FOAMEX CAPITAL CORP - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from .......... to ..........

Commission file number: 1-11432: 1-11436

FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
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(Exact Name of registrant as Specified in its Charter)

Delaware 05-0475617
Delaware 22-3182164
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

1000 Columbia Avenue, Linwood, PA 19061
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (610) 859-3000
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act: None
----

Indicate by check mark whether Foamex L.P. (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that Foamex
L.P. was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO

Indicate by check mark whether Foamex Capital Corporation (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods that
Foamex Capital Corporation was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. YES X NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Annual Report on Form 10-K or any
amendment to this Annual Report on Form 10-K. [X]

None of the voting securities of Foamex L.P. or Foamex Capital Corporation
are held by non-affiliates.

As of March 2, 2001, there were 1,000 shares of Foamex Capital
Corporation's common stock outstanding.

Foamex L.P. and Foamex Capital Corporation meet the conditions set for the
in General Instruction (I)(1)(a) and (b) of this Annual Report on Form 10-K and
are therefore filing this form with reduced disclosure format.

DOCUMENTS INCORPORATED BY REFERENCE
None

FOAMEX L.P.
FOAMEX CAPITAL CORPORATION

INDEX

Page
Part I

Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 13

Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 13
Item 6. Selected Consolidated Financial Data 14
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Item 7a. Quantitative and Qualitative Disclosures about Market Risk 28
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 28

Part III
Item 10. Directors and Executive Officers of the Registrant 28
Item 11. Executive Compensation 28
Item 12. Security Ownership of Certain Beneficial Owners
and Management 28
Item 13. Certain Relationships and Related Transactions 28

Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 29

Signatures 37

The Registrant will furnish a copy of any exhibit to this Annual Report on Form
10-K upon the payment of a fee equal to the Registrants' reasonable expense in
furnishing such exhibit.

2

PART I
ITEM l. BUSINESS

General

Foamex L.P., a wholly owned subsidiary of Foamex International Inc.
("Foamex International"), is engaged primarily in the manufacturing and
distribution of flexible polyurethane and advanced polymer foam products. As of
December 31, 2000, Foamex L.P.'s operations are conducted directly and through
its wholly owned subsidiaries, Foamex Canada Inc. ("Foamex Canada"), Foamex
Latin America, Inc. ("Foamex Mexico"), and Foamex Asia, Inc. ("Foamex Asia"). As
of December 31, 2000, Foamex L.P.'s partners were FMXI, Inc. ("FXMI") with a 2%
managing general partnership interest and Foamex International with a 98%
limited partnership interest. FMXI is a wholly owned subsidiary of Foamex
International.

References in this Annual Report on Form 10-K to "Foamex L.P." mean Foamex
L.P. and, where relevant or applicable, its subsidiaries.

Segments

General

Foamex L.P. operates in the flexible polyurethane and advanced polymer foam
products industry and is one of the largest manufacturers and distributors of
flexible polyurethane and advanced polymer foam products in North America.
Foamex L.P. has numerous manufacturing facilities dedicated to certain product
lines as well as facilities with the capability to support multiple product
lines. Each of Foamex L.P.'s business segments has a diverse customer base.
Foamex L.P.'s senior executives direct sales efforts for each business segment.

Business segments are listed below.

Foam Products - manufactures and markets foam used by the bedding industry,
the furniture industry and the retail industry.
Carpet Cushion Products - manufactures and distributes prime, rebond,
sponge rubber and felt carpet cushion to Foamex Carpet Cushion, Inc.
("Foamex Carpet"), a sister company wholly owned by Foamex International.
Automotive Products - supplies foam primarily for automotive interior
applications to automotive manufacturers and tier one suppliers.
Technical Products - manufactures and markets reticulated foams and other
custom polyester and polyether foams for industrial, specialty and consumer
and safety applications.
Other - primarily consists of certain manufacturing operations in Mexico,
corporate expenses not allocated to the other business segments and
restructuring and other charges (credits).

Segment financial information is included in Note 15 to the consolidated
financial statements included in this Annual Report on Form 10-K.

Foam Products

Products are distributed directly from manufacturing facilities and
indirectly through independent fabricator distributors. These foams are used by
the bedding industry in quilts, toppers, cores and border rolls for mattresses.
In the furniture industry, they are generally used for upholstered seating
products and in the retail industry, for a broad range of products such as
mattress overlay pads, leisure furniture, futons, and pillows. Foam Products are
generally sold in large volumes on a regional basis because of high shipping
costs.

Foamex L.P.'s bedding products are sold to mattress manufacturers. Foamex
L.P. also supplies cut-to-size seat cushions, back cushions and other pieces to
the furniture industry. Furniture foams are sold directly to manufacturers as
well as through distributors. The consumer products group sells therapeutic
sleep products such as

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mattress pads and bed pillows for the health care and consumer markets and a
broad line of home furnishing products to retailers throughout North America.

The development and introduction of value added products continues to be a
priority including viscoelastic or "memory" foams for the bedding industry,
which maintain their resiliency better than other foams and materials, and
products incorporating Reflex(R). Reflex(R) materials include cushion wraps and
cushion cores and are advanced polymer cushioning products designed to improve
comfort, quality and durability in upholstered furniture and bedding products.
Reflex(R) was created using the variable pressure foaming manufacturing process
("VPF(SM)"). High efficiency thermal management foam products for applications
in work gloves and outerwear have also been introduced.

Carpet Cushion Products

Foamex L.P. manufactures and distributes Carpet Cushion Products, which
include prime, rebond, sponge rubber and felt carpet cushion, to Foamex Carpet.
Prime carpet cushion is made from polyurethane foam buns. Rebond carpet cushion
is made from various types of scrap foam which are shredded into small pieces,
processed and then bonded using a chemical adhesive. In accordance with a supply
agreement with Foamex Carpet, if requested by Foamex Carpet, Foamex L.P. is
required to supply all of Foamex Carpet's requirements for Carpet Cushion
Products. Rebond manufacturing requires the management of a comprehensive
recycling business that includes an extensive collection network from the
automotive and foam industries on a worldwide basis.

Automotive Products

Foamex L.P. is one of the largest suppliers of automotive foam products for
the North American operations of original equipment manufacturers ("OEMs").
Depending on the automotive manufacturer and/or the application, automotive foam
products are supplied by Foamex L.P. either directly to the manufacturers or
indirectly through tier one suppliers. Automotive Products include foam for trim
pads, door panel parts, headliners and for acoustical purposes. Products also
include flame and adhesive laminates and rolls for tri-lamination. Tri-laminated
foam is applied to automotive fabrics to form a foam/fabric composite that
results in cost savings and aesthetic value for the automotive manufacturer.

Domestic automotive manufacturers have narrowed their supply base during
recent years and increased the percentage and dollar amount of components that
they purchase from outside suppliers. As a result, a smaller number of companies
are supplying an increasing percentage of automotive foam products. Automotive
suppliers are increasingly offering integrated systems which lower the overall
cost and improve quality relative to previous sourcing methods in which
individually sourced components were assembled and installed by the OEMs. A
continuing focus on new product development and flexible manufacturing
capabilities are essential to satisfy changing specifications.

Examples of Foamex L.P.'s ability to react to changing industry
requirements include its development of thermoformable headliners,
tri-laminates, advanced cutting technology and energy absorbing foams. For
example, Foamex L.P. has introduced surface modification technology ("SMT(R)")
and continuous platform cutting ("CPC(SM)") used for vehicle flooring systems.
Also, the use of tri-laminates has increased due to the manufacturers' need for
significant cost savings and consumer demand for improved aesthetics. Foamex
L.P. intends to increase its production and distribution of foam and fabric
components, such as tri-laminated material for automotive seating.

Automotive manufacturers are increasingly requiring the production
facilities of their suppliers to meet certain high quality standards. Foamex
L.P. has achieved and expects to maintain the highest quality ratings awarded to
foam suppliers by automotive manufacturers. In addition, all tier one and tier
two automotive supplier facilities worldwide will eventually be required to meet
the QS-9000 quality manufacturing standards set by the United States automotive
manufacturers. In 1996, Foamex L.P. completed QS-9000 and ISO-9001 certification
for its eight domestic facilities which supply the automotive industry. Foamex
L.P. was one of the first polyurethane manufacturers to be QS-9000 certified
which demonstrates its commitment to producing the highest quality products and
meeting the needs of its customers.

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Technical Products

Foamex L.P. believes that it is one of the foam industry's prime innovators
and producers of industrial, specialty, consumer and safety foams (collectively,
"Technical Products"). Technical Products consist of reticulated foams and other
custom polyester and polyether foams, which are sometimes combined with other
materials to yield specific properties. Reticulation is the thermal or chemical
process used to remove the membranes from the interconnecting cells within foam.
This leaves a porous, skeletal structure allowing for the free flow of gases
and/or liquids. Felting and lamination with other foams or materials give these
composites specific properties.

Reticulated foams are well suited for filtration, reservoiring, sound
absorption and sound transmission. Industrial applications include carburetors,
computer cabinets, inkpad reservoirs, high-speed inkjet printers and speaker
grills. Medical applications include oxygenators for cardiopulmonary surgery,
instrument holders for sterilization, pre-op scrubbers impregnated with
anti-microbial agents and EKG pads containing conductive gels. Other Technical
Products have unique characteristics such as flame retardancy and fluid
absorption. Additional products sold within this group include foams for
refrigerated supermarket produce counters, mop heads, paint brushes and cosmetic
applications.

Foamex L.P. uses advertising in trade journals and related media in order
to attract customers and, more generally, to increase an awareness of its
capabilities for Technical Products. In addition, due to the highly specialized
nature of most Technical Products, Foamex L.P.'s research staff works with
customers to design, develop and manufacture each product to specification.

Other

Other consists primarily of certain manufacturing operations in Mexico,
corporate expenses not allocated to the other business segments and
restructuring and other charges (credits). See Note 15 to the consolidated
financial statements.

Marketing and Sales

Foam Products are sold directly by Foamex L.P. to major bedding and
furniture manufacturers such as Sealy, Simmons and Berkline and also through
third party independent fabricators. In addition, Foamex L.P. manufactures and
distributes foam-based consumer products such as futons, pillows, mattress pads
and juvenile furniture to retail chains such as Wal-Mart, Target, J.C. Penney
and Bed Bath & Beyond, Inc. Foamex L.P.'s foam-based consumer products sales
efforts are primarily regionally based. In December 2000, Foamex L.P. announced
that it was exploring a marketing alliance with Sleep Innovations. Sleep
Innovations is a leader in the marketing of foam-based consumer products and if
a marketing alliance is established, it is anticipated that Sleep Innovations
would direct all marketing efforts. The key strategic elements supporting growth
in these areas are a focus on marketing and sales efforts, high quality,
cost-competitive products and low freight costs through optimal plant location.
Plant locations are critical in this regionalized line of business where the
transportation cost typically comprises a significant portion of product cost.

Carpet Cushion Products are sold to Foamex Carpet, which in turn sells to
distributors and to major floor covering retail chains such as Home Depot, Sears
and CarpetMax. A key focus in 2001 will be increased marketing efforts to
commercial product lines.

Foamex L.P. has been a leading supplier of Automotive Products to OEMs,
including Ford, General Motors and DaimlerChrysler for more than 30 years.
Foamex L.P. is also the primary supplier of Automotive Products to certain tier
one suppliers, including Lear Corporation and Johnson Controls. Foamex L.P.
competes for new business both at the beginning of development of new models and
upon the redesign of existing models. Once a foam producer has been designated
to supply parts for a new model program, the foam producer usually produces
parts for the life of the program. Competitive factors in the market include
product quality and reliability, cost and timely service, technical expertise
and development capability, new product innovation and customer service.

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Foamex L.P.'s Technical Products are used for filtration and reservoiring
in a wide variety of applications by companies such as Hewlett-Packard, Lexmark
and Briggs & Stratton. Foamex L.P. markets most of its Technical Products
through a network of independent fabrication and distribution companies in North
America, the United Kingdom and South Korea. Such fabricators or distributors
often further process or finish Technical Products to meet the specific needs of
end users. Foamex L.P.'s specialty and technical foams service unique end user
requirements and are generally sold at relatively high margins. This line of
business is characterized by a diversity and complexity of both customers and
applications.

International Operations and Export Sales

Foamex L.P.'s geographical information is included in Note 15 to the
consolidated financial statements.

Major Customers

Sales to Foamex Carpet, reported under Carpet Cushion Products, totaled
$165.8 million in 2000, $187.7 million in 1999 and $185.5 million in 1998.
During 2000 and 1999, sales to Johnson Controls, which are included in
Automotive Products, accounted for approximately 13.3% and 12.5% of Foamex
L.P.'s net sales, respectively. No other unaffiliated customer accounted for
more than 10.0% of Foamex L.P.'s net sales during any of the past three years.
During the year ended December 31, 2000, net sales to the five largest customers
comprised approximately $373.9 million or 32.2% of Foamex L.P.'s net sales. The
loss of any one of these customers could have a material adverse effect on
Foamex L.P.

Manufacturing and Raw Materials

As of December 31, 2000, Foamex L.P. conducted its operations at 56
manufacturing and distribution facilities with a total of approximately 7.9
million square feet of floor space. Foamex L.P. believes that its manufacturing
and distribution facilities are well suited for their intended purposes and are
in good condition. The manufacturing and distribution facilities are
strategically located to service Foamex L.P.'s major customers because of the
high freight cost in relation to the cost of the foam product generally results
in distribution being most cost effective within a 200 to 300 mile radius.

Foamex L.P.'s fabrication process involves cutting foam buns into various
shapes and sizes to meet customer specifications. Fabricated foam is sold to
customers and is utilized by Foamex L.P. to produce its foam-based consumer
products. Scrap foam, generated in connection with the fabrication of foam
products, is used by Foamex L.P. to produce rebond carpet cushion.

Raw materials account for a significant portion of the manufacturing costs
of Foamex L.P. The two principal chemicals used in the manufacture of flexible
polyurethane foam are toluene diisocyanate ("TDI") and polyol.

Foamex L.P. generally has alternative suppliers for each major raw material
and Foamex L.P. believes that it could find alternative sources of supply should
it cease doing business with any one of its major suppliers.

The price of TDI and polyol has historically been cyclical and volatile.
The price of these raw materials is influenced by demand, manufacturing capacity
and oil prices. Foamex L.P.'s price for TDI and polyol were increased several
times during 2000. In response, Foamex L.P. increased selling prices, where
possible, for cushioning, automotive and technical foam products depending on
the product. The 2000 results were adversely affected by the delays in, and the
inability to implement selling price increases to offset the raw material price
increases. Foamex L.P. has announced selling price increases during 2001 to
offset the additional raw material price increases. However, there can be no
assurance that Foamex L.P. will be successful in implementing selling price
increases or that competitive pricing pressure will not require Foamex L.P. to
adjust selling prices.

A key raw material used in the manufacture of carpet cushion is scrap foam.
Foamex L.P. internally generates a substantial portion of the scrap foam used in
the production of rebond carpet cushion from its other operations. Historically,
the market price of rebond carpet cushion has fluctuated with the market price
of scrap foam.

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Employees

As of December 31, 2000, Foamex L.P. employed approximately 5,500 persons.
Approximately 1,650 of these employees are located outside the United States and
approximately 775 of these employees are covered by collective bargaining
agreements with labor unions, which agreements expire on various dates through
2004. Foamex L.P. considers relations with its employees to be good.

Competition

The flexible polyurethane foam industry is highly competitive with price,
quality and service being significant competitive factors. Foamex L.P.'s
competitors in the polyurethane foam industry include E. R. Carpenter Company,
Hickory Springs Manufacturing Company, Vitafoam, Inc., General Foam Corporation,
Flexible Foam Products, Inc., and Future Foam, Inc. None of these competitors
individually competes in all of the business segments in which Foamex L.P. does
business.

Patents and Trademarks

Foamex L.P. owns various patents and trademarks registered in the United
States and in numerous foreign countries. The registered processes and products
were developed through ongoing research and development activities to improve
quality, reduce costs and expand markets through development of new applications
for flexible polyurethane foam products. While Foamex L.P. considers its patents
and trademarks to be a valuable asset, it does not believe that its competitive
position is dependent on patent protection or that its operations are dependent
upon any individual patent, trademark or tradename.

Research and Development

Foamex L.P. believes it has a leading research and development capability
in the flexible polyurethane foam industry. Foamex L.P.'s primary research and
development facility is located in Eddystone, Pennsylvania. Expenditures for
research and development amounted to $2.5 million, $3.3 million and $3.3 million
for 2000, 1999 and 1998, respectively.

Foamex L.P., Recticel, s.a. ("Recticel"), a European polyurethane foam
manufacturer, whose subsidiary was a former partner of Foamex L.P. and
affiliates of Recticel are current shareholders of Foamex International, and
Beamech Group Limited, an unaffiliated third party, have an interest in a Swiss
corporation that develops new manufacturing technology for the production of
polyurethane foam including the VPF(SM) manufacturing process. Foamex L.P.,
Recticel and their affiliates have a royalty-free license to use technology
developed by the Swiss corporation. Foamex L.P. and Recticel have exchanged
know-how, trade secrets, engineering and other data, designs, specifications,
chemical formulations, technical information, market information and drawings
which are necessary or useful for the manufacture, use or sale of foam products
and it is anticipated that they will continue to do so in the future.

Buyout Proposals - History

On February 9, 2000, Foamex International announced that it was in
discussions with respect to a proposal involving the acquisition of all of
Foamex International's outstanding common stock for cash. Foamex International
stated that the proposal was subject to a number of conditions, including the
buyer's due diligence and the execution of definitive agreements. Foamex
International agreed to an exclusive negotiating period ending five business
days after deliver of its audited financial statements included in Foamex
International's Annual Report on Form 10-K to the prospective buyer. On April 5,
2000, Foamex International announced that discussions with the potential buyer
were terminated with no agreement having been reached. Foamex International
subsequently terminated the engagement of J.P. Morgan & Company, Inc. ("JP
Morgan"), which acted as financial advisor in connection with such transaction.
During the second quarter of 2000, Foamex International ended discussions with
JP Morgan concerning an additional engagement.

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On August 5, 1999, Foamex International announced that its Board of
Directors signed a letter of intent with Sorgenti Chemical Industries, LLC and
Liberty Partners Holdings 20, LLC (collectively, the "Purchasers") for a
business combination providing for $11.50 per share for all of Foamex
International's outstanding common stock (the "Sorgenti Transaction"). Under the
terms of the letter of intent, if Foamex International entered into a business
combination with another party, the Purchasers would be entitled to a break-up
fee of $6.0 million plus reimbursement of certain expenses, subject to certain
conditions, including the willingness of the Purchasers to enter into a
definitive merger agreement providing for a price of at least $11.50 per share
prior to the expiration of the letter of intent. The proposed transaction was
subject to a number of conditions, including the negotiation of definitive
documents regarding certain conditions relating to the bank credit facilities
and the public debt of Foamex International's subsidiaries. Additional issues
considered included minimum shareholder acceptance, change of board membership,
and other provisions providing for a higher break-up fee and expense
reimbursement if Foamex International entered into a business combination
providing a more favorable transaction. On December 15, 1999, Foamex
International announced that the letter of intent with the Purchasers, which had
been extended, expired by its terms. The Purchasers had submitted a revised bid
at a price and on terms that were less favorable than those contained in the
letter of intent and the Negotiating Committee of Foamex International's Board
of Directors rejected the revised bid.

In 1998, Foamex International received an unsolicited buyout proposal from
Trace International Holdings, Inc. ("Trace"), Foamex International's principal
stockholder. Foamex International entered into two merger agreements, which were
subsequently terminated by Trace.

Foamex International Shareholder and Change in Control Developments

Trace is a privately held company, which owned approximately 29% of Foamex
International's outstanding voting common stock at September 30, 2000, and whose
former Chairman also serves as Foamex International's Chairman. Foamex
International's common stock owned by Trace was pledged as collateral against
certain of Trace's obligations. The Foamex L.P. credit facility, pursuant to
which approximately $351.1 million of debt was outstanding as of September 30,
2000, provided that a "change of control" would be an event of default and could
result in the acceleration of such indebtedness. "Change of control" means, for
this purpose, that (i) a person or related group, other than Trace, beneficially
owns more than 25% of Foamex International's outstanding voting stock and (ii)
such voting stock constitutes a greater percentage of such voting stock than the
amount beneficially owned by Trace. Additionally, certain indentures of Foamex
L.P. and Foamex Capital Corporation ("FCC") relating to senior subordinated
notes of $248.0 million contain similar "change of control" provisions, which
require Foamex L.P. and FCC to tender for such notes at a price in cash equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid interest
thereon, if there is such a "change of control".

On July 21, 1999, Foamex L.P. was informed by Trace that it filed a
petition for relief under Chapter 11 of the Bankruptcy Code in Federal Court in
New York City. Subsequently, on January 24, 2000, an order was signed converting
the Trace bankruptcy from Chapter 11 to Chapter 7 of the Bankruptcy Code. A
trustee was appointed to oversee the liquidation of Trace's assets. Neither
Trace's bankruptcy filing nor the conversion to Chapter 7 constituted a "change
of control" under the provisions of the debt agreements described above.

On July 31, 2000, Foamex International announced that it had entered into
an agreement (the "Exchange Agreement") with The Bank of Nova Scotia relating to
a portion of the 7,197,426 shares of Foamex International's common stock pledged
by Trace to The Bank of Nova Scotia. The Exchange Agreement provided for the
transfer of the pledged stock to The Bank of Nova Scotia in a manner that would
not constitute a "change of control" as described above. These transactions were
conditioned upon bankruptcy court approval of a settlement agreement between The
Bank of Nova Scotia and the trustee for the Trace bankruptcy, which was entered
on October 18, 2000. On November 2, 2000, the transactions contemplated by the
Exchange Agreement and the settlement agreement were consummated, and did not
constitute a "change of control". As a result, Trace no longer owns any shares
of Foamex International's common stock.

Under the Exchange Agreement, The Bank of Nova Scotia initially received
1,500,000 shares of Foamex International's common stock from the Trace
bankruptcy estate and exchanged these common stock shares for 15,000 shares of a
new class of Foamex International's non-voting non-redeemable convertible
preferred stock (the

8

"Series B Preferred Stock"). Each share of the Series B Preferred Stock can be
converted into 100 shares of Foamex International's common stock but only if
such conversion would not trigger a "change of control" event, as discussed
above. The Series B Preferred Stock: (a) is entitled to dividends only if a
dividend is declared on Foamex International's common stock, (b) ranks senior to
any future preferred stock issued by Foamex International and (c) is entitled to
a liquidation preference of $100 per share. Following this exchange, The Bank of
Nova Scotia became the owner of 24.41% of the outstanding shares of Foamex
International's common stock when the remaining 5,697,426 shares of Foamex
International's common stock were transferred to The Bank of Nova Scotia from
the Trace bankruptcy estate.

GFI Transaction

On February 27, 1998, Foamex International, Foamex L.P. and certain of
their affiliates completed a series of transactions which changed Foamex L.P.'s
structure (collectively, the "GFI Transaction"). Prior to the consummation of
the GFI Transaction, Foamex L.P. defeased the $4.5 million outstanding principal
amount of its 9 1/2% senior secured notes due 2000. Foamex L.P. settled its
intercompany payables to General Felt Industries, Inc. ("General Felt") with
$4.8 million in cash and a promissory note in the aggregate principal amount of
$34.0 million supported by a $34.5 million letter of credit under the Foamex
L.P. credit facility (the "Foamex/GFI Note"). The initial transaction resulted
in the transfer from Foamex L.P. to Foam Funding LLC, an indirect wholly owned
subsidiary of Trace, of all of the outstanding common stock of General Felt, in
exchange for (i) the assumption by Foam Funding LLC of $129.0 million of Foamex
L.P.'s indebtedness and (ii) the transfer by Foam Funding LLC to Foamex L.P. of
a 1% non-managing general partnership interest in Foamex L.P. As a result,
General Felt ceased being a subsidiary of Foamex L.P. and was relieved from all
obligations under Foamex L.P.'s 9 7/8% senior subordinated notes due 2007 and 13
1/2% senior subordinated notes due 2005. Upon consummation of the initial
transaction, Foamex Carpet, a newly formed wholly owned subsidiary of Foamex
International, Foamex International, Foam Funding LLC, and General Felt entered
into an Asset Purchase Agreement dated February 27, 1998, in which General Felt
sold substantially all of its assets (other than cash, the Foamex/GFI Note and
its operating facility in Pico Rivera, California) to Foamex Carpet in exchange
for (i) $20.0 million in cash and (ii) a promissory note issued by Foamex Carpet
to Foam Funding LLC in the aggregate principal amount of $70.2 million. The
$20.0 million cash payment was funded with a distribution by Foamex L.P.

No gain was recognized on the GFI Transaction. The net impact of the GFI
Transaction was an increase in Foamex L.P.'s partners' capital (deficit) of
approximately $10.1 million, a distribution of $20.0 million to Foamex
International and approximately $1.5 million of fees charged to earnings. The
$129.0 million of debt assumed by Foam Funding LLC in the GFI Transaction was
used to repay approximately $125.1 million of term loan borrowings that was
accounted for as an extinguishment of debt which resulted in an extraordinary
loss of approximately $3.2 million. The 1% non-managing general partnership
interest acquired in connection with the GFI Transaction was accounted for as a
redemption of equity.

Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. In connection with
certain forward-looking statements contained in this Annual Report on Form 10-K
and those that may be made in the future by or on behalf of Foamex L.P. which
are identified as forward-looking, Foamex L.P. notes that there are various
factors that could cause actual results to differ materially from those set
forth in any such forward-looking statements, such as the ability to implement
customer selling price increases in response to higher raw material costs, raw
material price increases, general economic conditions, the interest rate
environment, the level of automotive production, carpet cushion production and
housing starts, the completion of various restructuring/consolidation plans, the
achievement of management's business plans, Foamex L.P.'s capital and debt
structure (including various financial covenants), litigation and changes in
environmental legislation and environmental conditions. The forward-looking
statements contained in this Annual Report on Form 10-K were prepared by
management and are qualified by, and subject to, significant business, economic,
competitive, regulatory and other uncertainties and contingencies, all of which
are difficult or impossible to predict and many of which are beyond the control
of Foamex L.P.

