SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-K/A
                                 Amendment No. 2

            [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: 0-22624

                            FOAMEX INTERNATIONAL INC.
             ------------------------------------------------------
             (Exact Name of registrant as Specified in its Charter)

            Delaware                                          05-0473908
-------------------------------                         ----------------------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification Number)

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

Registrant's telephone number, including area code:  (610) 859-3000
                                                     --------------

Securities registered pursuant to Section 12(b) of the Act: None
                                                            ----

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
                                                value $.01 per share, which is
                                                traded through the National
                                                Association of Securities
                                                Dealers, Inc. National Market
                                                System.

     Indicate  by check mark  whether the  registrant  (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 the
registrant  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 registrant's  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. [ ]

     The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 2, 2001, was $50.2 million.

     The number of shares  outstanding  of the  registrant's  common stock as of
March 15, 2001 was 23,559,994.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None
<PAGE>


                                Amendment No. 2

Item 8 -  Financial  Statements  and  Supplementary  Data is hereby  amended  to
restate  unaudited  1999  quarterly  financial  data presented in Note 21 to the
consolidated  financial  statements.  The  restatement of this data was required
since the Company  subsequently  determined  that  certain  fourth  quarter 1999
adjustments should have been recorded in prior quarters in 1999.

Item 14 - Exhibits,  Financial Statement Schedules and Reports is hereby amended
to  include a restated  Exhibit 14 (a) -  Financial  Statements  to include  the
disclosures discussed above and to include Exhibit 23.1 - Consent of Independent
Accountants.



                                       2
<PAGE>


                                   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 21st day of February
2002.

                                   FOAMEX INTERNATIONAL INC.


                                   By: /s/  Peter W. Johnson
                                       --------------------------------
                                   Name:  Peter W. Johnson
                                   Title: President and Chief Operating Officer
                                          (Principal Executive Officer)



                                   By: /s/ Thomas E. Chorman
                                       --------------------------------
                                   Name:  Thomas E. Chorman
                                   Title: Executive Vice President,
                                          Chief Financial Officer and
                                          Chief Administrative Officer



                                   By: /s/  Michael D. Carlini
                                       --------------------------------
                                   Name:  Michael D. Carlini
                                   Title: Senior Vice President - Finance
                                          and Chief Accounting Officer



                                       3
<PAGE>


     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 on the dates indicated:

Signature                         Title                       Date


/s/ Marshall S. Cogan             Chairman of the Board       February 21, 2002
----------------------------
    Marshall S. Cogan


/s/ Robert J. Hay                 Chairman Emeritus           February 21, 2002
----------------------------        and Director
    Robert J. Hay


/s/ Julie Nixon Eisenhower        Director                    February 21, 2002
----------------------------
    Julie Nixon Eisenhower


/s/ Stuart J. Hershon             Director                    February 21, 2002
----------------------------
    Stuart J. Hershon


/s/ Virginia A. Kamsky            Director                    February 21, 2002
----------------------------
    Virginia A. Kamsky


/s/ Raymond E. Mabus              Director                    February 21, 2002
----------------------------
    Raymond E. Mabus


/s/ Steven B. Sharpe              Director                    February 21, 2002
----------------------------
    Steven B. Sharpe


/s/ John V. Tunney                Vice Chairman and Director  February 21, 2002
----------------------------
    John V. Tunney



                                       4
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

(a)  Financial statements.

     Foamex International Inc. 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 Stockholders' Deficit for
          the years 2000, 1999 and 1998                                     F-7
       Notes to Consolidated Financial Statements                           F-8

     Foamex International Inc. and Subsidiaries Financial Statement Schedules:
       Schedule I - Condensed Financial Information of Registrant           S-2
       Schedule II - Valuation and Qualifying Accounts                      S-5

(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 the  Company's  voting  common  stock  pledged by
     Trace  to The  Bank of Nova  Scotia  as a result  of the  Trace  bankruptcy
     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.


                                       5
<PAGE>

3.7.1(a)  - Certificate of Incorporation of Foamex International.
3.7.1(dd) - Amendment to Certificate of Incorporation of Foamex International.
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.


                                       6
<PAGE>

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.
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, Inc. and Foamex  International  Inc. 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.


                                       7
<PAGE>

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.
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(ff) -  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(gg) -  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.
4.10.16(gg) - Amendment No. 4 to Foamex Carpet Cushion Agreement, dated February
     18, 2000.
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.
4.12.5(gg) -  Amendment  to  Promissory  Note of Foamex  Carpet in favor of Foam
     Funding LLC dated as of February 18, 2000.
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.


                                       8
<PAGE>


4.13.1(ff) - 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(ff) - 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(hh) - Letter Agreement,  dated as of July 31, 2000, between the Company and
     The Bank of Nova Scotia.
4.14.1(jj) -  Certificate  of  Designations  of Series B Preferred  Stock of the
     Company.
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 a 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.


                                       9
<PAGE>

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. 401(k) Savings Plan effective October 1, 1997.
10.10.7(ii) - Foamex  International's  Amended and  Restated  1993 Stock  Option
     Plan.
10.10.8(a) - Foamex International's Non-Employee Director Compensation Plan.
10.11.1 - Employment Agreement,  dated as of January 1, 1999, by and between the
     Company and Marshall S. Cogan.
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 - 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.
23   - Consent of Independent Accountants, PricewaterhouseCoopers LLP.
23.1 - Consent of Independent Accountants, PricewaterhouseCoopers LLP.
----------------------------

(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 Annual  Report on
     Form 10-K of the Company 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 the Company 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 the Company 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.


                                       10
<PAGE>


(f)  Incorporated  herein by  reference  to the  Exhibit to the Form 10-Q of the
     Company 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 Annual  Report on
     Form 10-K Statement of Foamex L.P. and FCC for fiscal 1992.

(i)  Incorporated  herein by  reference  to the Exhibit to the Annual  Report on
     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 the Company for the fiscal year ended December 29, 1996.

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

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

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

(q)  Incorporated  herein by  reference  to the Exhibit to the Annual  Report on
     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 the Company
     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 the  Company  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.


                                       11
<PAGE>


(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 Annual  Report on
     Form 10-K of the Company for the fiscal year ended December 28, 1997.

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

(bb) Incorporated  herein by reference  to the Exhibit to the Current  Report on
     Form 8-K of the Company 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 Annual  Report on
     Form 10-K of the Company 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 the Company reporting an event that occurred on June 30, 1999.

(ff) Incorporated  herein by  reference  to the Exhibit to the Annual  Report on
     Form 10-K of the Company for the fiscal year ended December 31, 1999.

(gg) Incorporated  herein by  reference  to the  Exhibit to the Form 10-Q of the
     Company for the quarterly period ended March 30, 2000.

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

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

(jj) Incorporated  herein by reference  to the Exhibit to the Current  Report on
     Form 8-K of the  Company  reporting  an event that  occurred on November 2,
     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.



                                       12
<PAGE>


                                                                     Item 14(a)

                            FOAMEX INTERNATIONAL INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
  Foamex International Inc.

<S>                                                                                                       <C>
    Index to Consolidated Financial Statements                                                          F-1

    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 Stockholders' Deficit for the years 2000,
       1999 and 1998                                                                                    F-7

    Notes to Consolidated Financial Statements                                                          F-8
</TABLE>



                                      F-1
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders
of Foamex International Inc.:

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements of  operations,  of  stockholders'  deficit and of cash
flows present fairly, in all material respects, the financial position of Foamex
International Inc. and its subsidiaries (the "Company") 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. In addition, in our opinion,
the financial  statement  schedules 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 schedules are the responsibility of
the Company'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  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 13, during the year ending December 31, 2001, the Company's
financial  debt  covenants,  with which the  Company  must comply on a quarterly
basis, become more restrictive.  Management's plans in regard to this matter are
also described in Note 13.


PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 30, 2001



                                      F-2
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                 December 31,   December 31,
ASSETS                                                                              2000           1999
                                                                                 ------------   ------------
                                                                                         (thousands)
CURRENT ASSETS
<S>                                                                                <C>            <C>
    Cash and cash equivalents                                                      $  4,890       $  6,577
    Accounts receivable, net of allowance for doubtful
      accounts and discounts of $9,926 and $9,549                                   170,590        166,571
    Inventories                                                                     100,334         97,882
    Deferred income taxes                                                                 -             60
    Other current assets                                                             22,788         23,602
                                                                                   --------       --------

            Total current assets                                                    298,602        294,692
                                                                                   --------       --------

PROPERTY, PLANT AND EQUIPMENT
    Land and land improvements                                                        6,805          6,947
    Buildings and leasehold improvements                                            100,169         98,939
    Machinery, equipment and furnishings                                            268,353        264,241
    Construction in progress                                                         21,964         14,851
                                                                                   --------       --------

            Total                                                                   397,291        384,978

    Less accumulated depreciation and amortization                                 (184,760)      (163,145)
                                                                                   --------       --------

       Property, plant and equipment, net                                           212,531        221,833

COST IN EXCESS OF ASSETS ACQUIRED, net of
accumulated amortization of $29,076 in 2000 and
$23,252 in 1999                                                                     209,125        215,258

DEBT ISSUANCE COSTS, net of
accumulated amortization of $10,675 in 2000 and
$6,791 in 1999                                                                       15,082         18,966

DEFERRED INCOME TAXES                                                                   328            285

OTHER ASSETS                                                                         19,812         30,279
                                                                                   --------       --------

TOTAL ASSETS                                                                       $755,480       $781,313
                                                                                   ========       ========
</TABLE>


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


                                      F-3
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 December 31,   December 31,
LIABILITIES AND STOCKHOLDERS' DEFICIT                                               2000           1999
                                                                                 ------------   ------------
                                                                                (thousands except share data)
CURRENT LIABILITIES
<S>                                                                                <C>            <C>
    Short-term borrowings                                                          $      -       $  1,627
    Current portion of long-term debt                                                 8,356          7,866
    Current portion of long-term debt - related party                                15,795         10,530
    Accounts payable                                                                 86,838         86,576
    Accrued employee compensation and benefits                                       21,853         17,878
    Accrued interest                                                                  9,198          9,741
    Accrued restructuring                                                             4,766          5,266
    Accrued customer rebates                                                         23,839         22,823
    Other accrued liabilities                                                        23,196         23,519
    Deferred income taxes                                                             1,511          3,220
                                                                                   --------       --------

      Total current liabilities                                                     195,352        189,046

LONG-TERM DEBT                                                                      656,168        646,544

LONG-TERM DEBT - RELATED PARTY                                                       31,590         78,753

ACCRUED EMPLOYEE BENEFITS                                                            18,824         14,901

DEFERRED INCOME TAXES                                                                 2,708            997

ACCRUED RESTRUCTURING                                                                 4,681          7,533

OTHER LIABILITIES                                                                    10,826          9,920
                                                                                   --------       --------

    Total liabilities                                                               920,149        947,694
                                                                                   --------       --------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
    Preferred Stock, par value $1.00 per share:
      Authorized 5,000,000 shares
      Issued 15,000 shares - Series B                                                    15              -
    Common Stock, par value $.01 per share:
      Authorized 50,000,000 shares
      Issued 27,048,994 and 27,045,480 shares, respectively;
      Outstanding 23,559,994 and 25,056,480 shares, respectively                        270            270
    Additional paid-in capital                                                       96,275         87,475
    Accumulated deficit                                                            (200,932)      (217,945)
    Accumulated other comprehensive loss                                            (23,296)        (7,758)
    Other:
      Common Stock held in treasury, at cost:
        3,489,000 and 1,989,000 shares, respectively                                (27,780)       (19,202)
      Shareholder note receivable                                                    (9,221)        (9,221)
                                                                                   --------       --------

      Total stockholders' deficit                                                  (164,669)      (166,381)
                                                                                   --------       --------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                        $755,480       $781,313
                                                                                   ========       ========
</TABLE>

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


                                      F-4
<PAGE>




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

<TABLE>
<CAPTION>
                                                               2000                 1999           1998
                                                            ----------           ----------      ---------
                                                                 (thousands except per share amounts)
<S>                                                         <C>                  <C>             <C>
NET SALES                                                   $1,257,778           $1,294,639      $1,260,559

COST OF GOODS SOLD                                           1,085,753            1,114,331       1,106,054
                                                            ----------           ----------      ----------

GROSS PROFIT                                                   172,025              180,308         154,505

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                                    69,286               76,759           89,171

RESTRUCTURING AND OTHER CHARGES (CREDITS)                        6,268               10,491           (9,698)
                                                            ----------           ----------      -----------

INCOME FROM OPERATIONS                                          96,471               93,058           75,032

INTEREST AND DEBT ISSUANCE EXPENSE                              75,229               72,908           72,295

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

OTHER INCOME (EXPENSE), NET                                     (3,042)               1,516          (14,348)
                                                            ----------           ----------      -----------

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES                 19,852               22,178          (11,611)

PROVISION FOR INCOME TAXES                                       2,839                2,462           58,242
                                                            ----------           ----------      -----------

INCOME (LOSS) BEFORE EXTRAORDINARY LOSS                         17,013               19,716          (69,853)

EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
    OF DEBT, NET OF INCOME TAXES                                     -                    -           (1,917)
                                                            ----------           ----------      -----------

NET INCOME (LOSS)                                           $   17,013           $   19,716      $   (71,770)
                                                            ==========           ==========      ===========

BASIC EARNINGS (LOSS) PER SHARE
   BEFORE EXTRAORDINARY LOSS                                $     0.69           $     0.79      $     (2.79)
   EXTRAORDINARY LOSS                                                -                    -            (0.08)
                                                            ----------           ----------      -----------
   NET EARNINGS (LOSS)                                      $     0.69           $     0.79      $     (2.87)
                                                            ==========           ==========      ===========

DILUTED EARNINGS (LOSS) PER SHARE
   BEFORE EXTRAORDINARY LOSS                                $     0.67           $     0.78      $     (2.79)
   EXTRAORDINARY LOSS                                                -                    -            (0.08)
                                                            ----------           ----------      -----------
   NET EARNINGS (LOSS)                                      $     0.67           $     0.78      $     (2.87)
                                                            ==========           ==========      ===========
</TABLE>

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


                                      F-5
<PAGE>



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

<TABLE>
<CAPTION>
                                                                         2000                1999            1998
                                                                      ----------          ----------      ----------
OPERATING ACTIVITIES                                                                      (thousands)
<S>                                                                    <C>                 <C>            <C>
   Net income (loss)                                                   $17,013             $19,716        $(71,770)
   Adjustments to reconcile net income (loss) to net
     cash provided by (used for) operating activities:
     Depreciation and amortization                                      36,588              35,750          35,385
     Amortization of debt issuance costs, debt premium, deferred
        swap adjustment and gain, and debt discount                      1,335               1,315            (100)
     Asset write-downs and other charges (credits)                       2,621                 314          (7,972)
     Provision for uncollectible accounts                                2,838               2,758           2,611
     Retirement benefit funding (greater) less than expense             (7,198)              1,865             787
     Deferred income taxes                                                 513                 807          54,178
     Other, net                                                          1,957              (3,407)         (4,056)
   Changes in operating assets and liabilities:
     Accounts receivable                                                (6,857)             15,829         (12,085)
     Inventories                                                        (2,452)             38,776         (20,809)
     Accounts payable                                                      262             (62,692)         17,579
     Accrued restructuring                                              (3,352)                849         (14,946)
     Other assets and liabilities                                        7,720               6,839           7,272
                                                                       -------             -------        --------

        Net cash provided by (used for) operating activities            50,988              58,719         (13,926)
                                                                       -------             -------        -------

INVESTING ACTIVITIES
   Capital expenditures                                                (23,593)            (20,080)        (33,701)
   Proceeds from sale of assets                                          3,570              17,823           2,230
   Other investing activities                                           (1,850)                599          (1,290)
                                                                       -------             -------        --------

        Net cash used for investing activities                         (21,873)             (1,658)        (32,761)
                                                                       -------             -------        --------

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)            (17,281)       (143,047)
   Repayments of long-term debt-related party                          (41,898)             (9,652)         (5,265)
   Increase (decrease) in cash overdrafts                                1,029              (1,444)          7,300
   Debt issuance costs                                                       -              (7,866)         (2,029)
   GFI transaction costs                                                     -                   -          (5,229)
   GFI transaction payments of accounts payable                              -                   -          (4,800)
   GFI transaction purchase of assets                                        -                   -         (20,000)
   Payment of dividends                                                      -                   -          (1,245)
   Other financing activities                                               24                 270           1,850
                                                                      --------             -------        --------

        Net cash provided by (used for) financing activities           (30,802)            (63,056)         47,215
                                                                      --------             -------        --------

Net increase (decrease) in cash and cash equivalents                    (1,687)             (5,995)            528

Cash and cash equivalents at beginning of period                         6,577              12,572          12,044
                                                                      --------             -------        --------

Cash and cash equivalents at end of period                            $  4,890             $ 6,577        $ 12,572
                                                                      ========             =======        ========
</TABLE>


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


                                      F-6
<PAGE>




                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                        For the Years 2000, 1999 and 1998


<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                               Additional                  Other
                                           Preferred  Common    Paid-in    Accumulated  Comprehensive
                                             Stock    Stock     Capital      Deficit         Loss          Other       Total
                                           ---------  ------   ----------  -----------  --------------   ---------   ---------
                                                                            (thousands)
<S>                                           <C>       <C>       <C>        <C>            <C>           <C>         <C>
Balances at December 28, 1997                $  -      $269      $86,025    $(164,118)     $ (6,598)     $(28,997)   $(113,419)

