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UNITED STATES
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 27, 2004
Commission file numbers 1-11432; 1-11436
FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 05-0475617
Delaware 22-3182164
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 Columbia Avenue
Linwood, PA 19061
- ------------------------------- ----------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (610) 859-3000
Indicate by check mark whether the 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
--- ---
Foamex L.P. and Foamex Capital Corporation meet the conditions set forth in
General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this
form with the reduced disclosure format.
The number of shares of Foamex Capital Corporation's common stock outstanding as
of August 2, 2004 was 1,000.
FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements (unaudited).
Condensed Consolidated Statements of Operations - Quarters and Two Quarter
Ended June 27, 2004 and June 29, 2003 3
Condensed Consolidated Balance Sheets as of June 27, 2004 and December 28, 2003 4
Condensed Consolidated Statements of Cash Flows - Two Quarters Ended
June 27, 2004 and June 29, 2003 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. 20
Item 3. Quantitative and Qualitative Disclosures about Market Risk. 26
Item 4. Controls and Procedures. 26
Part II. Other Information
Item 1. Legal Proceedings. 28
Item 6. Exhibits and Reports on Form 8-K. 28
Signatures 29
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Quarters Ended Two Quarters Ended
------------------------ ------------------------
June 27, June 29, June 27, June 29,
2004 2003 2004 2003
-------- -------- -------- --------
(thousands)
NET SALES $314,140 $337,637 $627,758 $665,788
COST OF GOODS SOLD 273,959 298,963 547,818 596,577
-------- -------- -------- --------
GROSS PROFIT 40,181 38,674 79,940 69,211
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 21,564 19,097 47,017 39,730
RESTRUCTURING CHARGES (CREDITS) 1,716 (1,551) 2,244 (1,551)
-------- -------- -------- --------
INCOME FROM OPERATIONS 16,901 21,128 30,679 31,032
INTEREST AND DEBT ISSUANCE EXPENSE 18,598 19,378 37,209 38,489
INCOME (LOSS) FROM EQUITY INTEREST IN
JOINT VENTURES (2) 513 275 879
OTHER INCOME (EXPENSE), NET (740) (233) 252 (1,848)
-------- -------- -------- --------
INCOME (LOSS) BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES (2,439) 2,030 (6,003) (8,426)
PROVISION (BENEFIT) FOR INCOME TAXES (280) 176 492 263
-------- -------- -------- --------
NET INCOME (LOSS) $ (2,159) $ 1,854 $ (6,495) $ (8,689)
======== ======== ======== ========
The accompanying notes are an integral part of the
unaudited condensed consolidated financial statements.
3
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 27, 2004 December 28, 2003
------------- -----------------
ASSETS (unaudited)
CURRENT ASSETS (thousands)
Cash and cash equivalents $ 4,636 $ 6,610
Accounts receivable, net of allowances of $11,597 in 2004
and $10,505 in 2003 183,778 181,288
Inventories 100,227 95,882
Other current assets 21,566 27,287
-------- --------
Total current assets 310,207 311,067
Property, plant and equipment 410,635 414,680
Less accumulated depreciation (258,297) (251,830)
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT 152,338 162,850
GOODWILL 126,078 126,258
DEBT ISSUANCE COSTS, net of accumulated
amortization of $14,008 in 2004 and $10,648 in 2003 23,835 27,195
SOFTWARE COSTS, net of accumulated amortization of $4,602 in
2004 and $3,603 in 2003 10,415 9,767
INVESTMENTS IN AND ADVANCES TO AFFILIATES 15,291 14,503
OTHER ASSETS 20,786 13,515
-------- --------
TOTAL ASSETS $658,950 $665,155
======== ========
LIABILITIES AND PARTNERS' DEFICIENCY
CURRENT LIABILITIES
Revolving credit borrowings $115,130 $ 96,065
Current portion of long-term debt 8,931 8,937
Accounts payable 92,835 98,310
Accrued employee compensation and benefits 33,153 28,331
Accrued interest 11,910 12,376
Accrued customer rebates 13,356 18,077
Cash overdrafts 10,367 12,688
Other accrued liabilities 16,466 17,584
-------- --------
Total current liabilities 302,148 292,368
LONG-TERM DEBT 633,602 640,621
ACCRUED EMPLOYEE BENEFITS 43,174 43,348
OTHER LIABILITIES 13,353 13,949
-------- --------
Total liabilities 992,277 990,286
-------- --------
COMMITMENTS AND CONTINGENCIES
PARTNERS' DEFICIENCY
General partner (275,523) (268,097)
Limited partner - -
Accumulated other comprehensive loss (48,583) (47,813)
Notes receivable from related party (9,221) (9,221)
-------- --------
Total partners' deficiency (333,327) (325,131)
-------- --------
TOTAL LIABILITIES AND PARTNERS' DEFICIENCY $658,950 $665,155
======== ========
The accompanying notes are an integral part of the
unaudited condensed consolidated financial statements.
4
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Two Quarters Ended
-------------------------
June 27, June 29,
2004 2003
-------- --------
OPERATING ACTIVITIES (thousands)
Net loss $(6,495) $(8,689)
Adjustments to reconcile net loss to net cash provided
by (used for) operating activities:
Depreciation and amortization 12,210 12,956
Amortization of debt issuance costs, debt premium
and debt discount 1,368 2,877
Gain on sale of assets (1,004) -
Other operating activities 7,721 1,320
Changes in operating assets and liabilities, net (23,659) 4,949
------- -------
Net cash provided by (used for) operating activities (9,859) 13,413
------- -------
INVESTING ACTIVITIES
Capital expenditures (3,110) (3,165)
Proceeds from sale of assets 2,243 -
Other investing activities (1,647) (2,197)
------- -------
Net cash used for investing activities (2,514) (5,362)
------- -------
FINANCING ACTIVITIES
Proceeds from (repayments of) revolving loans 19,064 (979)
Repayments of long-term debt (5,492) (29)
Decrease in cash overdrafts (2,321) (3,168)
Other financing activities (852) (208)
------- -------
Net cash provided by (used for) financing activities 10,399 (4,384)
------- -------
Net increase (decrease) in cash and cash equivalents (1,974) 3,667
Cash and cash equivalents at beginning of period 6,610 4,363
------- -------
Cash and cash equivalents at end of period $ 4,636 $ 8,030
======= =======
Supplemental Information:
Cash paid for interest $36,307 $35,810
======= =======
The accompanying notes are an integral part of the
unaudited condensed consolidated financial statements.
5
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Foamex L.P. operates in the flexible polyurethane and advanced polymer foam
products industry. Foamex L.P.'s operations are conducted directly and through
its wholly owned subsidiaries, Foamex Canada Inc. ("Foamex Canada"), Foamex
Latin America, Inc. ("Foamex Mexico") and Foamex Asia, Inc. ("Foamex Asia").
Financial information concerning the business segments of Foamex L.P. is
included in Note 7.
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited
and do not include certain information and disclosures required by accounting
principles generally accepted in the United States of America for complete
financial statements. However, in the opinion of management, all adjustments,
consisting only of normal recurring adjustments considered necessary to present
fairly Foamex L.P.'s consolidated financial position and results of operations
have been included. These interim financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in Foamex L.P.'s 2003 Annual Report on Form 10-K. Results for interim
periods are not necessarily indicative of trends or of results for a full year.
The condensed consolidated balance sheet as of December 28, 2003 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements.
2. RESTRUCTURING CHARGES (CREDITS)
During the quarter and two quarters ended June 27, 2004, Foamex L.P.
recorded restructuring charges of $1.7 million and $2.2 million, respectively,
which were primarily related to lease costs and asset write offs in connection
with the closing of its New York office and the realignment of its automotive
operations.
The following tables set forth the components of Foamex L.P.'s
restructuring accruals and activity for the quarter and two quarters ended June
27, 2004:
Plant Closure Personnel
Total and Leases Reductions Other
----- ------------- ---------- -----
(millions)
Balance at March 28, 2004 $8.9 $7.2 $1.1 $0.6
Restructuring charges 1.7 1.3 0.4 -
Asset impairment (0.8) (0.8) - -
Cash spending (1.1) (0.6) (0.3) (0.2)
---- ---- ---- ----
Balance at June 27, 2004 $8.7 $7.1 $1.2 $0.4
==== ==== ==== ====
Balance at December 28, 2003 $9.7 $8.0 $0.9 $0.8
Restructuring charges 2.2 1.3 0.9 -
Asset impairment (0.8) (0.8) - -
Cash spending (2.4) (1.4) (0.6) (0.4)
---- ---- ---- ----
Balance at June 27, 2004 $8.7 $7.1 $1.2 $0.4
==== ==== ==== ====
Foamex L.P. expects to spend approximately $3.0 million during the twelve
months ending July 3, 2005, with the balance to be spent through 2012 primarily
for lease termination costs which are recorded net of estimated sublease rental
income.
