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"),
"Reporting Comprehensive Income," was issued by the Financial Accounting
Standards Board in June 1997. This statement requires all items that must be
recognized under accounting standards as components of comprehensive income to
be reported in a financial statement that is displayed with the same prominence
as other financial statements. The Company adopted SFAS No.
130 during the first quarter of 1998 (see Note 10).
Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
"Disclosures about Segments of an Enterprise and Restated Information," was
issued by the Financial Accounting Standards Board in June 1997. This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected financial
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The Company will
adopt SFAS No. 131 for the year ended 1998 reporting. The Company is evaluating
the impact, if any, the standard will have on its present segment reporting.
In February 1998 the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pension and Other Postretirement Benefits"
("SFAS No. 132"), which is effective for fiscal years beginning after December
15, 1997. SFAS No. 132 revised the required disclosures about pension and other
postretirement benefit plans. The Company plans to adopt SFAS No. 132 in the
fourth quarter of 1998.
In June 1998 the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No.
133 establishes new procedures for accounting for derivatives and hedging
activities and supercedes and amends a number of existing standards. The
statement is effective for fiscal years beginning after June 15, 1999.
19
<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/A for the
fiscal year ended December 28, 1997 and in the Company's Quarterly
Report on Form 10-Q/A for the fiscal quarter ended March 29, 1998.
The information from Notes 6 and 7 of the condensed consolidated
financial statements of the Company as of June 28, 1998 (unaudited)
is incorporated herein by reference.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1(x) - Transfer Agreement, dated as of February 27, 1998, by and between
Foam Funding LLC and Foamex L.P.
2.2(x) - Asset Purchase Agreement, dated as of February 27, 1998, by and
among Foamex Carpet Cushion, Inc. ("Foamex Carpet"), Foamex
International Inc. ("Foamex International"), Foam Funding LLC and
General Felt Industries, Inc. ("General Felt").
2.3(z) - Agreement and Plan of Merger, dated as of June 25, 1998, by and
among Foamex International, Trace International Holdings, Inc. and
Trace Merger Sub Corp.
3.1(a) - Certificate of Limited Partnership of Foamex L.P.
3.2.1(a) - Fourth Amended and Restated Agreement of Limited Partnership of
Foamex L.P., dated as of December 14, 1993, by and among FMXI, Inc.
("FMXI") and Trace Foam Company, Inc. ("Trace Foam"), as general
partners, and Foamex International, as a limited partner (the
"Partnership Agreement").
3.2.2(b) - First Amendment to the Partnership Agreement, dated June 28, 1994.
3.2.3(c) - Second Amendment to the Partnership Agreement, dated June 12,
1997.
3.2.4(v) - Third Amendment to the Partnership Agreement, dated December 23,
1997.
3.2.5(x) - Fourth Amendment to the Partnership Agreement, dated February 27,
1998.
3.3(y) - Certificate of Incorporation of FMXI.
3.4(y) - By-laws of FMXI.
3.5(k) - Certificate of Incorporation of Foamex Capital Corporation
("FCC").
3.6(k) - By-laws of FCC.
3.7(a) - Certificate of Incorporation of Foamex International.
3.8(a) - By-laws of Foamex International.
20
<PAGE>
4.1.1(d) - Indenture, dated as of June 12, 1997, by and among Foamex L.P.,
FCC, the Subsidiary Guarantors and The Bank of New York, as trustee,
relating to $150,000,000 principal amount of 9 7/8% Senior
Subordinated Notes due 2007 (the "9 7/8% Notes"), including the form
of Senior Subordinated Note and Subsidiary Guarantee.
4.1.2(v) - First Supplemental Indenture, dated as of December 23, 1997,
between Foamex LLC ("FLLC") and The Bank of New York, as trustee,
relating to the 9 7/8% Notes.
4.1.3(x) - Second Supplemental Indenture, dated as of February 27, 1998,
among Foamex L.P. and FCC, as joint and several obligors, General
Felt, Foamex Fibers, Inc. (`Foamex Fibers"), and FLLC, as
withdrawing guarantors, and The Bank of New York, as trustee,
relating to the 9 7/8% Notes.