Net loss                                                                      (71,770)                                 (71,770)
Minimum pension liability adjustment                                                        (11,525)                   (11,525)
Foreign currency translation adjustment                                                      (6,598)                    (6,598)
                                                                                                                     ---------
  Comprehensive loss                                                                                                   (89,893)
Issuance of common stock                                             163                                                   163
Stock option compensation                                            208                                                   208
Stock options exercised                                   1          594                                                   595
Cash dividend                                                                  (1,245)                                  (1,245)
Other                                                                            (528)                                    (528)
                                             ----      ----      -------    ---------      --------      --------    ---------
Balances at December 31, 1998                   -       270       86,990     (237,661)      (24,721)      (28,997)    (204,119)

Net income                                                                     19,716                                   19,716
Minimum pension liability adjustment                                                         12,009                     12,009
Foreign currency translation adjustment                                                       4,954                      4,954
                                                                                                                     ---------
  Comprehensive income                                                                                                  36,679
Stock option compensation                                            215                                                   215
Stock options exercised                                   -          270                                                   270
Other                                                                                                         574          574
                                             ----      ----      -------    ---------      --------      --------    ---------
Balances at December 31, 1999                   -       270       87,475     (217,945)       (7,758)      (28,423)    (166,381)

Net income                                                                     17,013                                   17,013
Minimum pension liability adjustment                                                        (14,628)                   (14,628)
Foreign currency translation adjustment                                                        (910)                      (910)
                                                                                                                     ---------
  Comprehensive income                                                                                                   1,475
Exchange of common stock for
  preferred stock - Series B                   15                  8,563                                   (8,578)           -
Stock option compensation                                            213                                                   213
Stock options exercised                                               24                                                    24
                                             ----      ----      -------    ---------      --------      --------    ---------

Balances at December 31, 2000                $ 15      $270      $96,275    $(200,932)     $(23,296)     $(37,001)   $(164,669)
                                             ====      ====      =======    =========      ========      ========    =========
</TABLE>


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



                                      F-7
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND BASIS OF PRESENTATION

     Organization

     Foamex   International  Inc.  (the  "Company")  operates  in  the  flexible
polyurethane  and advanced  polymer foam products  industry.  As of December 31,
2000, the Company's  operations are primarily conducted through its wholly owned
subsidiaries,  Foamex L.P. and Foamex Carpet Cushion,  Inc.  ("Foamex  Carpet").
Financial  information  concerning  the  business  segments  of the  Company  is
included in Note 16.

     Shareholder and Change in Control Developments

     Trace International  Holdings,  Inc. ("Trace") is a privately held company,
which owned  approximately 29% of the Company's  outstanding voting common stock
at September  30, 2000,  and whose former  Chairman also serves as the Company's
Chairman.  The  Company's  common stock owned by Trace was pledged as collateral
against certain of Trace's obligations. Certain credit agreements and promissory
notes of the  Company's  subsidiaries,  pursuant to which  approximately  $401.1
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 the  Company'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,  the  Company  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,  the  Company  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 the Company'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 the Company's common stock.

     Under the Exchange  Agreement,  The Bank of Nova Scotia initially  received
1,500,000 shares of the Company's common stock from the Trace bankruptcy  estate
and exchanged  these common stock shares for 15,000 shares of a new class of the
Company'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 the Company'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
the  Company's  common  stock,  (b) ranks senior to any future  preferred  stock
issued by the Company 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 the  Company's  common  stock  when  the
remaining 5,697,426 shares of the Company's common stock were transferred to The
Bank of Nova Scotia from the Trace bankruptcy estate.


                                      F-8
<PAGE>



                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

     The consolidated  financial  statements include the accounts of the Company
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 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 $28.7  million,  $27.9  million  and $27.3
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.


                                      F-9
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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, the Company
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 stockholders' 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.

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.


                                      F-10
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 the Company.

     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.  The Company  determined that a
portion of shipping costs billed to customers required a  reclassification  from
cost of sales to revenue. Accordingly, net sales reported for all periods in the
consolidated statements of operations reflect the reclassification  required. On
a segment  basis,  Note 16, the Carpet  Cushion  Segment  was the only  business
segment  impacted  and  net  sales  for  all  periods   presented   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 the Company 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, the Company
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 the Company.  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
stockholders' deficit. The amount reclassified is the result of certain interest
rate swaps that were  terminated in prior years,  as discussed in Note 13 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,  the  Company  sold its  corporate  airplane  for $16.3
million and recorded a gain of approximately $4.2 million. The gain was recorded
in other income  (expense) in the  consolidated  statements of operations.  Debt
associated  with the  airplane of $8.9  million was repaid with a portion of the
proceeds.

     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,  the Company 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
18, at Trace's request.


                                      F-11
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.   RESTRUCTURING AND OTHER CHARGES (CREDITS)

1998

     Based on business  developments  during  1998,  the Company  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 the Company's packaging  business.  During 1998, the
Company  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,  the  Company  recorded a $15.1  million  restructuring  adjustment
associated with the 1997 restructuring plan. The components of the $15.1 million
restructuring  adjustment  included:  $10.2 million for fixed asset write-downs,
$3.8 million for plant closure and operating lease  obligations and $1.1 million
for personnel reductions.

     In addition, the Company recorded restructuring and other charges (credits)
of $5.4  million  during 1998 to reserve for  approximately  $3.1 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, the Company 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 in cost in
excess of net assets acquired.

1999

     During 1999, the Company approved and implemented four restructuring  plans
to reduce selling,  general and  administrative  costs and to rationalize  plant
operations.

     The Company recorded  restructuring  charges of approximately  $2.4 million
relating to severance  costs in connection  with the first  restructuring  plan.
This plan reduced the Company's salaried work force by 82 employees.

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

     In  connection  with the third  restructuring  plan,  the Company  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 117 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, the Company closed its
New York office (see Note 18). The Company 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,  the Company recorded  restructuring  charges of approximately
$0.7 million  relating to changes in estimates to prior years' plans,  primarily
for the sale of the  packaging  business  in 1999.  The $0.7  million  charge is
comprised of $0.2 million of severance,  $1.3 million of lease and plant closure
costs, offset by $0.8 million of adjustments for asset write-downs.  The Company
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,   the  Company   approved  and   implemented   four  separate
restructuring  plans to  further  rationalize  plant  operations  and to  reduce
selling, general and administrative expenses.


                                      F-12
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

     The Company  recorded  restructuring  charges of $2.1 million for severance
costs in connection  with the first  restructuring  plan.  This plan reduced the
Company's  salaried work force by 18 employees,  including certain executives of
the Company.

     The second  restructuring plan was implemented to rationalize certain plant
operations relating to the increase in the VPFSM capacity in North Carolina. The
Company  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 the
Company's  fiber  operations in Indiana.  The Company  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.   The  Company  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,  the  Company  recorded  a net  restructuring  charge of $0.1
million  associated  with changes in  estimates  to prior  years'  restructuring
plans.  The net charge was comprised of $0.1 million for asset  write-downs  and
$0.1  million  for  lease  and plant  closure  costs  offset by a credit of $0.1
million  relating to severance  costs.  Also during May 2000, the Company sold a
facility for net proceeds of $3.6 million.  The facility was closed as part of a
1997 restructuring plan.

     The   following   table  sets  forth  the   components   of  the  Company's
restructuring and other charges (credits):

<TABLE>
<CAPTION>
                                                       Asset          Plant Closure      Personnel
                                           Total     Write-downs        and Leases       Reductions       Other
                                         --------    -----------      -------------      ----------     ---------
                                                                        (millions)
<S>                                       <C>          <C>               <C>                <C>           <C>
     Balance at December 28, 1997         $21.2        $(5.7)            $ 23.5             $ 3.4          $  -
     Cash spending                        (15.7)           -              (12.2)             (3.5)            -
     Cash proceeds                          2.1          2.1                  -                 -             -
     1998 restructuring charge              5.4          5.4                  -                 -             -
     Restructuring adjustments            (15.1)       (10.2)              (3.8)             (1.1)            -
     Asset write-off/write-downs           (6.3)        (5.5)              (0.8)                -             -
     Reclassified fixed asset basis
       for restructuring credit             8.2          8.2                  -                 -             -
     Plant consolidation costs              6.4            -                5.2               1.2             -
                                          -----        -----             ------             -----          ----
     Balance at December 31, 1998           6.2         (5.7)              11.9                 -             -

       Cash spending                       (8.9)           -               (4.1)             (4.5)         (0.3)
       Cash proceeds                        1.5          1.5                  -                 -             -
       1999 restructuring charge            9.8          1.5                1.0               7.0           0.3
       Restructuring adjustments            0.7         (0.8)               1.3               0.2             -
       Asset write-off/write-downs         (0.3)        (0.3)                 -                 -             -
                                          -----        -----             ------             -----          ----
       Balance at December 31, 1999         9.0         (3.8)              10.1               2.7             -


                                      F-13
<PAGE>



                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

       Cash spending                       (7.1)           -               (3.9)             (3.2)            -
       Cash proceeds                        3.6          3.6                  -                 -             -
       2000 restructuring charge            6.2          2.5                1.3               2.4             -
       Restructuring adjustments            0.1          0.1                0.1              (0.1)            -
       Asset write-off/write-downs         (2.6)        (2.6)                 -                 -             -
                                           ----        -----             ------             -----          ----
       Balance at December 31, 2000        $9.2        $(0.2)            $  7.6             $ 1.8          $  -
                                           ====        =====             ======             =====          ====
</TABLE>


     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. The Company
expects to spend  approximately  $4.8 million during 2001 with the balance to be
spent through 2006, principally for lease runout costs.