6
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
3. INVENTORIES
The components of inventories are listed below.
June 27, December 28,
2004 2003
-------- ------------
(thousands)
Raw materials and supplies $ 63,756 $61,855
Work-in-process 18,004 16,484
Finished goods 18,467 17,543
-------- -------
Total $100,227 $95,882
======== =======
4. LONG-TERM DEBT AND REVOLVING CREDIT BORROWINGS
The components of long-term debt and revolving credit borrowings are listed
below.
June 27, December 28,
2004 2003
--------- ------------
(thousands)
Foamex L.P. Senior Secured Credit Facility
Term Loan (1) $ 42,728 $ 48,214
Foamex L.P. Secured Term Loan (1) 80,000 80,000
10 3/4% Senior secured notes due 2009 (2) (3) 310,867 311,950
9 7/8% Senior subordinated notes due 2007 (2) 148,500 148,500
13 1/2% Senior subordinated notes due 2005 (includes
$1,070 in 2004 and $1,543 in 2003 of unamortized
debt premium) (2) 52,655 53,128
Industrial revenue bonds 7,000 7,000
Other (net of unamortized debt discount of $70 in 2004
and $93 in 2003) 783 766
-------- --------
642,533 649,558
Less current portion 8,931 8,937
-------- --------
Long-term debt $633,602 $640,621
======== ========
Revolving credit borrowings (1) $115,130 $ 96,065
======== ========
(1) Debt of Foamex L.P., guaranteed by Foamex International Inc. ("Foamex
International"), FMXI, Inc. and Foamex Canada.
(2) Debt of Foamex L.P. and Foamex Capital Corporation.
(3) Includes $10.9 million in 2004 and $12.0 million in 2003 of deferred
credit on interest rate swap transactions.
Senior Secured Credit Facility
The $240.0 Million Senior Secured Credit Facility consists of a revolving
credit facility with a maximum availability of $190.0 million and an initial
term loan of $50.0 million. The revolving credit facility includes a $50.0
million sublimit for letters of credit and availability is limited to eligible
amounts, as defined, of accounts receivable and inventory. At June 27, 2004,
Foamex L.P. had available borrowings of approximately $26.6 million and letters
of credit outstanding of $21.9 million. Borrowings under the term loan are
limited to eligible amounts, as defined, of equipment and real estate.
Substantially all the assets of Foamex L.P. and its domestic subsidiaries and
Foamex Canada are pledged as collateral for the related borrowings. Borrowings
under the revolving credit facility and the term loan bear interest at floating
rates based upon and including a margin over either LIBOR or a Base Rate, as
defined. At June 27, 2004, the weighted average interest rates were 4.55% and
4.50% for the revolving loans and the term loan, respectively. The term loan
requires quarterly installment payments of approximately $1.8 million,
7
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. LONG-TERM DEBT AND REVOLVING CREDIT BORROWINGS (continued)
which commenced on September 30, 2003. All borrowings under the $240.0 Million
Senior Secured Credit Facility will mature on April 30, 2007. The $240.0 Million
Senior Secured Credit Facility includes both a subjective acceleration clause
and a lockbox arrangement which requires all lockbox receipts be used to repay
revolving credit borrowings. Accordingly, borrowings under the revolving credit
facility are classified as current in the accompanying condensed consolidated
balance sheets as of June 27, 2004 and December 28, 2003 as required by Emerging
Issues Task Force Issue No. 95-22, "Balance Sheet Classification of Borrowings
Outstanding Under Revolving Credit Agreements that Include both a Subjective
Acceleration Clause and a Lockbox Arrangement" ("EITF No. 95-22").
The $80.0 million term loan facility (the "Secured Term Loan") will mature
on April 30, 2007. Borrowings under this facility will bear interest at a rate
that is 9.25% plus the greater of the Reference Rate, as defined, or 4.25%. The
minimum rate, which is in effect as of June 27, 2004, is 13.50%. In addition,
Foamex L.P. is subject to a 1.00% facility fee which is payable annually on the
anniversary date. Borrowings under the Secured Term Loan are collateralized by
the same collateral as the $240.0 Million Senior Secured Credit Facility. An
intercreditor agreement governs the distribution of collateral among the lenders
under the $240.0 Million Senior Secured Credit Facility and the Secured Term
Loan.
10 3/4% Senior Secured Notes
The 10 3/4% Senior Secured Notes were issued by Foamex L.P. and Foamex
Capital Corporation on March 25, 2002 and are due on April 1, 2009. The notes
are guaranteed on a senior basis by all of Foamex L.P.'s domestic subsidiaries
that guarantee the $240.0 Million Senior Secured Credit Facility. The notes are
secured on a second-priority basis (subject to permitted liens) on substantially
the same collateral that secures the obligations under the $240.0 Million Senior
Secured Credit Facility and the Secured Term Loan. The notes rank effectively
junior to all senior indebtedness that is secured by first priority liens and
senior in right of payment to all subordinated indebtedness. Interest is payable
April 1 and October 1. The notes may be redeemed at the option of Foamex L.P.,
in whole or in part, at any time on or after April 1, 2006. The initial
redemption is at 105.375% of their principal amount, plus accrued and unpaid
interest, if any, thereon to the date of redemption and declining annually to
100.0% on or after April 1, 2008. Additionally, on or before April 1, 2005, up
to 35.0% of the principal amount of the notes may be redeemed at a redemption
price equal to 110.750% of the principal amount, plus accrued and unpaid
interest, if any, thereon to the date of redemption with the net proceeds of one
or more equity offerings.
Upon the occurrence of a change of control, as defined, each holder will
have the right to require Foamex L.P. to tender for such notes at a price in
cash equal to 101.0% of the aggregate principal amount thereof, plus accrued and
unpaid interest, if any.
Effective May 1, 2002, Foamex L.P. completed a series of interest rate swap
transactions with notional amounts aggregating $300.0 million. Foamex L.P.
designated, documented and accounted for these interest rate swaps as fair value
hedges of Foamex L.P.'s 10 3/4% Senior Secured Notes due April 1, 2009. The risk
being hedged in these transactions was the change in fair value of Foamex L.P.'s
10 3/4% Senior Secured Notes based on changes in the benchmark interest rate,
LIBOR. The effect of these interest rate swap transactions was to convert the
fixed interest rate on the senior secured notes to floating rates reset twice
per year to correspond with the interest payment dates for the 10 3/4% Senior
Secured Notes. On September 18, 2002, Foamex L.P. unwound the interest rate swap
transactions in exchange for net cash proceeds of $18.4 million, including $3.6
million realized through lower effective interest rates while the swap
transactions were in effect. The unwinding resulted in a deferred credit of
$14.8 million which is being amortized through April 1, 2009, using the
effective interest rate method.
9 7/8% Senior Subordinated Notes
The 9 7/8% Senior Subordinated Notes were issued by Foamex L.P. and Foamex
Capital Corporation and are due on June 15, 2007. The notes represent
uncollateralized general obligations of Foamex L.P. and are subordinated to all
Senior Debt, as defined in the Indenture. Interest is payable June 15 and
December 15. The notes may be redeemed at the option of Foamex L.P., in whole or
in part, at any time on or after June 15, 2002. The initial
8
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. LONG-TERM DEBT AND REVOLVING CREDIT BORROWINGS (continued)
redemption was 104.938% of their principal amount, plus accrued and unpaid
interest, if any, thereon to the date of redemption and declining annually to
100.0% on or after June 15, 2005. At June 27, 2004, the redemption price was
101.646% plus accrued and unpaid interest.
Upon the occurrence of a change of control, as defined, each holder will
have the right to require Foamex L.P. to tender for such notes at a price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon. The notes are subordinated in right of payment to all
senior indebtedness and are pari passu in right of payment to the 13 1/2% Senior
Subordinated Notes (described below).
13 1/2% Senior Subordinated Notes
The 13 1/2% Senior Subordinated Notes were issued by Foamex L.P. and Foamex
Capital Corporation and are due on August 15, 2005. The notes represent
uncollateralized general obligations of Foamex L.P. and are subordinated to all
Senior Debt, as defined in the Indenture. Interest is payable semiannually on
February 15 and August 15. The notes may be redeemed at the option of Foamex
L.P., in whole or in part, at any time on or after August 15, 2000. The initial
redemption was 106.75% of their principal amount, plus accrued and unpaid
interest, if any, thereon to the date of redemption and declining annually to
100.0% on or after August 15, 2004. At June 27, 2004, the redemption price was
101.6875% plus accrued and unpaid interest.
