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FOAMEX INTERNATIONAL ANNOUNCES THIRD QUARTER 2004 RESULTS
Company Secures Financing for Repayment of $52 Million of Senior Subordinated Notes
LINWOOD, PA, November 5, 2004 –
Foamex International Inc. (NASDAQ: FMXI), the leading manufacturer
of flexible polyurethane and advanced polymer foam products in North America,
today announced results for the third quarter and year-to-date period ended September
26, 2004.
Third Quarter 2004 Results
Sales
Net sales for the third quarter of 2004 were $310.0 million, down 4% from $323.5 million
in the third quarter of 2003 primarily due to lower volume in the Automotive Products
segment, which offset higher net sales in other segments. Gross profit in the third
quarter of 2004 was $33.2 million, down 11% from $37.3 million in the third quarter of
2003. Gross profit margin for the third quarter of 2004 was 10.7%, down from 11.5% in
the third quarter of 2003 primarily reflecting a non-cash charge for idle manufacturing
assets, and higher raw material and other costs.
Earnings
Income from operations was $14.9 million for the third quarter of 2004, down 16% from $17.6
million in the third quarter of 2003. Selling, general and administrative expenses for the
third quarter of 2004 were $18.2 million versus $19.4 million in the third quarter of 2003.
The decrease in SG&A expenses primarily reflects lower costs related to the closing of the
New York office. Interest and debt issuance expense for the third quarter of 2004 was
$18.7 million, compared to $31.6 million in the third quarter 2003. The third quarter of
2003 included a $12.9 million write off of debt issuance costs associated with the
refinancing of Foamex's bank credit facilities.
Net loss for the third quarter of 2004 was $114.5 million, or $4.68 per diluted share,
compared with a net loss of $11.0 million, or $0.45 per diluted share, in the third quarter
of 2003. The net loss reflects a $112.0 million charge resulting from the Company's decision
to establish a valuation allowance against its deferred tax assets. The Company has
determined that this one-time non-cash charge is appropriate given the impact that higher
chemical costs will have on its near-term operating results, and the general uncertainty
in oil and gas markets that affects the price of our raw materials.
Commenting on the results, Tom Chorman, Foamex's President and Chief Executive Officer,
said: "We continue to face difficult marketplace challenges associated with the rising
costs of chemicals, which had a negative impact on gross margins in the quarter. We
are addressing this situation by aggressively pursuing price increases to recover our
cost increases and controlling the balance of our cost structure. Despite these
short-term challenges, we continue to make progress on our long-term strategies,
including differentiating ourselves in the marketplace with higher value added and
consumer focused products like our all foam mattress."
Financing Agreements
The Company also announced that Foamex L.P. entered into financing arrangements with its
existing lenders under its senior secured credit facilities to provide financing for the
repayment of Foamex L.P.'s 13 ˝% Senior Subordinated Notes due in August 2005. Under the
terms of the new agreements, the lenders will provide up to $54.0 million of new financing,
including up to $15.0 million as a new term loan under its $240.0 Million Senior Secured
Credit Facility due April 30, 2007 and up to $39.0 million of additional loans under its
Secured Term Loan facility due April 1, 2009.
Foamex L.P. plans to use all or a portion of the financing available under the new
agreements, along with other sources of cash, to repay the $51.6 million currently
outstanding on the 13 ˝% Senior Subordinated Notes.
Year to Date Results
Sales & Gross Profit
Net sales for the first three quarters of 2004 were $937.8 million, down 5% from $989.3
million in the first three quarters of 2003 as lower volumes in the Automotive segment
were only partially offset by higher revenues in the Foam Products and Technical Products
segments. Gross profit was $113.1 million, up 6% from $106.6 million in 2003, and gross
profit as a percentage of sales increased to 12.1% in 2004 from 10.8% in 2003 due to a
better mix of value-added products and lower operating costs, partially offset by lower
volumes in the Automotive Products segment.
Earnings
Income from operations was $44.8 million for the first three quarters of 2004, down 7% from
$48.2 million in the 2003 period. Higher gross profit was offset by an increase in SG&A
expenses, primarily due to higher bad debt charges, litigation-related costs and professional
fees partially offset by lower corporate expenses and employee costs related to the closing
of the New York office. Selling, general and administrative expenses for the first three
quarters of 2004 were $66.0 million versus $59.6 million in the first three quarters of
2003. Results for the 2004 period included restructuring charges of $2.3 million associated
with the closing of the New York office and a realignment of the Automotive business,
compared to restructuring credits of $1.2 million in 2003.
Interest and debt issuance expense for the first three quarters of 2004 was $55.9 million,
a 20% decrease from 2003, as the 2003 period included a write-off of $12.9 million in debt
issuance costs.
Net loss for the first three quarters of 2004 was $119.2 million, or $4.88 per diluted
share, compared to a net loss of $18.0 million, or $0.74 per diluted share, in 2003.
Business Segment Performance
Foam Products
Foam Products net sales for the third quarter of 2004 were $140.0 million, up 2% from
$137.4 million in the third quarter of 2003, primarily due to higher volumes of value-added
products. Income from operations for the third quarter of 2004 was $14.0 million, down 5%
from $14.7 million in the third quarter of 2003. This is primarily the result of higher
raw material costs.