5.   RETIREE BENEFIT PLANS

Pensions

     The Company 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.

     The components of pension expense are listed below.

                                             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.



                                      F-14
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.   RETIREE BENEFIT PLANS (continued)

<TABLE>
<CAPTION>
                                                                                 December 31,     December 31,
                                                                                    2000             1999
                                                                                 ------------     ------------
                                                                                         (thousands)
       Change in Benefit Obligation
<S>                                                                               <C>               <C>
         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 (gains) losses                                             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)
                                                                                  ========          ========
</TABLE>

(a)  Minimum pension liability.

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

<TABLE>
<CAPTION>
                                                                       2000          1999          1998
                                                                     --------      --------      --------

<S>                                                                   <C>            <C>           <C>
     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%
</TABLE>

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

     The Company'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").


                                      F-15
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.   RETIREE BENEFIT PLANS (continued)

     At December 31, 2000 and 1999,  included in plan assets were 420,000 shares
of the Company'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 the Company'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 the Company.  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

     The Company  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.  The Company 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)
                                       ===           ===            ===

     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.

<TABLE>
<CAPTION>
                                                                                 December 31,     December 31,
                                                                                    2000             1999
                                                                                 ------------     ------------
                                                                                         (thousands)
       Change in Benefit Obligation
<S>                                                                                 <C>              <C>
         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                                 $    -           $     -
                                                                                    ======           =======


                                      F-16
<PAGE>



                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.   RETIREE BENEFIT PLANS (continued)

                                                                                 December 31,     December 31,
                                                                                    2000             1999
                                                                                 ------------     ------------
                                                                                         (thousands)
       Funded Status of the Plan
         Plan assets in excess of (less than) benefit obligation                    $ (763)          $  (868)
         Unamortized prior service cost                                                (67)              (73)
         Unamortized net (gains) losses                                               (389)             (644)
                                                                                    ------           -------
           Net prepaid assets (accrued liabilities)                                 $(1,219)         $(1,585)
                                                                                    =======          =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                        2000         1999         1998
                                                                      --------     --------     --------
<S>                                                                     <C>          <C>          <C>
     Discount rates on projected benefit obligations                    7.25%        7.5%         6.5%
     Health care cost increase                                          7.0%         7.5%         6.0%
</TABLE>

     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

Stock Options

     The 1993 stock  option  plan,  as  amended,  provides  for the  issuance of
nonqualified  and  incentive  stock  options  for  common  stock.  Officers  and
executive employees of the Company, its subsidiaries and affiliates are eligible
to participate.  Directors of the Company are also eligible to  participate.  At
the Annual  Meeting of  Stockholders  on June 30,  2000,  stockholders  approved
amendments  to the 1993 stock  option  plan that  increased  from  3,000,000  to
4,750,000 the number of shares of the Company's common stock that may be issued,
and to allow future option grants to qualify as "performance-based compensation"
for purposes of the Internal  Revenue  Code of 1986,  as amended.  The price and
terms of each such option is at the  discretion of the Company,  except that the
term cannot  exceed ten years.  During  2000,  25,000  options were granted to a
director of the  Company in  exchange  for  consulting  services.  Also in 2000,
60,000  options  were  granted to  non-employee  directors.  These  options  are
included in the stock activity  disclosure  below and the options carry the same
terms and conditions as options granted to employees under the 1993 stock option
plan, as amended.  During 1999,  750,450  options were granted with a three-year
vesting period. All other options outstanding at year-end 2000 were granted with
a five-year vesting period and a ten-year term.

     A summary of stock option activity is presented below.

<TABLE>
<CAPTION>
                                           2000                       1999                        1998
                                   --------------------     -----------------------     ------------------------
                                                Weighted                    Weighted                    Weighted
                                                Average                     Average                     Average
                                                Exercise                    Exercise                    Exercise
                                     Shares      Price         Shares        Price        Shares          Price
                                   ---------  -----------    ---------    ----------    ---------      ---------
<S>                                <C>           <C>         <C>             <C>        <C>              <C>
Outstanding at beginning of year   2,299,649     $7.94       1,388,916       $7.02      1,439,049        $ 7.08
Granted                              885,250      5.93       1,067,950        6.11        132,750         13.22
Exercised                             (3,514)     6.88         (39,728)       6.88        (82,440)         7.03
Forfeited                           (201,275)     7.79        (117,489)       9.08       (100,443)         9.84
                                  ----------    ------       ---------       -----      ---------        ------
Outstanding at end of year         2,980,110     $7.35       2,299,649       $7.94      1,388,916        $ 9.41
                                   =========     =====       =========       =====      =========        ======

Exercisable at end of year         1,145,727     $8.16         803,303       $8.36        549,124        $ 7.02
                                   =========     =====       ==========      =====      =========        ======
</TABLE>


                                      F-17
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.   COMPENSATION PLANS (continued)

     Listed below is a summary of the stock options  outstanding and exercisable
at year-end 2000.

       Outstanding
                                               Weighted          Weighted
            Exercise                            Average          Average
             Price                             Exercise         Remaining
             Range           Options            Price           Life-Years
         -------------      ---------          --------         ----------
         $5.06 -  5.75        801,475           $ 5.29             8.91
          6.06 -  6.50        510,975             6.42             8.32
          6.56 -  6.88      1,004,327             6.72             7.49
          7.88 - 14.00        663,333            11.53             7.02

       Exercisable
                                               Weighted          Weighted
            Exercise                            Average          Average
             Price                             Exercise         Remaining
             Range           Options            Price           Life-Years
         -------------      ---------          --------         ----------
         $5.44 -  6.50        294,900           $ 5.96             8.31
          6.88                485,327             6.88             5.52
          9.00 - 14.00        365,500            11.65             6.89

     Options granted were issued with an exercise price equal to the fair market
value at the date of the grant. During 1996, the Company granted 202,240 options
with a weighted  average  market  price on the date of grant of $6.52.  The 1996
aggregate  difference  of $1.1  million  between  the fair  market  value of the
options at the date of grant and the option  price was  charged to expense  over
the five-year  vesting  period which ended  December  2000.  Total  compensation
expense relating to options amounted to approximately $0.2 million in 2000, 1999
and 1998. The consulting expense associated with the 25,000 options granted to a
director of the Company was less than $0.1 million and will be  recognized  over
the five-year vesting period.

     The Company applies the provisions of Accounting  Principles  Board Opinion
No. 25 ("Accounting for Stock Issued to Employees") and related  interpretations
("APB 25") in accounting for its stock-based  compensation  plans.  Accordingly,
compensation   expense  has  been  recognized  in  the  consolidated   financial
statements  with  respect  to the above  plans in  accordance  with APB 25.  Had
compensation  costs for the above plans been determined  based on the fair value
of the options at the grant dates under those plans  consistent with the methods
under Statement of Financial Accounting Standards No. 123 ("Accounting for Stock
Based  Compensation"),  the  Company's  income from  continuing  operations  and
earnings (loss) per share would have the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                          2000         1999         1998
                                                         -------      -------      -------
                                                         (thousands, except per share data)
     Income (loss) before extraordinary loss
<S>                                                      <C>          <C>          <C>
       As reported                                       $17,013      $19,716      $(69,853)
                                                         =======      =======      ========
       Pro forma                                         $15,750      $18,719      $(70,270)
                                                         =======      =======      ========

     Basic earnings (loss) per share -
       before extraordinary loss
       As reported                                       $  0.69      $  0.79      $  (2.79)
                                                         =======      =======      ========
       Pro forma                                         $  0.63      $  0.75      $  (2.81)
                                                         =======      =======      ========

     Diluted earnings (loss) per share -
       before extraordinary loss
       As reported                                       $  0.67      $  0.78      $  (2.79)
                                                         =======      =======      ========
       Pro forma                                         $  0.62      $  0.74      $  (2.81)
                                                         =======      =======      ========
</TABLE>


                                      F-18
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.   COMPENSATION PLANS (continued)

     The fair  value of each  option was  estimated  on the grant date using the
Black-Scholes  option pricing model.  Based on the assumptions listed below, the
weighted  average  fair value of options  granted  was $2.52 per option in 2000,
$2.30 per option in 1999 and $4.74 per option in 1998.

                                    2000            1999            1998
                                  --------        --------        --------
     Expected life in years         3               3               3
     Risk-free interest rate        6.11%           5.21%           5.40%
     Volatility                    55.00%          48.00%          45.00%
     Dividend yield                 0.00%           0.00%           0.00%

Incentive Compensation

     Most  of  the  Company's  salaried   employees   participate  in  incentive
compensation  programs.  These programs are based on the consolidated results of
the  Company 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.

