LINWOOD, Pa. -- Foamex International Inc. reported second quarter net income of $2.7 million, or 10 cents per diluted share, on net sales of $334.3 million, a decline of 3 percent compared to $345.9 million in the record quarter of a year ago. The company also announced that it is presently finalizing a comprehensive refinancing of its bank debt.

Gross profit was $40.2 million in 2003, down 14 percent from $46.9 million in 2002. Sequentially, the second quarter gross margin of 12 percent was higher than the 9.5 percent reported in the first quarter of 2003 which, the company said, represents a significant step in its efforts to return to historical levels of profitability. The improvement primarily reflects the implementation of selling price increases and manufacturing efficiencies derived from the execution of Foamex's profit restoration plan.

By way of comparison, net income for the second quarter of 2002 was $81.4 million, or $3.04 per diluted share. That figure included a $77.3 million income tax benefit related to a reversal in that period of a valuation allowance on deferred income tax assets.

Income from operations was $21.2 million for the second quarter of 2003, compared to $25.2 million in the second quarter of 2002, reflecting the impact of raw material cost increases that have not been fully recovered through selling price increases. Selling, general, and administrative expenses in the quarter were $19.8 million, down 9 percent from the year-earlier period. Interest and debt issuance expense for the second quarter was $19.4 million, an increase of 12 percent from the 2002 quarter, due to higher effective interest rates and slightly higher average debt levels.

Net sales for the six months ended June 29, 2003 were $662.1 million, up marginally from the $660.0 million in the first half of 2002. Gross profit was $71.5 million, down 16 percent from $84.6 million in 2002. Gross profit as a percentage of sales decreased to 10.8 percent in 2003 from 12.8 percent in 2002.

Net loss for the first half of 2003 was $5.4 million, or 22 cents per diluted share, compared to net income of $13.9 million, or 52 cents per diluted share in 2002. The 2002 period includes the $77.3 million benefit from a deferred income tax adjustment and a $70.6 million charge from accounting changes related to goodwill.

Income from operations was $32.0 million for the first half of 2003, down from $46.7 million in the 2002 period. The impact of raw material cost increases experienced in the second half of 2002 has only been partially recovered by selling price increases.

Carpet Cushion Products net sales for the second quarter were $54.3 million, down 10 percent from the second quarter of 2002 due to lower volume related to facility closures and a strategic refocusing of this business for improved profitability. Loss from operations in the second quarter was $300,000, compared to a $1.2 million loss in the same period of 2002.

For the first six months of 2003, Carpet Cushion Products net sales decreased 9 percent to $103.2 million from $113.2 in the first half of 2002. Loss from operations was $3.4 million in the first half of 2003 compared to a $4.2 million loss during the same period in 2002.