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FOAMEX INTERNATIONAL SECOND QUARTER 2004 RESULTS
LINWOOD, PA, August 5, 2004 –
Foamex International Inc. (NASDAQ: FMXI), the leading manufacturer
of flexible polyurethane and advanced polymer foam products in North America,
today announced its 2004 second quarter results. The Board of Directors also adopted a Stockholder
Rights Plan.
Second Quarter 2004 Results
Sales & Gross Profit
Net sales for the second quarter of 2004 were $314.1 million, down 7% from $337.6 million in
the second quarter of 2003 due to lower volume in the Automotive segment. Gross profit in
the second quarter of 2004 was $40.2 million, up 4% from $38.7 million in the second quarter
of 2003. Gross profit margin for the second quarter of 2004 was 12.8%, up from 11.5% in the
second quarter of 2003. The gross margin improvement reflects lower operating costs and a
better mix of value-added products.
Earnings
Income from operations was $16.7 million for the second quarter of 2004, down 20% from $20.9
million in the second quarter of 2003 as the improved gross profit was more than offset by
higher selling, general and administrative (SG&A) expenses. Results for the 2004 period also
included restructuring charges of $1.7 million associated with the closing of the New York
office and a realignment of the Automotive business. This compares to restructuring credits
of $1.6 million recorded in the second quarter of 2003. Selling, general and administrative
expenses for the second quarter of 2004 were $21.8 million versus $19.3 million in the second
quarter of 2003. The increase in SG&A expenses primarily relates to litigation costs and
higher professional fees. Interest and debt issuance expense for the second quarter of 2004
was $18.6 million, a decrease from $19.4 million in the second quarter 2003 due to lower
amortization of debt issuance costs.
Net loss for the second quarter of 2004 was $2.6 million, or $0.11 per diluted share,
compared with net income of $3.4 million, or $0.13 per diluted share, in the second quarter
of 2003.
Commenting on the results, Tom Chorman, Foamex's President and Chief
Executive Officer, said: "The business climate in our industry has become more challenging
as a result of the rising costs of raw materials and their respective feedstocks. Based on
the actions we took earlier in the year to delay the impact of higher chemical costs, and
the continued progress of our other profit recovery strategies, we were able to achieve
another quarter of gross margin progress. We continue to work with our customers to
increase prices to deal with these increasing cost pressures, while also pursuing higher
margin business opportunities, supply chain efficiencies and international growth to advance
our long-term strategy."
Year to Date Results
Sales & Gross Profit
Net sales for the first half of 2004 were $627.8 million, down 6% from $665.8 million in the
first half of 2003 as lower volumes in the Automotive segment were only partially offset by
higher revenues in the Foam Products segment. Gross profit was $79.9 million, up 16% from
$69.2 million in 2003, and gross profit as a percentage of sales increased to 12.7% in 2004
from 10.4% in 2003 due to a better mix of value-added products and lower operating costs.
Earnings
Income from operations was $29.9 million for the first half of 2004, down 2% from $30.5
million in the 2003 period. The improvement in gross profit was offset by higher SG&A
expenses, primarily due to a $3.7 million bad debt charge in the first quarter as a result
of a customer bankruptcy and the litigation-related costs and professional fees in the second
quarter. Also, results for the 2004 period included restructuring charges of $2.2 million
associated with the closing of the New York office and a realignment of the Automotive
business, compared to restructuring credits of $1.6 million during the six months of 2003.
Interest and debt issuance expense for the first half of 2004 was $37.2
million, a 3% decrease from 2003 due to lower amortization of debt issuance costs.
Net loss for the first half of 2004 was $4.7 million, or $0.19 per diluted
share, compared to a net loss of $7.0 million, or $0.29 per diluted share, in 2003.
Business Segment Performance
Foam Products
Foam Products net sales for the second quarter of 2004 were $126.1 million, up 3% from
$122.8 million in the second quarter of 2003, primarily due to higher volumes of value-added
products. Income from operations for the second quarter of 2004 was $12.3 million, up 13%
from $10.9 million in the second quarter of 2003. The increase primarily reflects the effect
of higher volume and improved product mix.
For the six months ended June 27, 2004, Foam Products net sales were
$260.5 million, up 8% from $241.0 million in 2003, due to higher volumes of value-added
products. Income from operations increased to $28.6 million from $17.9 million, primarily
as a result of improved volume and product mix.
Automotive Products
Automotive Products net sales for the second quarter of 2004 were $96.6 million, down 22%
from $123.5 million in the second quarter of 2003. The decrease is primarily due to lower
volumes from sourcing actions by major customers. Income from operations for the second
quarter of 2004 was $8.0 million, down 15% from $9.4 million in the second quarter of 2003,
primarily due to the effect of lower volume.