Defined Contribution Plan

     The Company maintains a defined  contribution plan which is qualified under
Section  401(k)  of the Code  ("401(k)  Plan")  and is  available  for  eligible
employees  who elect to  participate.  Under the terms of the 401(k)  Plan,  the
Company  partially  matches certain  employee  contributions.  Expense for these
contributions  for 2000,  1999 and 1998 was  approximately  $1.1  million,  $1.0
million and $0.9 million, respectively.

7.   OTHER INCOME (EXPENSE), NET

     Other expense, net in 2000 totaled $3.0 million and primarily consisted of:
$1.7  million  loss on the  disposal  of fixed  assets,  $1.2  million  of costs
associated  with a buyout  proposal  (see Note 19) and $0.7 million of letter of
credit fees offset by $0.6 million of interest income.

     As  discussed  in Note 3, during the first  quarter of 1999 a $4.2  million
gain was  recognized  on the sale of the  corporate  aircraft.  Interest  income
totaled $0.5 million in 1999.  Losses on the disposal of fixed assets and letter
of credit fees related to the GFI  Transaction  (see Note 13)  partially  offset
these income items.

     Other income (expense), net in 1998 primarily consisted of: $6.5 million of
costs  associated with a buyout proposal (see Note 19); $3.1 million of fees and
costs  related  to the GFI  Transaction,  as  defined;  $3.0  million of foreign
currency  losses in Mexico;  and a $1.1  million  reduction  in the value of the
Company's  investment in the Trace Global  Opportunities Fund. These expenses in
1998 were partially offset by approximately $1.9 million of interest income.

8.   INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                       2000        1999          1998
                                                                     -------     -------       ----------
                                                                               (thousands)
<S>                                                                  <C>         <C>            <C>
     United States                                                   $14,877     $19,243        $ (1,318)
     Foreign                                                           4,975       2,935         (10,293)
                                                                     -------     -------        --------

     Income (loss) before provision for income taxes
       and extraordinary loss                                        $19,852     $22,178        $(11,611)
                                                                     =======     =======        ========
</TABLE>


                                      F-19
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.   INCOME TAXES (continued)

     Listed below are the  components of the provision for income taxes included
in the statements of operations.

<TABLE>
<CAPTION>
                                                                       2000        1999            1998
                                                                     -------     -------         --------
                                                                               (thousands)
<S>                                                                  <C>         <C>             <C>
     Provision for income taxes - before extraordinary loss          $ 2,839     $ 2,462         $58,242
     Extraordinary loss on early extinguishment
       of debt                                                             -           -          (1,278)
                                                                     -------     -------         -------

     Total consolidated provision for income taxes                   $ 2,839     $ 2,462         $56,964
                                                                     =======     =======         =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                       2000        1999            1998
                                                                     -------     -------         --------
                                                                               (thousands)
<S>                                                                  <C>         <C>             <C>
     Statutory income taxes                                          $ 6,948     $ 7,762         $(4,064)
     State income taxes, net of federal benefit                          825       1,060               -
     Increase (decrease) in valuation allowance                       (6,939)     (7,300)         52,573
     Amortization of cost in excess of assets acquired                 1,364       1,385           1,505
     Write-off excess cost                                                 -           -             770
     Costs associated with buyout proposal                                 -           -           1,750
     Limitation on the utilization of foreign tax benefits                 -           -           3,800
     Other, net                                                          641        (445)          1,908
                                                                     -------     -------         -------
     Total                                                           $ 2,839     $ 2,462         $58,242
                                                                     =======     =======         =======
</TABLE>

     The provision for income taxes is summarized as follows:

<TABLE>
<CAPTION>
                                                                       2000        1999            1998
                                                                     -------     -------         --------
        Current                                                                (thousands)
<S>                                                                  <C>         <C>             <C>
         Federal                                                     $     -     $   300         $ 3,391
         State                                                           160         238               -
         Foreign                                                        ,541       1,117             673
                                                                     -------     -------         -------
           Total current                                               2,701       1,655           4,064
                                                                     -------     -------         -------

       Deferred
         Federal                                                       6,083       8,247             378
         State                                                           920         837               -
         Foreign                                                          74        (977)            (51)
                                                                     -------     -------         -------
           Total deferred                                              7,077       8,107             327
                                                                     -------     -------         -------

       Change in valuation allowance                                  (6,939)     (7,300)         52,573
                                                                     -------     -------         -------

       Total provision for income taxes                              $ 2,839     $ 2,462         $56,964
                                                                     =======     =======         =======
</TABLE>

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


                                      F-20
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.   INCOME TAXES (continued)

<TABLE>
<CAPTION>
                                                                                  December 31,    December 31,
                                                                                     2000             1999
                                                                                  ------------    ------------
     Deferred income tax assets                                                           (thousands)
<S>                                                                                 <C>              <C>
       Inventory basis differences                                                  $   777          $   781
       Employee benefit accruals                                                     12,561            7,126
       Allowances and contingent liabilities                                          8,225            8,987
       Restructuring and plant closing accruals                                       3,590            4,894
       Other                                                                          6,762           10,977
       Net operating loss carryforwards                                              69,229           67,264
       Capital loss carryforwards                                                     2,105            2,105
       Valuation allowance for deferred income tax assets                           (71,180)         (73,826)
                                                                                    -------          -------
       Deferred income tax assets                                                    32,069           28,308
                                                                                    -------          -------

     Deferred income tax liabilities
       Basis difference in property, plant and equipment                            (23,854)         (23,587)
       Other                                                                        (12,106)          (8,593)
                                                                                    -------          -------
       Deferred income tax liabilities                                              (35,960)         (32,180)
                                                                                    -------          -------

       Net deferred income tax liabilities                                          $(3,891)         $(3,872)
                                                                                    =======          =======
</TABLE>

     The 2000 and 1999 effective tax rates were reduced by the partial  reversal
of the deferred  income tax asset  valuation  allowance  recognized in 1998. The
valuation  allowance  was reduced to reflect  the  realization  of Federal  loss
carryforwards  that  offset  the  current  tax  component  of  the  Federal  tax
provision.  Additionally,  the valuation allowance was reduced to offset the net
deferred Federal tax liability generated in 2000 and 1999.

     The 1998 provision for income taxes  consisted  primarily of an increase in
valuation allowance for deferred income tax assets.

     The  Company  has  determined  that it will be more likely than not to have
insufficient  future income to utilize its net operating loss  carryforwards and
realize  other  deferred  income tax assets.  In  addition,  the Company did not
recognize the tax benefits  associated with net operating loss  carryforwards in
Mexico since it appears  likely that the net operating loss  carryforwards  will
not be able to be realized in the near future.

     During 1998, the valuation allowance for deferred income tax assets and net
deferred  income tax  assets  decreased  by $9.1  million  primarily  due to the
reduction of capital loss carryforwards  associated with the transfer of General
Felt's common stock in connection with the GFI Transaction.  In addition, during
1998,  deferred income tax assets were increased by $8.7 million associated with
a change in the income tax basis of Foamex Carpet.

     The Company will continually review the adequacy of the valuation allowance
and recognize  benefits only as  reassessment  indicates  that it is more likely
than not that the benefits will be realized.  At December 31, 2000,  the Company
had approximately $178.5 million of net operating loss carryforwards for federal
income tax purposes  expiring from 2010 to 2020.  Also at year-end  2000,  there
were $0.3 million of alternative minimum tax credits carryforwards.

9.   EXTRAORDINARY LOSSES

     In 1998,  extraordinary  losses of $1.9 million (net of income tax benefits
of $1.3 million), or $.08 per common share - basic, 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-21
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.  EARNINGS (LOSS) PER SHARE

     The  calculation  of earnings  (loss) per share is  presented  in the table
below.

<TABLE>
<CAPTION>
                                                                    2000           1999         1998
                                                                  --------       --------     --------
                                                                  (thousands, except per share amounts)
     Basic earnings (loss) per share
<S>                                                               <C>             <C>         <C>
       Income (loss) before extraordinary loss                    $17,013         $19,716     $(69,853)
                                                                  =======         =======     ========

       Average common stock outstanding                            24,814          25,053       24,996
                                                                  =======         =======     ========

     Basic earnings (loss) per share                              $  0.69         $  0.79     $  (2.79)
                                                                  =======         =======     ========

     Diluted earnings (loss) per share
       Income (loss) before extraordinary loss available
         for common stock and dilutive securities                 $17,013         $19,716     $(69,853)
                                                                  =======         =======     ========

       Average common stock outstanding                            24,814          25,053       24,996
       Common stock equivalents resulting from
         Stock options (a) (b)                                        149             203            -
         Warrants (c)                                                   -               -            -
         Convertible preferred stock (d)                              245               -            -
                                                                  -------         -------     --------

         Average common stock and dilutive
           equivalents                                             25,208          25,256       24,996
                                                                  =======         =======     ========

       Diluted earnings (loss) per share                          $  0.67         $  0.78     $  (2.79)
                                                                  =======         =======     ========
<FN>

(a)  In periods with a loss, stock options and warrants were not included in the
     calculations because they were anti-dilutive.

(b)  The average  number of stock  options that were not included in the diluted
     earnings per share calculation  because the exercise price was greater than
     the average market price totaled 1,715,000 in 2000 and 849,000 in 1999.