Upon the occurrence of a change of control, as defined, each holder will
have the right to require Foamex L.P. to tender for such notes at a price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest, if any, thereon. The notes are subordinated in right of the
payment of all senior indebtedness and are pari passu in right of payment to the
9 7/8% Senior Subordinated Notes (described above).
Industrial Revenue Bonds ("IRBs")
IRB debt includes a $1.0 million bond that matures on October 1, 2005 and a
$6.0 million bond that matures in 2013. Interest is based on a variable rate, as
defined, with options available to Foamex L.P. to convert to a fixed rate. At
June 27, 2004, the interest rate was 1.20% on the $1.0 million bond and 1.15% on
the $6.0 million bond. The maximum interest rate for either of the IRBs is 15.0%
per annum.
If Foamex L.P. exercises its option to convert the bonds to a fixed
interest rate structure, the IRBs are redeemable at the option of the
bondholders. The obligations are collateralized by certain properties, which
have an approximate net carrying value of $10.8 million at June 27, 2004.
Other
Other debt includes a non-interest bearing promissory note with a principal
amount of $0.9 million at June 27, 2004 issued in connection with increasing
Foamex L.P.'s interest in an Asian joint venture to 70.0% in 2001. The
promissory note had unamortized discount of $0.1 million at June 27, 2004.
Debt Covenants
The indentures and other indebtedness agreements contain certain covenants
that limit, among other things, the ability of Foamex L.P.'s subsidiaries (i) to
pay distributions or redeem equity interests, (ii) to make certain restrictive
payments or investments, (iii) to incur additional indebtedness or issue
Preferred Equity Interests, as defined, (iv) to merge, consolidate or sell all
or substantially all of its assets, or (v) to enter into certain transactions
with affiliates or related persons. In addition, certain agreements contain
provisions that, in the event of a defined change of control or the occurrence
of an undefined material adverse change in the ability of the obligor to perform
its obligations, the indebtedness must be repaid, in certain cases, at the
option of the holder. Under the most restrictive of the distribution
restrictions, as of June 27, 2004, Foamex L.P. was able to distribute funds to
its partners only to the extent to enable its partners to meet their tax payment
liabilities and Foamex International's normal operating expenses of up to $1.5
million annually, so long as no default or event of default has occurred.
9
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. LONG-TERM DEBT AND REVOLVING CREDIT BORROWINGS (continued)
Under the $240.0 Million Senior Secured Credit Facility and the Secured
Term Loan, Foamex L.P. is subject to a minimum fixed charge coverage ratio, as
defined, of 1.00. For the four quarters ended June 27, 2004, Foamex L.P.'s fixed
charge coverage ratio was 1.04. Foamex L.P. is also subject to a maximum annual
capital expenditure amount which is $36.0 million for the year ending January 2,
2005.
Maturities of Long-Term Debt
Scheduled maturities of long-term debt as of June 27, 2004 are shown below
(thousands):
Two quarters ending January 2, 2005 $ 5,359
2005 60,579
2006 7,143
2007 251,585
2008 -
Thereafter 306,000
--------
630,666
Unamortized debt premium/discount and fair
value adjustment, net 11,867
--------
Total $642,533
========
5. RETIREE BENEFIT PLANS
Components of net periodic pension benefit cost are listed below:
Quarters Ended Two Quarters Ended
----------------------- ------------------------
June 27, June 29, June 27, June 29,
2004 2003 2004 2003
-------- -------- -------- --------
(thousands)
Service cost $ 950 $1,117 $2,220 $2,088
Interest cost 1,869 1,788 3,671 3,336
Expected return on plan assets (1,696) (1,438) (3,394) (2,680)
Amortization of transition assets (19) (19) (37) (36)
Amortization of prior service benefit (28) (34) (55) (61)
Amortization of net loss 657 716 1,361 1,337
------ ------ ------ ------
Net periodic pension benefit cost $1,733 $2,130 $3,766 $3,984
====== ====== ====== ======
Foamex L.P. previously disclosed that it anticipated estimated retiree
benefit plan contributions of $11.8 million for fiscal 2004. During the quarter
and two quarters ending June 27, 2004, Foamex L.P. contributed $2.8 million and
$2.9 million, respectively, and there has been no change in estimated
contributions for fiscal 2004. Actuarial valuations are in process for fiscal
2004 that will determine the actual contribution requirements.
6. COMPREHENSIVE INCOME (LOSS)
The components of comprehensive income (loss) are listed below.
Quarters Ended Two Quarters Ended
---------------------- -----------------------
June 27, June 29, June 27, June 29,
2004 2003 2004 2003
-------- -------- -------- --------
(thousands)
Net income (loss) $(2,159) $1,854 $(6,495) $(8,689)
Foreign currency translation adjustments (570) 2,569 (770) 4,136
------- ------ ------- -------
Total comprehensive income (loss) $(2,729) $4,423 $(7,265) $(4,553)
======= ====== ======= =======
10
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
7. SEGMENT RESULTS
Foam Products manufactures and markets cushioning foams for bedding,
furniture, packaging and health care applications and foam-based consumer
products, such as mattress pads and children's furniture. Carpet Cushion
Products manufactures and distributes rebond, prime, felt and rubber carpet
padding. Automotive Products supplies foam products and laminates to major tier
one suppliers and original equipment manufacturers. Technical Products
manufactures and markets reticulated foams and other specialty foams for
reservoiring, filtration, gasketing and sealing applications. The "Other" column
in the table below represents certain manufacturing operations in Mexico City,
corporate expenses not allocated to other business segments and restructuring
charges (credits).
Segment results are presented below.
Carpet
Foam Cushion Automotive Technical
Products Products Products Products Other Total
-------- -------- ---------- --------- --------- ---------
(thousands)
Quarter ended June 27, 2004
Net sales $126,089 $ 53,596 $ 96,620 $31,253 $ 6,582 $314,140
Income (loss) from operations $ 12,332 $ 3,428 $ 7,991 $ 8,458 $(15,308) $ 16,901
Depreciation and amortization $ 2,525 $ 717 $ 639 $ 678 $ 1,285 $ 5,844
Quarter ended June 29, 2003
Net sales $122,809 $ 54,089 $123,540 $30,616 $ 6,583 $337,637
Income (loss) from operations $ 10,929 $ 1,620 $ 9,423 $ 9,794 $(10,638) $ 21,128
Depreciation and amortization $ 2,674 $ 803 $ 747 $ 732 $ 1,895 $ 6,851
Two quarters ended June 27, 2004
Net sales $260,484 $ 99,694 $190,620 $62,340 $ 14,620 $627,758
Income (loss) from operations $ 28,612 $ 4,731 $ 13,014 $17,314 $(32,992) $ 30,679
Depreciation and amortization $ 5,341 $ 1,491 $ 1,266 $ 1,391 $ 2,721 $ 12,210
Two quarters ended June 29, 2003
Net sales $241,039 $103,226 $244,685 $63,004 $ 13,834 $665,788
Income (loss) from operations $ 17,866 $ 1,004 $ 18,860 $18,726 $(25,424) $ 31,032
Depreciation and amortization $ 5,430 $ 1,601 $ 1,432 $ 1,455 $ 3,038 $ 12,956
8. COMMITMENTS AND CONTINGENCIES
Litigation
Foamex L.P. is party to various 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 Foamex L.P.'s financial position or results of
operations or cash flows. If management's assessment of Foamex L.P.'s liability
relating to these actions is incorrect, these actions could have a material
adverse effect on Foamex L.P.'s consolidated financial position, results of
operations and cash flows.
As of June 27, 2004, Foamex L.P. had accrued approximately $1.5 million for
litigation and other matters in addition to the environmental matters discussed
below.
Environmental and Health and Safety
Foamex L.P. is subject to extensive and changing federal, state, local and
foreign environmental laws and regulations, including those relating to the use,
handling, storage, discharge and disposal of hazardous substances, the discharge
or emission of materials into the environment, and the remediation of
environmental contamination, and as a result, are from time to time involved in
administrative and judicial proceedings and inquiries relating to environmental
matters. As of June 27, 2004, Foamex L.P. had accruals of approximately $2.3
million for
11
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
8. COMMITMENTS AND CONTINGENCIES (continued)
environmental matters, including approximately $2.1 million related to
remediating and monitoring soil and groundwater contamination and approximately
$0.2 million related to sites where Foamex L.P. has been designated as a
Potentially Responsible Party or "PRP" and other matters. Additional losses, if
any, in excess of amounts currently accrued, cannot be reasonably estimated at
this time. If there are additional matters or if our current estimates are
incorrect, there could be a material adverse effect on Foamex L.P.'s financial
position, results of operations and cash flows.