4.2.1(v) - Indenture, dated as of December 23, 1997, by and among Foamex
L.P., FCC, the Subsidiary Guarantors, Crain Holdings Corp., as
Intermediate obligator, and The Bank of New York, as trustee,
relating to $98,000,000 principal amount of 13 1/2% Senior
Subordinated Notes due 2005 (the "13 1/2% Notes"), including the
form of Senior Subordinated Note and Subsidiary Guarantee.
4.2.2(x) - First Supplemental Indenture, dated as of February 27, 1998, among
Foamex L.P. and FCC, as joint and several obligors, General Felt,
Foamex Fibers and FLLC, as withdrawing guarantors, Crain Industries,
Inc., as withdrawing intermediate obligor, and The Bank of New York,
as trustee, relating to the 13 1/2% Notes.
4.3(x) - Discharge of Indenture, dated as of February 27, 1998, by and
among Foamex L.P., General Felt, Foamex International and State
Street Bank and Trust Company, as trustee, relating to the 9 1/2%
Senior Secured Notes due 2000.
4.4.1(x) - Credit Agreement, dated as of June 12, 1997, as amended and
restated as of February 27, 1998, by and among Foamex L.P., and
FMXI, the institutions from time to time party thereto as lenders,
the institutions from time to time party thereto as issuing banks,
and Citicorp USA, Inc. and The Bank of Nova Scotia, as
Administrative Agents.
4.4.2(x) - Second Amended and Restated Foamex International Guaranty, dated
as of February 27, 1998, made by Foamex International in favor of
Citicorp USA, Inc., as Collateral Agent.
4.4.3(x) - Amended and Restated Partnership Guaranty, dated as of February
27, 1998, made by FMXI in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.4(p) - Foamex Guaranty, dated as of June 12, 1997, made by Foamex L.P. in
favor of Citicorp USA, Inc., as Collateral Agent.
4.4.5(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Latin America, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.6(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.7(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by FCC in
favor of Citicorp USA, Inc., as Collateral Agent.
4.4.8(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.9(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Asia, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.10(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.11(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Latin America, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.12(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Asia, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.13(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.14(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.15(p) - Foamex Security Agreement, dated as of June 12, 1997, made by
Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
21
<PAGE>
4.4.16(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Latin America, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.17(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.18(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.19(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Asia, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.20(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.21(r) - Foamex Pledge Agreement, dated as of June 12, 1997, made by Foamex
L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.22(w) - First Amendment to Foamex Pledge Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.23(w) - First Amendment to Foamex Security Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.24(w) - First Amendment to Foamex Patent Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.25(w) - First Amendment to Trademark Security Agreement, dated as of
December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.26(w) - Acknowledgment of Guaranty by each of the guarantors to a Guaranty
dated June 12, 1997 in favor of Citicorp USA, Inc.
4.4.27(w) - First Amendment to Pledge Agreement, dated as of December 23,
1997, by pledgors in favor of Citicorp USA, Inc.
4.4.28(w) - Crain Industries Guaranty, dated as of December 23, 1997, made by
Crain in favor of Citicorp USA, Inc.
4.4.29(x) - Partnership Pledge Agreement, dated as of February 27, 1998, made
by Foamex International and FMXI in favor of Citicorp USA, Inc., as
Collateral Agent.
4.5(u) - Commitment letter, dated July 17, 1997, from The Bank of Nova
Scotia to Foamex Canada Inc.
4.6(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").
4.7(a) - Marely Loan Commitment Agreement, dated as of December 14, 1993,
by and between Foamex L.P. and Marely s.a. ("Marely").
4.8(a) - DLJ Loan Commitment Agreement, dated as of December 14, 1993, by
and between Foamex L.P. and DLJ Funding, Inc. ("DLJ Funding").
4.9.1(p) - Promissory Note, dated June 12, 1997, in the aggregate principal
amount of $5,000,000, executed by Trace Holdings to Foamex L.P.
4.9.2(p) - Promissory Note, dated June 12, 1997, in the aggregate principal
amount of $4,794,828, executed by Trace Holdings to Foamex L.P.
4.10.1(x) - Credit Agreement, dated as of February 27, 1998, by and among
Foamex Carpet, the institutions from time to time party thereto as
lenders, the institutions from time to time party thereto as issuing
banks and Citicorp USA, Inc. and The Bank of Nova Scotia, as
administrative agents.