9

Accordingly, there can be no assurance that the forward-looking statements
contained in this Annual Report on Form 10-K will be realized or that actual
results will not be significantly higher or lower. The forward-looking
statements have not been audited by, examined by, compiled by or subjected to
agreed-upon procedures by independent accountants, and no third party has
independently verified or reviewed such statements. Readers of this Annual
Report on Form 10-K should consider these facts in evaluating the information
contained herein. In addition, the business and operations of Foamex L.P. are
subject to substantial risks, which increase the uncertainty inherent in the
forward-looking statements contained in this Annual Report on Form 10-K. The
inclusion of the forward-looking statements contained in this Annual Report on
Form 10-K should not be regarded as a representation by Foamex L.P. or any other
person that any of the forward-looking statements contained in this Annual
Report on Form 10-K will be achieved. In light of the foregoing, readers of this
Annual Report on Form 10-K are cautioned not to place undue reliance on the
forward-looking statements contained herein.

ITEM 2. PROPERTIES

As of December 31, 2000, Foamex L.P. conducted its operations at 56
manufacturing and distribution facilities. Total floor space in use at the owned
manufacturing and distribution facilities is approximately 3.3 million square
feet and total floor space in use at the leased manufacturing and distribution
facilities is approximately 4.6 million square feet. Forty-five of these
facilities are located throughout 32 cities in the United States, four
facilities are located in Canada and seven facilities are located in Mexico. The
2001 annual base rental with respect to such leased facilities is approximately
$11.6 million under leases expiring from 2001 to 2025. Foamex L.P. does not
anticipate any problem in renewing or replacing any of such leases expiring in
2001. In addition, Foamex L.P. has approximately 1.5 million square feet of idle
space of which approximately 1.1 million is leased.

Foamex L.P. maintains its administrative office in Linwood, Pennsylvania.

Property information by business segment is not reported because many of
Foamex L.P.'s facilities produce products for multiple business segments.

ITEM 3. LEGAL PROCEEDINGS

Litigation - Foamex International Shareholders

On August 1, 2000, Foamex International announced that it had reached
agreements in principle with the plaintiffs in the stockholder actions described
below providing for the settlement and dismissal of such actions, subject to
certain conditions, including court approval.

The Shareholder Litigation. Beginning on March 17, 1998, six actions, which
were subsequently consolidated under the caption In re Foamex International Inc.
Shareholders Litigation, were filed in the Court of Chancery of the State of
Delaware, and on August 13, 1999, another action, Watchung Road Associates,
L.P., et al. v. Foamex International Inc., et al. (the "Watchung Action"), was
filed in the same court. The two actions were consolidated on May 3, 2000, into
a single action under the caption In re Foamex International Inc. Shareholders
Litigation (the "Delaware Action"). The Delaware Action, a purported derivative
and class action on behalf of Foamex International and its stockholders,
originally named as defendants Foamex International, certain of its current and
former directors and officers, Trace and a Trace affiliate. The complaint in the
Delaware Action alleges, among other things, that certain of the defendants
breached their fiduciary duties to Foamex International in connection with an
attempt by Trace to acquire Foamex International's publicly traded common stock
as well as with a potential acquisition transaction with a group led by Sorgenti
Chemical Industries LLC, and that certain of the defendants breached their
fiduciary duties by causing Foamex International to waste assets in connection
with a variety of transactions entered into with Trace and its affiliates. The
Delaware Action seeks various remedies, including injunctive relief, money
damages and the appointment of a receiver for Foamex International.

On April 26, 1999, a putative securities class action entitled Molitor v.
Foamex International Inc., et al., was filed in the United States District Court
for the Southern District of New York naming as defendants Foamex International,
Trace and certain current and former directors and officers of Foamex
International, on behalf of stockholders who bought shares of Foamex
International's common stock during the period from May 7, 1998

10

through and including April 16, 1999. The lawsuit alleged that the defendants
violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by
misrepresenting and/or omitting material information about Foamex
International's financial situation and operations, with the result of
artificially inflating the price of Foamex International's stock. The lawsuit
also alleged that Trace and Marshall S. Cogan violated Section 20(a) of the
Securities Exchange Act of 1934 as controlling persons of Foamex International.
The complaint sought class certification, a declaration that defendants violated
the federal securities laws, an award of money damages, and costs and
attorneys', accountants' and experts' fees. On May 18, 1999, a similar action
entitled Thomas W. Riley v. Foamex International Inc., et al., was filed in the
same court. The two actions were consolidated and a consolidated complaint was
filed; the consolidated suit is referred to herein as the "Federal Action."

The Settlements. On August 23, 2000, Foamex International and the
plaintiffs in the Federal Action entered into a settlement agreement providing
that members of the class of shareholders who purchased shares between May 7,
1998 and April 16, 1999 would receive payments as defined in the agreement. The
court approved the settlement and dismissed the action with prejudice on January
11, 2001, and no appeals were filed. Payments to class members and plaintiffs'
lawyers' fees in the Federal Action have been paid directly by Foamex
International's insurance carrier on behalf of Foamex International.

Under the terms of the agreement in principle to settle the Delaware
Action, Foamex International agreed that a special nominating committee of the
Board of Directors, consisting of Robert J. Hay as chairman, Stuart J. Hershon,
John G. Johnson, Jr., and John V. Tunney, will nominate two additional
independent directors to serve on the Board. The terms of the agreement also
establish the criteria for the independence of the directors and require that
certain transactions with affiliates be approved by a majority of the
disinterested members of the Board. On September 28, 2000, Foamex International
announced that Raymond E. Mabus, Jr. was elected to Foamex International's Board
of Directors. On December 21, 2000, Foamex International announced that Virginia
A. Kamsky was elected to Foamex International's Board of Directors. The addition
of Mr. Mabus and Ms. Kamsky adds two independent directors and brought the total
number of directors to eight. The parties are negotiating the terms of the
settlement agreement and related documentation. On January 9, 2001, the Court
ordered the Watchung Action dismissed with prejudice only as to the named
plaintiffs Watchung Road Associates, L.P. and Pyramid Trading Limited
Partnership. The dismissal did not have any effect on the claims asserted in the
consolidated action.

The settlement of the Delaware Action (assuming a definitive settlement
agreement is reached with plaintiffs) is subject to court approval, which, if
obtained, will resolve all outstanding shareholder litigation against Foamex
International and its current and former directors and officers. The settlements
of the Federal Action and the Delaware Action involve no admissions or findings
of liability or wrongdoing by Foamex International or any individuals. If
management's assessment of Foamex International's liability with respect to
these actions is incorrect, such actions could have a material adverse effect on
Foamex International's consolidated financial position, results of operations
and cash flows.

Litigation - Breast Implants

As of March 21, 2001, Foamex L.P. and Trace were two of multiple defendants
in actions filed on behalf of approximately 2,104 recipients of breast implants
in various United States federal and state courts and one Canadian provincial
court, some of which allege substantial damages, but most of which allege
unspecified damages for personal injuries of various types. Three of these cases
seek to allege claims on behalf of all breast implant recipients or other
allegedly affected parties, but no class has been approved or certified by the
court. In addition, three cases have been filed alleging claims on behalf of
approximately 39 residents of Australia, New Zealand, England, and Ireland.
Foamex L.P. believes that the number of suits and claimants may increase. During
1995, Foamex L.P. and Trace were granted summary judgments and dismissed as
defendants from all cases in the federal courts of the United States and the
state courts of California. Appeals for these decisions were withdrawn and the
decisions are final.

Although breast implants do not contain foam, certain silicone gel implants
were produced using a polyurethane foam covering fabricated by independent
distributors or fabricators from bulk foam purchased from Foamex L.P. or Trace.
Neither Foamex L.P. nor Trace recommended, authorized, or approved the use of
its foam for these purposes. Foamex L.P. is also indemnified by Trace for any
such liabilities relating to foam manufactured

11

prior to October 1990. Trace's insurance carrier has continued to pay Foamex
L.P.'s litigation expenses after Trace's filing under the Bankruptcy Code.
Trace's insurance policies continue to cover certain liabilities of Trace but if
the limits of those policies are exhausted, it is unlikely that Trace will be
able to continue to provide additional indemnification. While it is not feasible
to predict or determine the outcome of these actions, based on management's
present assessment of the merits of pending claims, after consultation with the
general counsel of Foamex L.P., and without taking into account the
indemnification provided by Trace, the coverage provided by Trace's and Foamex
L.P.'s liability insurance and potential indemnity from the manufacturers of
polyurethane covered breast implants, management believes that the disposition
of the matters that are pending or that may reasonably be anticipated to be
asserted should not have a material adverse effect on either Foamex L.P.'s
consolidated financial position or results of operations. If management's
assessment of Foamex L.P.'s liability with respect to these actions is
incorrect, such actions could have a material adverse effect on the financial
position, results of operations and cash flows of Foamex L.P.

Litigation - Other

Foamex L.P. is party to various other lawsuits, both as defendant and
plaintiff, arising in the normal course of business. It is the opinion of
management that the disposition of these lawsuits will not, individually or in
the aggregate, have a material adverse effect on the financial position or
results of operations of Foamex L.P. If management's assessment of Foamex L.P.'s
liability with respect to these actions is incorrect, such actions could have a
material adverse effect on Foamex L.P.'s consolidated financial position,
results of operations and cash flows.

Environmental and Health and Safety

Foamex L.P. is subject to extensive and changing federal, state, local and
foreign environmental laws and regulations, including those relating to the use,
handling, storage, discharge and disposal of hazardous substances and the
remediation of environmental contamination, and as a result, is from time to
time involved in administrative and judicial proceedings and inquiries relating
to environmental matters. As of December 31, 2000, Foamex L.P. had accruals of
approximately $3.1 million for environmental matters. During 1998, Foamex L.P.
established an allowance of $0.6 million relating to receivables from Trace for
environmental indemnifications due to the financial difficulties of Trace.

The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments") provide
for the establishment of federal emission standards for hazardous air pollutants
including methylene chloride, propylene oxide and TDI, which are used in the
manufacturing of foam. On December 27, 1996, the United States Environmental
Protection Agency (the "EPA") proposed regulations under the 1990 CAA Amendments
that will require manufacturers of slab stock polyurethane foam and foam
fabrication plants to reduce emissions of methylene chloride. The final National
Emission Standard for Hazardous Air Pollutants ("NESHAP") was promulgated
October 7, 1998. NESHAP requires a reduction of approximately 70% of the
emission of methylene chloride for the slab stock foam industry effective
October 7, 2001. Foamex L.P. believes that the use of alternative technologies,
including VPF(SM), which do not utilize methylene chloride and its ability to
shift current production to the facilities which use these alternative
technologies will minimize the impact of these regulations. The 1990 CAA
Amendments also may result in the imposition of additional standards regulating
air emissions from polyurethane foam manufacturers, but these standards have not
yet been proposed or promulgated.

Foamex L.P. has reported to the appropriate state authorities that it has
found soil and/or groundwater contamination in excess of state standards at six
facilities. These sites are in various stages of investigation or remediation.
Accordingly, the extent of contamination and the ultimate liability is not known
with certainty for all sites. Foamex L.P. has accruals of $2.1 million for the
estimated cost of remediation, including professional fees and monitoring costs,
for these sites. During 2000, Foamex L.P. reached an indemnification agreement
with the former owner of the Morristown, Tennessee facility. The agreement
allocates the incurred and future remediation costs between the former owner and
Foamex L.P. The estimated allocation of future costs for the remediation of this
facility is not significant, based on current information known. The former
owner was Recticel Foam Corporation, a subsidiary of Recticel s.a.

12

Foamex L.P. has either upgraded or closed all underground storage tanks at
its facilities in accordance with applicable regulations.

On November 14, 2000, the United States Occupational Safety and Health
Administration ("OSHA") released the final ergonomics standard ("Ergonomics
Standard"), which applies to Foamex L.P., as well as all other employers in the
United States, with certain industry specific exclusions. The Ergonomics
Standard addresses musculoskeletal disorders, including those commonly
referenced as repetitive motion disorders.

The Ergonomics Standard is comprehensive, covering essentially all
employees of Foamex L.P. in the United States. Although the implementation costs
could be significant, in the present form, Foamex L.P. does not believe it will
have a negative impact on its competitive position within the industry.

Subsequent to year-end 2000, a joint resolution by the United States House
of Representatives and Senate was approved that repealed the Ergonomics
Standard. The repeal has been submitted to the President of the United States
for his review and signature.

On April 10, 1997, the OSHA promulgated new standards governing employee
exposure to methylene chloride, which is used as a blowing agent in some of
Foamex L.P.'s manufacturing processes. The phase-in of the standards was
completed in 1999 and Foamex L.P. has developed and implemented a compliance
program. Capital expenditures required and changes in operating procedures are
not anticipated to significantly impact Foamex L.P.'s competitive position.

Foamex L.P. has been designated as a Potentially Responsible Party ("PRP")
by the EPA with respect to six sites. Estimates of total cleanup costs and
fractional allocations of liability are generally provided by the EPA or the
committee of PRP's with respect to the specified site. In each case and in the
aggregate, the liability of Foamex L.P. is not considered to be significant.

In 2001 and 2002, capital expenditures for environmental compliance
projects are anticipated to be approximately $1.0 million per year. Although it
is possible that new information or future developments could require Foamex
L.P. to reassess its potential exposure relating to all pending environmental
matters, including those described herein, Foamex L.P. believes that, based upon
all currently available information, the resolution of such environmental
matters will not have a material adverse effect on Foamex L.P.'s operations,
financial position, capital expenditures or competitive position. The
possibility exists, however, that new environmental legislation and/or
environmental regulations may be adopted, or other environmental conditions may
be found to exist, that may require expenditures not currently anticipated and
that may be significant.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

(a) Foamex L.P. is a privately held limited partnership. There is no
established public trading market for its securities.

(b) As of December 31, 2000, there were two holders of Foamex L.P.'s equity
securities.

(c) Listed below are the net cash receipts in accordance with tax sharing
agreements. At December 31, 2000, Foamex L.P. has a receivable of
approximately $0.5 million from its partners in accordance with the tax
sharing agreement.

13

Tax Sharing Distributions
2000 1999
-------- --------
(thousands)
FMXI $ - $ (5)
Foamex International - (12)
---- ----
$ - $(17)
==== ====

1999 Distributions

In 1999, Foamex L.P. distributed $17.3 million in cash pro rata to its
partners.

Limitations on Distributions

The Foamex L.P. credit agreement and the Indentures for the 9 7/8% senior
subordinated notes due 2007 and the 13 1/2% senior subordinated notes due 2005
restrict the ability of Foamex L.P. to make distributions to its partners.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents selected historical consolidated financial
data of Foamex L.P. The financial data should be read in conjunction with the
financial statements and related notes thereto of Foamex L.P. included in this
Annual Report on Form 10-K.

Fiscal Year (1)
2000 1999 1998 1997 (5) 1996
---------- ---------- ---------- -------- --------
(thousands)
Statements of Operations Data

Net sales (2) $1,161,017 $1,190,679 $1,157,751 $945,519 $940,924
Income (loss) from continuing
operations (3) 13,268 15,581 (5,869) 11,265 53,661

Balance Sheet Data (at period end)
Total assets $677,561 $698,495 $768,528 $834,068 $586,157
Total long-term debt, classified as current (4) - - 715,817 - -
Total long-term debt 656,168 680,544 - 726,649 392,617
Partners' equity (deficit) (168,907) (164,591) (196,037) (156,302) 12,832

(1) Foamex L.P. changed its fiscal year to the calendar year during 1998. Prior
to the change, Foamex L.P. had a 52 or 53 week fiscal year ending on the
Sunday closest to the end of the calendar year. Each fiscal year presented
prior to 1998 was comprised of 52 weeks.

(2) As discussed in Note 2 to the consolidated financial statements included in
this Annual Report on Form 10-K, net sales for periods prior to February
28, 1998 reflect a reclassification of certain shipping costs that were
billed to customers. The reclassification required shipping costs
originally reported in cost of sales to be recognized in net sales, with no
impact on income from continuing operations.

(3) Includes net restructuring and other charges (credits), as discussed in
Note 4 to the consolidated financial statements included in this Annual
Report on Form 10-K. Listed below are the pre-tax charges (credits).

2000 - $6.0 million
1999 - $10.8 million
1998 - $(10.1) million
1997 - $21.1 million
1996 - $(6.4) million

14

(4) As of December 31, 1998, Foamex L.P. classified approximately $715.8
million of long-term debt as current, in response to financial conditions
at year-end 1998.

(5) The balance sheet data included the estimated fair value of the net assets
acquired in the acquisition of Crain Industries, Inc. in December 1997. The
income statement data excludes the results of Crain Industries, Inc. from
the acquisition date of December 23, 1997, since the effect was
insignificant.

15

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Overview

Foamex L.P. operates in the flexible polyurethane and advanced polymer foam
products industry. As of December 31, 2000, Foamex L.P.'s operations are
conducted directly and through its wholly owned subsidiaries, Foamex Canada Inc.
("Foamex Canada"), Foamex Latin America, Inc. ("Foamex Mexico") and Foamex Asia,
Inc. ("Foamex Asia"). Business segments are listed below. Segment financial
information is included in Note 15 to the consolidated financial statements.

An executive vice president heads each operating segment. Each vice
president is responsible for developing budgets and plans as well as directing
the operations of the segment. The performance of each operating segment is
measured based upon income from operations, excluding restructuring charges.
Foamex L.P. does not allocate restructuring and other charges to operating
segments because many of Foamex L.P.'s facilities produce products for multiple
segments.

Foam Products - manufactures and markets foam used by the bedding industry,
the furniture industry and the retail industry.
Carpet Cushion Products - manufactures and distributes prime, rebond,
sponge rubber and felt carpet cushion to Foamex Carpet Cushion, Inc.
("Foamex Carpet"), a sister company wholly owned by Foamex International
Inc. ("Foamex International").
Automotive Products - supplies foam primarily for automotive interior
applications to automotive manufacturers and tier one suppliers.
Technical Products - manufactures and markets reticulated foams and other
custom polyester and polyether foams for industrial, specialty and consumer
and safety applications.
Other - primarily consists of certain manufacturing operations in Mexico,
corporate expenses not allocated to the other business segments and
restructuring and other charges (credits). The restructuring and other
charges (credits) amounted to $6.0 million in 2000, $10.8 million in 1999
and $(10.1) million in 1998.

Foamex L.P.'s sales are primarily to markets in the United States. These
sales are impacted by economic conditions in several sectors of the United
States economy, including consumer spending, sales of new and existing homes,
the overall level of passenger car and light truck production and seasonality.
Foamex L.P. typically experiences two seasonally slow periods during each year,
in early July and in late December, due to scheduled plant shutdowns and
holidays.

The following discussion should be read in conjunction with the
consolidated financial statements and related notes included in this Annual
Report on Form 10-K.

RESULTS OF OPERATIONS

Carpet
Foam Cushion Automotive Technical
Products Products Products Products Other Total
--------- --------- ------------- ---------- ---------- -----------
2000 (thousands)

Net sales $512,507 $165,783 $342,386 $106,697 $33,644 $1,161,017
Income (loss) from operations 54,929 (11,661) 22,652 29,287 (11,092) 84,115
Depreciation and amortization 17,615 5,238 5,785 2,663 2,500 33,801
Income (loss) from operations
as a percentage of net sales 10.7% (7.0)% 6.6% 27.4% n.m.(b) 7.2%

1999
Net sales $521,377 $187,668 $361,806 $92,180 $27,648 $1,190,679
Income (loss) from operations 54,439 869 22,853 23,048 (17,474) 83,735
Depreciation and amortization 16,390 6,436 4,596 2,564 2,604 32,590
Income (loss) from operations
as a percentage of net sales 10.4% 0.5% 6.3% 25.0% n.m.(b) 7.0%

16

Carpet
Foam Cushion Automotive Technical
Products Products Products Products Other Total
--------- --------- ------------- ---------- ---------- -----------
1998 (thousands)
Net sales (a) $559,690 $212,146 $285,190 $79,140 $21,585 $1,157,751
Income (loss) from operations 36,253 (58) 17,319 14,919 (2,925) 65,508
Depreciation and amortization 17,418 5,092 4,582 2,615 1,972 31,679
Income (loss) from operations
as a percentage of net sales 6.5% 0.0% 6.1% 18.9% n.m.(b) 5.7%

(a) As discussed below, net sales for periods prior to February 28, 1998
reflect a reclassification of certain shipping costs that were billed to
customers. The reclassification required shipping costs originally recorded
in cost of sales to be recognized in net sales, with no impact on income
from operations. Carpet Cushion Products was the only segment impacted.

(b) Not meaningful.

Dispositions

GFI Transaction

On February 27, 1998, Foamex International, Foamex L.P. and certain of
their affiliates completed a series of transactions which changed Foamex L.P.'s
structure (collectively, the "GFI Transaction"). Prior to the consummation of
the GFI Transaction, Foamex L.P. defeased the $4.5 million outstanding principal
amount of its 9 1/2% senior secured notes due 2000. Foamex L.P. settled its
intercompany payables to General Felt Industries, Inc. ("General Felt") with
$4.8 million in cash and a promissory note in the aggregate principal amount of
$34.0 million supported by a $34.5 million letter of credit under the Foamex
L.P. credit facility (the "Foamex/GFI Note"). The initial transaction resulted
in the transfer from Foamex L.P. to Foam Funding LLC, an indirect wholly owned
subsidiary of Trace International Holdings, Inc. ("Trace"), of all of the
outstanding common stock of General Felt, in exchange for (i) the assumption by
Foam Funding LLC of $129.0 million of Foamex L.P.'s indebtedness and (ii) the
transfer by Foam Funding LLC to Foamex L.P. of a 1% non-managing general
partnership interest in Foamex L.P. As a result, General Felt ceased being a
subsidiary of Foamex L.P. and was relieved from all obligations under Foamex
L.P.'s 9 7/8% senior subordinated notes due 2007 and 13 1/2% senior subordinated
notes due 2005. Upon consummation of the initial transaction, Foamex Carpet, a
newly formed wholly owned subsidiary of Foamex International, Foamex
International, Foam Funding LLC, and General Felt entered into an Asset Purchase
Agreement dated February 27, 1998, in which General Felt sold substantially all
of its assets (other than cash, the Foamex/GFI Note and its operating facility
in Pico Rivera, California) to Foamex Carpet in exchange for (i) $20.0 million
in cash and (ii) a promissory note issued by Foamex Carpet to Foam Funding LLC
in the aggregate principal amount of $70.2 million. The $20.0 million cash
payment was funded with a distribution by Foamex L.P.

No gain was recognized on the GFI Transaction. The net impact of the GFI
Transaction was an increase in Foamex L.P.'s partners' capital (deficit) of
approximately $10.1 million, a distribution of $20.0 million to Foamex
International and approximately $1.5 million of fees charged to earnings. The
$129.0 million of debt assumed by Foam Funding LLC in the GFI Transaction was
used to repay approximately $125.1 million of term loan borrowings that was
accounted for as an extinguishment of debt which resulted in an extraordinary
loss of approximately $3.2 million. The 1% non-managing general partnership
interest acquired in connection with the GFI Transaction was accounted for as a
redemption of equity.

2000 Compared to 1999

Net sales for 2000 decreased 2.5% to $1,161.0 million from $1,190.7 million
in 1999. The decline in sales primarily reflected a deterioration in market
conditions during the second half of 2000. Lower sales were recorded in the Foam
Products, Carpet Cushion Products and Automotive Products business segments. The
Technical Products segment continued to report strong sales growth and certain
Foamex L.P.'s foreign operations reported in the "Other" segment also reported
higher sales, which partially offset sales declines in the business segments
discussed above.

17

Income from operations in 2000 was $84.1 million, 0.5% higher than the
$83.7 million recorded during 1999. These results included restructuring and
other charges (discussed under "Other" below) of $6.0 million in 2000 and $10.8
million in 1999. Excluding the restructuring and other charges for comparison
purposes, income from operations was $90.1 million in 2000, down 4.7% from $94.6
million in 1999. On this basis, income from operations was 7.8% of net sales in
2000 compared to 7.9% of net sales in 1999.

The decline in income from operations, excluding restructuring and other
charges, was largely attributable to the impact of lower sales and higher raw
material costs offset by improved operating efficiencies and lower selling,
general and administrative expenses, discussed below. Higher oil prices
translated into raw material costs increases in 2000 and these higher costs were
not fully recovered through selling price increases. The gross profit margin was
12.4% for 2000 compared to 13.0% in 1999.

Selling, general and administrative expenses were down 9.7% in 2000
compared to 1999. The decrease primarily reflected cost savings initiatives,
lower incentive compensation expenses and lower selling expenses.

Foam Products

Foam Products net sales for 2000 decreased 1.7% to $512.5 million from
$521.4 million in 1999. Lower sales primarily reflected a volume decline in the
consumer products market and the loss of sales from Foamex L.P.'s packaging
business that was sold in 1999. Income from operations in 2000 was up 0.9% to
$54.9 million compared to $54.4 million in 1999. As discussed above, raw
material costs continued to increase during the year, and selling price
increases and improved operating efficiencies did not fully recover the
increased costs. However, reduced selling, general and administrative costs
contributed to the overall improvement. As a percentage of net sales, income
from operations was 10.7% of net sales in 2000, up from 10.4% in 1999.

Carpet Cushion Products

Carpet Cushion Products net sales for 2000 decreased 11.7% to $165.8
million from $187.7 million in 1999. The sales decline primarily reflected
competitive pressures experienced by Foamex Carpet that resulted in lower sales
volumes across all product lines. As a result, a loss from operations of $11.7
million was recorded in 2000 compared to income from operations of $0.9 million
in 1999.

Automotive Products

Automotive Products net sales for 2000 were $342.4 million, down 5.4% from
$361.8 million in 1999. The decrease reflected a slow down in the automotive
industry, particularly during the second half of the year. Lower sales
translated to a 0.9% decrease in income from operations, from $22.9 million in
1999 to $22.7 million in 2000. Results in 2000 benefited from the favorable
impact of a selling price adjustment. Income from operations represented 6.6% of
net sales in 2000 and 6.3% of net sales in 1999.

Technical Products

Technical Products net sales for 2000 increased 15.7% to $106.7 million
from $92.2 million in 1999. Income from operations increased 27.1% to $29.3
million in 2000, up from $23.0 million in 1999. Income from operations
represented 27.4% of net sales in 2000 compared to 25.0% in 1999. The
improvement reflected favorable market conditions that resulted in sales volume
growth and improved operating efficiencies.

Other

Other primarily consists of certain manufacturing operations in Mexico,
corporate expenses not allocated to business segments and restructuring and
other charges. The increase in net sales associated with this segment primarily
resulted from an increase in net sales from Foamex L.P.'s Mexico City operation.
The loss from operations of $11.1 million in 2000 included a provision of $6.0
million for restructuring and other charges, discussed below. The loss from
operations of $17.5 million in 1999 included $10.8 million of restructuring and
other charges.