On August 31, 2002, Environment Canada, the Canadian environmental
regulatory agency, finalized a rule, which requires flexible polyurethane foam
manufacturing operations to reduce methylene chloride (dichloromethane) air
emissions. The rule establishes a 50.0% reduction in methylene chloride
emissions by December 1, 2004 and 100.0% reductions by January 1, 2007. Foamex
L.P. does not believe that this standard will require it to make material
expenditures for its Canadian plants.
Foamex L.P. has reported to the appropriate state authorities that it found
soil and/or groundwater contamination in excess of state standards at certain
locations. Seven sites are currently in various stages of investigation or
remediation. Accordingly, the extent of contamination and the ultimate liability
is not known with certainty for all sites.
Foamex L.P. has either upgraded or closed all underground storage tanks at
its facilities in accordance with applicable regulations.
The Comprehensive Environmental Response, Compensation and Liability Act,
or "CERCLA," and comparable state laws impose liability without fault for the
costs of cleaning up contaminated sites on certain classes of persons that
contributed to the release of hazardous substances into the environment at those
sites, for example, by generating wastes containing hazardous substances which
were disposed at such sites. Foamex L.P. is currently designated as a PRP by the
EPA or by state environmental agencies or other PRPs, pursuant to CERCLA or
analogous state statutes, with respect to eleven sites. Estimates of total
cleanup costs and fractional allocations of liability are often provided by the
EPA, the state environmental agency or the committee of PRPs with respect to the
specified site. Based on these estimates (to the extent available) and on known
information, in each case and in the aggregate, Foamex L.P. does not expect
additional costs, if any, to be material to liquidity, results of operations or
financial position.
The possibility exists that new environmental legislation and/or
environmental regulations may be adopted, or other environmental conditions,
including the presence of previously unknown environmental contamination, may be
found to exist or a reassessment of the potential exposure to pending
environmental matters may be necessary due to new information or future
developments, that may require expenditures not currently anticipated and that
may be material.
9. GUARANTOR INFORMATION
The payment obligations of Foamex L.P. and Foamex Capital Corporation under
the 10 3/4% Senior Secured Notes are guaranteed by Foamex L.P.'s 100.0% owned
domestic subsidiaries ("Guarantors"). Such guarantees are full, unconditional
and joint and several. Separate financial statements of the Guarantors are not
presented because Foamex L.P.'s management has determined that they would not be
material to investors. The following presents condensed consolidating balance
sheets as of June 27, 2004 and December 28, 2003 and the condensed consolidating
statements of operations for the quarters and two quarters ended June 27, 2004
and June 29, 2003 and cash flows for the two quarters ended June 27, 2004 and
June 29, 2003 of the Guarantors and nonguarantors. The Guarantors include Foamex
Latin America, Inc., Foamex Mexico, Inc., Foamex Mexico II, Inc. and Foamex
Asia, Inc. The nonguarantors are Foamex Canada Inc. and Grupo Foamex de Mexico,
S.A. de C.V. and its subsidiaries. The following financial information is
intended to provide information for the Guarantors and nonguarantors of Foamex
L.P. based on amounts derived from the financial statements of Foamex L.P.
12
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
9. GUARANTOR INFORMATION (continued)
Condensed Consolidating Balance Sheet
As of June 27, 2004
Foamex
Capital Foamex L.P. Consolidated
Guarantors Nonguarantors Corporation (Parent) Eliminations Foamex L.P.
---------- ------------- ----------- ----------- ------------ ------------
Assets (thousands of dollars)
Current assets $ - $28,280 $ 1 $287,511 $ (5,585) $310,207
Investment in subsidiaries 10,708 - - 40,374 (51,082) -
Property, plant and equipment, net - 18,985 - 133,353 - 152,338
Goodwill - 5,591 - 120,487 - 126,078
Debt issuance costs - - - 23,835 - 23,835
Other assets 14,525 2,267 - 38,750 (9,050) 46,492
------- ------- ------- -------- -------- --------
Total assets $25,233 $55,123 $ 1 $644,310 $(65,717) $658,950
======= ======= ======= ======== ======== ========
Liabilities and Partners' Deficiency
Current liabilities $ 676 $18,701 $ - $289,316 $ (6,545) $302,148
Long-term debt 4,980 4,850 - 632,822 (9,050) 633,602
Other liabilities - 1,028 - 55,499 - 56,527
------- ------- ------- -------- -------- --------
Total liabilities 5,656 24,579 - 977,637 (15,595) 992,277
Partners' deficiency 19,577 30,544 1 (333,327) (50,122) (333,327)
------- ------- ------- -------- -------- --------
Total liabilities and partners'
deficiency $25,233 $55,123 $ 1 $644,310 $(65,717) $658,950
======= ======= ======= ======== ======== ========
Condensed Consolidating Balance Sheet
As of December 28, 2003
Foamex
Capital Foamex L.P. Consolidated
Guarantors Nonguarantors Corporation (Parent) Eliminations Foamex L.P.
---------- ------------- ----------- ----------- ------------ ------------
Assets (thousands of dollars)
Current assets $ 419 $31,859 $ 1 $283,144 $ (4,356) $311,067
Investment in subsidiaries 10,513 - - 43,598 (54,111) -
Property, plant and equipment, net - 19,736 - 143,114 - 162,850
Goodwill - 5,772 - 120,486 - 126,258
Debt issuance costs - - - 27,195 - 27,195
Other assets 13,857 2,125 - 30,853 (9,050) 37,785
------- ------- ------- -------- -------- --------
Total assets $24,789 $59,492 $ 1 $648,390 $(67,517) $665,155
======= ======= ======= ======== ======== ========
Liabilities and Partners' Deficiency
Current liabilities $ 585 $18,746 $ - $277,393 $ (4,356) $292,368
Long-term debt 4,957 4,851 - 639,863 (9,050) 640,621
Other liabilities - 1,032 - 56,265 - 57,297
------- ------- ------- -------- -------- --------
Total liabilities 5,542 24,629 - 973,521 (13,406) 990,286
Partners' deficiency 19,247 34,863 1 (325,131) (54,111) (325,131)
------- ------- ------- -------- -------- --------
Total liabilities and partners'
deficiency $24,789 $59,492 $ 1 $648,390 $(67,517) $665,155
======= ======= ======= ======== ======== ========
13
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
9. GUARANTOR INFORMATION (continued)
Condensed Consolidating Statement of Operations
For the quarter ended June 27, 2004
Foamex
Capital Foamex L.P. Consolidated
Guarantors Nonguarantors Corporation (Parent) Eliminations Foamex L.P.
---------- ------------- ----------- ----------- ------------ ------------
(thousands of dollars)
Net sales $ - $23,175 $ - $296,193 $(5,228) $314,140
Cost of goods sold - 21,778 - 257,409 (5,228) 273,959
----- ------- ----- -------- ------- --------
Gross profit - 1,397 - 38,784 - 40,181
Selling, general and administrative
expenses - 1,701 - 19,863 - 21,564
Restructuring charges - - - 1,716 - 1,716
----- ------- ----- -------- ------- --------
Income from operations - (304) - 17,205 - 16,901
Interest and debt issuance expense 58 82 - 18,578 (120) 18,598
Equity in undistributed earnings
of affiliates (745) - - (1,009) 1,752 (2)
Other income (expense), net 46 (628) - (38) (120) (740)
----- ------- ----- -------- ------- --------
Loss before benefit for income taxes (757) (1,014) - (2,420) 1,752 (2,439)
Benefit for income taxes - (19) - (261) - (280)
----- ------- ----- -------- ------- --------
Net loss $(757) $ (995) $ - $ (2,159) $ 1,752 $ (2,159)
===== ======= ===== ======== ======= ========
14
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
9. GUARANTOR INFORMATION (continued)
Condensed Consolidating Statement of Operations
For the quarter ended June 29, 2003
Foamex
Capital Foamex L.P. Consolidated
Guarantors Nonguarantors Corporation (Parent) Eliminations Foamex L.P.
---------- ------------- ----------- ----------- ------------ ------------
(thousands of dollars)
Net sales $ - $27,770 $ - $314,365 $(4,498) $337,637
Cost of goods sold - 25,484 - 277,977 (4,498) 298,963
----- ------- ----- -------- ------- --------
Gross profit - 2,286 - 36,388 - 38,674
Selling, general and administrative
expenses - 1,695 - 17,402 - 19,097
Restructuring charges (credits) - 403 - (1,954) - (1,551)
----- ------- ----- -------- ------- --------
Income from operations - 188 - 20,940 - 21,128
Interest and debt issuance expense 74 7 - 19,297 - 19,378
Equity in undistributed earnings
of affiliates 271 - - 309 (67) 513
Other expense, net 63 (198) - (98) - (233)
----- ------- ----- -------- ------- --------
Income before provision for income
taxes 260 (17) - 1,854 (67) 2,030
Provision for income taxes - 176 - - - 176
----- ------- ----- -------- ------- --------
Net income $ 260 $ (193) $ - $ 1,854 $ (67) $ 1,854
===== ======= ===== ======== ======= ========
15
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
9. GUARANTOR INFORMATION (continued)
Condensed Consolidating Statement of Operations
For the two quarters ended June 27, 2004
Foamex
Capital Foamex L.P. Consolidated
Guarantors Nonguarantors Corporation (Parent) Eliminations Foamex L.P.