4.10.2(x) - Foamex International Guaranty, dated as of February 27, 1998, made
by Foamex International in favor of Citicorp USA, Inc., as
Collateral Agent.
4.10.3(x) - Foamex International Pledge Agreement, dated as of February 27,
1998, made by Foamex International in favor of Citicorp USA, Inc.,
as Collateral Agent.
4.10.4(x) - New GFI Security Agreement, dated as of February 27, 1998, made by
Foamex Carpet in favor of Citicorp USA, Inc., as Collateral Agent.
4.10.5(x) - New GFI Intercreditor Agreement, dated as of February 27, 1998, by
and among Foamex Carpet, The Bank of Nova Scotia, as Administrative
Agent, and Citicorp USA, Inc., as Administrative Agent and
Collateral Agent.
22
<PAGE>
4.10.6(x) - FII Intercreditor Agreement, dated as of February 27, 1998, by and
between Foamex International and Citicorp USA, Inc., as Collateral
Agent.
4.11.1(x) - Promissory Note of Foamex L.P. in favor of Foam Funding LLC in the
principal amount of $34 million, dated February 27, 1998.
4.12.1(x) - Promissory Note of Foamex Carpet in favor of Foam Funding LLC in
the principal amount of $70.2 million, dated February 27, 1998.
10.1.1(p) - Amendment to Master Agreement, dated as of June 5, 1997, between
Citibank, N.A. and Foamex L.P.
10.1.2(p) - Amended Confirmation, dated as of June 13, 1997, between Citibank,
N.A. and Foamex L.P.
10.1.3(w) - Amended Confirmation, dated as of February 2, 1998, between
Citibank, N.A. and Foamex L.P.
10.2(h) - Reimbursement Agreement, dated as of March 23, 1993, between Trace
Holdings and General Felt.
10.3(h) - Shareholder Agreement, dated December 31, 1992, among Recticel,
s.a. ("Recticel"), Recticel Holding Noord B.V., Foamex L.P., Beamech
Group Limited, LME-Beamech, Inc., James Brian Blackwell, and Prefoam
AG relating to foam technology sharing arrangement.
10.4.1(k) - Asset Transfer Agreement, dated as of October 2, 1990, between
Trace Holdings and Foamex 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
Recticel Foam Corporation ("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, FMXI and Trace Foam.
10.7.3(w) - Second Amendment to Amended and Restated Tax Sharing Agreement of
Foamex L.P., dated as of December 23, 1997, by and among Foamex
L.P., Foamex International, FMXI, and Trace Foam.
10.7.4(y) - Third Amendment to Amended and Restated Tax Sharing Agreement of
Foamex L.P., dated as of February 27, 1998, by and between Foamex
L.P., Foamex International and FMXI.
10.8.1(m) - Tax Distribution Advance Agreement, dated as of December 11, 1996,
by and between Foamex L.P. and Foamex-JPS Automotive.
10.8.2(d) - Amendment No. 1 to Tax Distribution Advance Agreement, dated as of
June 12, 1997, by and between Foamex L.P. and Foamex International.
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.
23
<PAGE>
10.10.3(k) - Equity Growth Participation Program.
10.10.4(o) - The Foamex L.P. Salaried Pension Plan (formerly the General Felt
Industries, Inc. Retirement Plan for Salaried Employees), effective
as of January 1, 1995.
10.10.5(u) - The Foamex L.P. Hourly Pension Plan (formerly "The Foamex Products
Inc. Hourly Employee Retirement Plan), as amended December 31, 1995.
10.10.6(u) - Foamex L.P. 401(k) Savings Plan effective October 1, 1997.
10.10.7(a) - Foamex L.P.'s 1993 Stock Option Plan.
10.10.8(a) - Foamex L.P.'s Non-Employee Director Compensation Plan.
10.11.1(o) - Employment Agreement, dated as of February 1, 1994, by and between
Foamex L.P. and William H. Bundy.
10.12.1(a) - Warrant Exchange Agreement, dated as of December 14, 1993, by and
between Foamex L.P. and Marely.