(c)  All warrants  expired without being exercised in 1999, as discussed in Note
     17.

(d)  Series B Preferred Stock was issued during the fourth quarter of 2000 (Note
     17) and is convertible into 1,500,000 common shares.
</FN>
</TABLE>

11.  INVENTORIES

     The components of inventory are listed below.

                                          December 31,        December 31,
                                              2000                1999
                                          ------------        ------------
                                                    (thousands)
     Raw materials and supplies            $ 66,690              $67,520
     Work-in-process                         11,580               11,574
     Finished goods                          22,064               18,788
                                           --------              -------
     Total                                 $100,334              $97,882
                                           ========              =======


                                      F-22
<PAGE>



                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.  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 rate on short-term
borrowings outstanding at year-end 1999 was 7.3%.

13.  LONG-TERM DEBT

     The components of long-term debt are listed below.

<TABLE>
<CAPTION>
                                                                   December 31,    December 31,
                                                                      2000            1999
                                                                   ------------    ------------
     Foamex L.P. Credit Facility                                           (thousands)
<S>                                                                  <C>             <C>
       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
     Foamex Carpet Credit Facility (2)                                      -               -
     9 7/8% Senior subordinated notes due 2007 (3)                    150,000         150,000
     13 1/2% Senior subordinated notes due 2005 (includes
       $8,308 and $10,100 of unamortized debt premium) (3)            106,308         108,100
     Industrial revenue bonds (4)                                       7,000           7,000
     Subordinated note payable (net of unamortized
       debt discount of $49 and $232) (4)                               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
                                                                     ========        ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                   December 31,    December 31,
                                                                      2000            1999
                                                                   ------------    ------------
                                                                           (thousands)
<S>                                                                  <C>             <C>
       Foamex/GFI Note (4)                                           $      -        $ 34,000
       Note payable to Foam Funding LLC (5)                            47,385          55,283
                                                                     --------        --------
                                                                       47,385          89,283

       Less current portion                                            15,795          10,530
                                                                     --------        --------

       Long-term debt - related party                                $ 31,590        $ 78,753
                                                                     ========        ========
<FN>
(1)  Subsidiary debt of Foamex L.P., guaranteed by the Company and FMXI, Inc.
(2)  Subsidiary debt of Foamex Carpet, guaranteed by the Company.
(3)  Subsidiary debt of Foamex L.P. and FCC.
(4)  Subsidiary debt of Foamex L.P.
(5)  Subsidiary debt of Foamex Carpet.
</FN>
</TABLE>


                                      F-23
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  LONG-TERM DEBT (continued)

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 the Company,  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 the Company,  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.
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%.  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.

     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 required 1999 payment was made during the second quarter
of 2000.


                                      F-24
<PAGE>



                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  LONG-TERM DEBT (continued)

Foamex Carpet Credit Facility

     Foamex Carpet has a revolving  credit  facility (the "Foamex  Carpet Credit
Facility"),  which provides a commitment of $15.0 million through February 2004.
During 1999, amendments modified the financial covenants for net worth, interest
coverage,  fixed charge coverage and leverage ratios.  Also,  effective June 30,
1999, the interest rate on outstanding borrowings under the Foamex Carpet Credit
Facility increased by 25 basis points.

     There were no borrowings  outstanding under the credit facility at year-end
2000 and available borrowings totaled $15.0 million. The interest rate was based
on the  combination  of a variable rate plus a margin.  The variable rate is the
same as the one defined in the Foamex L.P. Credit Facility, discussed above, and
the margin is 2.25%. At the option of Foamex Carpet, portions of the outstanding
loans are convertible into LIBOR based loans plus 3.25%.

     Borrowings  under the Foamex Carpet Credit Facility are  collateralized  by
substantially  all of the assets of Foamex Carpet on a pari passu basis with the
Note Payable to Foam Funding LLC (described below).

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.

                                      F-25
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  LONG-TERM DEBT (continued)

     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.

Subordinated Note Payable

     This note payable was issued during 1993 to John Rallis, a former President
and Chief Operating  Officer of the Company.  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.

Related Party - Note Payable to Foam Funding LLC

     As part of the GFI Transaction, discussed below, Foamex Carpet entered into
a $70.2  million  promissory  note  payable to Foam  Funding  LLC.  Principal is
payable  in  quarterly  installments  that  began  in  June  1998  with a  final
installment in February 2004.  Interest is based on a variable rate equal to the
sum of 2.25% plus 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 Carpet,  interest
payable under the note is convertible  into LIBOR based loans plus 3.25%.  As of
December 31, 2000, the interest rate for borrowings was 9.94%.

     Amounts  outstanding  under  the  Note  Payable  to  Foam  Funding  LLC are
collateralized  by all of the assets of Foamex Carpet on a pari passu basis with
the Foamex Carpet Credit Facility.

GFI Transaction

     On February 27, 1998, the Company and certain of its affiliates completed a
series of transactions which changed the Company's structure (collectively,  the
"GFI Transaction"). Prior to the consummation of these transactions, 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


                                      F-26
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  LONG-TERM DEBT (continued)

$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 the Company, the Company, 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. Upon  consummation  of the  transactions  contemplated  by the Asset
Purchase  Agreement,  Foamex  Carpet  entered into a credit  agreement  with the
institutions from time to time party thereto as issuing banks, and Citicorp USA,
Inc. and The Bank of Nova Scotia, as administrative  agents,  which provided for
up to $20.0 million in revolving credit  borrowings.  Foamex Carpet conducts the
carpet cushion business previously conducted by General Felt. Also, Foam Funding
LLC retained ownership of one of General Felt's operating  facilities,  which is
being leased to Foamex Carpet, and the $34.0 million Foamex/GFI Note.

     No gain was recognized on the GFI Transaction. The Company has continued to
account for these net assets using the carryover basis of Foamex L.P. The $129.0
million of debt assumed by Foam Funding LLC in the GFI Transaction was accounted
for as an  extinguishment  of debt, which resulted in an  extraordinary  loss of
approximately  $1.9 million,  net of income taxes.  The 1% non-managing  general
partnership  interest  acquired  in  connection  with  the GFI  Transaction  was
accounted  for as a redemption  of equity.  By virtue of the transfer of General
Felt stock and the subsequent  merger of General Felt into Foam Funding LLC, the
Pico Rivera,  California  facility was  transferred to Foam Funding LLC; no gain
was recognized on the transfer since the Company  leased-back the facility.  The
net effect resulted in a charge to stockholders'  deficit of approximately  $0.5
million.

Interest Rate Swap Agreements

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

     In connection with a refinancing  plan in 1997, the Company'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,  the Company 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, the Company  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,  the Company 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.


                                      F-27
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  LONG-TERM DEBT (continued)

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 the Company's  subsidiaries (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,  the  Company's
subsidiaries  are  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,  the
Company was  available to be paid by its  subsidiaries  as of December 31, 2000,
funds  only  to the  extent  to  enable  the  Company  to meet  its tax  payment
liabilities.

     Foamex L.P. and Foamex Carpet were in compliance with the various financial
covenants of their loan agreements as of December 31, 2000 and 1999.

     Various  Foamex L.P.  and Foamex  Carpet debt  agreements  contain  certain
quarterly  financial covenants which become more restrictive during 2001. Foamex
L.P. and Foamex Carpet anticipate that they will continue to comply in 2001 with
the  quarterly   financial   covenants  in  the  applicable   debt   agreements.
Management's current business plans for Foamex L.P. and Foamex Carpet 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
plans 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,  the Company  will seek the  lenders'  approvals of
amendments  to, or waivers  of,  such  financial  covenants.  Historically,  the
Company 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                                  $ 24,151
         2002                                    17,976
         2003                                   178,071
         2004                                    54,354
         2005                                   155,273
         Balance                                273,825
                                               --------
         Total                                  703,650
         Unamortized debt premium, net            8,259
                                               --------
         Total                                 $711,909
                                               ========


                                      F-28
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

Concentration of Credit Risk

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

     The Company sells foam products to the automotive,  carpet,  cushioning and
other  industries.  The  Company  performs  ongoing  credit  evaluations  of its
customers  and  generally  does not require  collateral.  The Company  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 the Company's assessment of available market information and
appropriate valuation methodologies.

     The estimated fair values of the Company's financial instruments are listed
below.

                                             Carrying Amount      Fair Value
                                             ---------------      ----------
     Liabilities:                                        (thousands)
         Total debt - December 31, 2000         $711,909            $595,051
                                                ========            ========

         Total debt - December 31, 1999         $745,320            $705,340
                                                ========            ========

     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.

     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.