For the three quarters ended September 26, 2004, Foam Products net sales were $400.5
million, up 6% from $378.4 million in 2003, due to higher volumes of value-added products.
Income from operations increased 31% to $42.6 million from $32.5 million, primarily as a
result of improved volume mix.
Automotive Products
Automotive Products net sales for the third quarter of 2004 were $77.1 million, down 23%
from $100.6 million in the third quarter of 2003. The decrease is primarily due to lower
volumes from sourcing actions by major customers. Income from operations for the third
quarter of 2004 was $3.2 million, down 58% from $7.6 million in the third quarter of 2003,
primarily due to the effect of lower volume and unfavorable sales mix.
For the first three quarters of 2004, Automotive Products net sales decreased 22% to
$267.8 million from $345.3 million in the 2003 first three quarters, due to lower volumes
from sourcing actions by major customers. Income from operations decreased 39% to $16.2
million compared to $26.4 million in the 2003 period, primarily due to lower sales volume.
Carpet Cushion Products
Carpet Cushion Products net sales for the third quarter of 2004 were $54.8 million, up 1%
from $54.1 million in the third quarter of 2003. Income from operations in the third quarter
of 2004 was $3.0 million, up 69% from $1.8 million in the third quarter of 2003, primarily
due to lower operating costs.
For the first three quarters of 2004, Carpet Cushion Products net sales decreased 2% to
$154.5 million from $157.4 million in the first three quarters 2003, primarily due to volume
declines and lower average selling prices. Income from operations was $7.7 million in the
first three quarters of 2004 compared to $2.8 million during the same period in 2003,
primarily due to lower material and operating costs and partly offset by lower average
selling prices.
Technical Products
Technical Products net sales for the third quarter of 2004 were $31.0 million, up 20% from
$25.8 million in the third quarter of 2003 due to increased unit volume. Income from
operations for the third quarter of 2004 was $8.0 million, up 30% from $6.2 million in the
third quarter of 2003, primarily due to improved sales mix and pricing.
For the first three quarters of 2004, Technical Products net sales increased 5% to $93.3
million from $88.8 million in 2003, primarily due to higher volumes and improved sales mix.
Income from operations increased 2% to $25.3 million for the first three quarters of 2004
compared to $24.9 million in the same period in 2003 due to sales mix improvement.
Conference Call and Replay
Foamex management will host a conference call today, November 5, 2004, at 11:00 a.m. EST to
discuss the Company's third 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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Third 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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$309,993
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$323,542
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$937,751
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$989,330
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Cost of
Goods Sold
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276,821
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286,196
|
824,639
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882,773
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Gross
Profit
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33,172
|
37,346
|
113,112
|
106,557
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|
Selling,
General & Administrative Expenses
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18,213
|
19,394
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66,005
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59,608
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Restructuring,
Charges (Credits)
|
78
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314
|
2,322
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(1,237)
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|
Income
from Operations
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14,881
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17,638
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44,785
|
48,186
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Interest
and Debt Issuance Expense
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18,702
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31,550
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55,911
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70,039
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|
Income
from Equity Interest in Joint Venture
|
67
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495
|
342
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1,374
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Other
Expense, Net
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(531)
|
(952)
|
(279)
|
(2,800)
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|
Loss
Before Provision (Benefit) for Income Taxes
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(4,285)
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(14,369)
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(11,063)
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(23,279)
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Provision (Benefit) for Income Taxes
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110,216
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(3,370)
|
108,170
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(5,303)
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Net Loss
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$(114,501)
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$(10,999)
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$(119,233)
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$(17,976)
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Net
Loss Per Share - Basic
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$(4.68)
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$(0.45)
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$(4.88)
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$(0.74)
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Net
Loss Per Share - Diluted
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$(4.68)
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$(0.45)
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$(4.88)
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$(0.74)
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Weighted
Average Number of Shares - Basic
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24,443
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24,409
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24,441
|
24,389
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Weighted
Average Number of Shares - Diluted
|
24,443
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24,409
|
24,441
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24,389
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Foamex
International Inc. and Subsidiaries
Selected Financial Data
($ Millions)
(Unaudited)
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As of
September 26, 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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$5.9
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$6.6
|
|
|
|
|
|
Accounts Receivable, Net
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$193.1
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$181.3
|
|
|
|
|
|
Inventories
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$99.3
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$95.9
|
|
|
|
|
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Current Assets
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$320.2
|
$326.6
|
|
|
|
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Total Assets
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$661.2
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$789.9
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|
|
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Revolving Credit Borrowings
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$98.9
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$96.1
|
|
|
|
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Accounts Payable
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$107.9
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$98.3
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|
|
|
|
|
Current Liabilities
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$358.5
|
$295.4
|
|
|
|
|
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Long-Term Debt
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$578.6
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$640.6
|
|
|
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Total Debt
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$738.8
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$745.6
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|
|
|
|
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Shareholders’ Deficit
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$(338.4)
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$(203.1)
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|
|
|
|
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Three Quarters Ended
September 26, 2004
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Three Quarters Ended
June 29, 2003
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Other:
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|
|
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Depreciation
and Amortization
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$19.0
|
$19.3
|
|
|
|
|
|
Capital
Expenditures
|
$4.2
|
$4.7
|
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