---------- ------------- ----------- ----------- ------------ ------------
(thousands of dollars)
Net sales $ - $48,017 $ - $590,443 $(10,702) $627,758
Cost of goods sold - 44,246 - 514,274 (10,702) 547,818
----- ------- ----- -------- -------- --------
Gross profit - 3,771 - 76,169 - 79,940
Selling, general and administrative
expenses - 3,249 - 43,768 - 47,017
Restructuring charges - - - 2,244 - 2,244
----- ------- ----- -------- -------- --------
Income from operations - 522 - 30,157 - 30,679
Interest and debt issuance expense 117 152 - 37,191 (251) 37,209
Equity in undistributed earnings
of affiliates 371 - - 168 (264) 275
Other income (expense), net 94 (334) - 743 (251) 252
----- ------- ----- -------- -------- --------
Loss before provision for income taxes 348 36 - (6,123) (264) (6,003)
Provision for income taxes - 120 - 372 - 492
----- ------- ----- -------- -------- --------
Net loss $ 348 $ (84) $ - $ (6,495) $ (264) $ (6,495)
===== ======= ===== ======== ======= ========
16
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
9. GUARANTOR INFORMATION (continued)
Condensed Consolidating Statement of Operations
For the two quarters ended June 29, 2003
Foamex
Capital Foamex L.P. Consolidated
Guarantors Nonguarantors Corporation (Parent) Eliminations Foamex L.P.
---------- ------------- ----------- ----------- ------------ ------------
(thousands of dollars)
Net sales $ - $54,271 $ - $620,710 $(9,193) $665,788
Cost of goods sold - 49,906 - 555,864 (9,193) 596,577
----- ------- ----- -------- ------- --------
Gross profit - 4,365 - 64,846 - 69,211
Selling, general and administrative
expenses - 3,230 - 36,500 - 39,730
Restructuring charges (credits) - 402 - (1,953) - (1,551)
----- ------- ----- -------- ------- --------
Income from operations - 733 - 30,299 - 31,032
Interest and debt issuance expense 133 19 - 38,337 - 38,489
Equity in undistributed earnings
of affiliates (385) - - (408) 1,672 879
Other expense, net 112 (1,717) - (243) - (1,848)
----- ------- ----- -------- ------- --------
Loss before provision for income
taxes (406) (1,003) - (8,689) 1,672 (8,426)
Provision for income taxes - 263 - - - 263
----- ------- ----- -------- ------- --------
Net loss $(406) $(1,266) $ - $ (8,689) $ 1,672 $ (8,689)
===== ======= ===== ======== ======= ========
17
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
9. GUARANTOR INFORMATION (continued)
Condensed Consolidating Statement of Cash Flows
For the two quarters ended June 27, 2004
Foamex
Capital Foamex L.P. Consolidated
Guarantors Nonguarantors Corporation (Parent) Eliminations Foamex L.P.
---------- ------------- ----------- ----------- ------------ ------------
(thousands of dollars)
Cash Flows from Operating Activities
Net loss $348 $ (84) $ - $(6,495) $ (264) $(6,495)
Total adjustments to reconcile net
loss to net cash used for
operating activities (348) 164 - (3,444) 264 (3,364)
----- ------- ----- ------- ------ -------
Net cash used for
operating activities - 80 - (9,939) - (9,859)
----- ------- ----- ------- ------ -------
Cash Flows from Investing Activities
Capital expenditures - (745) - (2,365) - (3,110)
Other - - - 3,096 (2,500) 596
----- ------- ----- ------- ------ -------
Net cash used for investing
activities - (745) - 731 (2,500) (2,514)
----- ------- ----- ------- ------ -------
Cash Flows from Financing Activities
Net repayments of revolving loans - - - 19,064 - 19,064
Repayments of long-term debt - - - (5,492) - (5,492)
Other, net - (2,500) - (3,173) 2,500 (3,173)
----- ------- ----- ------- ------ -------
Net cash provided by financing
activities - (2,500) - 10,399 2,500 10,399
----- ------- ----- ------- ------- -------
Net increase in cash and cash
equivalents - (3,165) - 1,191 - (1,974)
Cash and cash equivalents at
beginning of period - 4,669 1 1,940 - 6,610
----- ------- ----- ------- ------- -------
Cash and cash equivalents at
end of period $ - $ 1,504 $ 1 $ 3,131 $ - $ 4,636
===== ======= ===== ======= ======= =======
18
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
9. GUARANTOR INFORMATION (continued)
Condensed Consolidating Statement of Cash Flows
For the two quarters ended June 29, 2003
Foamex
Capital Foamex L.P. Consolidated
Guarantors Nonguarantors Corporation (Parent) Eliminations Foamex L.P.
---------- ------------- ----------- ----------- ------------ ------------
(thousands of dollars)
Cash Flows from Operating Activities
Net loss $(406) $(1,266) $ - $(8,689) $ 1,672 $(8,689)
Total adjustments to reconcile net
loss to net cash provided
by operating activities 406 682 - 22,686 (1,672) 22,102
----- ------- ----- ------- ------- -------
Net cash provided by operating
activities - (584) - 13,997 - 13,413
----- ------- ----- ------- ------- -------
Cash Flows from Investing Activities
Capital expenditures - (414) - (2,751) - (3,165)
Other - - - (2,197) - (2,197)
----- ------- ----- ------- ------- -------
Net cash used for investing
activities - (414) - (4,948) - (5,362)
----- ------- ----- ------- ------- -------
Cash Flows from Financing Activities
Repayments of revolving loans - - - (979) - (979)
Repayments of long-term debt - - - (29) - (29)
Other, net - - - (3,376) - (3,376)
----- ------- ----- ------- ------- -------
Net cash used for financing
activities - - - (4,384) - (4,384)
----- ------- ----- ------- ------- -------
Net increase (decrease) in cash and
cash equivalents - (998) - 4,665 - 3,667
Cash and cash equivalents at
beginning of period - 1,781 1 2,581 - 4,363
----- ------- ----- ------- ------- -------
Cash and cash equivalents at
end of period $ - $ 783 $ 1 $ 7,246 $ - $ 8,030
===== ======= ===== ======= ======= =======
19
FOAMEX L.P. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Forward-Looking Statements
This document contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on management's present expectations and beliefs about
future events. As with any projection or forecast, they are inherently
susceptible to uncertainty and changes in circumstances, and we are under no
obligation to, and expressly disclaim any obligation to, update or alter
forward-looking statements whether as a result of such changes, new information,
subsequent events or otherwise.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 27, 2004 COMPARED TO THE
QUARTER ENDED JUNE 29, 2003
Carpet
Foam Cushion Automotive Technical
Products Products Products Products Other Total
-------- -------- ---------- --------- --------- ---------
(thousands)
Quarter ended June 27, 2004
Net sales $126,089 $53,596 $ 96,620 $31,253 $ 6,582 $314,140
Income (loss) from operations $ 12,332 $ 3,428 $ 7,991 $ 8,458 $(15,308) $ 16,901
Depreciation and amortization $ 2,525 $ 717 $ 639 $ 678 $ 1,285 $ 5,844
Income (loss) from operations
as a percentage of net sales 9.8% 6.4% 8.3% 27.1% n.m.* 5.4%
Quarter ended June 29, 2003
Net sales $122,809 $54,089 $123,540 $30,616 $ 6,583 $337,637
Income (loss) from operations $ 10,929 $ 1,620 $ 9,423 $ 9,794 $(10,638) $ 21,128
Depreciation and amortization $ 2,674 $ 803 $ 747 $ 732 $ 1,895 $ 6,851
Income (loss) from operations
as a percentage of net sales 8.9% 3.0% 7.6% 32.0% n.m.* 6.3%
* not meaningful
Income from Operations
Net sales for the quarter ended June 27, 2004 decreased 7% to $314.1
million from $337.6 million in the quarter ended June 29, 2003. The decrease was
primarily attributable to lower net sales in the Automotive Products segment due
to lower volume, including sourcing actions by major customers, partially offset
by higher net sales in the Foam Products segment.