15.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                              2000            1999            1998
                                                            --------        --------        --------
                                                                          (thousands)
<S>                                                         <C>             <C>             <C>
     Cash paid for interest                                 $75,155         $71,182         $75,260
                                                            =======         =======         =======

     Cash paid for income taxes, net                        $ 2,962         $ 1,032         $ 2,134
                                                            =======         =======         =======

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

     Non cash - common stock - preferred stock
         exchange (Note 1)                                  $ 8,578         $     -         $     -
                                                            =======         =======         =======
</TABLE>

16.  BUSINESS SEGMENTS

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



                                      F-29
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16.  BUSINESS SEGMENTS (continued)

     An  executive  vice  president  heads  each  operating  segment.  Each vice
president  is  responsible  for  developing  budgets  and  plans  as well as and
directing  the  operations of the segment.  The  performance  of each  operating
segment is measured based upon income from operations,  excluding  restructuring
charges.  The  Company  does not  allocate  restructuring  and other  charges to
operating segments because many of the Company'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.  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 the
Company's  facilities  produce  products for  multiple  business  segments.  The
restructuring  and other  charges  (credits)  amounted to $6.3  million in 2000,
$10.5 million in 1999 and $(9.7) 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  12.3% and 11.5%,  respectively,  of the
Company's  net sales.  No other  customer  accounted  for more than 10.0% of the
Company's net sales during any of the last three years.

<TABLE>
<CAPTION>
                                                 Carpet
                                   Foam         Cushion     Automotive     Technical
                                 Products       Products     Products      Products        Other         Total
                                ---------      ---------    -----------    ----------    ----------   -----------
2000                                                        (thousands)
<S>                              <C>            <C>           <C>           <C>            <C>        <C>
Net sales                        $519,197       $256,439      $342,386      $106,697       $33,059    $1,257,778
Income (loss) from operations      55,001          2,035        22,235        28,888       (11,688)       96,471
Depreciation and amortization      17,813          7,742         5,785         2,663         2,585        36,588

1999
Net sales (a)                    $527,159       $285,846      $361,806       $92,180       $27,648    $1,294,639
Income (loss) from operations      57,028          8,512        22,547        22,588       (17,617)       93,058
Depreciation and amortization      17,432          8,096         4,823         2,724         2,675        35,750

1998
Net sales (a)                    $559,690       $314,954      $285,190       $79,140       $21,585    $1,260,559
Income (loss) from operations      35,313         12,005        16,788        14,571        (3,645)       75,032
Depreciation and amortization      18,300          5,529         6,424         2,929         2,203        35,385
</TABLE>
<TABLE>
<CAPTION>
                                                              United
                                                              States         Canada         Mexico     Consolidated
                                                            ----------      --------      ---------    ------------
2000                                                                                     (thousands)
<S>                                                         <C>              <C>           <C>         <C>
Net sales                                                   $1,024,388       $69,180       $164,210    $1,257,778
Property, plant and equipment, net                             183,266         4,623         24,642       212,531

1999
Net sales (a)                                               $1,082,009       $61,486       $151,144    $1,294,639
Property, plant and equipment, net                             193,051         5,406         23,376       221,833


                                      F-30
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



16.    BUSINESS SEGMENTS (continued)

                                                              United
                                                              States         Canada         Mexico     Consolidated
                                                            ----------      --------      ---------    ------------
1998                                                                                     (thousands)
Net sales (a)                                               $1,127,827       $62,529        $70,203    $1,260,559
Property, plant and equipment, net                             212,658         4,998         24,517       242,173
<FN>

(a)  As  discussed  in  Note  2,  net  sales  for  1999  and  1998  reflected  a
     reclassification  of certain  shipping costs that were billed to customers.
     The  reclassification  impacted  Carpet Cushion  Products.  On a geographic
     basis,  the  reclassification  impacted United States net sales in 1999 and
     1998.
</FN>
</TABLE>

17.  STOCKHOLDERS' DEFICIT

Preferred Stock

     There are 5.0 million  shares of  preferred  stock,  par value of $1.00 per
share,  authorized for issuance. As discussed in Note 1, 15,000 shares of Series
B Preferred  Stock were issued in exchange for 1,500,000  shares of common stock
during  the fourth  quarter of 2000.  Series B  Preferred  Stock is  non-voting,
non-redeemable  and convertible  into 100 shares of the Company's  common stock.
The conversion  feature is only available if the conversion  would not trigger a
"change of control"  event, as discussed in Note 1. The Series B Preferred Stock
is non  cumulative  and would be  entitled  to  dividends  only if a dividend is
declared on the  Company's  common  stock,  rank senior to any future  preferred
stock issued by the Company and be entitled to a liquidation  preference of $100
per share. No other preferred shares have been issued.

Common Stock

     At year-end  2000,  there were 4.75 million shares of common stock reserved
for issuance in connection with the stock option plan, discussed in Note 6. Also
included in Note 6 is the number of common  shares  issued during the last three
years resulting from the exercise of stock options.

Warrants

     On July 1, 1999, 116,745 warrants for an aggregate of 0.6 million of common
stock expired without having been exercised.  All remaining warrants outstanding
to purchase  1.2 million  shares of common  stock  expired on October 12,  1999,
without being exercised.

Treasury Stock

     As discussed in Note 1 and the Preferred Stock disclosures above, 1,500,000
shares of common stock were  exchanged  for Series B Preferred  Stock during the
fourth quarter of 2000.

     The Board of Directors  have  authorized  the purchase of up to 3.0 million
shares of the Company's common stock. At the end of 2000,  1,989,000 shares have
been purchased under these programs.

Accumulated Other Comprehensive Loss

     The accumulated other comprehensive loss consists of the following:

<TABLE>
<CAPTION>
                                                                December 31,       December 31,      December 31,
                                                                   2000               1999              1998
                                                                ------------       ------------      ------------
                                                                                   (thousands)
<S>                                                              <C>                 <C>               <C>
     Foreign currency translation adjustment                     $ (6,921)           $(6,011)          $(10,965)
     Minimum pension liability (a)                                (16,375)            (1,747)           (13,756)
                                                                 --------            -------           --------
                                                                 $(23,296)           $(7,758)          $(24,721)
                                                                 ========            =======           ========


                                      F-31
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.  STOCKHOLDERS' DEFICIT

<FN>
(a)  As discussed in Note 8, a valuation  allowance was  established in 1998 for
     essentially  all  deferred  income tax  assets.  Accordingly,  the  minimum
     pension liability amounts do not include any of their related tax benefits.
</FN>
</TABLE>

18.  RELATED PARTY TRANSACTIONS AND BALANCES

     The Company  regularly enters into  transactions with its affiliates in the
ordinary course of business.

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  stockholders'   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, the Company 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  $3.4  million.  During  1998,  an  allowance  of $3.1 million was
recorded as a  restructuring  and other  charges  (credits) due to the financial
difficulties  of Trace.  The Company  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 (credits).

Trace Buyout Negotiations and Related Financing

     During  1998,  $6.5  million  was  recorded  in other  income  and  expense
associated  with  negotiations  related to a proposed  Trace  buyout and related
refinancing that was subsequently terminated.

Trace Global Opportunities Fund

     During  1997,  the Company  purchased a $2.0  million  investment  in Trace
Global  Opportunities  Fund, which primarily  invests in companies  organized or
operating outside the G-7 markets and was a related party to Trace. The value of
the Company's  investment in Trace Global Opportunities Fund was $0.9 million at
December  31,  1998.  The change in value of this  investment  was recorded as a
charge to other income and expense.  In 1999,  the  investment was sold for $0.9
million.

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


                                      F-32
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


18.  RELATED PARTY TRANSACTIONS AND BALANCES (continued)

$1.75 million to $3.0  million,  plus  reimbursement  of expenses  incurred.  An
amendment to the Foamex L.P.  Credit 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.

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.  The Company has closed
the New York office and Foamex L.P.  subleased  the premises to a third party at
an amount in excess of Foamex L.P.'s lease commitment.

Foam Funding LLC Debt

     Subsidiaries  of the  Company  paid $5.8  million,  $7.4  million  and $6.4
million of interest on notes  payable to Foam Funding LLC during 2000,  1999 and
1998, respectively.

     Also,  during 2000,  1999 and 1998,  subsidiaries of the Company paid $41.9
million,  $9.7  million and $5.3  million,  respectively,  of principal on notes
payable to Foam Funding LLC.

Other

     The general director of Foamex de Mexico S.A. de C.V.  ("Foamex de Mexico")
which is the Company's operating subsidiary in Mexico has a 5% stock interest in
Foamex de Mexico.  A member of the board  provides  consulting  services  to the
Company 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 6, 25,000  common
stock   options  of  the  Company  were  granted  to  member  of  the  board  in
consideration of consulting services.

     As discussed in Note 13,  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 the Company.

     During 1999,  certain employees of the Company were also employed by Trace.
The Company paid a portion of the total  compensation of such employees based on
the amount of time  devoted to the  Company'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.

     The Company,  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 the  Company,  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 VPFSM manufacturing process.

19.  BUYOUT PROPOSALS - HISTORY

     On February 9, 2000, the Company  announced that it was in discussions with
respect  to a  proposal  involving  the  acquisition  of all  of  the  Company's
outstanding  common  stock for cash.  The Company  stated that the  proposal was
subject to a number of  conditions,  including the buyer's due diligence and the
execution  of  definitive  agreements.   The  Company  agreed  to  an  exclusive
negotiating  period  ending  five  business  days after  delivery of its audited
financial statements included in the Company's Annual Report on Form 10-K to the
prospective buyer. On April 5, 2000, the Company announced that discussions with
the potential buyer were terminated with no agreement  having been reached.  The
Company  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,  the Company ended  discussions
with JP Morgan concerning an additional engagement.