18

During 2000, Foamex L.P. approved and implemented four separate
restructuring plans to further rationalize plant operations and to reduce
selling, general and administrative expenses.

Foamex L.P. recorded restructuring charges of $1.7 million for severance
costs in connection with the first restructuring plan. This plan reduced Foamex
L.P.'s salaried work force by 15 employees, including certain executives of
Foamex L.P.

The second restructuring plan was implemented to rationalize certain plant
operations relating to the increase in the VPF(SM) capacity in North Carolina.
Foamex L.P. recorded a restructuring charge of $0.7 million associated with this
plan. The restructuring charge was comprised of $0.1 million of severance costs
in connection with a work force reduction of 12 employees, $0.4 million of lease
and plant closure costs and $0.2 million of asset write-downs.

The third restructuring plan, as amended, was implemented to exit Foamex
L.P.'s fiber operations in Indiana. Foamex L.P. recorded a restructuring charge
of $1.1 million in connection with this plan which was comprised of less than
$0.1 million of severance costs for the work force reduction of seven employees,
$0.1 million of lease and plant closure costs and $1.0 million of asset
write-downs.

The fourth restructuring plan was implemented for the consolidation of
pourline operations and certain product line rationalizations resulting from the
closure of facilities in Indiana and Arkansas. Foamex L.P. recorded a
restructuring charge of $2.3 million in connection with this plan. The charge
was comprised of $0.2 million of severance costs relating to work force
reductions of 65 employees, $0.8 million for lease and plant closure costs and
$1.3 million for asset write-downs.

In addition, Foamex L.P. recorded a net restructuring charge of $0.2
million associated with changes in estimates to prior years' restructuring
plans. The net charge was comprised of $0.3 million for asset write-downs offset
by a credit of $0.1 million relating to severance costs.

The accrued restructuring balance at December 31, 2000 will be used for
payments relating to severance and lease and plant closure costs, including
runout costs at the facilities. As of December 31, 2000, all employees subject
to the plans have been terminated. Foamex L.P. expects to spend approximately
$3.8 million during 2001 with the balance to be spent through 2006, principally
for lease runout costs.

During 1999, Foamex L.P. approved and implemented four restructuring plans
to reduce selling, general and administrative costs and to rationalize plant
operations.

Foamex L.P. recorded restructuring charges of approximately $2.3 million
relating to severance costs in connection with the first restructuring plan.
This plan reduced Foamex L.P.'s salaried work force by 78 employees.

Foamex L.P. recorded restructuring charges of approximately $2.9 million
relating to severance costs in connection with the second restructuring plan for
replacing three of Foamex L.P.'s former executives, including its former Chief
Executive Officer.

In connection with the third restructuring plan, Foamex L.P. recorded
restructuring charges of approximately $1.7 million relating to the closure of
one facility and certain product line rationalizations. The $1.7 million charge
was comprised of approximately $0.1 million of severance costs in connection
with the work force reductions of 115 employees, $0.1 million of lease and plant
closure costs and $1.5 million of asset write-downs.

In connection with the fourth restructuring plan, Foamex L.P. closed its
New York office (see Note 17 to the consolidated financial statements). Foamex
L.P. recorded approximately $2.5 million of restructuring charges comprised of
$1.6 million of severance costs for eight employees and $0.9 million of costs
primarily relating to future lease obligations, net of sublease proceeds.

In addition, Foamex L.P. recorded restructuring charges of approximately
$1.1 million relating to changes in estimates to prior years' plans, primarily
for the sale of the packaging business in 1999. The $1.1 million charge is
comprised of $0.2 million of severance, $1.7 million of lease and plant closure
costs, offset by $0.8 million

19

of adjustments for asset write-downs. Foamex L.P. also recorded $0.3 million of
other charges relating to rent due from Trace for the New York office prior to
its closure.

Interest and Debt Issuance Expense

Interest and debt issuance expenses totaled $69.3 million in 2000, which
represented a 4.2% increase from 1999 expense of $66.5 million. The impact of
higher effective interest rates was partially offset by the benefit of lower
average debt levels. Higher effective interest rates reflected market conditions
and the impact of a certain provision of the Foamex L.P. credit facility that
required an incremental interest rate margin, as discussed in Note 12 to the
consolidated financial statements. The additional interest rate margin was 25
basis points in the first quarter of 2000. During the second quarter of 2000,
the interest rate margin was increased 25 basis points to a cumulative
adjustment of 50 basis points. During the third quarter of 2000, an additional
25 basis point adjustment became effective that resulted in a cumulative
adjustment of 75 basis points. Based on the debt leverage ratio of Foamex L.P.
at the end of the third quarter, the cumulative adjustment of 75 basis points
was reset to zero during the fourth quarter of 2000. Interest capitalized as a
component of the construction costs of plant and equipment totaled $0.8 million
in 2000.

Income from Equity Interest in Joint Venture

Income from an equity interest in an Asian joint venture totaled $1.7
million in 2000 compared to $0.5 million in 1999. The improved results reflected
the growth of the joint venture as it moves beyond the start up phase.

Other Expense, Net

Other expense, net in 2000 totaled $1.3 million and primarily consisted of:
$1.3 million loss on the disposal of fixed assets and $0.7 million letter of
credit fees offset by $0.6 million of interest income. During, 1999, other
expense, net totaled $0.9 million. Partially offsetting income items in 1999
were losses on the disposal of fixed assets and letter of credit fees related to
the GFI Transaction, discussed in Note 12 to the consolidated financial
statements.

Income Tax Expense

Foamex L.P., as a limited partnership, is not subject to Federal income
taxes. Consequently, no current or deferred provision has been provided for such
taxes. However, Foamex L.P. has provided for the income taxes of certain states
in which it is subject to taxes and for subsidiaries located in foreign
jurisdictions that file separate tax returns. Compared to 1999, the effective
tax rate was higher in 2000 primarily due to a greater percentage of income from
foreign sources and a higher effective tax rate on foreign source income.

Net Income

Net income for 2000 was down 14.8% to $13.3 million compared to $15.6
million in 1999.

1999 Compared to 1998

Net sales for 1999 increased 2.8% to $1,190.7 million from $1,157.8 million
in 1998. The increase was primarily the result of stronger volume growth in the
Automotive Products and Technical Products segments partially offset by sales
declines in the Foam Products and Carpet Cushion Products segments.

Income from operations increased 27.8% to $83.7 million in 1999 from $65.5
million in 1998. Results in 1999 included $10.8 million of restructuring and
other charges. In 1998, a net restructuring credit of previously established
restructuring accruals increased operating income by $10.1 million. These
restructuring and other charges (credits) are discussed further under "Other"
below. Excluding the restructuring and other charges (credits) for comparison
purposes, income from operations increased 70.8% to $94.6 million in 1999 from
$55.4 million in 1998. On this basis, income from operations represented 7.9% of
net sales in 1999, up from 4.8% of net sales in 1998. The improvement was
primarily due to (i) the increase in net sales, (ii) improved gross profit
margins and (iii)

20

lower selling, general and administrative expenses at both the business unit and
corporate levels. Improved gross profit margins resulted primarily from
operating efficiencies, the benefits of the first phase of implementation of
improved operating practices across a number of Foamex L.P.'s facilities,
enhanced raw material utilization and the full year benefits from the
consolidation of facilities acquired in connection with the acquisition of Crain
Industries, Inc. (the "Crain Acquisition") in December 1997. Lower selling,
general and administrative expenses primarily reflected the integration of the
Crain Acquisition, staffing reductions in January 1999, elimination of the Trace
management fee and the closure of the New York office.

Foam Products

Foam Products net sales for 1999 decreased 6.8% to $521.4 million from
$559.7 million in 1998. The decrease was primarily due to decreased sales
volumes resulting from Foamex L.P.'s decision to exit certain business lines and
the closure of facilities related to the Crain Acquisition. Despite the decline
in sales, income from operations increased 50.2% to $54.4 million in 1999 from
$36.3 million in 1998. Income from operations represented 10.4% of net sales in
1999, up from 6.5% in 1998. The improvement was primarily driven by (i) enhanced
raw material utilization, (ii) the benefits of the first phase of implementation
of improved operating practices across a number of Foamex L.P.'s facilities,
(iii) the benefits of consolidation of facilities in the Southeast region of the
U.S. and in Southern California and (iv) the elimination of operating
inefficiencies incurred in 1998. Income from operations for 1998 was adversely
impacted by a number of factors, the most significant of which were (i) $4.0
million of costs associated with the Crain Acquisition transition including
inventory adjustments for facilities affected by the consolidation of
manufacturing facilities, (ii) operating inefficiencies and logistics costs of
$2.5 million associated with the sales of juvenile and other consumer products
sold through mass merchandisers and discount stores and (iii) operating losses
and inefficiencies of $1.0 million resulting from fires at Foamex L.P.'s
facilities in Orlando, Florida and Cornelius, North Carolina.

Carpet Cushion Products

Carpet Cushion Products net sales for 1999 decreased 11.5% to $187.7
million from $212.1 million in 1998 primarily due to lower sales volumes.
Competitive pressures in the carpet cushion marketplace contributed to lower
sales volumes. Sales volumes were also reduced due to limited production from
Foamex L.P.'s Orlando, Florida facility as a result of the 1998 fire. Income
from operations for 1999 increased to $0.9 million from a loss of $0.1 million
in 1998. Income from operations continued to be impacted by lower sales volumes
and the Orlando fire, which increased product transportation costs as the
fulfillment process was shifted to less geographically optimal facilities. The
Orlando, Florida carpet cushion line was brought back on stream and operational
in the fourth quarter of 1999. These effects were partially offset by lower
expenses associated with the rationalization associated with the Crain
Acquisition. Results in 1998 were impacted by a $1.0 million charge associated
with the Orlando, Florida fire and costs related to the Crain Acquisition
transition of $0.9 million.

Automotive Products

Automotive Products net sales for 1999 increased 26.9% to $361.8 million
from $285.2 million in 1998, primarily as a result of higher sales volume of
lamination products. Income from operations increased 32.0% to $22.9 million in
1999 from $17.3 million in 1998. Income from operations represented 6.3% of net
sales in 1999, up from 6.1% in 1998. The improvement was primarily due to (i)
operating efficiencies at Foamex L.P.'s Mexican border facilities that became
fully operational in the fourth quarter of 1998 and (ii) increased sales
volumes. Income from operations for 1998 was reduced by (i) $3.0 million of
costs incurred during the start up phase of new lamination business at the
Mexican border, (ii) contract price reductions of approximately $1.1 million and
(iii) losses of $1.0 million associated with the production of thermoformable
headliners.

Technical Products

Technical Products net sales for 1999 increased 16.5% to $92.2 million from
$79.1 million in 1998. Income from operations increased 54.5% to $23.0 million
in 1999 from $14.9 million in 1998. Income from operations represented 25.0% of
net sales in 1999, up from 18.9% in 1998. The improvement was primarily driven
by favorable market conditions, strong growth in sales volumes, a higher-margin
product mix and improved

21

manufacturing efficiencies. Plans to expand capacity for Technical Products were
initiated during the second half of 1999.

Other

Other primarily consists of certain manufacturing operations in Mexico,
corporate expenses not allocated to business segments and restructuring and
other charges (credits). The increase in net sales associated with this segment
primarily resulted from an increase in net sales from Foamex L.P.'s Mexico City
operation. The loss from operations in 1999 was primarily associated with the
$10.8 million of restructuring and other charges discussed below. The loss from
operations in 1998 included $10.1 million of net restructuring credits discussed
below. The loss from operations for 1998 was impacted by accounts receivable and
inventory write downs of approximately $8.5 million at the Mexico City facility
and start up costs of $2.5 million for Foamex L.P.'s Asian joint venture.

Restructuring and other charges for 1999 amounted to $10.8, as discussed
previously.

In 1998, net restructuring credits were approximately $10.1 million, which
reflect a $14.8 million reversal of prior year's restructuring plans, offset by
other charges of $4.7 million. The $4.7 million was comprised of a $2.4 million
reserve for net receivables due from Trace and a $2.3 million of impaired cost
in excess of assets acquired associated with a foreign facility. However, these
charges were offset by a $14.8 million restructuring credit associated with
modifications to the 1997 restructuring plan. The $14.8 million credit reflected
the reversal of $10.2 million of fixed asset write-downs, $3.5 million of plant
closure and lease obligations and $1.1 million of personnel reductions.

Interest and Debt Issuance Expense

Interest and debt issuance expense totaled $66.5 million in 1999, slightly
higher than the 1998 expense of $66.1 million. The benefit of lower average debt
levels was offset by higher effective interest rates and increased amortization
expense related to additional debt issuance costs paid during 1999.

Other Expense, Net

Other expense, net totaled $0.9 million and was primarily due to losses on
the disposal of fixed assets and letter of credit fees related to the GFI
Transaction. Interest income totaled $2.2 million in 1999.

Other expense, net for 1998 primarily consists of: $3.0 million of foreign
currency losses in Mexico; $2.5 million of fees and costs related to the GFI
Transaction; and other expenses offset by approximately $3.4 million of interest
income.

Income Tax Expense

Foamex L.P., as a limited partnership, is not subject to Federal income
taxes. Consequently, no current or deferred provision has been provided for such
taxes. However, Foamex L.P. has provided for the income taxes of certain states
in which it is subject to taxes and for subsidiaries located in foreign
jurisdictions that file separate tax returns.

Income (Loss) Before Extraordinary Loss

Income (loss) before extraordinary loss increased to $15.6 million for 1999
as compared to a loss of $5.9 million in 1998. The increase is primarily due to
improved operating results during 1999 as compared to 1998, as discussed above.

Extraordinary Loss

The extraordinary loss on the early extinguishment of debt in 1998 was $3.2
million. The charge primarily reflected the write-off of debt issuance costs in
connection with the GFI Transaction.

22

Business Outlook

The coming year presents a number of challenges for Foamex L.P. Although
the domestic economy is clearly not as strong as in recent years, Foamex L.P.
believes improved results are attainable. In Foam Products, reduced profit
margins are anticipated to continue, given the current cost structure. Any
improvement in profit margins for Foam Products will largely depend on the
ability to implement selling price increases to recover higher raw material
costs and higher transportation costs, combined with a continued focus on
operating efficiencies. In Carpet Cushion Products, the introduction by Foamex
Carpet of new products and marketing strategies, including expansion of
commercial applications, will be a key to improving results in the coming year.
In Automotive Products, the slow down in the automotive industry is anticipated
to continue in the short term and will continue to limit results. Improved
results for the Mexico City operation, reported in Other, is primarily dependent
on a continued focus on a higher-value product mix and increased shipments.
Technical Products are anticipated to continue their growth trend and results
for the business segment should help to offset the impact of the unfavorable
business conditions discussed above.

The effective start up of two new VPF(SM) facilities and the conversion to
other production technologies to comply with new emission standards, effective
in the fourth quarter of 2001, will be also a key success factor.

Results in 2001 should also benefit from continued growth and results from
Foamex L.P.'s joint venture in Asia and from lower interest expense resulting
from anticipated debt reduction and anticipated lower effective interest rates,
discussed below.

Liquidity and Capital Resources

Foamex L.P.'s operating cash requirements consist principally of working
capital requirements, scheduled payments of principal and interest on
outstanding indebtedness and capital expenditures. Based on the business outlook
discussed above, Foamex L.P. believes that cash flow from its operating
activities, cash on hand and periodic borrowings under its credit facility,
discussed below, will be adequate to meet its liquidity requirements. The
ability of Foamex L.P. to make distributions to Foamex International is
restricted by the terms of its financing agreements; therefore, Foamex
International is not expected to have access to the cash flow generated by
Foamex L.P. for the foreseeable future.

Cash and cash equivalents totaled $2.9 million at the end of 2000 compared
to $1.6 million at the end of 1999. Working capital at the end of 2000 was
$109.5 million compared to working capital at the end of 1999 of $110.5 million.
The current ratio was 1.7 to 1 at year-end 2000 and 1999. The increase in
accrued employee compensation and benefits primarily reflects an increase in the
amount of contributions required for the Foamex L.P. defined benefit pension
plan in the United States.

Total debt at the end of 2000 was $664.5 million, down $25.5 million from
year-end 1999. During the first quarter of 2000, the Foamex/GFI Note was repaid
with borrowings under the Foamex L.P. revolving credit facility. The $34.5
million letter of credit that was outstanding at year-end 1999 to collateralize
principal and interest payable under the Foamex/GFI Note was also terminated.

Cash Flow from Operating Activities

Cash provided by operating activities in 2000 was $46.7 million compared to
$58.1 million in 1999. The cash flow decrease primarily reflected lower results
and an increase in retirement benefit funding. Working capital and other
requirements were relatively comparable for the two years.

Cash Flow from Investing Activities

Cash used for investing activities totaled $22.5 million in 2000. Cash
requirements for capital expenditures were $22.8 million, partially offset by
$4.0 million of proceeds from the sale of assets. In 1999, cash flow used for
investing activities totaled $15.8 million primarily for $19.4 million of
capital expenditures partially offset by a $2.5

23

million repayment of a note receivable from Foamex International and $1.5
million of proceeds from Foamex L.P.'s packaging business. Foamex L.P. expects
capital expenditures for 2001 to be approximately $17.0 million, which includes
the completion of a fourth VPF(SM) facility. In addition, Foamex L.P. is
continuing to explore the possible implementation of a new ERP software system,
but no significant expenditures are anticipated for the balance of 2001.

Cash Flow from Financing Activities

Cash used for financing activities was $22.9 million in 2000 compared to
cash used of $43.8 million in 1999. As discussed previously, the $34.0 million
Foamex/GFI Note was repaid during the first quarter of 2000 with borrowings
under the Foamex L.P. revolving credit facility. The remaining cash requirements
for financing activities primarily reflected other debt repayments. Cash used
for financing activities in 1999 was primarily due to net debt repayments, net
distributions paid to partners and costs incurred to amend certain financing
agreements.

Financial Condition

Based on the business outlook discussed above, coupled with forecasted
capital expenditures in 2001 of approximately $17.0 million, Foamex L.P.'s
targeted debt reduction is approximately $35.0 million in the coming year.

The Foamex L.P. Credit Facility contains certain quarterly financial
covenants which become more restrictive during 2001. Foamex L.P. anticipates
that it will continue to comply in 2001 with the quarterly financial covenants
in the Foamex L.P. Credit Facility. Management's current business plan for
Foamex L.P. anticipate customer selling price increases in response to higher
raw material costs, improved working capital management, a reduced capital
expenditure program, declining interest rates, successful implementation of
on-going cost savings initiatives and improved operating efficiencies. The
achievement of the business plan is necessary for compliance with the various
financial covenants in 2001.

The possibility exists that certain financial covenants will not be met if
business conditions are other than as anticipated or other unforeseen events
impact results. In the absence of a waiver of or amendment to such financial
covenants, such noncompliance would constitute a default under the applicable
debt agreements, and the lenders would be entitled to accelerate the maturity of
the indebtedness outstanding thereunder. In the event that such noncompliance
appears likely, or occurs, Foamex L.P. will seek the lenders' approvals of
amendments to, or waivers of, such financial covenants. Historically, Foamex
L.P. has been able to renegotiate financial covenants and/or obtain waivers, as
required, and management believes such waivers and/or amendments could be
obtained if required. However, there can be no assurance of future amendments or
waivers will be obtained.

Foamex L.P. Credit Facility

At December 31, 2000, Foamex L.P. had a credit facility (the "Foamex L.P.
Credit Facility") with a group of banks which provided for a revolving credit
facility commitment of $177.5 million and three term loans with an outstanding
balance totaling $248.8 million. Included in the group of banks that provides
the Foamex L.P. Credit Facility is The Bank of Nova Scotia, which is a
shareholder of Foamex International, as discussed below. Amendments in 1998
provided for a $2.5 million quarterly reduction of the availability under the
revolving credit facility, which extends through June 2003. On January 2, 2001,
the revolving credit facility commitment was $175.0 million with the fourth
quarter 2000 reduction applied on January 2nd because the last day of 2000 was a
Sunday.

Borrowings under the Foamex L.P. Credit Facility are collateralized by
substantially all of the assets of Foamex L.P. on a pari passu basis with the
IRBs (see Note 12 to the consolidated financial statements); however, the rights
of the holders of the applicable issue of the IRBs to receive payment upon the
disposition of the collateral securing such issue of the IRBs has been
preserved.

In response to financial conditions at year-end 1998, amendments to debt
agreements were executed during the first half of 1999. As a result the Foamex
L.P. Credit Facility, which was amended and restated in February 1998, was
further amended and restated in June 1999 to modify financial covenants for net
worth, interest coverage,

24

fixed charge coverage and leverage ratios through December 2006. The agreement
was also amended to no longer permit Foamex L.P. to make certain cash payments,
including the payment of an annual management fee of $3.0 million to a
subsidiary of Trace and distributions to Foamex International, and to limit
future investments in foreign subsidiaries and joint ventures. The "change of
control" definition under the agreement was also modified to conform to the
definition discussed in "change of control" in Note 1 to the consolidated
financial statements. Changes in the interest rate structure, effective in 2000,
were also made and are discussed below. Foamex L.P. was in compliance with this
agreement at year-end 2000 and 1999.

At year-end 2000, interest was based on the combination of a variable rate
consisting of the higher of (i) the base rate of The Bank of Nova Scotia or (ii)
the Federal Funds rate plus 0.5% plus a margin. The margins for revolving, Term
B, Term C and Term D loans were 2.25%, 2.50%, 2.75% and 2.875%, respectively. At
the option of Foamex L.P., portions of the outstanding loans are convertible
into LIBOR based loans plus 1.0% added to the margins identified above. The
effective interest rates for the Foamex L.P. Credit Facility at the end of 2000
ranged between 10.31% and 10.69%.

Effective January 1, 2000, the interest rate on outstanding borrowings
under the Foamex L.P. Credit Facility will increase by 25 basis points each
quarter that Foamex L.P.'s leverage ratio, as defined, exceeds 5.00 to 1.00.
Once the leverage ratio is reduced below this level, the cumulative amount of
any 25 basis point adjustments to the interest rate on borrowings is reset to
zero. During 2000, basis point adjustments were incurred in the first three
quarters, beginning with 25 basis points in the first quarter and ending with a
cumulative impact of 75 basis points by the end of the third quarter. There were
no basis point adjustments for the fourth quarter of 2000. At December 31, 2000,
the calculated leverage ratio was 5.3 to 1.00. Consequently, a 25 basis point
adjustment will be applicable for the calculation of interest in 2001, effective
upon delivery of the financial statements to the lenders.

Available borrowings under the revolving credit facility totaled $10.5
million at year-end 2000. Letters of credit outstanding at December 31, 2000
totaled $21.1 million.

As part of the Foamex L.P. Credit Facility, excess cash flow generated
annually, as defined, is required to prepay portions of Term B, C and D loans.
There was no required prepayment at year-end 2000. The prepayment amount
determined 1999 was $13.3 million and was financed through revolving loans under
the facility. The 1999 required payment was made during the second quarter of
2000.

Buyout Proposals - History

On February 9, 2000, Foamex International announced that it was in
discussions with respect to a proposal involving the acquisition of all of
Foamex International's outstanding common stock for cash. Foamex International
stated that the proposal was subject to a number of conditions, including the
buyer's due diligence and the execution of definitive agreements. Foamex
International agreed to an exclusive negotiating period ending five business
days after delivery of its audited financial statements included in Foamex
International's Annual Report on Form 10-K to the prospective buyer. On April 5,
2000, Foamex International announced that discussions with the potential buyer
were terminated with no agreement having been reached. Foamex International
subsequently terminated the engagement of J.P. Morgan & Company, Inc. ("JP
Morgan"), which acted as financial advisor in connection with such transaction.
During the second quarter of 2000, Foamex International ended discussions with
JP Morgan concerning an additional engagement.

On August 5, 1999, Foamex International announced that its Board of
Directors signed a letter of intent with Sorgenti Chemical Industries, LLC and
Liberty Partners Holdings 20, LLC (collectively, the "Purchasers") for a
business combination providing for $11.50 per share for all of Foamex
International's outstanding common stock (the "Sorgenti Transaction"). Under the
terms of the letter of intent, if Foamex International entered into a business
combination with another party, the Purchasers would be entitled to a break-up
fee of $6.0 million plus reimbursement of certain expenses, subject to certain
conditions, including the willingness of the Purchasers to enter into a
definitive merger agreement providing for a price of at least $11.50 per share
prior to the expiration of the letter of intent. The proposed transaction was
subject to a number of conditions, including the negotiation of definitive
documents regarding certain conditions relating to the bank credit facilities
and the public debt of Foamex International's subsidiaries. Additional issues
considered included minimum shareholder acceptance, change of

25

board membership, and other provisions providing for a higher break-up fee and
expense reimbursement if Foamex International entered into a business
combination providing a more favorable transaction. On December 15, 1999, Foamex
International announced that the letter of intent with the Purchasers, which had
been extended, expired by its terms. The Purchasers had submitted a revised bid
at a price and on terms that were less favorable than those contained in the
letter of intent and the Negotiating Committee of Foamex International's Board
of Directors rejected the revised bid.

In 1998, Foamex International received an unsolicited buyout proposal from
Trace, Foamex International's principal stockholder. Foamex International
entered into two merger agreements, which were subsequently terminated by Trace.

Foamex International Shareholder and Change in Control Developments

Trace is a privately held company, which owned approximately 29% of Foamex
International's outstanding voting common stock at September 30, 2000, and whose
former Chairman also serves as Foamex International's Chairman. Foamex
International's common stock owned by Trace was pledged as collateral against
certain of Trace's obligations. The Foamex Credit Facility pursuant to which
approximately $351.1 million of principal was outstanding as of September 30,
2000, provided that a "change of control" would be an event of default and could
result in the acceleration of such indebtedness. "Change of control" means, for
this purpose, that (i) a person or related group, other than Trace, beneficially
owns more than 25% of Foamex International's outstanding voting stock and (ii)
such voting stock constitutes a greater percentage of such voting stock than the
amount beneficially owned by Trace. Additionally, certain indentures of Foamex
L.P. and Foamex Capital Corporation ("FCC") relating to senior subordinated
notes of $248.0 million contain similar "change of control" provisions, which
require Foamex L.P. and FCC to tender for such notes at a price in cash equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid interest
thereon, if there is such a "change of control".