10.12.2(a) - Warrant Exchange Agreement, dated as of December 14, 1993, by and
between Foamex L.P. and DLJ Funding.
10.13(t) - Warrant Agreement, dated as of June 28, 1994, by and between
Foamex International and Shawmut Bank.
10.14(o) - Stock Purchase Agreement, dated as of December 23, 1993, by and
between Transformacion de Espumas u Fieltros, S.A., the stockholders
which are parties thereto, and Foamex L.P.
10.15.1(r) - Asset Purchase Agreement, dated as of August 29, 1997, by and
among General Felt, Foamex L.P., Bretlin, Inc. and The Dixie Group.
10.15.2(s) - Addendum to Asset Purchase Agreement, dated as of October 1, 1997,
by and among General Felt, Foamex L.P., Bretlin, Inc. and The Dixie
Group.
10.16.1(x) - Supply Agreement, dated as of February 27, 1998, by and between
Foamex L.P. and General Felt (as assigned to Foamex Carpet).
10.16.2(x) - Administrative Services Agreement, dated as of February 27, 1998,
by and between Foamex L.P. and General Felt (as assigned to Foamex
Carpet).
10.17(y) - Tax Sharing Agreement, dated as of February 27, 1998, between
Foamex International and Foamex Carpet.
10.18.1(w) - Joint Venture Agreement between Hua Kee Company Limited and Foamex
Asia, Inc., dated as of July 8, 1997.
10.18.2(w) - Loan Agreement between Hua Kee Company Limited and Foamex Asia,
Inc., dated as of July 8, 1997. 27 - Financial Data Schedule for the
year ended December 28, 1997.
- ----------------------------
(a) Incorporated herein by reference to the Exhibit to Foamex L.P.'s
Registration Statement on Form S-1, Registration No. 33-69606.
(b) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
for the fiscal year ended January 1, 1995.
(c) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex reporting an event that occurred May 28, 1997.
(d) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex reporting an event that occurred June 12, 1997.
(e) Intentionally omitted.
(f) Intentionally omitted.
(g) Intentionally omitted.
24
<PAGE>
(h) Incorporated herein by reference to the Exhibit to the Form 10-K Statement
of Foamex and FCC for fiscal 1992.
(i) Intentionally omitted.
(j) Intentionally omitted.
(k) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex and FCC on Form S-1, Registration Nos. 33-49976 and
33-49976-01.
(l) Incorporated herein by reference to the Exhibit to the Registration
Statement of FJPS, FJCC and Foamex L.P. on Form S-4, Registration No.
33-82028.
(m) Incorporated herein by reference to the Exhibit to the Annual Report on
Form 10-K of Foamex for the fiscal year ended December 29, 1996.
(n) Intentionally omitted.
(o) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for fiscal 1993.
(p) Incorporated herein by reference to the Exhibit in the Registration
Statement of Foamex on Form S-4, Registration No. 333-30291.
(q) Intentionally omitted.
(r) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex L.P. reporting an event that occurred on August 29, 1997.
(s) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex L.P. reporting an event that occurred on October 6, 1997.
(t) Incorporated by reference to the Exhibit to the Form 10-Q of Foamex
International for the quarterly period ended July 3, 1994.
(u) Incorporated by reference to the Exhibit to the Form 10-Q of Foamex L.P.
for the quarterly period ended September 28, 1997.
(v) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex L.P., Foamex Capital Corporation and Foamex
International reporting an event that occurred December 23, 1997.
(w) Incorporated herein by reference to the Exhibit in the Registration
Statement of Foamex L.P. and FCC on Form S-4, Registration No. 333-45733.
(x) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex International reporting an event that occurred on February 27, 1998.
(y) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
International for the fiscal year ended December 28, 1997.
(z) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex International reporting an event that occurred on June 25, 1998.
25
<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/A, dated May 12, 1998, reporting the restated financial
statements of Foamex L.P. elating to the GFI Transaction.
Form 8-K, dated June 30, 1998, reporting the signing of the Merger
Agreement on June 25, 1998.
26
<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 17, 1998 By: /s/ John A. Feenan
----------------------------
John A. Feenan
Executive Vice President and
Chief Financial Officer
27
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<PERIOD-START> Dec-29-1997
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