Linwood, PA, Nov. 18--Foamex International posted net sales of $340.8 million in the third quarter, an increase of 4.5% from $326.2 million in the same period a year ago.
The increase was due primarily to improved sales in the company's automotive products segment, partially offset by lower sales in the foam products segment.
The company posted a net loss for the third quarter of $7.2 million, or $0.30 per diluted share, including restructuring, impairment and other credits of $3.7 million and a net $0.8 million credit for extraordinary items related to the repurchase of senior subordinated debt. The company had net income of $7.3 million, or $0.28 per diluted share, in the third quarter last year.
In addition to the raw material price increases that went into effect in June, the company's major chemical suppliers announced price increases of an additional 10% effective October 1. As a result of these increases, the company anticipates that fourth quarter gross profit will be substantially lower than that reported in the fourth quarter of 2001.
Thomas Chorman, president and CEO said, "Our third quarter results largely reflect the industry wide raw material price increases and one time, non-recurring SG&A expenses related to a planned initial public offering of a minority interest in our Symphonex division and the decision to terminate the potential sale of our carpet cushion business. While we continue to face an extremely challenging market, we are taking aggressive steps to return the company to profitability, including implementing additional price increases to our customers, expanding our raw material supply base, and moving forward on profit enhancement initiatives to reduce costs and increase efficiency. We are pleased to have the continued support of our bank lending group as we move forward to implement this plan."
Foamex has begun implementation of several new initiatives to enhance profitability, increase efficiency and reduce costs, including: implementing additional price increases for its foam products effective in November; reviewing its relationships with marginally profitable accounts; implementing a company wide cost reduction program; and leveraging the company's raw material purchasing capabilities to expand its supply base.
As a result of these initiatives and ones previously implemented under Project Transformation, Foamex expects to realize incremental annualized cost savings of approximately $18 to 20 million, of which approximately $6 to 8 million are related to new actions beyond those planned under Project Transformation, which was announced last December 26.
Net sales for the year-to-date period ended September 29 were approximately $1 billion, up 6% from $942.3 million in the first three quarters of last year1. Gross profit was $113.7 million in the first three quarters of the year, down 18% from $138.5 million a year ago. Gross profit as a percentage of sales in the first three quarters decreased to 11% from 15% in the same period last year.
Net income for the first three quarters was $10.5 million, or $0.40 per diluted share, compared to $23.8 million, or $0.94 per diluted share, last year. Net income in the first three quarters includes the effect of several extraordinary items and accounting changes, including: a $77.3 million benefit related to a deferred income tax adjustment realized in the second quarter; a $1.3 million credit for the cumulative effect of a change in accounting principle related to the write off of negative goodwill; and $68.2 million non-cash charge for the write down of goodwill that was retroactively applied to the company's first quarter results in accordance with SFAS 142.