On July 21, 1999, Foamex International was informed by Trace that it filed
a petition for relief under Chapter 11 of the Bankruptcy Code in Federal Court
in New York City. Subsequently, on January 24, 2000, an order was signed
converting the Trace bankruptcy from Chapter 11 to Chapter 7 of the Bankruptcy
Code. A trustee was appointed to oversee the liquidation of Trace's assets.
Neither Trace's bankruptcy filing nor the conversion to Chapter 7 constituted a
"change of control" under the provisions of the debt agreements described above.

On July 31, 2000, Foamex International announced that it had entered into
an agreement (the "Exchange Agreement") with The Bank of Nova Scotia relating to
a portion of the 7,197,426 shares of Foamex International's common stock pledged
by Trace to The Bank of Nova Scotia. The Exchange Agreement provided for the
transfer of the pledged stock to The Bank of Nova Scotia in a manner that would
not constitute a "change of control" as described above. These transactions were
conditioned upon bankruptcy court approval of a settlement agreement between The
Bank of Nova Scotia and the trustee for the Trace bankruptcy, which was entered
on October 18, 2000. On November 2, 2000, the transactions contemplated by the
Exchange Agreement and the settlement agreement were consummated, and did not
constitute a "change of control". As a result, Trace no longer owns any shares
of Foamex International's common stock.

Under the Exchange Agreement, The Bank of Nova Scotia initially received
1,500,000 shares of Foamex International's common stock from the Trace
bankruptcy estate and exchanged these common stock shares for 15,000 shares of a
new class of Foamex International's non-voting non-redeemable convertible
preferred stock (the "Series B Preferred Stock"). Each share of the Series B
Preferred Stock can be converted into 100 shares of Foamex International's
common stock but only if such conversion would not trigger a "change of control"
event, as discussed above. The Series B Preferred Stock (a) is entitled to
dividends only if a dividend is declared on Foamex International's common stock,
(b) ranks senior to any future preferred stock issued by Foamex International
and (c) is entitled to a liquidation preference of $100 per share. Following
this exchange, The Bank of Nova Scotia became the owner of 24.41% of the
outstanding shares of Foamex International's common stock when the remaining
5,697,426 shares of Foamex International's common stock were transferred to The
Bank of Nova Scotia from the Trace bankruptcy estate.

26

Environmental and Health and Safety Matters

Foamex L.P. is subject to extensive and changing environmental laws and
regulations. Expenditures to date in connection with Foamex L.P.'s compliance
with such laws and regulations did not have a material adverse effect on
operations, financial position, capital expenditures or competitive position.
Liabilities recorded by Foamex L.P. in connection with environmental matters as
of December 31, 2000 totaled $3.1 million. Although it is possible that new
information or future developments could require Foamex L.P. to reassess its
potential exposure to all pending environmental matters, including those
described in the consolidated financial statements, Foamex L.P. believes that,
based upon all currently available information, the resolution of all such
pending environmental matters will not have a significant adverse effect on
Foamex L.P.'s operations, financial position, capital expenditures or
competitive position.

On November 14, 2000, the United States Occupational Safety and Health
Administration ("OSHA") released the final ergonomics standard ("Ergonomics
Standard"), which applies to Foamex L.P., as well as all other employers in the
United States, with certain industry specific exclusions. The Ergonomics
Standard addresses musculoskeletal disorders, including those commonly
referenced as repetitive motion disorders.

The Ergonomics Standard is comprehensive, covering essentially all
employees of Foamex L.P. in the United States. Although the implementation costs
could be significant, in the present form, Foamex L.P. does not believe it will
have a negative impact on the its competitive position within the industry.

Subsequent to year-end 2000, a joint resolution by the United States House
of Representatives and Senate was approved that repealed the Ergonomics
Standard. The repeal has been submitted to the President of the United States
for his review and signature.

Inflation and Other Matters

On average, inflation rates for the domestic economy continue to be
relatively low. Although long-term inflation rates are difficult to predict,
Foamex L.P. believes it has the flexibility in operations and capital structure
to maintain a competitive position. In recent years, results of operations were
adversely affected by raw material cost increases. The price of the two
principal chemicals used, TDI and polyol, is influenced by demand, manufacturing
capacity and oil prices. Results for 2000 were negatively impacted by higher
transportation costs related to oil price increases and higher costs for raw
materials. Foamex L.P. attempts to offset raw material cost increases through
selling price increases; however, there can be no assurance that Foamex L.P.
will be successful in implementing selling price increases or that competitive
pricing pressure will not require Foamex L.P. to adjust selling prices. Results
of operations have been and could be adversely affected by delays in
implementing, or the inability of Foamex L.P. to implement, selling price
increases to offset raw material cost increases.

Accounting Changes - Revenue Recognition and Presentation

The Securities and Exchange Commission (the "SEC") issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB No. 101").
SAB No. 101, as amended, was effective as of January 1, 2000 and was adopted in
the fourth quarter of 2000. SAB No. 101 outlines the SEC's position that revenue
should not be recognized until it is realized or realizable. Based on the review
of the SAB No. 101 requirements, no significant impact was incurred or
anticipated on the revenue recognition practices of Foamex L.P.

During July 2000, the Emerging Issues Task Force (the "EITF") of the
Financial Accounting Standards Board reached a consensus on an issue concerning
the components of revenue. EITF No. 00-10 "Accounting for Shipping and Handling
Revenues and Costs" essentially requires that shipping and handling costs that
are billed to a customer be included in revenue. Foamex L.P. has determined that
a portion of shipping costs billed to certain customers prior to February 28,
1998 required a reclassification from costs of sales to revenue. Accordingly,
net sales for 1998 in the consolidated statements of operations reflect the
reclassification required. On a segment basis, the Carpet Cushion Products was
the only business segment impacted and net sales for 1998 reflect the
reclassification required. All other shipping and handling costs associated with
product shipments are reported in cost of goods sold.

27

Future Accounting Changes - Accounting for Derivatives and Hedging Activities

Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133") will require the
fair value of derivatives be recognized in the consolidated balance sheets.
Changes in the fair value of derivatives will be recognized in earnings or in
other comprehensive loss, essentially depending on the structure and the purpose
of the derivatives. During 2000, SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities", which amended SFAS No.
133 on a limited number of issues, was issued. The statements will be effective
for Foamex L.P. in the first quarter of 2001.

These statements create a foundation that will address accounting and
reporting issues for a wide range of financial instruments defined as
derivatives and related hedging activities. As of December 31, 2000, Foamex L.P.
did not have any derivatives, as defined in the statements. Accordingly, the
initial adoption of the statements will not have a significant impact on the
results of operations or financial position of Foamex L.P. The adoption of the
statements will require a reclassification in the consolidated balance sheets,
effective in 2001. Specifically, $6.1 million recognized at year-end 2000 as
liabilities will be reclassified to accumulated other comprehensive loss under
partners' deficit. The amount reclassified is the result of certain interest
rate swaps that were terminated in prior years, as discussed in Note 12 to the
consolidated financial statements. The amount reclassified will continue to be
amortized, with $0.9 million of amortization anticipated in 2001.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foamex L.P.'s debt securities with variable interest rates are subject to
market risk for changes in interest rates. On December 31, 2000, indebtedness
with variable interest rates totaled $405.6 million. On an annualized basis, if
the interest rates on these debt instruments increased by 1%, interest expense
would increase by approximately $4.1 million; concomitantly in fact interest
rates have decreased by 150 basis points for a potential savings in excess of
$6.0 million for the year 2001.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

An index to the financial statements and financial statement schedules is
included in Item 14(a).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

The information required by this Part III (Items 10, 11, 12 and 13) is not
applicable since Foamex L.P. is a wholly owned subsidiary of Foamex
International.

28

PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements and Schedule

Foamex L.P. and Subsidiaries
Report of Independent Accountants F-2
Consolidated Balance Sheets as of December 31, 2000 and 1999 F-3
Consolidated Statements of Operations for the years 2000, 1999 and 1998 F-5
Consolidated Statements of Cash Flows for the years 2000, 1999 and 1998 F-6
Consolidated Statements of Partners' Deficit for the years 2000, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-8
Foamex Capital Corporation
Report of Independent Accountants F-36
Balance Sheets as of December 31, 2000 and 1999 F-37
Notes to Balance Sheets F-38
Foamex L.P. and Subsidiaries Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts S-2

(b) Reports on Form 8-K.

A report, dated November 2, 2000, was filed for Item 5. Other Events,
concerning the consummation of an agreement with The Bank of Nova
Scotia relating to the shares of Foamex International's voting common
stock pledged by Trace to The Bank of Nova Scotia as a result of the
Trace bankrutpcy filing.

(c) Exhibits.

2.1(x) - Transfer Agreement, dated as of February 27, 1998, by and between
Foam Funding LLC and Foamex L.P.
2.2(x) - Asset Purchase Agreement, dated as of February 27, 1998, by and
among Foamex Carpet Cushion, Inc. ("Foamex Carpet"), Foamex
International Inc. ("Foamex International"), Foam Funding LLC and
General Felt Industries, Inc. ("General Felt").
2.3(z) - Agreement and Plan of Merger, dated as of November 5, 1998, by
and among Foamex International, Trace International Holdings, Inc.
("Trace Holdings") and Trace Merger Sub, Inc. ("Trace Sub").
2.4(aa) - Agreement and Plan of Merger, dated as of June 25, 1998, by and
among Trace Holdings, Trace Sub and Foamex International.
2.5(z) - Notice of termination of Agreement and Plan of Merger, dated as
of November 5, 1998, from Trace International Holdings, Inc. to
Foamex International Inc.
3.1(a) - Certificate of Limited Partnership of Foamex L.P.
3.2.1(a) - Fourth Amended and Restated Agreement of Limited Partnership of
Foamex L.P., dated as of December 14, 1993, by and among FMXI, Inc.
("FMXI") and Trace Foam Company, Inc. ("Trace Foam"), as general
partners, and Foamex International, as a limited partner (the
"Partnership Agreement").
3.2.2(b) - First Amendment to the Partnership Agreement, dated June 28,
1994.
3.2.3(c) - Second Amendment to the Partnership Agreement, dated June 12,
1997.
3.2.4(v) - Third Amendment to the Partnership Agreement, dated December 23,
1997.
3.2.5(x) - Fourth Amendment to the Partnership Agreement, dated February 27,
1998.
3.3(y) - Certificate of Incorporation of FMXI.
3.4(y) - By-laws of FMXI.
3.5(k) - Certificate of Incorporation of Foamex Capital Corporation
("FCC").
3.6(k) - By-laws of FCC.
3.7.1(a) - Certificate of Incorporation of Foamex International.
3.7.1(dd) - Amendment to Certificate of Incorporation of Foamex
International.

29

3.7.2(cc) - Certificate of Incorporation of Foamex Carpet Cushion, Inc.
("Foamex Carpet").
3.8(a) - By-laws of Foamex International.
3.8.1(cc) - By-laws of Foamex Carpet.
4.1.1(d) - Indenture, dated as of June 12, 1997, by and among Foamex L.P.,
FCC, the Subsidiary Guarantors and The Bank of New York, as
trustee, relating to $150,000,000 principal amount of 9 7/8% Senior
Subordinated Notes due 2007 (the "9 7/8% Notes"), including the
form of Senior Subordinated Note and Subsidiary Guarantee.
4.1.2(v) - First Supplemental Indenture, dated as of December 23, 1997,
between Foamex LLC ("FLLC") and The Bank of New York, as trustee,
relating to the 9 7/8% Notes.
4.1.3(x) - Second Supplemental Indenture, dated as of February 27, 1998,
among Foamex L.P. and FCC, as joint and several obligors, General
Felt, Foamex Fibers, Inc. ("Foamex Fibers"), and FLLC, as
withdrawing guarantors, and The Bank of New York, as trustee,
relating to the 9 7/8% Notes.
4.1.4(d) - Registration Rights Agreement, dated as of June 12, 1997, by and
among Foamex L.P., FCC, General Felt, Foamex Fibers, and all future
direct or indirect domestic subsidiaries of Foamex L.P. or FCC, and
Donaldson, Lufkin & Jenrette Securities Corporation, Salomon
Brothers Inc. and Scotia Capital Markets, as Initial Purchasers.
4.2.1(v) - Indenture, dated as of December 23, 1997, by and among Foamex
L.P., FCC, the Subsidiary Guarantors, Crain Holdings Corp., as
Intermediate Obligator, and The Bank of New York, as trustee,
relating to $98,000,000 principal amount of 13 1/2% Senior
Subordinated Notes due 2005 (the "13 1/2% Notes"), including the
form of Senior Subordinated Note and Subsidiary Guarantee.
4.2.2(x) - First Supplemental Indenture, dated as of February 27, 1998,
among Foamex L.P. and FCC, as joint and several obligors, General
Felt, Foamex Fibers and FLLC, as withdrawing guarantors, Crain
Industries, Inc., as withdrawing Intermediate Obligor, and The Bank
of New York, as trustee, relating to the 13 1/2% Notes.
4.3(x) - Discharge of Indenture, dated as of February 27, 1998, by and
among Foamex L.P., General Felt, Foamex International and State
Street Bank and Trust Company, as trustee, relating to the 9 1/2%
Senior Secured Notes due 2000.
4.4.2(x) - Second Amended and Restated Foamex International Guaranty, dated
as of February 27, 1998, made by Foamex International in favor of
Citicorp USA, Inc., as Collateral Agent.
4.4.3(x) - Amended and Restated Partnership Guaranty, dated as of February
27, 1998, made by FMXI in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.4(p) - Foamex Guaranty, dated as of June 12, 1997, made by Foamex L.P.
in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.5(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Latin America, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.6(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.7(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by FCC in
favor of Citicorp USA, Inc., as Collateral Agent.
4.4.8(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.9(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Asia, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.10(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.11(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Latin America, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.12(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Asia, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.13(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.14(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.

30

4.4.15(p) - Foamex Security Agreement, dated as of June 12, 1997, made by
Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.16(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Latin America, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.17(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.18(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.19(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Asia, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.20(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.21(r) - Foamex Pledge Agreement, dated as of June 12, 1997, made by
Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.22(w) - First Amendment to Foamex Pledge Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.23(w) - First Amendment to Foamex Security Agreement, dated as of
December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc.,
as Collateral Agent.
4.4.24(w) - First Amendment to Foamex Patent Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.25(w) - First Amendment to Trademark Security Agreement, dated as of
December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc.,
as Collateral Agent.
4.4.26(w) - Acknowledgment of Guaranty by each of the guarantors to a
Guaranty dated June 12, 1997 in favor of Citicorp USA, Inc.
4.4.27(w) - First Amendment to Pledge Agreement, dated as of December 23,
1997, by pledgors in favor of Citicorp USA, Inc.
4.4.28(w) - Crain Industries, Inc. ("Crain") Guaranty, dated as of December
23, 1997, made by Crain in favor of Citicorp USA, Inc.
4.4.29(x) - Partnership Pledge Agreement, dated as of February 27, 1998, made
by Foamex International and FMXI in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.30(bb) - Amendment No. 1 to Second Amended and Restated Foamex
International Guaranty, dated March 11, 1999.
4.4.31(bb) - Amendment No. 1 to Foamex International Guaranty, dated March 12,
1999.
4.4.32(dd) - Foamex Patent Agreement, dated as of June 12, 1997, by Foamex
L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.33(dd) - Trademark Security Agreement, dated as of June 12, 1997, by
Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.34(ee) - Amended and Restated Foamex Pledge Agreement, dated as of June
30, 1999 made by Foamex L.P. in favor of Citicorp U.S.A. Inc. as
Collateral Agent.
4.4.35(ee) - Amended and Restated Partnership Pledge Agreement, dated as of
June 30, 1999 by FMXI and Foamex International in favor of Citicorp
USA Inc. as FII Intercreditor Collateral Agent.
4.5 - Commitment letter, dated October 31, 2000, from The Bank of Nova
Scotia to Foamex Canada Inc.
4.6(a) - Subordinated Promissory Note, dated as of May 6, 1993, in the
original principal amount of $7,014,864 executed by Foamex L.P. to
John Rallis ("Rallis").
4.7(a) - Marely Loan Commitment Agreement, dated as of December 14, 1993,
by and between Foamex L.P. and Marely s.a. ("Marely").
4.8(a) - DLJ Loan Commitment Agreement, dated as of December 14, 1993, by
and between Foamex L.P. and DLJ Funding, Inc. ("DLJ Funding").
4.9.1(p) - Promissory Note, dated June 12, 1997, in the aggregate principal
amount of $5,000,000, executed by Trace Holdings to Foamex L.P.
4.9.2(p) - Promissory Note, dated June 12, 1997, in the aggregate principal
amount of $4,794,828, executed by Trace Holdings to Foamex L.P.

31

4.10.1(x) - Credit Agreement, dated as of February 27, 1998, by and among
Foamex Carpet, the institutions from time to time party thereto as
lenders, the institutions from time to time party thereto as
issuing banks and Citicorp USA, Inc. and The Bank of Nova Scotia,
as administrative agents.
4.10.2(x) - Foamex International Guaranty, dated as of February 27, 1998,
made by Foamex International in favor of Citicorp USA, Inc., as
Collateral Agent.
4.10.3(x) - Foamex International Pledge Agreement, dated as of February 27,
1998, made by Foamex International in favor of Citicorp USA, Inc.,
as Collateral Agent.
4.10.4(x) - New GFI Security Agreement, dated as of February 27, 1998, made
by Foamex Carpet in favor of Citicorp USA, Inc., as Collateral
Agent.
4.10.5(x) - New GFI Intercreditor Agreement, dated as of February 27, 1998,
by and among Foamex Carpet, The Bank of Nova Scotia, as
Administrative Agent, and Citicorp USA, Inc., as Administrative
Agent and Collateral Agent.
4.10.6(x) - FII Intercreditor Agreement, dated as of February 27, 1998, by
and between Foamex International and Citicorp USA, Inc., as
Collateral Agent.
4.10.9(dd) - Amendment No. 1 to Foamex Carpet Credit Agreement, dated October
30, 1998.
4.10.10(bb) - Amendment No. 2 to Foamex Carpet Credit Agreement, dated March
12, 1999.
4.10.11(ee) - Foamex L.P. Credit Agreement, dated June 12, 1997, as amended and
restated as of February 27, 1998 as further amended and restated as
of June 29, 1999 among Foamex L.P., FMXI, the institutions from
time to time party thereto as lenders, the institutions from time
to time party thereto as issuing banks and Citicorp USA, Inc. and
the Bank of Nova Scotia as Administrative Agents.
4.10.12(ee) - Amendment No. 3 to Foamex Carpet Credit Agreement, dated June 30,
1999.
4.10.13(ee) - Foamex International Pledge Agreement, dated June 30, 1999, made
by Foamex International in favor of Citicorp U.S.A. Inc. as FII
Intercreditor Collateral Agent.
4.10.14(gg) - Amendment No. 1 to the Foamex L.P. Credit Agreement, dated
December 23, 1999, as amended and restated as of February 27, 1998
as further amended and restated as of June 29, 1999 among Foamex
L.P., FMXI, the institutions from time to time party thereto as
lenders, the institutions from time to time party thereto as
issuing banks and Citicorp USA, Inc. and the Bank of Nova Scotia as
Administrative Agents.
4.10.15(hh) - Amendment No. 2 to the Foamex L.P. Credit Agreement, dated
February 16, 2000, as amended and restated as of February 27, 1998
as further amended and restated as of June 29, 1999 among Foamex
L.P., FMXI, the institutions from time to time party thereto as
lenders, the institutions from time to time party thereto as
issuing banks and Citicorp USA, Inc. and the Bank of Nova Scotia as
Administrative Agents.
4.11.1(x) - Promissory Note of Foamex L.P. in favor of Foam Funding LLC in
the principal amount of $34 million, dated February 27, 1998.
4.12.1(x) - Promissory Note of Foamex Carpet in favor of Foam Funding LLC in
the principal amount of $70.2 million, dated February 27, 1998.
4.12.2(bb) - Amendment to Promissory Note of Foamex Carpet in favor of Foam
Funding LLC dated March 15, 1999.
4.12.3(ee) - Amendment to Promissory Note of Foamex L.P. in favor of Foam
Funding LLC dated as of June 30, 1999.
4.12.4(ee) - Amendment to Promissory Note of Foamex Carpet in favor of Foam
Funding LLC dated as of June 30, 1999.
4.13(dd) - Waiver, dated as of April 15, 1999 to the Credit Agreement, dated
as of February 27, 1998, among Foamex Carpet, the institutions
party thereto as Lenders, the institutions party thereto as Issuing
Banks, and Citicorp USA, Inc. and The Bank of Nova Scotia as
Administrative Agents.
4.13.1(gg) - Waiver, dated as of April 15, 1999 to the Promissory Note, dated
as of February 27, 1998, payable by Foamex Carpet to Foam Funding
LLC.
4.13.2(gg) - Waiver, dated as of May 6, 1999 to the Promissory Note, dated as
of February 27, 1998, payable by Foamex Carpet to Foam Funding LLC.
4.14.1(gg) - Revolving Note of Foamex International in favor of Foamex L.P. in
the principal amount of $2,490,000, dated as of October 20, 1999.

32

4.14.2(hh) - Certificate of Designations of Series B Preferred Stock of Foamex
International, dated as of November 2, 2000.
10.1.1(p) - Amendment to Master Agreement, dated as of June 5, 1997, between
Citibank, N.A. and Foamex L.P.
10.1.2(p) - Amended Confirmation, dated as of June 13, 1997, between
Citibank, N.A. and Foamex L.P.
10.1.3(w) - Amended Confirmation, dated as of February 2, 1998, between
Citibank, N.A. and Foamex L.P.
10.2(h) - Reimbursement Agreement, dated as of March 23, 1993, between
Trace Holdings and General Felt.
10.3(h) - Shareholder Agreement, dated December 31, 1992, among, Recticel
s.a. ("Recticel"), Recticel Holding Noord B.V., Foamex L.P.,
Beamech Group Limited, LME-Beamech, Inc., James Brian Blackwell,
and Prefoam AG relating to foam technology-sharing arrangement.
10.4.1(k) - Asset Transfer Agreement, dated as of October 2, 1990, between
Trace Holdings and Foamex L.P. (the "Trace Holdings Asset Transfer
Agreement").
10.4.2(k) - First Amendment, dated as of December 19, 1991, to the Trace
Holdings Asset Transfer Agreement.
10.4.3(k) - Amended and Restated Guaranty, dated as of December 19, 1991,
made by Trace Foam in favor of Foamex L.P.
10.5.1(k) - Asset Transfer Agreement, dated as of October 2, 1990, between
Recticel Foam Corporation ("RFC") and Foamex L.P. (the "RFC Asset
Transfer Agreement").
10.5.2(k) - First Amendment, dated as of December 19, 1991, to the RFC Asset
Transfer Agreement.
10.5.3(k) - Schedule 5.03 to the RFC Asset Transfer Agreement (the "5.03
Protocol").
10.5.4(h) - The 5.03 Protocol Assumption Agreement, dated as of October 13,
1992, between RFC and Foamex L.P.
10.5.5(h) - Letter Agreement between Trace Holdings and Recticel regarding
the Recticel Guaranty, dated as of July 22, 1992.
10.6(l) - Supply Agreement, dated June 28, 1994, between Foamex L.P. and
Foamex International.
10.7.1(l) - First Amended and Restated Tax Sharing Agreement, dated as of
December 14, 1993, among Foamex L.P., Trace Foam, FMXI and Foamex
International.
10.7.2(d) - First Amendment to First Amended and Restated Tax Sharing
Agreement, dated as of June 12, 1997, by and among Foamex L.P.,
Foamex International, FMXI and Trace Foam.
10.7.3(w) - Second Amendment to First Amended and Restated Tax Sharing
Agreement, dated as of December 23, 1997, by and among Foamex L.P.,
Foamex International, FMXI, and Trace Foam.
10.7.4(y) - Third Amendment to First Amended and Restated Tax Sharing
Agreement, dated as of February 27, 1998, by and between Foamex
L.P., Foamex International and FMXI.
10.8.1(m) - Tax Distribution Advance Agreement, dated as of December 11,
1996, by and between Foamex L.P. and Foamex-JPS Automotive L.P.
10.8.2(d) - Amendment No. 1 to Tax Distribution Advance Agreement, dated as
of June 12, 1997, by and between Foamex L.P. and Foamex
International.
10.9.1(h) - Trace Foam Management Agreement between Foamex L.P. and Trace
Foam, dated as of October 13, 1992.
10.9.2(l) - Affirmation Agreement re: Management Agreement, dated as of
December 14, 1993, between Foamex L.P. and Trace Foam.
10.9.3(d) - First Amendment to Management Agreement, dated as of June 12,
1997, by and between Foamex L.P. and Trace Foam.
10.10.1(k) - Salaried Incentive Plan of Foamex L.P. and Subsidiaries.
10.10.2(k) - Trace Holdings 1987 Nonqualified Stock Option Plan.
10.10.3(k) - Equity Growth Participation Program.
10.10.4(o) - The Foamex L.P. Salaried Pension Plan (formerly. "The General
Felt Industries, Inc. Retirement Plan for Salaried Employees"),
effective as of January 1, 1995.
10.10.5(u) - The Foamex L.P. Hourly Pension Plan (formerly "The Foamex
Products Inc. Hourly Employee Retirement Plan"), as amended
December 31, 1995.
10.10.6(u) - Foamex L.P.'s 401(k) Savings Plan effective October 1, 1997.
10.10.7(ff) - Foamex International's Amended and Restated 1993 Stock Option
Plan.
10.10.8(a) - Foamex International's Non-Employee Director Compensation Plan.