For the first six months of 2004, Automotive Products net sales decreased
22% to $190.6 million from $244.7 million in the 2003 first half due to lower volumes from
sourcing actions by major customers. Income from operations decreased 31% to $13 million,
primarily due to lower sales volume.
Carpet Cushion Products
Carpet Cushion Products net sales for the second quarter of 2004 were $53.6 million, down 1%
from $54.1 million in the second quarter of 2003. Income from operations in the second
quarter of 2004 was $3.4 million as compared to $1.6 million in the second quarter of 2003,
primarily due to lower material and operating costs.
For the first six months of 2004, Carpet Cushion Products net sales
decreased 3% to $99.7 million from $103.2 in the 2003 first half, primarily due to volume
declines. Income from operations was $4.7 million in the first half of 2004 compared to
$1.0 million during the same period in 2003, primarily due to lower material and operating
costs.
Technical Products
Technical Products net sales for the second quarter of 2004 were $31.3 million, up 2% from
$30.6 million in the second quarter of 2003. Income from operations for the second quarter
of 2004 was $8.5 million, down 14% from $9.8 million in the second quarter of 2003, primarily
due to negative mix and pricing effects.
For the first six months of 2004, Technical Products net sales decreased
marginally to $62.3 million from $63.0 million in 2003. Income from operations decreased 8%
to $17.3 million for the first six months of 2004 compared to $18.7 million in the same
period in 2003 primarily due to the negative mix effect.
Stockholder Rights Plan
Foamex also announced today that the Board of Foamex International
adopted a stockholder rights plan on August 5, 2004. The plan is intended to protect
and maximize the value of shareholders' interests in the event of an unsolicited offer.
Commenting on the Stockholder Rights Plan, Raymond E. Mabus, Jr.,
Chairman of the Board, stated: "By adopting a stockholder rights plan, Foamex has taken
proactive steps to ensure that the Board and stockholders have a reasonable amount of time
to consider any offers for the Company's stock, as well as to give the Board more time
to consider other alternatives to maximize shareholder value. Foamex is not adopting the
rights plan in response to any specific effort to acquire control of the Company and is
presently unaware of any takeover plans. In fact, this rights plan is similar to plans
adopted by other companies as it is designed to make certain the Foamex Board has the
ability to negotiate the terms and conditions of any acquisition of a substantial block
of stock by third parties."
Under the rights plan, each common shareholder will receive a dividend
of one preferred share purchase right (a "Right") for each share of Common Stock held of
record at the close of business on August 16, 2004. Each Right entitles its holder to
purchase from the Company one one-thousandth of a share of a new series of preferred
stock at an exercise price of $20.00.
The Rights will become exercisable only if a person or group beneficially
acquires 20% or more of the stockholder voting power of Foamex or if a person or group
announces a tender offer which, if consummated, would result in such person or group
beneficially owning 20% or more of such voting power, in either case without the approval
of the Foamex Board. The Board of Directors may, at its option, redeem the Rights at $0.001
per Right or amend the rights plan within a certain period of time before the rights become
exercisable.
Under most circumstances involving an acquisition by a person or group
of 20% or more of the stockholder voting power of Foamex, and in which the Rights become
exercisable, each Right will entitle its holder (other than such person or group), in lieu
of purchasing preferred stock, to purchase Common Stock of the Company at a 50% discount.
In addition, in the event of certain business combinations following such an acquisition,
each Right will entitle its holder to purchase the Common Stock of an acquirer of the
Company at a 50% discount.
Unless earlier redeemed, exercised or exchanged, the Rights will
expire on August 4, 2014. The distribution of the Rights will not be taxable to
stockholders. A summary of the rights plan will be mailed to stockholders of Foamex
International Inc. and a Current Report on Form 8-K will be filed in connection with the
adoption of the rights plan.
Conference Call and Replay
Foamex management will host a conference call today, August 5,
2004, at 11:00 a.m. EDT to discuss the Company's second quarter 2004 results.
Investors can access the conference call in the U.S. by dialing 888-390-2576 (international
callers, dial 484-630-8116), asking to be connected to the Foamex investor call led by Thomas
Chorman. Participants will be asked to provide the following passcode for this conference
call: Foamex.
In addition, interested parties may listen to the conference
call over the Internet at www.foamex.com. To listen, go to the website 15 minutes early
to register and download and install any necessary audio software. For those unable to participate, a rebroadcast
will be made available at the Company’s web site that will be available shortly
after the call.
