Foamex International Announces Fourth Quarter and Full-Year 2002 Results
LINWOOD, Pa.--March 25, 2003--Foamex International Inc. , the leading manufacturer of flexible polyurethane and advanced polymer foam products in North America, today announced its 2002 fourth quarter and full-year financial results.Fourth Quarter 2002 Results
Sales
Net sales for the fourth quarter were $327.3 million, up 5% from $310.6 million in the fourth quarter of 2001 primarily due to increased Automotive Products net sales partially offset by lower net sales in the Foam Products segment. Gross profit was $27.7 million in 2002, compared to $41.6 million in the fourth quarter of 2001. The decrease in gross profit primarily reflects significant increases in the cost of raw materials that were not fully recovered through selling price increases. Gross profit as a percentage of sales in the quarter decreased to 8.5% from 13.4% in the 2001 quarter.
Earnings
Foamex had a net loss for the fourth quarter of $16.4 million, or $0.67 per diluted share, versus a net loss of $29.4 million, or $1.24 per diluted share, in the fourth quarter of 2001.
The loss from operations was $7.8 million for the 2002 fourth quarter, compared to a loss from operations of $15.1 million in the fourth quarter of 2001. Operating results in the quarter were negatively impacted by lower gross profit and higher selling, general and administrative expenses as compared to the fourth quarter of 2001. Restructuring, impairment and other charges were $10.0 million in the 2002 quarter as compared to charges of $35.9 million in the fourth quarter of 2001
Interest and debt issuance expense for the 2002 quarter was $18.5 million, compared to $14.1 million for the 2001 quarter. The Company was in compliance with its financial covenants at year-end.
Profit Enhancement Initiatives Update
During the fourth quarter the Company implemented several initiatives to restore profitability, including customer price increases, a comprehensive cost reduction program and the rationalization of unprofitable accounts. The fourth quarter 2002 cost reduction program resulted in restructuring, impairment and other charges of $10.0 million, which included a reduction of its executive and management staff, the closure of six operations and a non-cash impairment charge of $2.5 million.
Thomas Chorman, President and Chief Executive Officer of Foamex said: "While we continue to face an extremely challenging business environment, we have taken aggressive steps to return the Company to profitability, including raising our selling prices in response to continuing raw material cost increases, successfully implementing on-going cost savings initiatives and improving operating efficiencies. In addition, we continue to manage our liquidity by controlling capital expenditures and working capital."
Outlook
Chorman continued, "Our major chemical suppliers have informed us that they are implementing additional price increases of approximately 10% to 12%, effective April 1, 2003. As in November, we are aggressively pursuing the necessary steps to recover any costs associated with these increases. Therefore, we have notified our customers that Foamex will be increasing its prices during April 2003. Looking toward first quarter results, shipments have remained strong, and we expect to be in compliance with our covenants for the quarter."
2002 Results
Sales
Net sales for 2002 were $1.328 billion, up 6% from $1.253 billion in 2001 as higher sales in Automotive and Technical Products segments were partially offset by lower sales in the Foam Products segment. Gross profit was $141.4 million, or 10.6% of sales, compared to $180.1 million, or 14.4% of sales, in 2001 due primarily to lower gross profit in the Foam Products segment, driven essentially by the approximately 35% increase in chemical costs initiated by our major suppliers in 2002.
Earnings
Income from operations was $41.9 million for 2002, compared to $63.5 million in 2001 due to lower gross margins attributable to the increase in raw material costs and higher operating, selling, general and administrative expenses. The current year included $4.8 million of restructuring, impairment and other charges compared to $36.1 million of such charges in 2001.
Interest and debt issuance expense for 2002 was $66.6 million, compared to $63.2 million in 2001. The increase is primarily due to higher amortization of debt issuance costs.
Net loss for 2002 was $9.7 million, or $0.37 per diluted share, compared to a net loss of $5.6 million, or $0.24 per diluted share, in 2001.
Business Segment Performance
Foam Products
Foam Products net sales for the fourth quarter of 2002 were $112.6 million, down 4% from the fourth quarter of 2001. Income from operations for the fourth quarter of 2002 was $0.9 million, as compared to income from operations of $13.7 million in the fourth quarter of 2001. This reduction was principally due to lower net sales and increased chemical and operating costs.
For the year 2002, Foam Products sales were $471.0 million, down 6% from $499.7 million in 2001, primarily as a result of a reduction in business from a major bedding manufacturer. Income from operations decreased to $23.9 million in 2002 from $66.3 million in 2001 primarily as a result of the lower net sales and increased chemical and operating costs.
Automotive Products
Automotive Products net sales for the fourth quarter of 2002 were $118.4 million, up 22% from the same period a year ago on higher volumes. Income from operations for the fourth quarter of 2002 was $3.7 million, flat compared to the same period in 2001 as the contribution from incremental sales was offset by higher raw material costs.
For the year 2002, Automotive Products had net sales of $466.7 million, representing a 24% increase from net sales of $377.8 million in 2001, reflecting a continued high build rate for new cars. Income from operations in 2002 increased to $25.3 million from $21.2 million in 2001.
Carpet Cushion Products
Carpet Cushion Products net sales for the fourth quarter were $59.7 million, up 2% from the fourth quarter of 2001. Loss from operations was $3.6 million in the fourth quarter of 2002, compared to a loss from operations of $1.5 million in the same period in 2001. The increase in loss from operations is primarily due to higher raw material and operating costs, partially offset by selling price increases.