33

10.11.1(o) - Employment Agreement, dated as of February 1, 1994, by and
between Foamex L.P. and William H. Bundy.
10.11.2(dd) - Employment Agreement, dated as of March 16, 1999, by and between
Foamex International and John G. Johnson, Jr.
10.11.3(jj) - Employment Agreement, amended effective as of January 29, 2001,
by and between Foamex International and John Televantos.
10.12.1(a) - Warrant Exchange Agreement, dated as of December 14, 1993, by and
between Foamex L.P. and Marely.
10.12.2(a) - Warrant Exchange Agreement, dated as of December 14, 1993, by and
between Foamex L.P. and DLJ Funding.
10.13(t) - Warrant Agreement, dated as of June 28, 1994, by and between
Foamex International and Shawmut Bank.
10.14(o) - Stock Purchase Agreement, dated as of December 23, 1993, by and
between Transformacion de Espumas u Fieltros, S.A., the
stockholders which are parties thereto, and Foamex L.P.
10.15.1(r) - Asset Purchase Agreement, dated as of August 29, 1997, by and
among General Felt, Foamex L.P., Bretlin, Inc. and The Dixie Group.
10.15.2(s) - Addendum to Asset Purchase Agreement, dated as of October 1,
1997, by and among General Felt, Foamex L.P., Bretlin, Inc. and The
Dixie Group.
10.16.1(x) - Supply Agreement, dated as of February 27, 1998, by and between
Foamex L.P. and General Felt (as assigned to Foamex Carpet).
10.16.2(x) - Administrative Services Agreement, dated as of February 27, 1998,
by and between Foamex L.P. and General Felt (as assigned to Foamex
Carpet).
10.17(y) - Tax Sharing Agreement, dated as of February 27, 1998, between
Foamex International and Foamex Carpet.
10.18.1(w) - Joint Venture Agreement between Hua Kee Company Limited and
Foamex Asia, Inc., dated as of July 8, 1997.
10.18.2(w) - Loan Agreement between Hua Kee Company Limited and Foamex Asia,
Inc., dated as of July 8, 1997.
21 - Subsidiaries of registrant.
- ----------------------------

(a) Incorporated herein by reference to the Exhibit to Foamex L.P.'s
Registration Statement on Form S-1, Registration No. 33-69606.

(b) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
International for the fiscal year ended January 1, 1995.

(c) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex International reporting an event that occurred May 28,
1997.

(d) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex International reporting an event that occurred June 12,
1997.

(e) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex L.P. and FCC on Form S-4, Registration No. 33-65158.

(f) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
International for the quarterly period ended June 30, 1996.

(g) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex L.P., FCC and General Felt on Form S-1, Registration
Nos. 33-60888, 33-60888-01, and 33-60888-02.

(h) Incorporated herein by reference to the Exhibit to the Form 10-K Statement
of Foamex L.P. and FCC for fiscal 1992.

34

(i) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for fiscal 1994.

(j) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
for the quarterly period ended September 30, 1996.

(k) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex L.P. and FCC on Form S-1, Registration Nos. 33-49976
and 33-49976-01.

(l) Incorporated herein by reference to the Exhibit to the Registration
Statement of FJPS, FJCC and Foamex L.P. on Form S-4, Registration No.
33-82028.

(m) Incorporated herein by reference to the Exhibit to the Annual Report on
Form 10-K of Foamex International for the fiscal year ended December 29,
1996.

(n) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
International for the quarterly period ended July 2, 1995.

(o) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for fiscal 1993.

(p) Incorporated herein by reference to the Exhibit in the Registration
Statement of Foamex International on Form S-4, Registration No. 333-30291.

(q) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for the fiscal year ended December 31, 1995.

(r) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex L.P. reporting an event that occurred on August 29, 1997.

(s) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex L.P. reporting an event that occurred on October 6, 1997.

(t) Incorporated by reference to the Exhibit to the Form 10-Q of Foamex
International for the quarterly period ended July 3, 1994.

(u) Incorporated by reference to the Exhibit to the Form 10-Q of Foamex L.P.
for the quarterly period ended September 28, 1997.

(v) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex L.P., FCC and Foamex International reporting an event
that occurred December 23, 1997.

(w) Incorporated herein by reference to the Exhibit in the Registration
Statement of Foamex L.P. and FCC on Form S-4, Registration No. 333-45733,
filed February 6, 1998.

(x) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex International reporting an event that occurred on February 27, 1998.

(y) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
International for the fiscal year ended December 28, 1997.

(z) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex International reporting an event that occurred on November 5, 1998.

(aa) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex International reporting an event that occurred on June
25, 1998.

35

(bb) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex International reporting an event that occurred on March
11, 1999.

(cc) Incorporated herein by reference to the Exhibit in the Registration
Statement of Foamex L.P. and FCC on Form S-4/A, Registration No. 333-45733,
filed May 11, 1998.

(dd) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
International Inc. for the fiscal year ended December 31, 1998.

(ee) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex International reporting an event that occurred on June
30, 1999.

(ff) Incorporated herein by reference to the Exhibit to Foamex International's
definitive proxy statement dated May 31, 2000.

(gg) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
International for the fiscal year ended December 31, 1999.

(hh) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
International for the quarter ended March 31, 2000.

(ii) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex International reporting an event that occurred on July
31, 2000.

(jj) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
International for the fiscal year ended December 31, 2000.

Certain instruments defining the rights of security holders have been
excluded herefrom in accordance with Item 601(b)(4)(iii) of Regulation S-K. The
registrant hereby agrees to furnish a copy of any such instrument to the
Commission upon request.

36

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized as of the 30th day of March 2001.

FOAMEX L.P.
By: FMXI, Inc.
General Partner

By: /s/ George L. Karpinski
----------------------------
Name: George L. Karpinski
Title: Vice President

FOAMEX CAPITAL CORPORATION

By: /s/ George L. Karpinski
----------------------------
Name: George L. Karpinski
Title: Vice President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on its behalf by the
registrant and in the capacities and as of the dates indicated:

Signature Title Date

/s/ Marshall S. Cogan Director of FMXI and FCC March 30, 2001
- ------------------------
Marshall S. Cogan

/s/ John Televantos Director of FMXI and FCC March 30, 2001
- ------------------------
John Televantos

37

FOAMEX L.P. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements of Registrants

Foamex L.P.
Report of Independent Accountants F-2
Consolidated Balance Sheets as of December 31, 2000 and 1999 F-3
Consolidated Statements of Operations for the years 2000, 1999 and 1998 F-5
Consolidated Statements of Cash Flows for the years 2000, 1999 and 1998 F-6
Consolidated Statements of Partners' Deficit for the years 2000, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-8

Foamex Capital Corporation
Report of Independent Accountants F-36
Balance Sheets as of December 31, 2000 and 1999 F-37
Notes to Balance Sheets F-38

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of Foamex L.P.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, partners' deficit and cash flows present
fairly, in all material respects, the financial position of Foamex L.P. and its
subsidiaries, an indirect wholly owned subsidiary of Foamex International Inc.
("Foamex International"), at December 31, 2000 and 1999 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States of America. In addition, in our opinion, the financial
statement schedule as of and for each of the three years in the period ended
December 31, 2000 when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein. These financial statements and
financial statement schedule are the responsibility of Foamex L.P.'s management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Note 12, during the year ending December 31, 2001, Foamex L.P.'s
financial debt covenants, with which Foamex L.P. must comply on a quarterly
basis, become more restrictive. Management's plans in regard to this matter are
also described in Note 12.

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 30, 2001

F-2

FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31, December 31,
ASSETS 2000 1999
------------ ------------
(thousands)
CURRENT ASSETS

Cash and cash equivalents $ 2,887 $ 1,573
Accounts receivable, net of allowance for doubtful
accounts and discounts of $6,458 and $5,310 134,478 128,929
Accounts receivable from related parties 12,483 16,717
Inventories 96,673 93,812
Other current assets 20,569 21,541
-------- --------

Total current assets 267,090 262,572
-------- --------

PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 6,805 6,947
Buildings and leasehold improvements 99,312 98,098
Machinery, equipment and furnishings 249,975 246,392
Construction in progress 21,640 14,598
-------- --------

Total 377,732 366,035

Less accumulated depreciation and amortization (175,260) (154,720)
-------- --------

Property, plant and equipment, net 202,472 211,315

COST IN EXCESS OF ASSETS ACQUIRED, net of
accumulated amortization of $20,677 in 2000 and
$15,804 in 1999 178,299 183,481

DEBT ISSUANCE COSTS, net of
accumulated amortization of $8,719 in 2000 and
$5,787 in 1999 11,491 14,423

OTHER ASSETS 18,209 26,704
-------- --------

TOTAL ASSETS $677,561 $698,495
======== ========

The accompanying notes are an integral part of the
consolidated financial statements.

F-3

FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31, December 31,
LIABILITIES AND PARTNERS' DEFICIT 2000 1999
------------ ------------
(thousands)
CURRENT LIABILITIES

Short-term borrowings $ - $ 1,627
Current portion of long-term debt 8,356 7,866
Accounts payable 82,756 82,229
Accrued employee compensation and benefits 20,420 16,341
Accrued interest 9,133 9,457
Accrued restructuring 3,831 3,915
Deferred income taxes 1,511 2,080
Accrued customer rebates 12,400 9,652
Other accrued liabilities 19,205 18,864
-------- --------

Total current liabilities 157,612 152,031

LONG-TERM DEBT 656,168 646,544

LONG-TERM DEBT - RELATED PARTY - 34,000

ACCRUED EMPLOYEE BENEFITS 18,366 14,131

ACCRUED RESTRUCTURING 4,681 7,097

OTHER LIABILITIES 9,641 9,283
-------- --------

Total liabilities 846,468 863,086
-------- --------

COMMITMENTS AND CONTINGENCIES

PARTNERS' DEFICIT
General partners (130,235) (143,271)
Limited partners - -
Accumulated comprehensive loss (24,461) (8,923)
Notes and advances receivable from partner (4,990) (3,176)
Notes receivable from related party (9,221) (9,221)
-------- --------

Total partners' deficit (168,907) (164,591)
-------- --------

TOTAL LIABILITIES AND PARTNERS' DEFICIT $677,561 $698,495
======== ========

The accompanying notes are an integral part of the
consolidated financial statements.

F-4

FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years 2000, 1999 and 1998

2000 1999 1998
------------ ------------ ------------
(thousands)

NET SALES $1,161,017 $1,190,679 $1,157,751

COST OF GOODS SOLD 1,016,643 1,036,056 1,029,074
---------- ---------- ----------

GROSS PROFIT 144,374 154,623 128,677

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 54,240 60,067 73,315

RESTRUCTURING AND OTHER CHARGES (CREDITS) 6,019 10,821 (10,146)
---------- ---------- ----------

INCOME FROM OPERATIONS 84,115 83,735 65,508

INTEREST AND DEBT ISSUANCE EXPENSE 69,259 66,471 66,112

INCOME FROM EQUITY INTEREST IN JOINT VENTURE 1,652 512 -

OTHER EXPENSE, NET (1,330) (882) (4,325)
---------- ---------- ----------

INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 15,178 16,894 (4,929)

PROVISION FOR INCOME TAXES 1,910 1,313 940
---------- ---------- ----------

INCOME (LOSS) BEFORE EXTRAORDINARY LOSS 13,268 15,581 (5,869)

EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT - - (3,195)
---------- ---------- ----------

NET INCOME (LOSS) $ 13,268 $ 15,581 $ (9,064)
========== ========== ==========

The accompanying notes are an integral part of the
consolidated financial statements.

F-5

FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years 2000, 1999 and 1998

2000 1999 1998
---------- ---------- ----------
OPERATING ACTIVITIES (thousands)

Net income (loss) $ 13,268 $ 15,581 $(9,064)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation and amortization 33,801 32,590 31,679
Amortization of debt issuance costs, debt premium, deferred
swap adjustment and gain, and debt discount 383 457 (244)
Asset write-downs and other charges (credits) 2,822 356 (5,507)
Extraordinary loss on early extinguishment of debt - - 2,857
Provision for uncollectible accounts 1,736 2,493 2,000
Retirement benefit funding (greater) less than expense (6,502) 2,405 1,081
Deferred income taxes (646) 81 267
Other, net 1,717 1,075 (5,274)
Changes in operating assets and liabilities:
Accounts receivable and accounts receivable from related parties (3,051) 12,695 (19,026)
Inventories (2,861) 33,824 (20,288)
Accounts payable and accounts payable to related parties 527 (58,288) 13,530
Accrued restructuring (2,500) 1,491 (14,183)
Other assets and liabilities 8,003 13,301 (5,610)
-------- -------- --------

Net cash provided by (used for) operating activities 46,697 58,061 (27,782)
-------- -------- --------

INVESTING ACTIVITIES
Capital expenditures (22,786) (19,407) (31,715)
Proceeds from sale of assets 3,995 1,510 2,230
Repayment of (purchase of) note from Foamex International - 2,490 (2,490)
Redemption of General Felt - - (10,153)
Increase in revolving loan with Foamex International (1,814) (676) -
Other investing activities (1,850) 249 (922)
-------- -------- --------

Net cash used for investing activities (22,455) (15,834) (43,050)
-------- -------- --------

FINANCING ACTIVITIES
Repayments of short-term borrowings (1,627) (1,330) (3,641)
Net proceeds from (repayments of) revolving loans 32,220 (25,753) 84,511
Proceeds from long-term debt - - 138,810
Repayments of long-term debt (20,550) (8,271) (142,212)
Repayments of long-term debt - related parties (34,000) - -
Increase (decrease) in cash overdrafts 1,029 (1,444) 7,300
Tax distribution repayments - 13,618 -
Net distribution paid to partners - (17,296) (20,293)
Debt issuance costs - (3,370) (979)
Other financing activities - - 1,123
-------- -------- --------

Net cash provided by (used for) financing activities (22,928) (43,846) 64,619
-------- -------- --------

Net increase (decrease) in cash and cash equivalents 1,314 (1,619) (6,213)

Cash and cash equivalents at beginning of period 1,573 3,192 9,405
-------- -------- --------

Cash and cash equivalents at end of period $ 2,887 $ 1,573 $ 3,192
======== ======== ========

The accompanying notes are an integral part of the
consolidated financial statements.

F-6

FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
For the Years Ended 2000, 1999 and 1998

Accumulated Notes
Other Notes Receivable
General Limited Comprehensive Receivable Related
Partners Partners Loss from Partners Party Total
---------- -------- ------------- ------------- ---------- ---------
(thousands)

Balances at December 28, 1997 $(122,304) $ - $ (8,085) $(16,118) $(9,795) $(156,302)

Net loss (181) (8,883) (9,064)
Minimum pension liability adjustment (11,525) (11,525)
Foreign currency translation adjustment (6,598) (6,598)
---------
Comprehensive loss (27,187)
Distributions (8) (326) (334)
Distribution associated with the
GFI Transaction (400) (19,600) (20,000)
Equity adjustment associated with the
GFI Transaction 201 9,868 10,069
Purchase of note receivable from Foamex
International (2,490) (2,490)
Other 207 207
Deficit balance of Limited Partner assumed
by General Partner (18,734) 18,734 -
--------- -------- -------- -------- ------- ---------
Balances at December 31, 1998 (141,426) - (26,208) (18,608) (9,795) (196,037)

Net income 312 15,269 15,581
Minimum pension liability adjustment 12,331 12,331
Foreign currency translation adjustment 4,954 4,954
---------
Comprehensive income 32,866
Distributions (7) (321) (328)
Distribution associated with tax distribution
advance (346) (16,967) (17,313)
Repayment of note receivable from Foamex
International 2,490 2,490
Repayment of tax advance 13,618 13,618
Revolving loan with Foamex International (676) (676)
Other 215 574 789
Deficit balance of Limited Partner assumed
by General Partner (1,804) 1,804 -
--------- -------- -------- -------- ------- ---------
Balances at December 31, 1999 (143,271) - (8,923) (3,176) (9,221) (164,591)

Net income 265 13,003 13,268
Minimum pension liability adjustment (14,628) (14,628)
Foreign currency translation adjustment (910) (910)
---------
Comprehensive loss (2,270)
Distributions (8) (432) (440)
Revolving loan with Foamex International (1,814) (1,814)
Other 208 208
Offset balance against Limited Partner deficit
assumed by General Partner 12,779 (12,779) -
--------- -------- -------- -------- ------- ---------
Balances at December 31, 2000 $(130,235) $ - $(24,461) $ (4,990) $(9,221) $(168,907)
========= ======== ======== ======== ======= =========

The accompanying notes are an integral part of the
consolidated financial statements.

F-7

FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

Foamex L.P. is a manufacturer and distributor of flexible polyurethane foam
and advanced polymer foam products. As of December 31, 2000, Foamex L.P.'s
operations consists of the following operating segments: (i) Foam Products, (ii)
Carpet Cushion Products, (iii) Automotive Products, (iv) Technical Products and
(v) Other, which primarily consists of certain foreign manufacturing operations
in Mexico, corporate expenses not allocated to the other operating segments and
restructuring and other charges. The net sales and income (loss) from operations
of these operating segments for each of the last three years are included in
Note 15. For periods prior to February 27, 1998, the consolidated financial
statements include the results of operations and cash flows of General Felt
Industries, Inc. ("General Felt"). In connection with the GFI Transaction (see
Note 12) the net assets and operations of General Felt were transferred from
Foamex L.P. and were acquired by Foamex Carpet Cushion, Inc. ("Foamex Carpet"),
a wholly owned subsidiary of Foamex International Inc. ("Foamex International").

Foamex L.P. is a Delaware limited partnership. Effective February 27, 1998,
Foamex L.P. became an indirect wholly owned subsidiary of Foamex International.
FMXI, Inc. ("FMXI") has a 2% managing general partnership interest in Foamex
L.P. Foamex International has a 98% limited partnership interest in Foamex L.P.
FMXI is a wholly owned subsidiary of Foamex International.

Foamex International Shareholder and Change in Control Developments

Trace International Holdings, Inc. ("Trace") is a privately held company,
which owned approximately 29% of Foamex International's outstanding voting
common stock at September 30, 2000, and whose former Chairman also serves as
Foamex International's Chairman. Foamex International's common stock owned by
Trace was pledged as collateral against certain of Trace's obligations. The
Foamex L.P. credit facility, pursuant to which approximately $351.1 million of
debt was outstanding as of September 30, 2000, provided that a "change of
control" would be an event of default and could result in the acceleration of
such indebtedness. "Change of control" means, for this purpose, that (i) a
person or related group, other than Trace, beneficially owns more than 25% of
Foamex International's outstanding voting stock and (ii) such voting stock
constitutes a greater percentage of such voting stock than the amount
beneficially owned by Trace. Additionally, certain indentures of Foamex L.P. and
Foamex Capital Corporation ("FCC") relating to senior subordinated notes of
$248.0 million contain similar "change of control" provisions, which require
Foamex L.P. and FCC to tender for such notes at a price in cash equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest
thereon, if there is such a "change of control".

On July 21, 1999, Foamex L.P. was informed by Trace that it filed a
petition for relief under Chapter 11 of the Bankruptcy Code in Federal Court in
New York City. Subsequently, on January 24, 2000, an order was signed converting
the Trace bankruptcy from Chapter 11 to Chapter 7 of the Bankruptcy Code. A
trustee was appointed to oversee the liquidation of Trace's assets. Neither
Trace's bankruptcy filing nor the conversion to Chapter 7 constituted a "change
of control" under the provisions of the debt agreements described above.

On July 31, 2000, Foamex International announced that it had entered into
an agreement (the "Exchange Agreement") with The Bank of Nova Scotia relating to
a portion of the 7,197,426 shares of Foamex International's common stock pledged
by Trace to The Bank of Nova Scotia. The Exchange Agreement provided for the
transfer of the pledged stock to The Bank of Nova Scotia in a manner that would
not constitute a "change of control" as described above. These transactions were
conditioned upon bankruptcy court approval of a settlement agreement between The
Bank of Nova Scotia and the trustee for the Trace bankruptcy, which was entered
on October 18, 2000. On November 2, 2000, the transactions contemplated by the
Exchange Agreement and the settlement agreement were consummated, and did not
constitute a "change of control". As a result, Trace no longer owns any shares
of Foamex International's common stock.

F-8

1. ORGANIZATION AND BASIS OF PRESENTATION (continued)

Under the Exchange Agreement, The Bank of Nova Scotia initially received
1,500,000 shares of Foamex International's common stock from the Trace
bankruptcy estate and exchanged these common stock shares for 15,000 shares of a
new class of Foamex International's non-voting non-redeemable convertible
preferred stock (the "Series B Preferred Stock"). Each share of the Series B
Preferred Stock can be converted into 100 shares of Foamex International's
common stock but only if such conversion would not trigger a "change of control"
event, as discussed above. The Series B Preferred Stock: (a) is entitled to
dividends only if a dividend is declared on Foamex International's common stock,
(b) ranks senior to any future preferred stock issued by Foamex International
and (c) is entitled to a liquidation preference of $100 per share. Following
this exchange, The Bank of Nova Scotia became the owner of 24.41% of the
outstanding shares of Foamex International's common stock when the remaining
5,697,426 shares of Foamex International's common stock were transferred to The
Bank of Nova Scotia from the Trace bankruptcy estate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The consolidated financial statements include the accounts of Foamex L.P.
and all majority-owned subsidiaries where control exists. Investments in
affiliates with 20% or greater ownership are accounted for using the equity
method. All significant intercompany accounts and transactions have been
eliminated in consolidation.

Reporting Period

Effective September 1998, the annual reporting period was changed from a 52
or 53 week fiscal year ending on the Sunday closest to the end of the calendar
year to a calendar year ending on December 31. This change was effective for the
third fiscal quarter of 1998, which ended on September 30, 1998.

Accounting Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and contingency disclosures. Actual
results could differ from those estimates.

Revenue Recognition, Discounts and Rebates

Revenue from sales, net of discounts and estimated returns, allowances and
rebates, is recognized when product title passes to the customer, which is
primarily at the time of shipment. See the section below entitled "Accounting
Changes - Revenue Recognition" regarding developments concerning revenue
recognition requirements.

Cash Equivalents

Highly liquid investments with an original maturity of three months or less
when purchased are recognized as cash equivalents.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
on a first-in, first-out basis.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over the estimated useful lives of the assets. The
range of useful lives estimated for buildings is generally 20 to 35 years, and
the range for machinery, equipment and furnishings is 5 to 12 years. Leasehold
improvements are amortized over

F-9

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

the shorter of the terms of the respective leases or the estimated useful lives
of the leasehold improvements. Depreciation expense for 2000, 1999 and 1998 was
$27.1 million, $25.9 million and $24.6 million, respectively.

Maintenance and repairs are charged to expense as incurred. Renewals and
major improvements are capitalized. When assets are retired or otherwise
disposed of, the asset and related accumulated depreciation are removed from the
accounts and any gain or loss is recognized in the results of operations.

Debt Issuance Costs

Debt issuance costs consist of amounts incurred in obtaining long-term
financing and are disclosed in the financing activities section of the
consolidated statements of cash flows. These costs are being amortized over the
term of the related debt using the effective interest method.

Cost in Excess of Net Assets Acquired

The excess of the acquisition cost over the fair value of net assets
acquired in business combinations accounted for as purchases is amortized using
the straight-line method over 40 years. At each balance sheet date, Foamex L.P.
evaluates the recoverability of cost in excess of net assets acquired using
certain financial indicators such as historical and future ability to generate
income and cash flows from operations based on a going concern basis. If an
impairment loss has occurred, based on expected future (undiscounted) cash
flows, the loss is recognized in the income statement. During 1998, a $2.3
million impairment charge was recorded associated with the cost in excess of net
assets acquired related with a foreign facility.

Environmental Remediation

Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be reasonably
estimated.

Comprehensive Income

Other comprehensive income or loss items are revenues, expenses, gains and
losses that under generally accepted accounting principles are excluded from net
income and reflected as a component of equity, such as currency translation and
minimum pension liability adjustments.

Foreign Currency Translation

The financial statements of foreign subsidiaries, except in countries that
are considered as highly inflationary as discussed below, have been translated
into U.S. dollars by using the year-end exchange rates for the assets and
liabilities and the average exchange rates for the statements of operations.
Currency translation adjustments are included in other partners' deficit. In
1998, Mexico was considered a highly inflationary economy. Accordingly, certain
financial statement amounts for the Mexican operations were translated at either
current or historical exchange rates, as appropriate. These translation
adjustments were reflected in the results of operations. Transaction gains
(losses) are reflected in operations and are insignificant. The effect of
foreign currency exchange rates on cash flows is insignificant.

Start-Up Costs

Costs incurred in the start-up of a facility, including training and
production testing, are expensed as incurred.

F-10

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

Income taxes are accounted for under the asset and liability method. Under
this method, deferred income taxes are provided for temporary differences
between the financial reporting basis and income tax basis of assets and
liabilities using the income tax rates, under existing legislation, expected to
be in effect at the date such temporary differences are expected to reverse.
Deferred income tax assets are reduced by a valuation allowance when it is
considered more likely than not that a portion of the deferred income tax assets
will not be realized in a future period. The estimates utilized in the
recognition of deferred income tax assets are subject to revision in future
periods.

Foamex L.P., as a limited partnership, is not subject to Federal income
taxes; therefore no current or deferred provision has been provided for such
taxes. However, Foamex L.P. has provided for the income taxes of certain states
in which it is subject to taxes and for certain subsidiaries, which are subject
to Federal and state income taxes and for subsidiaries located in foreign
jurisdictions that file separate tax returns. The partners will provide for
their respective shares of income or loss in their Federal or applicable state
income tax returns. Foamex L.P. has a tax sharing agreement that provides for
the payment of distributions to the partners for amounts that would be required
to be paid if Foamex L.P. were a corporation filing separate tax returns. The
ability of Foamex L.P. to make such distributions is limited by the terms of its
credit agreements and indentures. (See Notes 8 and 12).

Accounting Changes - Revenue Recognition and Presentation

The Securities and Exchange Commission (the "SEC") issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB No. 101").
SAB No. 101, as amended, was effective as of January 1, 2000 and was adopted in
the fourth quarter of 2000. SAB No. 101 outlines the SEC's position that revenue
should not be recognized until it is realized or realizable. Based on the review
of the SAB No. 101 requirements, no significant impact was incurred or
anticipated on the revenue recognition practices of Foamex L.P.

During July 2000, the Emerging Issues Task Force (the "EITF") of the
Financial Accounting Standards Board reached a consensus on an issue concerning
the components of revenue. EITF No. 00-10 "Accounting for Shipping and Handling
Revenues and Costs" essentially requires that shipping and handling costs that
are billed to a customer be included in revenue. Foamex L.P. determined that a
portion of shipping costs billed to certain customers prior to February 28, 1998
required a reclassification from cost of sales to revenue. Accordingly, net
sales for 1998 in the consolidated statements of operations reflect the
reclassification required. On a segment basis, the Carpet Cushion Products was
the only business segment impacted and net sales for 1998 reflect the
reclassification required. All other shipping and handling costs associated with
product shipments are reported in cost of goods sold.

Reclassifications

Certain amounts have been reclassified to conform with the current year's
presentation.

Future Accounting Changes - Accounting for Derivatives and Hedging Activities

Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133") will require the
fair value of derivatives be recognized in the consolidated balance sheets.
Changes in the fair value of derivatives will be recognized in earnings or in
other comprehensive loss, essentially depending on the structure and the purpose
of the derivatives. During 2000, SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities", which amended SFAS No.
133 on a limited number of issues, was issued. The statements will be effective
for Foamex L.P. in the first quarter of 2001.

