Linwood, PA, July 12---Foamex International said that volatility in raw materials prices and a difficult operating environment are contributing to weaker than expected performance in its businesses.
As a result, the company said that it has significantly reduced its earnings expectations for the second quarter of 2005. The company recently disclosed an amendment to the Foamex L.P. credit facility that provides additional flexibility in its second quarter bank covenants and bolsters liquidity.
Foamex also announced that it has retained the investment banking firm Miller Buckfire & Co., LLC to help evaluate strategic alternatives for strengthening the company's balance sheet and enhancing long-term value.
"For the past year, Foamex has encountered rising chemical raw material costs and unrelenting market pressures," said Tom Chorman, Foamex's President and Chief Executive Officer. "While we have implemented several measures to offset these pressures, our legacy balance sheet and high debt carrying cost have substantially limited our ability to reinvest in the business. Therefore, we are conducting a thorough assessment of our businesses in order to develop a solution that will result in a significantly stronger company able to generate substantial long-term value."
Chorman continued, "As we work through this process, nothing changes day-to-day. We will continue to focus on improving operations and delivering the superior products and urethane-based solutions our customers expect from Foamex. We are pleased to have the continued support of our lenders, as well as that of our customers and vendors, as we move forward with our recovery."
The previously disclosed amendment to the credit agreement modifies the fixed charge coverage calculation to adjust for the impact on operating income of the previously announced sale of the rubber and felt carpet cushion businesses and certain factors that have impacted the company's operating performance in the second quarter of 2005, including a potentially material claim asserted by one of its customers, which is currently in negotiations. In addition, the amendment permits Foamex to use a portion of the proceeds from the sale of its rubber and felt carpet cushion businesses for working capital and general corporate purposes.