The gross profit was $40.2 million, or 12.8% of net sales, in the quarter
ended June 27, 2004 compared to $38.7 million, or 11.5% of net sales, in the
2003 period. Gross profit margin continues to improve from the unusually low
levels experienced in late 2002 and early 2003 primarily due to profit
improvements in Foam Products and lower costs in Carpet Cushion Products,
partially offset by the lower volume in the Automotive Products segment. We
expect that the gross profit margin in the second half of 2004 will be lower,
primarily due to the net effects of anticipated increases in the costs of
chemical raw materials, but should approximate gross profit margins achieved in
the second half of 2003.
Income from operations for the quarter ended June 27, 2004 was $16.9
million, or 5.4% of net sales, which represented a 20% decrease from the $21.1
million, or 6.3% of net sales, reported during the 2003 period. The improved
gross profit margin, described above, was offset by higher selling, general and
administrative expenses, which increased $2.5 million, or 13%, due primarily to
higher litigation related costs and higher professional fees. Results include
net restructuring charges of $1.7 million in 2004 and net restructuring credits
of $1.6 million in 2003. Restructuring items are discussed under "Other" below.
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Foam Products
Foam Products net sales for the quarter ended June 27, 2004 increased 3% to
$126.1 million from $122.8 million in the 2003 period primarily due to higher
volumes of value-added viscoelastic products. Income from operations increased
13% to $12.3 million in the quarter ended June 27, 2004 from $10.9 million in
the 2003 period principally as a result of this improved volume mix. Income from
operations was 9.8% of net sales in 2004, up from 8.9% of net sales in 2003.
Carpet Cushion Products
Carpet Cushion Products net sales for the quarter ended June 27, 2004
decreased 1% to $53.6 million from $54.1 million in the 2003 period. Income from
operations of $3.4 million in the quarter ended June 27, 2004 was 112% more than
the $1.6 million income from operations reported in the 2003 period primarily as
a result of lower raw material costs. Income from operations represented 6.4% of
net sales in 2004 and 3.0% of net sales in 2003.
Automotive Products
Automotive Products net sales for the quarter ended June 27, 2004 decreased
22% to $96.6 million from $123.5 million in the 2003 period as a result of lower
volumes from sourcing actions by major customers. We anticipate this trend of
lower volume in this segment will continue with total 2004 net sales expected to
be approximately $370.0 million compared to $447.1 million in 2003. Income from
operations decreased 15% to $8.0 million compared to $9.4 million in the 2003
period primarily due to the decline in sales volume. Income from operations
represented 8.3% of net sales in 2004 and 7.6% of net sales in 2003.
Technical Products
Technical Products net sales for the quarter ended June 27, 2004 increased
2% to $31.3 million from $30.6 million in the 2003 period. Increases in unit
volume were partially offset by lower average selling prices due to product mix.
Income from operations decreased 14% to $8.5 million in the 2004 period compared
to $9.8 million in the 2003 period due to higher material and operating costs
and lower volumes of higher margin products. Income from operations represented
27.1% of net sales in 2004 compared to 32.0% of net sales in 2003.
Other
Other primarily consists of certain manufacturing operations in Mexico
City, corporate expenses not allocated to business segments and restructuring
charges (credits). The net sales associated with this segment resulted from our
Mexico City operations. The loss from operations was $15.3 million in the
quarter ended June 27, 2004 and $10.6 million in the quarter ended June 29, 2003
and primarily reflects corporate expenses not allocated to operating segments.
During the quarter ended June 27, 2004, we recorded restructuring charges
of $1.7 million primarily related to lease costs and asset write offs in
connection with the closing of the New York office and the realignment of
automotive operations. During the quarter ended June 29, 2003, we recorded
restructuring credits of $1.6 million from the reversal of prior restructuring
charges no longer required.
Interest and Debt Issuance Expense
Interest and debt issuance expense was $18.6 million in the quarter ended
June 27, 2004, which represented a 4% decrease from the 2003 period expense of
$19.4 million. The decrease is primarily due to lower amortization of debt
issuance costs.
21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Other Income (Expense), Net
Other expense, net was $0.7 million for the quarter ended June 27, 2004
compared to $0.2 million for the quarter ended June 29, 2003. The 2004 period
includes foreign currency transaction losses related to operations in Mexico and
Canada of $0.6 million compared to $0.2 million in 2003.
Provision (Benefit) for Income Taxes
Foamex L.P., as a limited partnership, is not subject to Federal income
taxes. Consequently, no current or deferred provision has been provided for such
taxes. However, Foamex L.P. has provided for the income taxes of certain states
in which it is subject to taxes and for subsidiaries located in foreign
jurisdictions that file separate tax returns.
RESULTS OF OPERATIONS FOR THE TWO QUARTERS ENDED JUNE 27, 2004 COMPARED TO THE
TWO QUARTERS ENDED JUNE 29, 2003
Carpet
Foam Cushion Automotive Technical
Products Products Products Products Other Total
-------- -------- ---------- --------- --------- ---------
(thousands)
Two Quarters ended June 27, 2004
Net sales $260,484 $ 99,694 $190,620 $62,340 $ 14,620 $627,758
Income (loss) from operations $ 28,612 $ 4,731 $ 13,014 $17,314 $(32,992) $ 30,679
Depreciation and amortization $ 5,341 $ 1,491 $ 1,266 $ 1,391 $ 2,721 $ 12,210
Income (loss) from operations
as a percentage of net sales 11.0% 4.7% 6.8% 27.8% n.m.* 4.9%
Two Quarters ended June 29, 2003
Net sales $241,039 $103,226 $244,685 $63,004 $ 13,834 $665,788
Income (loss) from operations $ 17,866 $ 1,004 $ 18,860 $18,726 $(25,424) $ 31,032
Depreciation and amortization $ 5,430 $ 1,601 $ 1,432 $ 1,455 $ 3,038 $ 12,956
Income (loss) from operations
as a percentage of net sales 7.4% 1.0% 7.7% 29.7% n.m.* 4.7%
* not meaningful
Income from Operations
Net sales for the two quarters ended June 27, 2004 decreased 6% to $627.8
million from $665.8 million in the two quarters ended June 29, 2003. The
decrease was primarily attributable to lower net sales in the Automotive
Products segment due to lower volume, including sourcing actions by major
customers, partially offset by higher net sales in the Foam Products segment.
The gross profit was $79.9 million, or 12.7% of net sales, in the two
quarters ended June 27, 2004 compared to $69.2 million, or 10.4% of net sales,
in the 2003 period. Gross profit margin continues to improve from the unusually
low levels experienced in late 2002 and early 2003 primarily due to profit
improvements in Foam Products and lower costs in Carpet Cushion Products,
partially offset by lower volume in the Automotive Products segment. We expect
that the gross profit margin in the second half of 2004 will be lower, primarily
due to the net effects of anticipated increases in the costs of chemical raw
materials, but should approximate gross profit margins achieved in the second
half of 2003.
Income from operations for the two quarters ended June 27, 2004 was $30.7
million, or 4.9% of net sales, which represented a 1% decrease from the $31.0
million, or 4.7% of net sales, reported during the 2003 period. The improved
gross profit margin, described above, was offset by higher selling, general and
administrative expenses
22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
which increased $7.3 million, or 18%, due partially to a $3.7 million bad debt
charge as a result of a customer bankruptcy and employee termination costs in
the first quarter and litigation related costs and higher professional fees in
the second quarter. Results include net restructuring charges of $2.2 million in
2004 and net restructuring credits of $1.6 million in 2003. Restructuring items
are discussed under "Other" below.
Foam Products
Foam Products net sales for the two quarters ended June 27, 2004 increased
8% to $260.5 million from $241.0 million in the 2003 period primarily due to
higher volumes of value-added viscoelastic products. Income from operations
increased 60% to $28.6 million in the two quarters ended June 27, 2004 from
$17.9 million in the 2003 period principally as a result of the improved volume
mix. Income from operations was 11.0% of net sales in 2004, up from 7.4% of net
sales in 2003.
Carpet Cushion Products
Carpet Cushion Products net sales for the two quarters ended June 27, 2004
decreased 3% to $99.7 million from $103.2 million in the 2003 period principally
due to volume declines. Income from operations was $4.7 million in the two
quarters ended June 27, 2004 compared to $1.0 million in the 2003 period due
primarily to lower material and operating costs. Income from operations
represented 4.7% of net sales in 2004 and 1.0% of net sales in 2003.
Automotive Products
Automotive Products net sales for the two quarters ended June 27, 2004
decreased 22% to $190.6 million from $244.7 million in the 2003 period as a
result of lower volume from sourcing actions by major customers. Income from
operations decreased 31% to $13.0 million compared to $18.9 million in the 2003
period primarily due the lower sales volume. Income from operations represented
6.8% of net sales in 2004 and 7.7% of net sales in 2003.