About Foamex International Inc.
Foamex, headquartered in Linwood,
PA, is the world's leading producer of
comfort cushioning for bedding, furniture, carpet cushion and automotive
markets. The Company also manufactures high-performance polymers for diverse applications
in the industrial, aerospace, defense, electronics and computer industries.
For more information visit the Foamex web
site at http://www.foamex.com.
Forward-Looking Statements
This press release contains and oral statements made from time to time by representatives of
the Company may contain, forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such forward-looking statements include, without limitation, those relating to cost
savings and restructuring charges, the expected benefits of expanding the use of VPF(SM)
technology, the Company's ability to introduce new products, enhance sales growth and margins
and the outlook for the Company's financial performance. These forward-looking statements are
affected by risks, uncertainties and assumptions that the Company makes about, among other
things, its ability to implement customer selling price increases in response to higher raw
material costs, raw material price increases, general economic conditions, conditions in the
capital markets, the interest rate environment, the level of automotive production, carpet
production, furniture and bedding production and housing starts, the completion of various
restructuring/consolidation plans, the achievement of management's business plans, its capital
and debt structure (including financial covenants), litigation and changes in environmental
legislation and environmental conditions and other factors mentioned in the documents filed
by the Company with the Securities and Exchange Commission. While the Company believes that
its assumptions regarding the foregoing matters are reasonable, any of the assumptions could
be inaccurate, and therefore there can be no assurance that the Company's forward-looking
statements will prove to be accurate. Additional information that could cause actual results
to vary materially from the results anticipated may be found in the Company's most recent
Form 10-K and other reports filed with the Securities and Exchange Commission. Readers
should be aware that any forward-looking statement made in this press release or elsewhere
by the Company speaks only as of the date on which it is made, and the Company disclaims
any obligation or intent to update any of the factors listed above or forward-looking
statements.
# # #
Foamex
International Inc. and Subsidiaries
Consolidated Statements of
Operations
($ Thousands, except EPS
data)
(Unaudited)
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Second Quarter Comparative
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YTD Comparative
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2004
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2003
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2004
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2003
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Net Sales
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$314,140
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$337,637
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$627,758
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$665,788
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Cost of
Goods Sold
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273,959
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298,963
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547,818
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596,577
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|
Gross
Profit
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40,181
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38,674
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79,940
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69,211
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Selling,
General & Administrative Expenses
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21,807
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19,315
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47,792
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40,214
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Restructuring,
Charges (Credits)
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1,716
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(1,551)
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2,244
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(1,551)
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Income
from Operations
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16,658
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20,910
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29,904
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30,548
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Interest
and Debt Issuance Expense
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18,598
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19,378
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37,209
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38,489
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Income
(Loss) from Equity Interest in Joint Venture
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(2)
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513
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275
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879
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Other
Income (Expense), Net
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(740)
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(233)
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252
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(1,848)
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Income (Loss)
Before Benefit for Income Taxes
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(2,682)
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1,812
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(6,778)
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(8,910)
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Benefit for Income Taxes
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(65)
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(1,633)
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(2,046)
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(1,933)
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Net Income (Loss)
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$(2,617)
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$3,445
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$(4,732)
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$(6,977)
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Net
Income (Loss) Per Share - Basic
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$(0.11)
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$0.14
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$(0.19)
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$(0.29)
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Net
Income (Loss) Per Share - Diluted
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$(0.11)
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$0.13
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$(0.19)
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$(0.29)
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Weighted
Average Number of Shares - Basic
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24,443
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24,407
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24,440
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24,379
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Weighted
Average Number of Shares - Diluted
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24,443
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25,914
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24,440
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24,379
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Foamex
International Inc. and Subsidiaries
Selected Financial Data
($ Millions)
(Unaudited)
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As of
June 27, 2004
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As of
December
28, 2003
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Balance
Sheet:
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Cash
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$4.6
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$6.6
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Accounts Receivable, Net
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$183.8
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$181.3
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Current Assets
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$326.7
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$326.6
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Total Assets
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$786.5
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$789.9
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Revolving Credit Borrowings
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$115.1
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$96.1
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Accounts Payable
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$92.8
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$98.3
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Current Liabilities
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$305.2
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$295.4
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Long-Term Debt
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$633.6
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$640.6
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Total Debt
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$757.7
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$745.6
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Shareholders’ Deficit
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$(208.4)
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$(203.1)
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Two Quarters Ended
June 27, 2004
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Two Quarters Ended
June 29, 2003
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Other:
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Depreciation
and Amortization
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$12.2
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$13.0
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Capital
Expenditures
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$3.1
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$3.2
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