For the year 2002, Carpet Cushion Products sales were $234.0 million, as compared to $231.0 million in 2001, despite the loss of one large retail customer, which exited the carpet business early in 2002. This segment had a loss from operations of $12.5 million in 2002, compared to a $6.8 million loss in 2001, as margins were negatively impacted by higher raw material costs that were not fully recovered by selling price increases.
Technical Products
Net sales for Technical Products in the fourth quarter were $29.2 million, compared to net sales of $29.4 million in the fourth quarter of 2001. Despite higher raw material costs, income from operations for the fourth quarter of 2002 was $4.1 million, compared to $4.4 million in the fourth quarter of 2001.
For the year 2002, net sales for Technical Products increased 12% to $124.1 million from $111.0 million in 2001 due to increased volume and improved selling prices. Income from operations in 2002 decreased to $20.3 million, from $22.9 million in 2001, as the improved selling prices were offset by higher raw material costs and one-time charges related to the termination of an initial public offering.
Amended Quarterly Filings
The Company is filing amended quarterly reports for the second and third quarters of 2002. The amendments adjust the allocation of income taxes between income from continuing operations and extraordinary items in the second quarter by $1.6 million and increase the amount of the Company's goodwill accounting change by $3.8 million. These adjustments have no impact on net income or earnings per share in either the second or third quarter of 2002. For the three quarters ended September 29, 2002 the goodwill adjustment reduced net income from $10.5 million ($0.40 per diluted share) to $6.7 million ($0.25 per diluted share).
Annual Meeting
Foamex will hold its annual meeting May 23, 2003.
Conference Call and Replay
Foamex management will host a conference call today, Tuesday, March 25, 2003, at 10:00 a.m. EST to discuss the Company's fourth quarter and full year 2002 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 after the call. It 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 completion of the operational restructuring as currently contemplated and the currently anticipated benefits of the restructuring, including those relating to the work force reductions, cost savings and restructuring charges, the expected benefits of expanding the use of VPF 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 various 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)
Fourth Quarter Year
Comparative Comparative
2002 2001 2002 2001
--------- --------- ----------- -----------
Net Sales $327,311 $310,570 $1,328,094 $1,252,904
Cost of Goods Sold 299,598 268,970 1,186,669 1,072,823
--------- --------- ----------- -----------
Gross Profit 27,713 41,600 141,425 180,081
Selling, General &
Administrative Expenses 25,491 20,857 94,744 80,540
Restructuring, Impairment
and Other Charges 10,011 35,864 4,799 36,068
--------- --------- ----------- -----------
Income (Loss) from
Operations (7,789) (15,121) 41,882 63,473
Interest and Debt Issuance
Expense 18,454 14,137 66,607 63,237
Income from Equity Interest
in Joint Ventures 220 1,035 1,734 1,645
Other Income (Expense), Net (92) (380) 41 (2,196)
--------- --------- ----------- -----------
Loss before Provision
(Benefit) for Income Taxes (26,115) (28,603) (22,950) (315)
Provision (Benefit) for
Income Taxes (9,727) 789 (85,691) 5,297
--------- --------- ----------- -----------
Income (Loss) before
Extraordinary Items and
Changes in Accounting
Principle (16,388) (29,392) 62,741 (5,612)
Extraordinary Items, Net of
Income Taxes - - (1,793) -
Cumulative Effect of
Changes in Accounting
Principle - - (70,647) -
--------- --------- ----------- -----------
Net Income (Loss) $(16,388) $(29,392) $(9,699) $(5,612)
========= ========= =========== ===========
Earnings Per Share - Basic:
Income (Loss) before
Extraordinary Items and
Changes
in Accounting Principle $(0.67) $(1.24) $2.58 $(0.24)
Extraordinary Items - - (0.07) -
Cumulative Effect of
Changes in Accounting
Principle - - (2.91) -
--------- --------- ----------- -----------
Net Income (Loss) $(0.67) $(1.24) $(0.40) $(0.24)
========= ========= =========== ===========
Weighted Average Shares
Outstanding 24,351 23,669 24,275 23,599
========= ========= =========== ===========
Earnings Per Share -
Diluted:
Income (Loss) before
Extraordinary Items and
Changes
in Accounting Principle $(0.67) $(1.24) $2.39 $(0.24)
Extraordinary Items - - (0.07) -
Cumulative Effect of
Changes in Accounting
Principle - - (2.69) -
--------- --------- ----------- -----------
Net Income (Loss) $(0.67) $(1.24) $(0.37) $(0.24)
========= ========= =========== ===========
Weighted Average Shares
Outstanding 24,351 23,669 26,304 23,599
========= ========= =========== ===========
Foamex L.P. and Subsidiaries (a)
Selected Comparative Financial Data
($ Thousands)
(Unaudited)
Fourth Quarter Year
Comparative Comparative
2002 2001 2002 2001
--------- --------- ----------- -----------
Net Sales $327,311 $310,570 $1,328,094 $1,252,904
Income (Loss) from
Operations $(7,524) $(14,744) $42,300 $64,727
% of Sales (2.3)% (4.7)% 3.2% 5.2%
Note to Selected Comparative Financial Data
(a) The Selected Comparative Financial Data for Foamex L.P. and
Subsidiaries includes Foamex Carpet Cushion LLC which was
contributed to Foamex L.P. on March 25, 2002. The contribution has
been accounted for as a merger of entities under common control
and has been recorded in a manner similar to a pooling of
interests.