Technical Products
Technical Products net sales for the two quarters ended June 27, 2004
decreased 1% to $62.3 million from $63.0 million in the 2003 period primarily
due to lower average selling prices as a result of product mix partially offset
by higher unit volume. Income from operations decreased 8% to $17.3 million in
the 2004 period compared to $18.7 million in the 2003 period primarily due to
lower volumes of higher margin products. Income from operations represented
27.8% of net sales in 2004 compared to 29.7% of net sales in 2003.
Other
Other primarily consists of certain manufacturing operations in Mexico
City, corporate expenses not allocated to business segments and restructuring
charges (credits). The increase in net sales associated with this segment
resulted from our Mexico City operations. The loss from operations was $33.0
million in the two quarters ended June 27, 2004 and $25.4 million in the two
quarters ended June 29, 2003 and reflected generally higher corporate expenses
in 2004 and included restructuring items discussed below.
During the two quarters ended June 27, 2004, we recorded restructuring
charges of $2.2 million primarily related to lease costs and asset write offs in
connection with the closing of the New York office and the realignment of
automotive operations. During the two quarters ended June 29, 2003, we recorded
restructuring credits of $1.6 million primarily from the reversal of prior
restructuring charges no longer required.
23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Interest and Debt Issuance Expense
Interest and debt issuance expense was $37.2 million in the two quarters
ended June 27, 2004, which represented a 3% decrease from the 2003 period
expense of $38.5 million. The decrease is primarily due to lower amortization of
debt issuance costs.
Other Income (Expense), Net
Other income, net was $0.3 million for the two quarters ended June 27, 2004
compared to other expense, net of $1.8 million for the two quarters ended June
29, 2003. The 2004 period includes foreign currency transaction losses related
to operations in Mexico and Canada of $0.3 million compared to $1.7 million in
2003. Also included in 2004 were gains of $1.0 million on asset disposals.
Provision for Income Taxes
Foamex L.P., as a limited partnership, is not subject to Federal income
taxes. Consequently, no current or deferred provision has been provided for such
taxes. However, Foamex L.P. has provided for the income taxes of certain states
in which it is subject to taxes and for subsidiaries located in foreign
jurisdictions that file separate tax returns.
Liquidity and Capital Resources
Our liquidity requirements consist principally of the need to fund accounts
receivable, inventory and accounts payable, scheduled payments of principal and
interest on outstanding indebtedness, capital expenditures and software
development costs, and employee and non-employee benefits. Cash flow from
operations for the two quarters ended June 27, 2004 was negative due to working
capital requirements, primarily for accounts receivable and inventory. Periodic
borrowings under our revolving credit facility ($26.6 million available at June
27, 2004) and cash flow from operating activities are the principal sources of
cash need to meet liquidity requirements. We expect that cash flow from
operations and the availability of borrowings under the revolving credit
facility will increase in the second half of the year. Scheduled principal
payments on our debt become more significant in the second half of 2005 when the
$51.6 million of 13 1/2% Senior Subordinated Notes mature. (See Note 4 to the
condensed consolidated financial statements.)
Cash and cash equivalents were $4.6 million at June 27, 2004 compared to
$6.6 million at December 28, 2003. Working capital at June 27, 2004 was $8.1
million and the current ratio was 1.03 to 1 compared to working capital at
December 28, 2003 of $18.7 million and a current ratio of 1.06 to 1.
Total long-term debt and revolving credit borrowings at June 27, 2004 were
$757.7 million, up $12.0 million from December 28, 2003. As of June 27, 2004,
there were $115.1 million of revolving credit borrowings under the $240.0
Million Senior Secured Credit Facility with $26.6 million available for
borrowings and $21.9 million of letters of credit outstanding. Revolving credit
borrowings at June 27, 2004 primarily reflect working capital requirements.
The $240.0 Million Senior Secured Credit Facility consists of a revolving
credit facility with a maximum availability of $190.0 million and an initial
term loan of $50.0 million. The revolving credit facility includes a $50.0
million sublimit for letters of credit and availability is limited to eligible
amounts, as defined, of accounts receivable and inventory. Borrowings under the
term loan are limited to eligible amounts, as defined, of equipment and real
estate. Substantially all the assets of Foamex L.P. and its domestic
subsidiaries and Foamex Canada are pledged as collateral for the related
borrowings. Borrowings under the revolving credit facility and the term loan
bear interest at floating rates based upon and including a margin over either
LIBOR or a Base Rate, as defined. At June 27, 2004, the weighted average
interest rates were 4.55% and 4.50% for the revolving loans and the term loan,
respectively. The margin for borrowings under the revolving credit facility and
term loan will increase by 0.50% as of September 1, 2004 which will increase
annualized interest expense by approximately $0.8 million based on current
borrowing
24
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
levels. The term loan requires quarterly installment payments of approximately
$1.8 million. All borrowings under the $240.0 Million Senior Secured Credit
Facility will mature on April 30, 2007.
The $80.0 million Secured Term Loan will mature on April 30, 2007.
Borrowings under this facility bear interest at a rate that is 9.25% plus the
greater of Reference Rate, as defined, or 4.25%. The minimum rate, which was in
effect as of June 27, 2004, is 13.50%. In addition, Foamex L.P. is subject to a
1.00% facility fee which is payable annually on the anniversary date. Borrowings
under the Secured Term Loan are collateralized by the same collateral as the
$240.0 Million Senior Secured Credit Facility. An intercreditor agreement
governs the distribution of collateral among the lenders under the $240.0
Million Senior Secured Credit Facility and the Secured Term Loan.
Under the $240.0 Million Senior Secured Credit Facility and the Secured
Term Loan, Foamex L.P. is subject to a minimum fixed charge coverage ratio, as
defined, of 1.00. For the four quarters ended June 27, 2004, Foamex L.P.'s fixed
charge coverage ratio was 1.04, which translates into $3.3 million of excess
coverage. Although we do not anticipate our fixed charge coverage ratio will
fall below the required minimum, if we are not able to maintain or improve our
operating results and manage our fixed charges, we may not be able to meet our
required fixed charge coverage ratio. If we are not able to meet the fixed
charge coverage ratio and we are not able to obtain waivers or amendments under
the $240.0 Million Senior Secured Credit Facility and the Secured Term Loan,
there would be a material adverse impact on our financial condition. Foamex L.P.
is also subject to a maximum annual capital expenditure amount which is $36.0
million for the year ending January 2, 2005.
Our 13 1/2% Senior Subordinated Notes with a face value of $51.6 million
are due on August 15, 2005. We must generate sufficient cash flow to repay these
notes or obtain additional financing. We continue to evaluate a number of
refinancing options. However, we may not be able to obtain financing at a
reasonable cost, or at all, which may have a material adverse effect on our
financial condition. We may, from time to time, directly or indirectly make
purchases of these notes or other public debt in the open market or in private
transactions.
Effective May 1, 2002, Foamex L.P. completed a series of interest rate swap
transactions with notional amounts aggregating $300.0 million. Foamex L.P.
designated, documented and accounted for these interest rate swaps as fair value
hedges of its 10 3/4% Senior Secured Notes due April 1, 2009. The risk being
hedged in these transactions was the change in fair value of the 10 3/4% Senior
Secured Notes based on changes in the benchmark interest rate, LIBOR. The effect
of these interest rate swap transactions was to convert the fixed interest rate
on the 10 3/4% Senior Secured Notes to floating rates reset twice per year to
correspond with the interest payment dates for the 10 3/4% Senior Secured Notes.
On September 18, 2002, Foamex L.P. unwound the interest rate swap transactions
in exchange for a net cash proceeds of $18.4 million, including $3.6 million
realized through lower effective interest rates while the swap transactions were
in effect. The unwinding resulted in a deferred credit of $14.8 million, which
is being amortized over the term of the 10 3/4% Senior Secured Notes, using the
effective interest rate method.
We anticipate contributing a total of $11.8 million to our pension plans in
2004 and have contributed $2.9 million for the two quarters ended June 27, 2004.
Actuarial valuations are in process for fiscal 2004 that will determine the
actual funding requirements.
Cash Flow from Operating Activities
Cash used for operating activities in the two quarters ended June 27, 2004
was $9.9 million compared to cash provided of $13.4 million in the two quarters
ended June 29, 2003. Accounts receivable and inventories increased $11.7 million
before changes in allowances while other assets increased by $7.2 million. The
increase in accounts receivable is primarily due to higher net sales in the last
two months of the current quarter when compared to the last two months of 2003,
while the inventory increase is due to purchase of major chemical raw materials
in anticipation of price increases for these items. Other assets increased
primarily as a result of cash collateral deposits under our insurance program.