F-11

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

These statements create a foundation that will address accounting and
reporting issues for a wide range of financial instruments defined as
derivatives and related hedging activities. As of December 31, 2000, Foamex L.P.
did not have any derivatives, as defined in the statements. Accordingly, the
initial adoption of the statements will not have a significant impact on the
results of operations or financial position of Foamex L.P. The adoption of the
statements will require a reclassification in the consolidated balance sheets,
effective in 2001. Specifically, $6.1 million recognized at year-end 2000 as
liabilities will be reclassified to accumulated other comprehensive loss under
partners' deficit. The amount reclassified is the result of certain interest
rate swaps that were terminated in prior years, as discussed in Note 12 to the
consolidated financial statements. The amount reclassified will continue to be
amortized, with $0.9 million of amortization anticipated in 2001.

3. ASSET SALES

On March 31, 1999, Foamex International sold its corporate airplane for
$16.3 million. The sale of the airplane resulted in an obligation to Trace of
approximately $0.6 million. Under the terms of the aircraft acquisition
agreement with Trace, Foamex International was obligated to share the net
proceeds in excess of a specified amount defined in the agreement. The
obligation was offset against Trace's two promissory notes payable to Foamex
L.P., discussed in Note 17, at Trace's request.

4. RESTRUCTURING AND OTHER CHARGES (CREDITS)

1998

Based on business developments during 1998, Foamex L.P. decided not to
close two facilities originally identified for closure in the 1997 restructuring
plan. One facility remained open to fill lost capacity resulting from a fire in
April 1998 at the Orlando, Florida facility, which returned to full operations
during 1999. The other facility remained open during 1998 due to improved demand
on the West Coast. The 1997 restructuring plan also included the closure of two
facilities associated with Foamex L.P.'s packaging business. During 1998, Foamex
L.P. modified the plan, and decided to sell the packaging business and did not
expect to incur the asset write-down and lease costs as originally planned. As a
result, Foamex L.P. recorded a $14.8 million restructuring adjustment associated
with the 1997 restructuring plan. The components of the $14.8 million
restructuring adjustment include: $10.2 million for fixed asset write-downs,
$3.5 million for plant closure and operating lease obligations and $1.1 million
for personnel reductions.

In addition, Foamex L.P. recorded restructuring and other charges (credits)
of $4.7 million during 1998 to reserve for approximately $2.4 million of net
receivables due from Trace and to write down approximately $2.3 million of
impaired cost in excess of net assets acquired associated with a foreign
facility. Also during 1998, Foamex L.P. incurred additional plant closure costs
of $5.2 million and personnel reduction costs of $1.2 million associated with
the closure of the former Crain facilities. The additional costs associated with
the closure of the former Crain facilities resulted in an increase to cost in
excess of net assets acquired.

1999

During 1999, Foamex L.P. approved and implemented four restructuring plans
to reduce selling, general and administrative costs and to rationalize plant
operations.

Foamex L.P. recorded restructuring charges of approximately $2.3 million
relating to severance costs in connection with the first restructuring plan.
This plan reduced Foamex L.P.'s salaried work force by 78 employees.

Foamex L.P. recorded restructuring charges of approximately $2.9 million
relating to severance costs in connection with the second restructuring plan for
replacing three of Foamex L.P.'s former executives, including its former Chief
Executive Officer.

F-12

4. RESTRUCTURING AND OTHER CHARGES (CREDITS) (continued)

In connection with the third restructuring plan, Foamex L.P. recorded
restructuring charges of approximately $1.7 million relating to the closure of
one facility and certain product line rationalizations. The $1.7 million charge
was comprised of approximately $0.1 million of severance costs in connection
with the work force reductions of 115 employees, $0.1 million of lease and plant
closure costs and $1.5 million of asset write-downs.

In connection with the fourth restructuring plan, Foamex L.P. closed its
New York office (see Note 17). Foamex L.P. recorded approximately $2.5 million
of restructuring charges comprised of $1.6 million of severance costs for eight
employees and $0.9 million of costs primarily relating to future lease
obligations, net of sublease proceeds.

In addition, Foamex L.P. recorded restructuring charges of approximately
$1.1 million relating to changes in estimates to prior years' plans, primarily
for the sale of the packaging business in 1999. The $1.1 million charge is
comprised of $0.2 million of severance, $1.7 million of lease and plant closure
costs, offset by $0.8 million of adjustments for asset write-downs. Foamex L.P.
also recorded $0.3 million of other charges relating to rent due from Trace for
the New York office prior to its closure.

2000

During 2000, Foamex L.P. approved and implemented four separate
restructuring plans to further rationalize plant operations and to reduce
selling, general and administrative expenses.

Foamex L.P. recorded restructuring charges of $1.7 million for severance
costs in connection with the first restructuring plan. This plan reduced Foamex
L.P.'s salaried work force by 15 employees, including certain executives of
Foamex L.P.

The second restructuring plan was implemented to rationalize certain plant
operations relating to the increase in the VPF(SM) capacity in North Carolina.
Foamex L.P. recorded a restructuring charge of $0.7 million associated with this
plan. The restructuring charge was comprised of $0.1 million of severance costs
in connection with a work force reduction of 12 employees, $0.4 million of lease
and plant closure costs and $0.2 million of asset write-downs.

The third restructuring plan, as amended, was implemented to exit Foamex
L.P.'s fiber operations in Indiana. Foamex L.P. recorded a restructuring charge
of $1.1 million in connection with this plan which was comprised of less than
$0.1 million of severance costs for the work force reduction of seven employees,
$0.1 million of lease and plant closure costs and $1.0 million of asset
write-downs.

The fourth restructuring plan was implemented for the consolidation of
pourline operations and certain product line rationalizations resulting from the
closure of facilities in Indiana and Arkansas. Foamex L.P. recorded a
restructuring charge of $2.3 million in connection with this plan. The charge
was comprised of $0.2 million of severance costs relating to work force
reductions of 65 employees, $0.8 million for lease and plant closure costs and
$1.3 million for asset write-downs.

In addition, Foamex L.P. recorded a net restructuring charge of $0.2
million associated with changes in estimates to prior years' restructuring
plans. The net charge was comprised of $0.3 million for asset write-downs offset
by a credit of $0.1 million relating to severance costs. Also during May 2000,
Foamex L.P. sold a facility for net proceeds of $3.6 million. The facility was
closed as part of the 1997 restructuring plan.

F-13

4. RESTRUCTURING AND OTHER CHARGES (CREDITS) (continued)

The following table sets forth the components of Foamex L.P.'s
restructuring and other charges (credits):

Asset Plant Closure Personnel
Total Write-downs and Leases Reductions Other
---------- ----------- ------------- ---------- -----------
(millions)

Balance at December 28, 1997 $21.2 $(5.7) $23.5 $3.4 $ -

Cash spending (15.3) - (11.8) (3.5) -
Cash proceeds 2.1 2.1 - - -
1998 restructuring charge 4.7 4.7 - - -
Restructuring adjustments (14.8) (10.2) (3.5) (1.1) -
Accruals transferred in connection
with the GFI Transaction (3.7) (0.6) (3.1) - -
Asset write-off/write-downs (5.6) (4.8) (0.8) - -
Reclassified fixed asset basis
for restructuring credit 8.8 8.8 - - -
Plant consolidation costs 6.4 - 5.2 1.2 -
----- ------ ------ ----- ----
Balance at December 31, 1998 3.8 (5.7) 9.5 - -

Cash spending (8.6) - (3.9) (4.4) (0.3)
Cash proceeds 1.5 1.5 - - -
1999 restructuring charge 9.7 1.5 1.0 6.9 0.3
Restructuring adjustments 1.1 (0.8) 1.7 0.2 -
Asset write-off/write-downs (0.3) (0.3) - - -
----- ------ ------ ----- ----
Balance at December 31, 1999 7.2 (3.8) 8.3 2.7 -

Cash spending (5.7) - (2.8) (2.9) -
Cash proceeds 3.6 3.6 - - -
2000 restructuring charge 5.8 2.5 1.3 2.0 -
Restructuring adjustments 0.2 0.3 - (0.1) -
Asset write-off/write-downs (2.8) (2.8) - - -
----- ------ ------ ----- ----
Balance at December 31, 2000 $ 8.3 $(0.2) $ 6.8 $ 1.7 $ -
===== ====== ====== ===== ====

As indicated in the table above, the balance at December 31, 2000 will be
used for payments relating to severance and lease and plant closure costs,
including runout costs at the facilities. As of December 31, 2000, all employees
subject to the plans have been terminated. The $0.2 million of asset write-downs
relates to estimated proceeds and is included in noncurrent assets. Foamex L.P.
expects to spend approximately $3.8 million during 2001 with the balance to be
spent through 2006, principally for lease runout costs.

5. RETIREE BENEFIT PLANS

Pensions

Foamex L.P. provides pension and survivor benefits for salaried and certain
hourly employees in the United States. Salaried employees are provided benefits
that are based principally on the combination of years of credited service and
compensation. Hourly employees are provided benefits that are based principally
on stated amounts for each year of credited service. Effective at the end of
1999, the two defined benefit plans for the salaried and hourly employees in the
United States were merged into a single plan. Benefits provided did not change
as a result of the plan merger.

Certain employees in a wholly owned Canadian subsidiary are provided
pension and survivor benefits. The following disclosures include the results
from this foreign plan, which is relatively small compared to the plan discussed
above.

F-14

5. RETIREE BENEFIT PLANS (continued)

The components of pension expense are listed below. Included in the table
below are Foamex Carpet's allocated net periodic costs of $0.7 million, $0.5
million and $0.4 million for 2000, 1999 and 1998, respectively.

2000 1999 1998
---------- ---------- ----------
(thousands)

Service cost $3,307 $3,685 $3,064
Interest cost 5,667 5,121 4,721
Expected return on plan assets (6,371) (5,708) (5,953)
Amortization
Transition asset (75) (75) (75)
Prior service cost (240) (240) (245)
(Gains) losses and other 179 819 111
------ ------ ------
Total $2,467 $3,602 $1,623
====== ====== ======

The following table sets forth the changes in obligations and assets, and
outlines the development of the funded status and amounts recognized in the
accompanying consolidated balance sheets.

December 31, December 31,
2000 1999
----------- ------------
Change in Benefit Obligation (thousands)

Benefit obligations at beginning of year $ 75,220 $ 77,451
Service cost 3,307 3,685
Interest cost 5,667 5,121
Amendments - 85
Benefits paid (4,207) (3,933)
Actuarial loss (gain) 4,833 (7,189)
-------- --------
Projected benefit obligation at end of year $ 84,820 $ 75,220
======== ========

Change in Plan Assets
Fair value of plan assets at beginning of year $ 65,102 $ 58,378
Actual return on plan assets (3,075) 9,506
Company contributions 9,299 1,656
Benefits paid (4,207) (3,933)
Other (920) (505)
-------- --------
Fair value of plan assets at end of year $ 66,199 $ 65,102
======== ========

Funded Status
Plan assets in excess of (less than) benefit obligation $(18,621) $(10,118)
Unamortized transition (asset) obligation (590) (665)
Unamortized prior service cost (1,832) (2,072)
Unamortized net (gain) loss 22,578 7,565
-------- --------
Net prepaid assets (accrued liabilities) $ 1,535 $ (5,290)
======== ========

Amounts Recognized in the Consolidated Balance Sheets
Prepaid benefit costs $ 207 $ 114
Accrued benefit liability (16,480) (8,613)
Intangible assets 268 296
Accumulated other comprehensive loss (a) 17,540 2,913
-------- --------
Net amount recognized $ 1,535 $ (5,290)
======== ========

(a) Minimum pension liability.

F-15

5. RETIREE BENEFIT PLANS (continued)

Significant assumptions used in the calculation of pension expense and
obligations are listed below.

2000 1999 1998
---------- ---------- ----------

Expected long-term rate of return on plan assets (a) 10.0% 10.0% 10.0%
Discount rate on projected benefit obligations 7.25% 7.5% 6.5%
Rate of compensation increase 4.0% 4.0% 4.0%

(a) Beginning in 2001, the expected long-term rate of return on plan assets
assumption will be lowered to 9.0%.

Foamex L.P.'s funding policy is to contribute annually an amount that both
satisfies the minimum funding requirements of the Employee Retirement Income
Security Act of 1974 and does not exceed the full funding limitations of the
Internal Revenue Code of 1986, as amended (the "Code").

At December 31, 2000 and 1999, included in plan assets were 420,000 shares
of Foamex International's stock. In 1994, 250,000 shares were purchased for $2.5
million, and in 1995, 170,000 shares were purchased for $1.6 million. The value
of the plan's investment in Foamex International's stock was approximately $2.3
million and $3.5 million at December 31, 2000 and 1999, respectively. Plan
assets at the end of 1998 included shares of Trace Global Opportunities Fund,
which was a related party to Trace. The shares were purchased during 1995 and
1997, at an aggregate cost of $5.0 million. The value of the plan's investment
in Trace Global Opportunities Fund, was approximately $4.3 million at December
31, 1998. In 1999, Trace divested its interest in the Trace Global Opportunities
Fund. The fund changed its name to the GLS Global Opportunities Fund, which is
not a related party to Foamex International. During 1998, 250,000 shares of
United Auto Group ("UAG"), which was a related party to Trace, were purchased
for approximately $4.8 million. The value of the UAG shares was $2.2 million at
December 31, 1999. During the fourth quarter of 2000, all of the UAG shares were
sold for $1.8 million.

Retiree Medical and Life Insurance Benefits

Foamex L.P. provides postretirement health care and life insurance for
eligible employees, limited primarily to one manufacturing facility in the
United States. These plans are unfunded and benefits are paid as the claims are
submitted. Foamex L.P. retains the right, subject to existing agreements, to
modify or eliminate these benefits.

The components of retiree medical and life insurance benefits expense are
listed below.

2000 1999 1998
-------- -------- --------
(thousands)

Service cost $15 $20 $10
Interest cost 57 62 46
Amortization
Prior service costs (6) (6) (35)
(Gains) losses and other (27) (21) (29)
--- --- ---
Total $39 $55 $(8)
=== === ===

F-16

5. RETIREE BENEFIT PLANS (continued)

The following table outlines the changes in obligations and benefit
payments, and outlines the development of the funded status and amounts
recognized in the accompanying consolidated balance sheets.

December 31, December 31,
2000 1999
------------ -------------
(thousands)
Change in Benefit Obligation

Benefit obligations at beginning of year $ 868 $ 651
Service cost 15 20
Interest cost 57 62
Employee contributions 28 28
Benefits paid (433) (164)
Amendments - 363
Actuarial loss (gain) 228 (92)
-------- --------
Projected benefit obligation at end of year $ 763 $ 868
======== ========

Change in Plan Assets
Fair value of plan assets at beginning of year $ - $ -
Company contributions 405 136
Employee contributions 28 28
Benefits paid (433) (164)
-------- --------
Fair value of plan assets at end of year $ - $ -
======== ========

Funded Status of the Plan
Plan assets in excess of (less than) benefit obligation $ (763) $ (868)
Unamortized prior service cost (67) (73)
Unamortized net (gain) loss (389) (644)
-------- --------
Net prepaid assets (accrued liabilities) $ (1,219) $ (1,585)
======== ========

Significant assumptions used in the calculation of retiree and life
insurance benefit expense and obligations are listed below.

2000 1999 1998
-------- -------- --------
(thousands)

Discount rates on projected benefit obligations 7.25% 7.5% 6.5%
Health care cost increase 7.0% 7.5% 6.0%

The health care cost increase assumption was revised during 1999. The rate
will gradually be reduced to 5.0% by 2005. Increasing or decreasing the weighted
average assumed health care cost trend rates by one percentage point would not
have a significant impact on the accumulated postretirement benefit obligation
or on service and interest costs.

6. COMPENSATION PLANS

Incentive Compensation

Most of Foamex L.P.'s salaried employees participate in incentive
compensation programs. These programs are based on the consolidated results of
Foamex L.P. and on the results of business segments. Incentive compensation
expense was approximately $1.5 million in 2000, $3.0 million in 1999 and $0.3
million in 1998.

F-17

6. COMPENSATION PLANS (continued)

Defined Contribution Plan

Foamex L.P. maintains a defined contribution plan which is qualified under
Section 401(k) of the Code ("401(k) Plan") and is available for eligible
employees of Foamex L.P. and Foamex Carpet who elect to participate. Under the
terms of the 401(k) Plan, Foamex L.P. partially matches certain employee
contributions. Expense for these contributions for 2000, 1999 and 1998 was
approximately $1.0 million, $0.9 million and $0.8 million, respectively. During
2000, 1999 and 1998, Foamex Carpet contributed approximately $0.1 million
annually to the plan for matching contribution expense for its employees.

7. OTHER EXPENSE, NET

Other expense, net in 2000 totaled $1.3 million and primarily consisted of:
$1.3 million loss on the disposal of fixed assets and $0.7 million of letter of
credit fees offset by $0.6 million of interest income.

Other expense, net in 1999 totaled $0.9 million was primarily due to losses
on the disposal of fixed assets and letter of credit fees related to the GFI
Transaction (see Note 12). Interest income totaled $2.2 million in 1999.

Other expense, net for 1998 totaled $4.3 million and primarily consisted
of: $3.0 million of foreign currency translation and transaction losses; $1.5
million of fees and $1.0 million of continuing costs related to the GFI
Transaction; and other expenses offset by approximately $3.4 million of interest
income.

8. INCOME TAXES

The sources of income (loss) before provision for income taxes and
extraordinary loss are listed below.

2000 1999 1998
---------- ---------- ----------
(thousands)

United States $10,203 $13,959 $ 5,364
Foreign 4,975 2,935 (10,293)
------- ------- -------

Income (loss) before provision for income taxes
and extraordinary loss $15,178 $16,894 $(4,929)
======= ======= =======

A reconciliation of the statutory federal income tax to the income tax
before extraordinary loss is listed below.

2000 1999 1998
---------- ---------- ----------
(thousands)

Statutory income taxes $ 5,312 $ 5,913 $(1,725)
State income taxes, net of federal benefit 593 794 300
Permanent difference on partnership income (6,156) (6,921) (1,570)
Increase (decrease) in valuation allowance 720 711 -
Amortization of cost in excess of assets acquired 1,017 1,038 53
Limitation on the utilization of foreign tax benefits - - 3,800
Write-off excess cost - - 770
Other, net 424 (222) (688)
------- ------- -------
Total $ 1,910 $ 1,313 $ 940
======= ======= =======

F-18

8. INCOME TAXES (continued)

The provision for income taxes is summarized as follows:

2000 1999 1998
---------- ---------- ----------
Current (thousands)

Federal $ - $ - $ -
State 65 115 -
Foreign 1,566 1,117 673
------- ------- -------
Total current 1,631 1,232 673
------- ------- -------

Deferred
Federal - - 318
State - - -
Foreign (441) (630) (51)
------- ------- -------
Total deferred (441) (630) 267
------- ------- -------

Change in valuation allowance 720 711 -
------- ------- -------

Total provision for income taxes $ 1,910 $ 1,313 $ 940
======= ======= =======

The tax effect of the temporary differences that give rise to deferred
income tax assets and liabilities are listed below.

December 31, December 31,
2000 1999
------------ ------------
(thousands)

Deferred income tax assets $ 1,759 $ 1,056
Valuation allowance for deferred income tax assets (1,431) (711)
------- -------

Deferred income tax assets 328 345
------- -------

Deferred income tax liabilities
Basis difference in property, plant and equipment (903) (568)
Other (1,514) (2,145)
------- -------

Deferred income tax liabilities (2,417) (2,713)
------- -------

Net deferred income tax liabilities $(2,089) $(2,368)
======= =======

During 2000 and 1999, the increase in valuation allowance for deferred
income tax assets related to net operating loss carryfowards from a foreign
subsidiary.

9. EXTRAORDINARY LOSSES

In 1998, extraordinary losses of $3.2 million were recorded. The loss was
in connection with the GFI Transaction, and related to the early extinguishment
of approximately $125.1 million of term loans under a Foamex L.P. credit
facility. The extraordinary loss was generated entirely from the write-off of
debt issuance costs.

F-19

10. INVENTORIES

The components of inventory are listed below.

December 31, December 31,
2000 1999
------------ -------------
(thousands)

Raw materials and supplies $64,801 $65,211
Work-in-process 11,437 11,447
Finished goods 20,435 17,154
------- -------
Total $96,673 $93,812
======= =======

11. SHORT-TERM BORROWINGS

Foamex Canada Inc., a wholly owned subsidiary of Foamex L.P., has a
short-term credit facility that provides for $8.0 million of Canadian dollar
loans (U.S. dollar equivalent of $5.2 million) of which up to $2.0 million are
available in U.S. dollar loans. The amount of borrowings available is based on a
combination of accounts receivable and inventory, as defined in the credit
facility. Interest on Canadian dollar borrowings is based on the bank's prime
lending rate plus 1/2% as of December 31, 2000. On U.S. dollar loans, interest
is based on the bank's U.S. dollar base rate in Canada plus 1/2% as of December
31, 2000. At year-end 2000, there were no short-term borrowings outstanding and
$5.2 million was available. The weighted average interest rates on short-term
borrowings outstanding at year-end 1999 was 7.3%.

12. LONG-TERM DEBT

The components of long-term debt are listed below.

December 31, December 31,
2000 1999
------------ -------------
Foamex L.P. Credit Facility (thousands)

Term Loan B (1) $ 77,136 $ 81,874
Term Loan C (1) 70,124 74,431
Term Loan D (1) 101,565 107,800
Revolving credit facility (1) 145,904 113,685
9 7/8% Senior subordinated notes due 2007 (2) 150,000 150,000
13 1/2% Senior subordinated notes due 2005 (includes
$8,308 and $10,100 of unamortized debt premium) (2) 106,308 108,100
Industrial revenue bonds (3) 7,000 7,000
Subordinated note payable (net of unamortized
debt discount of $49 and $232) (3) 2,289 4,444
Other 4,198 7,076
-------- --------
664,524 654,410

Less current portion 8,356 7,866
-------- --------

Long-term debt-unrelated parties $656,168 $646,544
======== ========

The components of related party long-term debt are listed below.

December 31, December 31,
2000 1999
------------ -------------
(thousands)

Foamex/GFI Note (3) $ - $ 34,000
======== ========

F-20

12. LONG-TERM DEBT (continued)

(1) Debt of Foamex L.P., guaranteed by Foamex International and FMXI.
(2) Debt of Foamex L.P. and FCC.
(3) Debt of Foamex L.P.

Foamex L.P. Credit Facility

At December 31, 2000, Foamex L.P. had a credit facility (the "Foamex L.P.
Credit Facility") with a group of banks which provided for a revolving credit
facility commitment of $177.5 million and three term loans with an outstanding
balance totaling $248.8 million. Included in the group of banks that provides
the Foamex L.P. Credit Facility is The Bank of Nova Scotia, which is a
shareholder of Foamex International, as discussed in Note 1. Amendments in 1998
provided for a $2.5 million quarterly reduction of the availability under the
revolving credit facility, which extends through June 2003. On January 2, 2001,
the revolving credit facility commitment was $175.0 million with the fourth
quarter 2000 reduction applied on January 2nd because the last day of 2000 was a
Sunday.

Borrowings under the Foamex L.P. Credit Facility are collateralized by
substantially all of the assets of Foamex L.P. on a pari passu basis with the
IRBs (described below); however, the rights of the holders of the applicable
issue of the IRBs to receive payment upon the disposition of the collateral
securing such issue of the IRBs has been preserved.

In response to financial conditions at year-end 1998, amendments to debt
agreements were executed during the first half of 1999. As a result, the Foamex
L.P. Credit Facility, which was amended and restated in February 1998, was
further amended and restated in June 1999 to modify financial covenants for net
worth, interest coverage, fixed charge coverage and leverage ratios through
December 2006. The agreement was also amended to no longer permit Foamex L.P. to
make certain cash payments, including the payment of an annual management fee of
$3.0 million to a subsidiary of Trace and distributions to Foamex International,
and to limit future investments in foreign subsidiaries and joint ventures. The
"change of control" definition under the agreement was also modified to conform
to the definition discussed in "change of control" in Note 1. Changes in the
interest rate structure, effective in 2000, were also made and are discussed
below.

At year-end 2000, interest was based on the combination of a variable rate
consisting of the higher of (i) the base rate of The Bank of Nova Scotia or (ii)
the Federal Funds rate plus 0.5% plus a margin. The margins for revolving, Term
B, Term C and Term D loans were 2.25%, 2.50%, 2.75% and 2.875%, respectively. At
the option of Foamex L.P., portions of the outstanding loans are convertible
into LIBOR based loans plus 1.0% added to the margins identified above. The
effective interest rates for the Foamex L.P. Credit Facility at the end of 2000
ranged between 10.31% and 10.69%. Interest capitalized as a component of the
construction costs of plant and equipment totaled $0.8 million in 2000.

Effective January 1, 2000, the interest rate on outstanding borrowings
under the Foamex L.P. Credit Facility will increase by 25 basis points each
quarter that Foamex L.P.'s leverage ratio, as defined, exceeds 5.00 to 1.00.
Once the leverage ratio is reduced below this level, the cumulative amount of
any 25 basis point adjustments to the interest rate on borrowings is reset to
zero. During 2000, basis point adjustments were incurred in the first three
quarters, beginning with 25 basis points in the first quarter and ending with a
cumulative impact of 75 basis points by the end of the third quarter. There was
no basis point adjustments for the fourth quarter of 2000. At December 31, 2000,
the calculated leverage ratio was 5.3 to 1.00. Consequently, the 25 basis point
adjustment will be applicable for the calculation of interest in 2001, effective
upon delivery of the financial statements to the lenders.

Available borrowings under the revolving credit facility totaled $10.5
million at year-end 2000. Letters of credit outstanding at December 31, 2000
totaled $21.1 million.

F-21

12. LONG-TERM DEBT (continued)

As part of the Foamex L.P. Credit Facility, excess cash flow generated
annually, as defined, is required to prepay portions of Term B, C and D loans.
There was no required prepayment at year-end 2000. The prepayment amount
determined for 1999 was $13.3 million and was financed through revolving loans
under the facility. The 1999 required payment was made during the second quarter
of 2000.