25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Cash Flow from Investing Activities
Investing activities used $2.5 million of cash for the two quarters ended
June 27, 2004. Cash requirements included capital expenditures of $3.1 million
and capitalized software development costs of $1.6 million. These uses were
partially offset by proceeds from asset disposals of $2.2 million. In the two
quarters ended June 29, 2003, cash used for investing activities was $5.4
million, which consisted of capital expenditures of $3.2 million and capitalized
software development costs of $2.2 million. The estimated capital expenditures
and software development costs for the full year 2004 are expected to be
approximately $6.0 to $8.0 million and approximately $4.0 million, respectively.
Cash Flow from Financing Activities
Cash provided by financing activities was $10.4 million for the two
quarters ended June 27, 2004 and consisted principally of $19.1 million of
revolving credit borrowings partially offset by scheduled payments of the term
loan under the $240.0 Million Senior Secured Credit Facility and the net
proceeds from the asset sale used to make an additional payment on the Term Loan
as required under the facility. In addition, cash overdrafts decreased by $2.3
million. Cash used for financing activities in the two quarters ended June 29,
2003 was $4.4 million consisting primarily of a decrease in cash overdrafts and
repayments of revolver borrowings.
Environmental Matters
We are subject to extensive and changing environmental laws and
regulations. Expenditures to date in connection with our compliance with such
laws and regulations did not have a material adverse effect on our operations,
financial position, capital expenditures or competitive position. The amount of
liabilities recorded in connection with environmental matters as of June 27,
2004 was $2.3 million. Although it is possible that new information or future
developments could require us to reassess our potential exposure to all pending
environmental matters, including those described in Note 8 to our condensed
consolidated financial statements, we believe that, based upon all currently
available information, the resolution of all such pending environmental matters
will not have a material adverse effect on our operations, financial position,
capital expenditures or competitive position.
Market Risk
Foamex L.P. has debt securities with variable interest rates subject to
market risk for changes in interest rates. On June 27, 2004, indebtedness with
variable interest rates aggregated $244.9 million. On an annualized basis, if
the interest rates on these debt instruments increased by 1.0%, interest expense
would increase by approximately $2.4 million.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See the "Market Risk" section under Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations.
ITEM 4. CONTROLS AND PROCEDURES.
Foamex L.P. maintains disclosure controls and procedures (as defined in
Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) that are
designed to ensure that information required to be disclosed in reports filed
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the specified time periods. In designing and
evaluating the disclosure controls and procedures, management recognizes that
any system of controls and procedures, no matter how well designed and executed,
can provide only reasonable assurance of achieving the desired control
objectives.
26
FOAMEX L.P. AND SUBSIDIARIES
ITEM 4. CONTROLS AND PROCEDURES.
On April 2, 2004, Foamex L.P. filed a current report on Form 8-K, which
disclosed that Foamex L.P.'s former independent public accountants had
communicated certain matters to Foamex L.P. involving internal controls that
they considered to be reportable conditions under standards established by the
American Institute of Certified Public Accountants. A reportable condition is an
internal control weakness that represents a significant deficiency in the design
or operation of internal control which could adversely affect an organization's
ability to record, process, summarize and report financial data consistent with
management's assertions in the financial statements. These reportable conditions
concerned matters relating to: (1) the integration of Foamex L.P.'s information
technology systems; (2) the design and operation of access and security controls
of Foamex L.P.'s information technology systems; (3) inventory procedures,
processes and systems, including both performance and review and (4) the
preparation of Foamex L.P.'s quarterly financial reports.
Management of Foamex L.P., under the guidance of the Foamex International
Audit Committee, is in the process of remediating the reportable conditions.
Foamex L.P. continues to install a new enterprise-wide information technology
system. Foamex L.P. expects to substantially complete the implementation during
2006. Several modules of the system have already been installed and others are
currently in the process of being implemented. Foamex L.P. believes it has
addressed and remediated the information technology security issues. Foamex L.P.
has implemented improved inventory procedures and processes at each of its
facilities and is taking appropriate actions to ensure their effectiveness,
including training of personnel and additional management oversight. Foamex L.P.
performs monthly physical counts and reconciliations of inventory at each of its
plants and will continue to do so until perpetual inventory records are
available as manufacturing modules of the enterprise-wide information technology
system are implemented at its facilities. The inventory procedures are formally
documented and include requirements that account reconciliations are reviewed
monthly and a checklist of the tasks performed are prepared and reviewed
monthly. Foamex L.P. has strengthened and continues to address the controls over
the preparation of its quarterly financial reports including more extensive and
stringent analytical review procedures applied to its results as well as
developing task logs and checklists to facilitate the accuracy and completeness
of its financial statements and required disclosures. Foamex L.P. has codified
and standardized closing journal entries across its facilities and has
formalized the review and approval process for such journal entries.
Additionally, Foamex L.P. has implemented a standardized consolidation and
reporting system in the United States, Mexico and Canada.
Foamex L.P. does not consider the reportable conditions discussed above,
either individually or in the aggregate, to be a material weakness as that term
is defined under standards established by the American Institute of Certified
Public Accountants. As discussed above, Foamex L.P. is taking actions to
remediate the reportable conditions and has concluded that the existence of the
reportable conditions does not have a material impact on its disclosure controls
and procedures.
Foamex L.P.'s Chief Executive Officer and Chief Financial Officer have
conducted an evaluation of the effectiveness of disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15 as of June 27, 2004 and have
concluded that Foamex L.P.'s disclosure controls and procedures were effective
as of June 27, 2004. Foamex L.P.'s management, including the Chief Executive
Officer and the Chief Financial Officer, also evaluated Foamex L.P.'s internal
control over financial reporting to determine whether any changes occurred
during the quarter covered by this report that have materially affected, or are
reasonably likely to materially affect, Foamex L.P.'s internal control over
financial reporting. Other than as described above, there have been no changes
that have materially affected, or are reasonably likely to materially affect,
Foamex L.P.'s internal control over financial reporting.
27
FOAMEX L.P. AND SUBSIDIARIES
Part II - Other Information.
Item 1. Legal Proceedings.
Reference is made to the description of the legal proceedings
contained in Foamex L.P.'s Annual Report on Form 10-K for the year
ended December 28, 2003. The information from Note 8 to the condensed
consolidated financial statements is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
4.15.4* Amendment No. 2 to Credit Agreement, dated as of June 15,
2004, among Foamex L.P., as Borrower, the affiliates of
Borrower party hereto, the lenders party hereto, and Bank of
America, N.A. as Administrative Agent.
4.16.4* Amendment No. 2 to Credit Agreement, dated as of June 25,
2004, among Foamex L.P., as Borrower, the affiliates of
Borrower party hereto, the lenders party hereto, and Silver
Point Finance, LLC as Administrative Agent.
10.11.15* Separation Agreement and Release between John V. Tunney and
Foamex International Inc., Foamex L.P. and all other
affiliates and subsidiaries of Foamex International Inc.
dated as of June 19, 2004.
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
* Incorporated by reference to the Exhibit to the Form 10-Q of
Foamex International for the quarterly period ended June
27, 2004.
(b) Foamex L.P. filed the following Current Reports on Form 8-K for
the quarter ended June 29, 2003:
Form 8-K dated April 4, 2004, was filed for Item 4 "Changes in
Registrant's Certifying Accountant", concerning the dismissal of
Deloitte & Touche LLP as the Company's independent accountants and the
appointment of KPMG LLP as the Company's new independent accountants
effective as of March 26, 2004.
Form 8-K dated April 4, 2004, was filed for Item 4 "Changes in
Registrant's Certifying Accountant", concerning the dismissal of
Deloitte & Touche LLP as the Company's independent accountants and the
appointment of KPMG LLP as the Company's new independent accountants
for the Foamex L.P. 401(k) Savings Plan for the fiscal year ended
December 31, 2003.
Form 8-K/A dated April 12, 2004, was filed for Item 4 "Changes in
Registrant's Certifying Accountant", furnishing a copy of Deloitte &
Touche LLP letter dated April 7, 2004 to the Securities and Exchange
Commission.
Form 8-K/A dated April 12, 2004, was filed for Item 4 "Changes in
Registrant's Certifying Accountant", furnishing a copy of Deloitte &
Touche LLP letter dated April 7, 2004 to the Securities and Exchange
Commission.
28
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 L.P.
By: FMXI, Inc.
Its Managing General Partner
Date: August 5, 2004 By: /s/ K. Douglas Ralph
----------------------------------
K. Douglas Ralph
Executive Vice President and Chief
Financial Officer
(Duly Authorized Officer)
FOAMEX CAPITAL CORPORATION
Date: August 5, 2004 By: /s/ K. Douglas Ralph
----------------------------------
K. Douglas Ralph
Executive Vice President and Chief
Financial Officer
29