9 7/8% Senior Subordinated Notes

The 9 7/8% Senior Subordinated Notes were issued by Foamex L.P. and FCC and
are due on June 15, 2007. The notes represent uncollateralized general
obligations of Foamex L.P. and are subordinated to all Senior Debt, as defined
in the Indenture. Interest is payable June 15 and December 15. The notes may be
redeemed at the option of Foamex L.P., in whole or in part, at any time on or
after June 15, 2002. The initial redemption is at 104.938% of their principal
amount, plus accrued and unpaid interest, as defined, if any, thereon to the
date of redemption and declining to 100.0% on or after June 15, 2005.

Upon the occurrence of a change of control, as defined, each holder will
have the right to require Foamex L.P. to tender for such notes at a price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, if there is such a "change of control". The notes are
subordinated in right of payment to all senior indebtedness and are pari passu
in right of payment to the 13 1/2% Senior Subordinated Notes and the
Subordinated Note Payable (described below).

13 1/2% Senior Subordinated Notes

The 13 1/2% Senior Subordinated Notes were issued by Foamex L.P. and FCC
and are due on August 15, 2005. The notes represent uncollateralized general
obligations of Foamex L.P. and are subordinated to all Senior Debt, as defined
in the Indenture. Interest is payable semiannually on February 15 and August 15.
The notes may be redeemed at the option of Foamex L.P., in whole or in part, at
any time on or after August 15, 2000. The initial redemption is at 106.75% of
their principal amount, plus accrued and unpaid interest, if any, thereon to the
date of redemption and declining to 100.0% on or after August 15, 2004.

Upon the occurrence of a change of control, as defined, each holder will
have the right to require Foamex L.P. to tender for such notes at a price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest, if any, thereon, if there is such a "change of control". The
notes are subordinated in right of the payment of all senior indebtedness and
are pari passu in right of payment to the 9 7/8% Senior Subordinated Notes and
to the Subordinated Note Payable (described above).

Industrial Revenue Bonds ("IRBs")

IRB debt includes a $1.0 million bond that matures in 2005 and a $6.0
million bond that matures in 2013. Interest is based on a variable rate, as
defined, with options available to Foamex L.P. to convert to a fixed rate. At
the end of 2000, the interest rate was 4.85% on the $6.0 million bond and 4.65%
on the $1.0 million bond. The maximum interest rate for either of the IRBs is
15.0% per annum.

If Foamex L.P. exercises its option to convert the bonds to a fixed
interest rate structure the IRBs are redeemable at the option of the
bondholders. The obligations are collateralized by certain properties, which
have an approximate net carrying value of $10.6 million at December 31, 2000 and
letters of credit approximating $7.3 million.

F-22

12. LONG-TERM DEBT (continued)

Subordinated Note Payable

This note payable was issued during 1993 to John Rallis, a former President
and Chief Operating Officer of Foamex International. The note was issued by
Foamex L.P. in connection with the 1993 acquisition of Great Western Foam
Products Corporation and certain related entities and assets. The note carries a
maximum interest rate of 6.0% and the principal is payable in three equal annual
installments that began in May 1999 and end in May 2001.

Other

At year-end 2000, other debt primarily included a term loan held by a
majority owned Mexican subsidiary. Quarterly principal payments are due on the
term loan through its maturity in May 2002. The interest rate at year-end 2000
was 11.11%.

Related Party - Foamex/GFI Note

As a result of the GFI Transaction, discussed below, Foamex L.P. owed a
$34.0 million promissory note payable to Foam Funding LLC. Interest was based on
a variable rate equal to the higher of (i) the base rate of The Bank of Nova
Scotia or (ii) the Federal Funds rate plus 0.5%. At the option of Foamex L.P.,
the note was convertible to a LIBOR-based interest rate plus 0.75%.

During the first quarter of 2000, the Foamex/GFI Note was repaid with
borrowings under the Foamex L.P. revolving credit facility. The $34.5 million
letter of credit that was outstanding at year-end 1999 to collateralize
principal and interest payable under the Foamex/GFI Note was also terminated. At
year-end 1999, the note was recognized as long-term in the consolidated balance
sheet because of the ability and intent, evidenced by the letter of credit, to
refinance the debt on a long-term basis.

GFI Transaction

On February 27, 1998, Foamex International, Foamex L.P. and certain of
their affiliates completed a series of transactions which changed Foamex L.P.'s
structure (collectively, the "GFI Transaction"). Prior to the consummation of
the GFI Transaction, Foamex L.P. defeased the $4.5 million outstanding principal
amount of its 9 1/2% senior secured notes due 2000. Foamex L.P. settled its
intercompany payables to General Felt with $4.8 million in cash and the
Foamex/GFI Note, described above. The initial transaction resulted in the
transfer from Foamex L.P. to Foam Funding LLC, an indirect wholly owned
subsidiary of Trace, of all of the outstanding common stock of General Felt, in
exchange for (i) the assumption by Foam Funding LLC of $129.0 million of Foamex
L.P.'s indebtedness and (ii) the transfer by Foam Funding LLC to Foamex L.P. of
a 1% non-managing general partnership interest in Foamex L.P. As a result,
General Felt ceased being a subsidiary of Foamex L.P. and was relieved from all
obligations under Foamex L.P.'s 9 7/8% senior subordinated notes due 2007 and 13
1/2% senior subordinated notes due 2005. Upon consummation of the initial
transaction, Foamex Carpet, a newly formed wholly owned subsidiary of Foamex
International, Foamex International, Foam Funding LLC, and General Felt entered
into an Asset Purchase Agreement dated February 27, 1998, in which General Felt
sold substantially all of its assets (other than cash, the Foamex/GFI Note and
its operating facility in Pico Rivera, California) to Foamex Carpet in exchange
for (i) $20.0 million in cash and (ii) a promissory note issued by Foamex Carpet
to Foam Funding LLC in the aggregate principal amount of $70.2 million. The
$20.0 million cash payment was funded with a distribution by Foamex L.P.

No gain was recognized on the GFI Transaction. The net impact of the GFI
Transaction was an increase in Foamex L.P.'s partners' deficit of approximately
$10.1 million, a distribution of $20.0 million to Foamex International and
approximately $1.5 million of fees charged to earnings. The $129.0 million of
debt assumed by Foam Funding LLC in the GFI Transaction was used to repay
approximately $125.1 million of term loan borrowings that was accounted for as
an extinguishment of debt which resulted in an extraordinary loss of
approximately $3.2 million. The 1% non-managing general partnership interest
acquired in connection with the GFI Transaction was accounted for as a
redemption of equity.

F-23

12. LONG-TERM DEBT (continued)

Interest Rate Swap Agreements

Prior to 1999, Foamex L.P. entered into interest rate swaps to lower
funding costs and/or to manage interest costs and exposure to changing interest
rates. Foamex L.P. did not hold or issue financial instruments for trading
purposes.

In connection with a refinancing plan in 1997, Foamex L.P.'s then existing
interest rate swap agreements with a notional amount of $300.0 million were
considered to be effectively terminated since the underlying debt was
extinguished. These interest rate swap agreements had an estimated fair value
liability of $8.2 million at the date of the refinancing plan which is included
in the extraordinary loss on the early extinguishment of debt. In lieu of a cash
payment for the estimated fair value of the then existing interest rate swap
agreements, Foamex L.P. entered into an amendment of the then existing interest
rate swap agreements resulting in one interest rate swap agreement with a
notional amount of $150.0 million through June 2007. Accordingly, the $8.2
million fair value liability has been recorded as a deferred credit, which is
being amortized as a reduction in interest and debt issuance expense on a
straight-line basis through June 2007. On January 8, 1998, Foamex L.P. entered
into a new amendment to its interest rate swap agreement. The new amendment
provided for an interest rate swap agreement with a notional amount of $150.0
million through June 2002. In September 1998, Foamex L.P. sold its existing
interest rate swap agreement for a net gain of approximately $1.0 million.
Accordingly, the $1.0 million gain has been recorded as a deferred credit, which
is being amortized through June 2007, which is the maturity date of the
underlying debt.

See Future Accounting Changes - Accounting for Derivatives and Hedging
Activities included in Note 2, which discusses a balance sheet reclassification
required in 2001 related to these swap transactions.

The effect of the interest rate swaps was a favorable adjustment to
interest and debt issuance expense of $0.7 million in 1998. The effect of the
amortization of the deferred credits was a favorable adjustment to interest and
debt issuance expense of $0.9 million for 2000, 1999 and 1998.

Debt Covenants

The indentures, credit facilities and other indebtedness agreements contain
certain covenants that will limit, among other things to varying degrees, the
ability of Foamex L.P. (i) to pay distributions or redeem equity interests, (ii)
to make certain restrictive payments or investments, (iii) to incur additional
indebtedness or issue Preferred Equity Interest, as defined, (iv) to merge,
consolidate or sell all or substantially all of its assets or (v) to enter into
certain transactions with affiliates or related persons. In addition, certain
agreements contain provisions that, in the event of a defined change of control
or the occurrence of an undefined material adverse change in the ability of the
obligor to perform its obligations, the indebtedness must be repaid, in certain
cases, at the option of the holder. Also, Foamex L.P. is required under certain
of these agreements to maintain specified financial ratios of which the most
restrictive are the maintenance of net worth, interest coverage, fixed charge
coverage and leverage ratios, as defined. Under the most restrictive of the
distribution restrictions as of December 31, 2000, Foamex L.P. was able to pay
Foamex International funds only to the extent to enable Foamex International to
meet its tax payment liabilities.

Foamex L.P. was in compliance with its various financial covenants of its
loan agreements as of December 31, 2000 and 1999.

The Foamex L.P. Credit Facility contains certain quarterly financial
covenants which become more restrictive during 2001. Foamex L.P. anticipates
that it will continue to comply in 2001 with the various quarterly financial
covenants in the Foamex L.P. Credit Facility. Management's current business plan
for Foamex L.P. anticipate customer selling price increases in response to
higher raw material costs, improved working capital management, a reduced
capital expenditure program, declining interest rates, successful implementation
of on-going cost savings initiatives and improved operating efficiencies. The
achievement of the business plan is necessary for compliance with the various
financial covenants in 2001.

F-24

12. LONG-TERM DEBT (continued)

The possibility exists that certain financial covenants will not be met if
business conditions are other than as anticipated or other unforeseen events
impact results. In the absence of a waiver of or amendment to such financial
covenants, such noncompliance would constitute a default under the Foamex L.P.
Credit Facility, and the lenders would be entitled to accelerate the maturity of
the indebtedness outstanding thereunder. In the event that such noncompliance
appears likely, or occurs, Foamex L.P. will seek the lenders' approvals of
amendments to, or waivers of, such financial covenants. Historically, Foamex
L.P. has been able to renegotiate financial covenants and/or obtain waivers, as
required, and management believes such waivers and/or amendments could be
obtained if required. However, there can be no assurance of future amendments or
waivers will be obtained.

Future Obligations on Debt

Scheduled maturities of long-term debt and long-term debt - related party
are shown below (thousands):

2001 $ 8,356
2002 3,936
2003 164,031
2004 50,844
2005 155,273
Balance 273,825
--------
Total 656,265
Unamortized debt premium, net 8,259
--------
Total $664,524
========

13. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

Concentration of Credit Risk

Financial instruments which potentially subject Foamex L.P. to significant
concentrations of credit risk consist primarily of cash and cash equivalents and
trade accounts receivable. Foamex L.P. maintains cash and cash equivalents and
certain other financial instruments with various large financial institutions.
Foamex L.P.'s periodic evaluation of these financial institutions are considered
in Foamex L.P.'s investment strategy.

Foamex L.P. sells foam products to the automotive, carpet, cushioning and
other industries. Foamex L.P. performs ongoing credit evaluations of its
customers and generally does not require collateral. Foamex L.P. maintains
allowance accounts for potential credit losses and such losses have been within
management's expectations.

Fair Value of Financial Instruments

The following disclosures of the estimated fair value amounts have been
determined based on Foamex L.P.'s assessment of available market information and
appropriate valuation methodologies.

The estimated fair values of Foamex L.P.'s financial instruments are listed
below.

Carrying Amount Fair Value
--------------- ----------
Liabilities: (thousands)
Total debt - December 31, 2000 $664,524 $547,667
======== ========

Total debt - December 31, 1999 $690,037 $650,057
======== ========

Carrying amounts reported in the consolidated balance sheet for cash and
cash equivalents, accounts receivable, accounts payable, accrued liabilities and
short-term borrowings approximates fair value due to the short-term nature of
these instruments.

F-25

13. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK (continued)

The fair value of long-term debt is estimated using quoted market prices,
where available, or discounted cash flows. Fair value estimates are made at a
specific point in time, based on relevant market information about the financial
instruments. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.

14. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

2000 1999 1998
---------- ---------- ----------
(thousands)

Cash paid for interest $69,939 $65,507 $69,615
======= ======= =======

Cash paid for income taxes, net $ 2,935 $ 1,126 $ 884
======= ======= =======

Non-cash capital expenditures $ 53 $ 456 $ 24
======= ======= =======

15. BUSINESS SEGMENTS

The reportable business segments reflects Foamex L.P.'s management
organization that was structured based on distinct product lines and customers.

An executive vice president heads each operating segment. Each vice
president is responsible for developing budgets and plans as well as directing
the operations of the segment. The performance of each operating segment is
measured based upon income from operations, excluding restructuring charges.
Foamex L.P. does not allocate restructuring and other charges to operating
segments because many of Foamex L.P.'s facilities produce products for multiple
segments.

Foam Products manufactures and markets foam used by the bedding industry,
the furniture industry and the retail industry. Carpet Cushion Products
manufactures and distributes prime, rebond, sponge rubber and felt carpet
cushion to Foamex Carpet. Automotive Products supplies foam primarily for
automotive interior applications. Technical Products manufactures and markets
reticulated foams (foams that are well suited for filtration, reservoiring,
sound absorption and sound transmissions) and other custom polyester and
polyether foams for industrial, specialty and consumer and safety applications.

The "other" column in the table below represents certain manufacturing
operations in Mexico, corporate expenses not allocated to other business
segments and restructuring and other charges (credits). Asset and capital
expenditure information by business segment is not reported because many of
Foamex L.P.'s facilities produce products for multiple business segments. The
restructuring and other charges (credits) amounted to $6.0 million in 2000,
$10.8 million in 1999 and $(10.1) million in 1998.

The accounting policies of the business segments are the same as described
in Note 2. Business segment results include revenues and costs that are
specifically identifiable and costs shared by business segments have been
allocated based on utilization. Geographic sales are determined based on the
location in which the sale originated.

During 2000 and 1999, sales to a customer which is included in Automotive
Products, accounted for approximately 13.3% and 12.5%, respectively, of Foamex
L.P.'s net sales. Sales to Foamex Carpet, reported under Carpet Cushion
Products, totaled $165.8 million in 2000, $187.7 million in 1999 and $185.5
million in 1998. No other unaffiliated customer accounted for more than 10.0% of
Foamex L.P.'s net sales during any of the last three years.

F-26

15. BUSINESS SEGMENTS (continued)

Carpet
Foam Cushion Automotive Technical
Products Products Products Products Other Total
-------- -------- ---------- --------- ---------- -----------
2000 (thousands)

Net sales $512,507 $165,783 $342,386 $106,697 $33,644 $1,161,017
Income (loss) from operations 54,929 (11,661) 22,652 29,287 (11,092) 84,115
Depreciation and amortization 17,615 5,238 5,785 2,663 2,500 33,801

1999
Net sales $521,377 $187,668 $361,806 $92,180 $27,648 $1,190,679
Income (loss) from operations 54,439 869 22,853 23,048 (17,474) 83,735
Depreciation and amortization 16,390 6,436 4,596 2,564 2,604 32,590

1998
Net sales (a) $559,690 $212,146 $285,190 $79,140 $21,585 $1,157,751
Income (loss) from operations 36,253 (58) 17,319 14,919 (2,925) 65,508
Depreciation and amortization 17,418 5,092 4,582 2,615 1,972 31,679

United
States Canada Mexico Consolidated
----------- ---------- --------- ------------
2000 (thousands)

Net sales $927,627 $69,180 $164,210 $1,161,017
Property, plant and equipment, net 173,207 4,623 24,642 202,472

1999
Net sales $978,049 $61,486 $151,144 $1,190,679
Property, plant and equipment, net 182,533 5,406 23,376 211,315

1998
Net sales (a) $1,025,019 $62,529 $70,203 $1,157,751
Property, plant and equipment, net 190,122 4,998 24,517 219,637

(a) As discussed in Note 2, net sales for periods prior to February 28, 1998
reflect a reclassification of certain shipping costs that were billed to
customers. The reclassification impacted Carpet Cushion Products. On a
geographic basis, the reclassification impacted the Untied States net
sales for periods prior to February 28, 1998.

16. PARTNERS' DEFICIT

Foamex L.P. was formed as a Delaware limited partnership on September 5,
1990, and initially capitalized on October 2, 1990, in accordance with a limited
partnership agreement as amended through February 1998. As of December 31, 2000,
the partnership interests of Foamex L.P. are a 2% managing general partnership
interest held by FMXI and a 98% limited partnership interest held by Foamex
International.

Net cash distributions in connection with a tax sharing agreement for 2000,
1999 and 1998 were paid (received) as follows:

2000 1999 1998
-------- -------- --------
(thousands)
FMXI $ - $ (5) $ 6
Foamex International - (12) 287
----- ---- ----
Total $ - $(17) $293
===== ==== ====

F-27

16. PARTNERS' DEFICIT (continued)

Accumulated Other Comprehensive Loss

The accumulated other comprehensive loss consists of the following:

December 31, December 31, December 31,
2000 1999 1998
------------ ------------ ------------
(thousands)

Foreign currency translation adjustment $ (6,921) $(6,011) $(10,965)
Minimum pension liability (17,540) (2,912) (15,243)
-------- ------- --------
$(24,461) $(8,923) $(26,208)
======== ======= ========

17. RELATED PARTY TRANSACTIONS AND BALANCES

Foamex L.P. regularly enters into transactions with its affiliates in the
ordinary course of business.

Supply Agreements

In connection with the GFI Transaction (see Note 12), Foamex L.P. and
General Felt entered into a supply agreement that was subsequently assigned to
Foamex Carpet (the "Supply Agreement"). Pursuant to the Supply Agreement, Foamex
L.P. will, at the option of Foamex Carpet, supply finished carpet cushion
products to Foamex Carpet at the lower of: (i) cost, as defined, plus 4.7% or
(ii) fair market value, as defined. Foamex L.P. will also supply various raw
materials used in the manufacture of carpet cushion products to Foamex Carpet at
the lower of cost, as defined, or fair market value, as defined. During 2000,
1999 and 1998, Foamex L.P. had sales of approximately $165.8 million, $187.7
million and $185.5 million, respectively, to Foamex Carpet under the Supply
Agreement. In addition, pursuant to the Supply Agreement, Foamex Carpet will, at
the option of Foamex L.P., supply various finished products to Foamex L.P. at
the lower of: (i) cost, as defined, plus 15.0% or (ii) fair market value, as
defined. Foamex Carpet will also supply various raw materials to Foamex L.P. at
the lower of cost, as defined or fair market value, as defined. During 2000,
1999 and 1998, Foamex L.P. had purchases of approximately $7.8 million, $9.9
million and $1.3 million, respectively, from Foamex Carpet under the Supply
Agreement. The initial term of the Supply Agreement is until December 31, 2004
at which time the Supply Agreement will continue year to year unless notice of
termination is given by either party or unless terminated earlier due to an
event of default, as defined.

Foamex L.P. had a supply agreement (the "Foamex International Supply
Agreement") with Foamex International pursuant to which, at the option of Foamex
L.P., Foamex International would purchase certain raw materials, which are
necessary for the manufacture of Foamex L.P.'s products, and resell such
materials to Foamex L.P. at a price equal to net cost plus reasonable out of
pocket expenses. Management believes that the terms of the Foamex International
Supply Agreement were no less favorable than those, which Foamex L.P. could have
obtained from an unaffiliated third party. The Foamex International Supply
Agreement was terminated in April 1998. During 1998, Foamex L.P. purchased
approximately $12.6 million of raw materials under the Foamex International
Supply Agreement.

Administrative Services Agreement

Also, in connection with the GFI Transaction, Foamex L.P. and General Felt
entered into an administrative services agreement that was subsequently assigned
to Foamex Carpet (the "Services Agreement"). Pursuant to the Services Agreement,
Foamex L.P. will provide Foamex Carpet administrative and management services,
as defined, at cost plus out-of-pocket expenses. During 2000, 1999 and 1998,
Foamex L.P. invoiced approximately $0.5 million, $0.5 million and $1.8 million,
respectively, of services to Foamex Carpet under the Services Agreement. The
Services Agreement can be terminated by either party by giving at least 30 days
written notice prior to the end of a calendar year. As of December 31, 2000 and
1999, Foamex L.P. had net receivables due from Foamex Carpet of approximately
$11.5 million and $16.4 million, respectively, associated with the Supply
Agreement and Services Agreement.

F-28

17. RELATED PARTY TRANSACTIONS AND BALANCES (continued)

Partners Distribution

In 1999, Foamex L.P. distributed $17.3 million in cash pro rata to its
partners. During 1998, in connection with the GFI Transaction, Foamex L.P. made
a $20.0 million distribution to Foamex International (see Note 12).

Foamex International Notes

On December 26, 1997, Foamex L.P. entered into a $2.5 million promissory
note with Foamex International. The note bears interest at the rate of LIBOR
plus 2 3/8%. The note and interest are payable on demand, or if no demand is
made, then on December 31, 2001. Also, on December 31, 1998, Foamex L.P. entered
into another promissory note with Foamex International with a principal amount
of approximately $2.5 million. The note bears interest at the rate LIBOR plus 2
3/8%. The note and interest thereon were repaid on March 31, 1999.

On October 20, 1999, Foamex L.P. and Foamex International entered into a
revolving note that allows Foamex International to borrow up to approximately
$2.5 million through October 20, 2004. The revolving note bears interest at a
rate equal to three-month LIBOR plus 2.5%, per annum, and is payable upon
demand, or if no demand is made, then on October 20, 2004.

At December 31, 2000 and 1999, Foamex L.P. had a receivable of
approximately $2.5 million and $0.7 million, respectively, relating to the
revolving note. The receivable for both notes is classified as a component of
partners' deficit.

Trace Promissory Notes

On July 1, 1997, Trace borrowed $5.0 million pursuant to a promissory note
with an aggregate principal amount of $5.0 million issued to Foamex L.P. on June
12, 1997. The promissory note is due and payable on demand or, if no demand is
made, on July 7, 2001, and bears interest at 2 3/8% plus three-month LIBOR, as
defined, per annum payable quarterly in arrears commencing October 1, 1997. On
June 12, 1997, another promissory note issued to Foamex L.P. by Trace in July
1996 was amended. The amended promissory note is an extension of a promissory
note of Trace that was due in July 1997. The aggregate principal amount of the
amended promissory note was increased to approximately $4.8 million and the
maturity of the promissory note was extended. The promissory note is due and
payable on demand or, if no demand is made, on July 7, 2001, and bears interest
at 2 3/8% plus three-month LIBOR, as defined, per annum payable quarterly in
arrears.

Note 3 includes disclosures regarding 1999 activity concerning Trace
promissory notes payable to Foamex L.P. The Trace notes are included in the
other component of partners' deficit, which is consistent with the recognition
in prior years. Based on Trace's financial position discussed in Note 1, Trace
may not be able to pay the aggregate amount of $9.2 million. Accordingly, Foamex
L.P. did not record interest income on these notes since the Trace bankruptcy.

Trace Accounts Receivables

At year-end 2000 and 1999, operating accounts receivables from Trace were
approximately $2.7 million. During 1998, an allowance of $2.4 million was
recorded as a restructuring and other charges (credits) due to the financial
difficulties of Trace. Foamex L.P. established an allowance of $0.3 million
during 1999 for additional operating accounts receivable from Trace. The
allowance was recorded as a restructuring and other charges (credit).

Trace Management Agreement

Foamex L.P. had a management service agreement with a subsidiary of Trace
pursuant to which general managerial services of a financial, technical, legal,
commercial, administrative and/or advisory nature were provided to Foamex L.P.
During June 1997, the management services agreement was amended to increase the
annual fee from $1.75 million to $3.0 million, plus reimbursement of expenses
incurred. An amendment to the Foamex L.P. Credit

F-29

17. RELATED PARTY TRANSACTIONS AND BALANCES (continued)

Facility on June 30, 1999 no longer permits Foamex L.P. to pay the management
fee. On July 29, 1999, Foamex L.P. submitted formal notice of the termination of
the management agreement.

Tax Distribution

On December 11, 1996, Foamex L.P. entered into a tax distribution advance
agreement, pursuant to which its partners are entitled to obtain advances, in
the aggregate not to exceed $17.0 million, against future distributions under
Foamex L.P.'s tax distribution agreement. On December 23, 1999, Foamex
International repaid the $13.6 million of advances made in 1997, plus accrued
interest, with proceeds received from a $17.3 million distribution from Foamex
L.P., discussed above.

Trace New York Sublease

Prior to September 30, 1999, Foamex L.P. subleased to Trace approximately
5,900 square feet of general, executive and administrative office space in New
York, New York. The terms of the lease were substantially the same terms as
Foamex L.P. leased such space from a third party lessor. Foamex L.P. has closed
its New York office and subleased the premises to a third party at an amount in
excess of its lease commitment.

Foamex/GFI Note

In connection with the GFI Transaction (see Note 12), Foamex L.P. entered
into the Foamex/GFI Note with General Felt that was subsequently retained by
Foam Funding LLC. As discussed in Note 12, the $34.0 million Foamex/GFI Note was
repaid in March 2000. During 2000, 1999 and 1998, Foamex L.P. paid approximately
$0.6 million, $2.1 million and $1.7 million, respectively, of interest on the
note payable to Foam Funding LLC.

Other

The general director of Foamex de Mexico S.A. de C.V. ("Foamex de Mexico")
which is Foamex L.P.'s operating subsidiary in Mexico has a 5% stock interest in
Foamex de Mexico. A member of the board provides consulting services to Foamex
L.P. for which fees paid to him in 2000 were $0.1 million, in 1999 were $0.2
million and were $0.1 million in 1998.

As discussed in Note 12, included in the group of banks that provides the
Foamex L.P. Credit Facility is The Bank of Nova Scotia, which is a shareholder
of Foamex International.

Foamex L.P. chartered an aircraft, which was owned by a wholly owned
subsidiary of Foamex International and incurred costs of approximately $0.1
million and $0.9 million in 1999 and 1998, respectively. Foamex International
sold this aircraft on March 31, 1999. The sale of the aircraft triggered an
obligation to Trace of approximately $0.6 million. The obligation was offset
against Trace's two promissory notes payable to Foamex L.P. The Trace notes are
included in partners' deficit, which is consistent with the recognition in prior
years.

During 1999, certain employees of Foamex L.P. were also employed by Trace.
Foamex L.P. paid a portion of the total compensation of such employees based on
the amount of time devoted to Foamex L.P.'s matters by such employees in the
aggregate. All such dual employment relationships have been terminated. Such
payments totaled $1.8 million and $2.2 million in 1999 and 1998, respectively.

Foamex L.P. made charitable contributions to the Trace International
Holdings, Inc. Foundation of approximately $0.2 million in 1998.

Foamex L.P., Recticel, s.a. ("Recticel"), a European polyurethane foam
manufacturer, whose subsidiary was a former partner of Foamex L.P. and
affiliates of Recticel are current shareholders of Foamex International, and
Beamech Group Limited, an unaffiliated third party, have an interest in a Swiss
corporation that develops new manufacturing technology for the production of
polyurethane foam including the VPF(SM) manufacturing process.

F-30

18. BUYOUT PROPOSALS - HISTORY

On February 9, 2000, Foamex International announced that it was in
discussions with respect to a proposal involving the acquisition of all of
Foamex International's outstanding common stock for cash. Foamex International
stated that the proposal was subject to a number of conditions, including the
buyer's due diligence and the execution of definitive agreements. Foamex
International agreed to an exclusive negotiating period ending five business
days after delivery of its audited financial statements included in Foamex
International's Annual Report on Form 10-K to the prospective buyer. On April 5,
2000, Foamex International announced that discussions with the potential buyer
were terminated with no agreement having been reached. Foamex International
subsequently terminated the engagement of J.P. Morgan & Company, Inc. ("JP
Morgan"), which acted as financial advisor in connection with such transaction.
During the second quarter of 2000, Foamex International ended discussions with
JP Morgan concerning an additional engagement.

On August 5, 1999, Foamex International announced that its Board of
Directors signed a letter of intent with Sorgenti Chemical Industries, LLC and
Liberty Partners Holdings 20, LLC (collectively, the "Purchasers") for a
business combination providing for $11.50 per share for all of Foamex
International's outstanding common stock (the "Sorgenti Transaction"). Under the
terms of the letter of intent, if Foamex International entered into a business
combination with another party, the Purchasers would be entitled to a break-up
fee of $6.0 million plus reimbursement of certain expenses, subject to certain
conditions, including the willingness of the Purchasers to enter into a
definitive merger agreement providing for a price of at least $11.50 per share
prior to the expiration of the letter of intent. The proposed transaction was
subject to a number of conditions, including the negotiation of definitive
documents regarding certain conditions relating to the bank credit facilities
and the public debt of Foamex International's subsidiaries. Additional issues
considered included minimum shareholder acceptance, change of board membership,
and other provisions providing for a higher break-up fee and expense
reimbursement if Foamex International entered into a business combination
providing a more favorable transaction. On December 15, 1999, Foamex
International announced that the letter of intent with the Purchasers, which had
been extended, expired by its terms. The Purchasers had submitted a revised bid
at a price and on terms that were less favorable than those contained in the
letter of intent and the Negotiating Committee of Foamex International's Board
of Directors rejected the revised bid.

In 1998, Foamex International received an unsolicited buyout proposal from
Trace, Foamex International's principal stockholder. Foamex International
entered into two merger agreements, which were subsequently terminated by Trace.

19. COMMITMENTS AND CONTINGENCIES

Operating Leases

Foamex L.P. is obligated under various noncancelable lease agreements for
rental of facilities, vehicles and other equipment. Many of the leases contain
renewal options with varying terms and escalation clauses that provide for
increased rentals based upon increases in the Consumer Price Index, real estate
taxes and lessors' operating expenses. Total minimum rental commitments
(excluding commitments accrued as part of Foamex L.P.'s various
restructuring/consolidation plans) required under operating leases at December
31, 2000 are:

Operating
Leases
----------
(thousands)
2001 $13,317
2002 11,878
2003 9,841
2004 7,239
2005 5,074
Balance 11,010
-------
Total $58,359
=======

F-31

19. COMMITMENTS AND CONTINGENCIES (continued)

Rental expense charged to operations under operating leases approximated
$14.7 million, $15.4 million and $17.7 million for 2000, 1999 and 1998,
respectively. Substantially all such rental expense represented the minimum
rental payments under operating leases.

Litigation - Foamex International Shareholders

On August 1, 2000, Foamex International announced that it had reached
agreements in principle with the plaintiffs in the stockholder actions described
below providing for the settlement and dismissal of such actions, subject to
certain conditions, including court approval.

The Shareholder Litigation. Beginning on March 17, 1998, six actions, which
were subsequently consolidated under the caption In re Foamex International Inc.
Shareholders Litigation, were filed in the Court of Chancery of the State of
Delaware, and on August 13, 1999, another action, Watchung Road Associates,
L.P., et al. v. Foamex International Inc., et al. (the "Watchung Action"), was
filed in the same court. The two actions were consolidated on May 3, 2000, into
a single action under the caption In re Foamex International Inc. Shareholders
Litigation (the "Delaware Action"). The Delaware Action, a purported derivative
and class action on behalf of Foamex International and its stockholders,
originally named as defendants Foamex International, certain of its current and
former directors and officers, Trace and a Trace affiliate. The complaint in the
Delaware Action alleges, among other things, that certain of the defendants
breached their fiduciary duties to Foamex International in connection with an
attempt by Trace to acquire Foamex International's publicly traded common stock
as well as with a potential acquisition transaction with a group led by Sorgenti
Chemical Industries LLC, and that certain of the defendants breached their
fiduciary duties by causing Foamex International to waste assets in connection
with a variety of transactions entered into with Trace and its affiliates. The
Delaware Action seeks various remedies, including injunctive relief, money
damages and the appointment of a receiver for Foamex International.

On April 26, 1999, a putative securities class action entitled Molitor v.
Foamex International Inc., et al., was filed in the United States District Court
for the Southern District of New York naming as defendants Foamex International,
Trace and certain current and former officers and directors of Foamex
International, on behalf of stockholders who bought shares of Foamex
International's common stock during the period from May 7, 1998 through and
including April 16, 1999. The lawsuit alleged that the defendants violated
Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by
misrepresenting and/or omitting material information about Foamex
International's financial situation and operations, with the result of
artificially inflating the price of Foamex International's stock. The lawsuit
also alleged that Trace and Marshall S. Cogan violated Section 20(a) of the
Securities Exchange Act of 1934 as controlling persons of Foamex International.
The complaint sought class certification, a declaration that defendants violated
the federal securities laws, an award of money damages, and costs and
attorneys', accountants' and experts' fees. On May 18, 1999, a similar action
entitled Thomas W. Riley v. Foamex International Inc., et al., was filed in the
same court. The two actions were consolidated and a consolidated complaint was
filed; the consolidated suit is referred to herein as the "Federal Action."

The Settlements. On August 23, 2000, Foamex International and the
plaintiffs in the Federal Action entered into a settlement agreement providing
that members of the class of shareholders who purchased shares between May 7,
1998 and April 16, 1999 would receive payments as defined in the agreement. The
court approved the settlement and dismissed the action with prejudice on January
11, 2001, and no appeals were filed. Payments to class members and plaintiffs'
lawyers' fees in the Federal Action have been paid directly by Foamex
International's insurance carrier on behalf of Foamex International.

Under the terms of the agreement in principle to settle the Delaware
Action, Foamex International agreed that a special nominating committee of the
Board of Directors, consisting of Robert J. Hay as chairman, Stuart J. Hershon,
John G. Johnson, Jr., and John V. Tunney, will nominate two additional
independent directors to serve on the Board. The terms of the agreement also
establish the criteria for the independence of the directors and require that
certain transactions with affiliates be approved by a majority of the
disinterested members of the Board. On September 28, 2000, Foamex International
announced that Raymond E. Mabus, Jr. was elected to Foamex International's Board
of Directors. On December 21, 2000, Foamex International announced that Virginia
A.

F-32

19. COMMITMENTS AND CONTINGENCIES (continued)

Kamsky was elected to Foamex International's Board of Directors. The addition of
Mr. Mabus and Ms. Kamsky adds two independent directors and brought the total
number of directors to eight. The parties are negotiating the terms of the
settlement agreement and related documentation. On January 9, 2001, the Court
ordered the Watchung Action dismissed with prejudice only as to the named
plaintiffs Watchung Road Associates, L.P. and Pyramid Trading Limited
Partnership. The dismissal did not have any effect on the claims asserted in the
consolidated action.

The settlement of the Delaware Action (assuming a definitive settlement
agreement is reached with plaintiffs) is subject to court approval, which, if
obtained, will resolve all outstanding shareholder litigation against Foamex
International and its current and former directors and officers. The settlements
of the Federal Action and the Delaware Action involve no admissions or findings
of liability or wrongdoing by Foamex International or any individuals. If
management's assessment of Foamex International's liability with respect to
these actions is incorrect, such actions could have a material adverse effect on
Foamex International's consolidated financial position, results of operations
and cash flows.

Litigation - Breast Implants

As of March 21, 2001, Foamex L.P. and Trace were two of multiple defendants
in actions filed on behalf of approximately 2,104 recipients of breast implants
in various United States federal and state courts and one Canadian provincial
court, some of which allege substantial damages, but most of which allege
unspecified damages for personal injuries of various types. Three of these cases
seek to allege claims on behalf of all breast implant recipients or other
allegedly affected parties, but no class has been approved or certified by the
court. In addition, three cases have been filed alleging claims on behalf of
approximately 39 residents of Australia, New Zealand, England, and Ireland.
Foamex L.P. believes that the number of suits and claimants may increase. During
1995, Foamex L.P. and Trace were granted summary judgments and dismissed as
defendants from all cases in the federal courts of the United States and the
state courts of California. Appeals for these decisions were withdrawn and the
decisions are final.

Although breast implants do not contain foam, certain silicone gel implants
were produced using a polyurethane foam covering fabricated by independent
distributors or fabricators from bulk foam purchased from Foamex L.P. or Trace.
Neither Foamex L.P. nor Trace recommended, authorized, or approved the use of
its foam for these purposes. Foamex L.P. is also indemnified by Trace for any
such liabilities relating to foam manufactured prior to October 1990. Trace's
insurance carrier has continued to pay Foamex L.P.'s litigation expenses after
Trace's filing under the Bankruptcy Code. Trace's insurance policies continue to
cover certain liabilities of Trace but if the limits of those policies are
exhausted, it is unlikely that Trace will be able to continue to provide
additional indemnification. While it is not feasible to predict or determine the
outcome of these actions, based on management's present assessment of the merits
of pending claims, after consultation with the general counsel of Foamex L.P.,
and without taking into account the indemnification provided by Trace, the
coverage provided by Trace's and Foamex L.P.'s liability insurance and potential
indemnity from the manufacturers of polyurethane covered breast implants,
management believes that the disposition of the matters that are pending or that
may reasonably be anticipated to be asserted should not have a material adverse
effect on either Foamex L.P.'s consolidated financial position or results of
operations. If management's assessment of Foamex L.P.'s liability with respect
to these actions is incorrect, such actions could have a material adverse effect
on the financial position, results of operations and cash flows of Foamex L.P.

Litigation - Other

Foamex L.P. is party to various other lawsuits, both as defendant and
plaintiff, arising in the normal course of business. It is the opinion of
management that the disposition of these lawsuits will not, individually or in
the aggregate, have a material adverse effect on the financial position or
results of operations of Foamex L.P. If management's assessment of Foamex L.P.'s
liability with respect to these actions is incorrect, such actions could have a
material adverse effect on Foamex L.P.'s consolidated financial position,
results of operations and cash flows.

F-33

19. COMMITMENTS AND CONTINGENCIES (continued)

Environmental and Health and Safety

Foamex L.P. is subject to extensive and changing federal, state, local and
foreign environmental laws and regulations, including those relating to the use,
handling, storage, discharge and disposal of hazardous substances and the
remediation of environmental contamination, and as a result, is from time to
time involved in administrative and judicial proceedings and inquiries relating
to environmental matters. As of December 31, 2000, Foamex L.P. had accruals of
approximately $3.1 million for environmental matters. During 1998, Foamex L.P.
established an allowance of $0.6 million relating to receivables from Trace for
environmental indemnifications due to the financial difficulties of Trace.

The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments") provide
for the establishment of federal emission standards for hazardous air pollutants
including methylene chloride, propylene oxide and TDI, materials used in the
manufacturing of foam. On December 27, 1996, the United States Environmental
Protection Agency (the "EPA") proposed regulations under the 1990 CAA Amendments
that will require manufacturers of slab stock polyurethane foam and foam
fabrication plants to reduce emissions of methylene chloride. The final National
Emission Standard for Hazardous Air Pollutants ("NESHAP") was promulgated
October 7, 1998. NESHAP requires a reduction of approximately 70% of the
emission of methylene chloride for the slab stock foam industry effective
October 7, 2001. Foamex L.P. believes that the use of alternative technologies,
including VPF(SM), which do not utilize methylene chloride and its ability to
shift current production to the facilities which use these alternative
technologies will minimize the impact of these regulations. The 1990 CAA
Amendments also may result in the imposition of additional standards regulating
air emissions from polyurethane foam manufacturers, but these standards have not
yet been proposed or promulgated.

Foamex L.P. has reported to the appropriate state authorities that it has
found soil and/or groundwater contamination in excess of state standards at six
facilities. These sites are in various stages of investigation or remediation.
Accordingly, the extent of contamination and the ultimate liability is not known
with certainty for all sites. Foamex L.P. has accruals of $2.1 million for the
estimated cost of remediation, including professional fees and monitoring costs,
for these sites. During 2000, Foamex L.P. reached an indemnification agreement
with the former owner of the Morristown, Tennessee facility. The agreement
allocates the incurred and future remediation costs between the former owner and
Foamex L.P. The estimated allocation of future costs for the remediation of this
facility is not significant, based on current information known. The former
owner was Recticel Foam Corporation, a subsidiary of Recticel s.a.

Foamex L.P. has either upgraded or closed all underground storage tanks at
its facilities in accordance with applicable regulations.

On November 14, 2000, the United States Occupational Safety and Health
Administration ("OSHA") released the final ergonomics standard ("Ergonomics
Standard"), which applies to Foamex L.P., as well as all other employers in the
United States, with certain industry specific exclusions. The Ergonomics
Standard addresses musculoskeletal disorders, including those commonly
referenced as repetitive motion disorders.

The Ergonomics Standard is comprehensive, covering essentially all
employees of Foamex L.P. in the United States. Although the implementation costs
could be significant, in the present form, Foamex L.P. does not believe it will
have a negative impact on its competitive position within the industry.

Subsequent to year-end 2000, a joint resolution by the United States House
of Representatives and Senate was approved that repealed the Ergonomics
Standard. The repeal has been submitted to the President of the United States
for his review and signature.

F-34

19. COMMITMENTS AND CONTINGENCIES (continued)

On April 10, 1997, the OSHA promulgated new standards governing employee
exposure to methylene chloride, which is used as a blowing agent in some of
Foamex L.P.'s manufacturing processes. The phase-in of the standards was
completed in 1999 and Foamex L.P. has developed and implemented a compliance
program. Capital expenditures required and changes in operating procedures are
not anticipated to significantly impact Foamex L.P.'s competitive position.

Foamex L.P. has been designated as a Potentially Responsible Party ("PRP")
by the EPA with respect to six sites. Estimates of total cleanup costs and
fractional allocations of liability are generally provided by the EPA or the
committee of PRP's with respect to the specified site. In each case and in the
aggregate, the liability of Foamex L.P. is not considered to be significant.

Although it is possible that new information or future developments could
require Foamex L.P. to reassess its potential exposure relating to all pending
environmental matters, including those described herein, Foamex L.P. believes
that, based upon all currently available information, the resolution of such
environmental matters will not have a material adverse effect on Foamex L.P.'s
operations, financial position, capital expenditures or competitive position.
The possibility exists, however, that new environmental legislation and/or
environmental regulations may be adopted, or other environmental conditions may
be found to exist, that may require expenditures not currently anticipated and
that may be significant.

F-35

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
Foamex Capital Corporation
Wilmington, Delaware

In our opinion, the accompanying balance sheets present fairly, in all material
respects, the financial position of Foamex Capital Corporation ("FCC") (a wholly
owned subsidiary of Foamex L.P.) at December 31, 2000 and 1999 in conformity
with accounting principles generally accepted in the United States of America.
These balance sheets are the responsibility of FCC's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Note 2, during the year ending December 31, 2001, Foamex L.P.
financial debt covenants, with which Foamex L.P. must comply on a quarterly
basis, become more restrictive. Management's plans in regard to this matter are
also described in Note 2.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania
March 30, 2001

F-36

FOAMEX CAPITAL CORPORATION
(A Wholly Owned Subsidiary of Foamex L.P.)
BALANCE SHEETS

December 31, December 31,
2000 1999
------------ ------------

CASH $1,000 $1,000
====== ======

COMMITMENTS AND CONTINGENCIES

STOCKHOLDER'S EQUITY
Common stock, par value $.01 per share;
1,000 shares authorized, issued and outstanding $ 10 $ 10
Additional paid-in capital 990 990
------ ------
Total Stockholder's Equity $1,000 $1,000
====== ======

The accompanying notes are an integral part of
the balance sheets.

F-37

FOAMEX CAPITAL CORPORATION
(A Wholly Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS

1. ORGANIZATION

Foamex Capital Corporation ("FCC"), a wholly-owned subsidiary of Foamex
L.P., was formed on July 20, 1992 and initially capitalized on July 23, 1992 for
the purpose of obtaining financing from external sources.

2. COMMITMENTS AND CONTINGENCIES

Trace International Holdings, Inc. ("Trace") is a privately held company,
which owned approximately 29% of Foamex International Inc.'s ("Foamex
International") outstanding voting common stock at September 30, 2000, and whose
former Chairman also serves as Foamex International's Chairman. Foamex
International's common stock owned by Trace was pledged as collateral against
certain of Trace's obligations. The Foamex L.P. credit facility pursuant to
which approximately $351.1 million of debt was outstanding as of September 30,
2000, provided that a "change of control" would be an event of default and could
result in the acceleration of such indebtedness. "Change of control" means, for
this purpose, that (i) a person or related group, other than Trace, beneficially
owns more than 25% of Foamex International's outstanding voting stock and (ii)
such voting stock constitutes a greater percentage of such voting stock than the
amount beneficially owned by Trace. Additionally, certain indentures of Foamex
L.P. and FCC relating to senior subordinated notes of $248.0 million contain
similar "change of control" provisions, which require Foamex L.P. and FCC to
tender for such notes at a price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, if there is
such a "change of control".

On July 21, 1999, Foamex L.P. was informed by Trace that it filed a
petition for relief under Chapter 11 of the Bankruptcy Code in Federal Court in
New York City. Subsequently, on January 24, 2000, an order was signed converting
the Trace bankruptcy from Chapter 11 to Chapter 7 of the Bankruptcy Code. A
trustee was appointed to oversee the liquidation of Trace's assets. Neither
Trace's bankruptcy filing nor the conversion to Chapter 7 constituted a "change
of control" under the provisions of the debt agreements described above.

On July 31, 2000, Foamex International announced that it had entered into
an agreement (the "Exchange Agreement") with The Bank of Nova Scotia relating to
a portion of the 7,197,426 shares of Foamex International's common stock pledged
by Trace to The Bank of Nova Scotia. The Exchange Agreement provided for the
transfer of the pledged stock to The Bank of Nova Scotia in a manner that would
not constitute a "change of control" as described above. These transactions were
conditioned upon bankruptcy court approval of a settlement agreement between The
Bank of Nova Scotia and the trustee for the Trace bankruptcy, which was entered
on October 18, 2000. On November 2, 2000, the transactions contemplated by the
Exchange Agreement and the settlement agreement were consummated, and did not
constitute a "change of control". As a result, Trace no longer owns any shares
of Foamex International's common stock.

Under the Exchange Agreement, The Bank of Nova Scotia initially received
1,500,000 shares of Foamex International's common stock from the Trace
bankruptcy estate and exchanged these common stock shares for 15,000 shares of a
new class of Foamex International's non-voting non-redeemable convertible
preferred stock (the "Series B Preferred Stock"). Each share of the Series B
Preferred Stock can be converted into 100 shares of Foamex International's
common stock but only if such conversion would not trigger a "change of control"
event, as discussed above. The Series B Preferred Stock (a) is entitled to
dividends only if a dividend is declared on Foamex International's common stock,
(b) ranks senior to any future preferred stock issued by Foamex International
and (c) is entitled to a liquidation preference of $100 per share. Following
this exchange, The Bank of Nova Scotia became the owner of 24.41% of the
outstanding shares of Foamex International's common stock when the remaining
5,697,426 shares of Foamex International's common stock were transferred to The
Bank of Nova Scotia from the Trace bankruptcy estate.

F-38

FOAMEX CAPITAL CORPORATION
(A Wholly Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS

2. COMMITMENTS AND CONTINGENCIES (continued)

FCC is a joint obligor and severally liable on the following borrowings of
Foamex L.P.:

9 7/8% Senior Subordinated Notes due 2007 ("9 7/8% Senior Subordinated Notes")

The 9 7/8% Senior Subordinated Notes were issued by Foamex L.P. and FCC
(the "Issuers") and are due on June 15, 2007. The notes represent
uncollateralized general obligations of the Issuers and are subordinated to all
Senior Debt, as defined in the Indenture. Interest is payable June 15 and
December 15. The notes may be redeemed at the option of the Issuers, in whole or
in part, at any time on or after June 15, 2002. The initial redemption is at
104.938% of their principal amount, plus accrued and unpaid interest, as
defined, if any, thereon to the date of redemption and declining to 100.0% on or
after June 15, 2005.

Upon the occurrence of a change of control, as defined, each holder will
have the right to require the Issuers to tender for such notes at a price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, if there is such a "change of control". The notes are
subordinated in right of payment to all senior indebtedness and are pari passu
in right of payment to the 13 1/2% Senior Subordinated Notes (described below)
and Foamex L.P.'s subordinated note payable.

13 1/2% Senior Subordinated Notes due 2005, Series B ("13 1/2% Senior
Subordinated Notes")

The 13 1/2% Senior Subordinated Notes were issued by the Issuers and are
due on August 15, 2005. The notes represent uncollateralized general obligations
of the Issuers and are subordinated to all Senior Debt, as defined in the
Indenture. Interest is payable semiannually on February 15 and August 15. The
notes may be redeemed at the option of the Issuers, in whole or in part, at any
time on or after August 15, 2000. The initial redemption is at 106.75% of their
principal amount, plus accrued and unpaid interest, if any, thereon to the date
of redemption and declining to 100.0% on or after August 15, 2004.

Upon the occurrence of a change of control, as defined, each holder will
have the right to require the Issuers to tender for such notes at a price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest, if any, thereon, if there is such a "change of control". The
notes are subordinated in right of the payment of all senior indebtedness and
are pari passu in right of payment to the 9 7/8% Senior Subordinated Notes
(described above) and Foamex L.P.'s subordinated note payable.

The Foamex L.P. Credit Facility contains certain quarterly financial
covenants which become more restrictive during 2001. Foamex L.P. anticipates
that it will continue to comply in 2001 with the various quarterly financial
covenants in the Foamex L.P. Credit Facility. Management's current business plan
for Foamex L.P. anticipate customer selling price increases in response to
higher raw material costs, improved working capital management, a reduced
capital expenditure program, declining interest rates, successful implementation
of on-going cost savings initiatives and improved operating efficiencies. The
achievement of the business plan is necessary for compliance with the various
financial covenants in 2001.

The possibility exists that certain financial covenants will not be met if
business conditions are other than as anticipated or other unforeseen events
impact results. In the absence of a waiver of or amendment to such financial
covenants, such noncompliance would constitute a default under the Foamex L.P.
Credit Facility and the lenders would be entitled to accelerate the maturity of
the indebtedness outstanding thereunder. If any such default occurs under the
Foamex L.P. Credit Facility, it would also result in a default under the senior
subordinated notes described above. In the event that such noncompliance appears
likely, or occurs, Foamex L.P. will seek the lenders' approvals of amendments
to, or waivers of, such financial covenants. Historically, Foamex L.P. has been
able to renegotiate financial covenants and/or obtain waivers, as required, and
management believes such waivers and/or amendments could be obtained if
required. However, there can be no assurance of future amendments or waivers
will be obtained.

F-39

FOAMEX L.P. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULE

Index to Financial Statement Schedule

Schedule II - Valuation and Qualifying Accounts

All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements and notes thereto.

S-1

Schedule II
FOAMEX L.P. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(thousands)

Balance at Charged to Charged to Balance at
Beginning of Costs and other End of
Period Expenses Accounts Deductions Period
------------ ---------- ---------- ---------- ----------

YEAR ENDED DECEMBER 31, 2000

Allowance for Uncollectible Accounts $ 4,333 $ 1,736 $ - $ 857 $5,212
======= ======= ======= ====== ======

Reserve for Discounts $ 977 $ - $ 9,379 (1) $9,110 $1,246
======= ======= ======= ====== ======

Deferred Income Tax Asset Valuation Allowance $ 711 $ 720 $ - $ - $1,431
======= ======= ======= ====== ======

YEAR ENDED DECEMBER 31, 1999
Allowance for Uncollectible Accounts $ 6,349 $ 2,493 $ - $4,509 $4,333
======= ======= ======= ====== ======

Reserve for Discounts $ 929 $ - $ 9,365 (1) $9,317 $ 977
======= ======= ======= ====== ======

Deferred Income Tax Asset Valuation Allowance $ - $ 711 $ - $ - $ 711
======= ======= ======= ====== ======

YEAR ENDED DECEMBER 31, 1998
Allowance for Uncollectible Accounts $ 6,844 $ 2,000 $ (762)(1)(2) $1,733 $6,349
======= ======= ======= ====== ======

Reserve for Discounts $ 1,238 $ - $ 6,889 (1) $7,198 $ 929
======= ======= ======= ====== ======

Deferred Income Tax Asset Valuation Allowance $ 9,097 $ - $(9,097)(3) $ - $ -
======= ======= ======= ====== ======

(1) Discounts and billing adjustments reflect a reduction in net sales.

(2) Includes $3.2 million of reserves transferred out due to the GFI
Transaction.

(3) Represents valuation allowances transferred out due to the GFI Transaction.

S-2