                                      F-33
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.  BUYOUT PROPOSALS - HISTORY (continued)

     On August 5, 1999, the Company 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 the Company's outstanding common stock
(the "Sorgenti  Transaction").  Under the terms of the letter of intent,  if the
Company 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 the  Company'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  the  Company  entered  into a  business  combination
providing a more  favorable  transaction.  On  December  15,  1999,  the Company
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 the  Company's  Board of Directors
rejected the revised bid.

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

20.  COMMITMENTS AND CONTINGENCIES

Operating Leases

     The Company 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   the   Company's   various
restructuring/consolidation  plans) required under operating  leases at December
31, 2000 are:

                                                   Operating
                                                     Leases
                                                  -----------
                                                  (thousands)
       2001                                         $14,644
       2002                                          13,150
       2003                                          10,868
       2004                                           8,006
       2005                                           5,156
       Balance                                       11,010
                                                    -------
       Total                                        $62,834
                                                    =======

     Rental expense charged to operations  under operating  leases  approximated
$16.3  million,  $16.9  million  and  $18.9  million  for  2000,  1999 and 1998,
respectively.  Substantially  all such rental  expense  represented  the minimum
rental payments under operating leases.

Litigation - Shareholders

     On August 1, 2000, the Company 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.



                                      F-34
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20.  COMMITMENTS AND CONTINGENCIES (continued)

     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 the Company and its stockholders, originally named
as  defendants  the  Company,  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 the  Company  in  connection  with an  attempt  by Trace to
acquire the Company'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
the Company 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
the Company.

     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  the Company,  Trace
and certain current and former officers and directors of the Company,  on behalf
of  stockholders  who bought  shares of the  Company'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 the Company's  financial  situation and operations,  with the
result of artificially  inflating the price of the Company'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 the  Company.  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, the Company 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 the Company's insurance carrier on
behalf of the Company.

     Under the terms of the  agreement  in  principle  to  settle  the  Delaware
Action, the Company 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, the Company  announced that Raymond
E. Mabus,  Jr. was elected to the Company's Board of Directors.  On December 21,
2000, the Company announced that Virginia A. Kamsky was elected to the Company'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 the
Company 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 the Company or any individuals. If


                                      F-35
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


20.  COMMITMENTS AND CONTINGENCIES (continued)

management's assessment of the Company'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 the Company.

Litigation - Breast Implants

     As of March 21, 2001, the Company 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. The
Company  believes that the number of suits and  claimants  may increase.  During
1995,  the Company 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 the Company or Trace.
Neither the Company nor Trace  recommended,  authorized,  or approved the use of
its foam for these  purposes.  The Company 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 the Company'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 the Company,
and without  taking  into  account the  indemnification  provided by Trace,  the
coverage provided by Trace's and the Company'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 the  Company's  consolidated  financial  position or results of
operations.  If management's  assessment of the Company'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 the Company.

Litigation - Other

     The  Company 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  the  Company.  If  management's  assessment  of the
Company's  liability  with respect to these actions is  incorrect,  such actions
could have a material  adverse  effect on the Company's  consolidated  financial
position, results of operations and cash flows.

Environmental and Health and Safety

     The Company 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, the Company had accruals of
approximately $4.1 million for environmental  matters.  During 1998, the Company
established an allowance of $1.2 million  relating to receivables from Trace for
environmental indemnifications due to the financial difficulties of Trace.


                                      F-36
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


20.  COMMITMENTS AND CONTINGENCIES (continued)

     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. The Company believes that the use of alternative  technologies,
including  VPFSM,  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.

     The Company has reported to the appropriate  state  authorities that it has
found soil and/or  groundwater  contamination  in excess of state  standards  at
seven sites.  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.  The Company has accruals of $2.5 million for the
estimated cost of remediation, including professional fees and monitoring costs,
for these sites.  During 2000,  Foamex  L.P., a wholly owned  subsidiary  of the
Company,  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.

     The Company has either upgraded or closed all underground  storage tanks at
its   facilities   in  accordance   with   applicable   regulations.   Petroleum
contamination  was  found  at one of the  sites  and  the  Company  has  accrued
approximately  $0.5 million for the estimated  remediation  costs. Soil sampling
continues to access the full extent of contamination.

     On November  14, 2000,  the United  States  Occupational  Safety and Health
Administration  ("OSHA")  released the final  ergonomics  standard  ("Ergonomics
Standard"),  which applies to the Company, 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 the Company in the United States. Although the implementation costs
could be significant,  in the present form, the Company 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 the
Company's manufacturing  processes.  The phase-in of the standards was completed
in 1999 and the Company has  developed  and  implemented  a compliance  program.
Capital  expenditures  required  and  changes in  operating  procedures  are not
anticipated to significantly impact the Company's competitive position.

     The Company has been designated as a Potentially  Responsible Party ("PRP")
by the EPA with respect to seven 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 the Company is not considered to be significant.


                                      F-37
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


20.  COMMITMENTS AND CONTINGENCIES (continued)

     Although it is possible that new information or future  developments  could
require the Company to reassess its potential  exposure  relating to all pending
environmental  matters,  including those described herein,  the Company believes
that,  based upon all currently  available  information,  the resolution of such
environmental  matters will not have a material  adverse effect on the Company'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-38
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21.  QUARTERLY FINANCIAL DATA - RESTATED (UNAUDITED)

     As previously  identified in Note 21 (c) of the Company's Form 10-K for the
year ended  December 31, 2000,  the Company  recorded  adjustments in the fourth
quarter of 1999  primarily  related to certain  1999  restructuring  plans.  The
Company has  subsequently  determined  that the 1999  quarterly  financial  data
should be restated  because these fourth  quarter 1999  adjustments  should have
been  recorded  in  prior  quarters  in  1999.  Additionally,  the  Company  has
subsequently  determined that other fourth quarter 1999  adjustments,  primarily
related to results from foreign subsidiaries, should have been recorded in prior
quarters of 1999. The impact of the 1999 restatement is as follows:


<TABLE>
<CAPTION>
                                                      First       Second           Third          Fourth
                                                     Quarter      Quarter         Quarter        Quarter
                                                     --------     -------         -------       ---------
                                                            housands, except per share amounts)
       2000
<S>                                                  <C>          <C>             <C>           <C>
         Net sales (a)                               $329,119     $322,721        $309,666      $296,272
         Gross profit                                  42,936       47,773          44,729        36,587
         Net income (b)                                 1,783        7,986           3,785         3,459
         Earnings per share
           Basic (d)                                     0.07         0.32            0.15          0.14
           Diluted                                       0.07         0.32            0.15          0.14

       1999 - As Previously Reported
         Net sales                                   $326,626     $316,809        $330,563      $320,641
         Gross profit                                  43,597       43,777          48,813        44,121
         Net income                                     6,013        3,177           6,128         4,398
         Earnings per share
           Basic                                         0.24         0.13            0.24          0.18
       Diluted                                           0.24         0.13            0.24          0.17

       1999 - Adjustments
         Net sales                                   $      -     $      -        $      -      $      -
         Gross profit (loss) (e)                         (105)         (19)            112            12
         Net income (loss)  (f)                          (349)        (319)             98           570
         Earnings (loss) per share
           Basic                                        (0.01)       (0.02)           0.01          0.02
       Diluted                                          (0.01)       (0.02)           0.01          0.03

       1999 - As Restated
         Net sales (a)                               $326,626     $316,809        $330,563      $320,641
         Gross profit                                  43,492       43,758          48,925        44,133
         Net income (b) (c)                             5,664        2,858           6,226         4,968
         Earnings per share
           Basic                                         0.23         0.11            0.25          0.20
       Diluted                                           0.23         0.11            0.25          0.20
<FN>

(a)  As discussed  in Note 2, net sales  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 gross profit or net income. As a result, quarterly
     net sales in 2000 previously reported on Form 10-Q,  increased in thousands
     $3,257 and $3,612 for the first and second quarters of 2000,  respectively,
     and  $3,763  and  $3,780  for  the  first  and  second  quarters  of  1999,
     respectively.

(b)  Restructuring and other charges (credits) are discussed in Note 4.


                                      F-39
<PAGE>


                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(c)  Fourth  quarter 1999 results were  favorably  impacted by $1.8 million from
     the realization of a business interruption insurance claim.

(d)  During the fourth  quarter of 2000,  1,500,000  shares of common stock were
     exchanged for a new preferred stock series, as discussed in Note 1.

(e)  Primarily  relates  to  employee  benefit  expenses,  inventory  usage  and
     reported  results from foreign  subsidiaries,  including the recognition of
     foreign currency transactions.

(f)  Primarily  includes  those  identified  in (e)  above and  severance  costs
     originally recorded in the fourth quarter.
</FN>
</TABLE>

                                      F-40
<PAGE>


                            FOAMEX INTERNATIONAL INC.
                     INDEX TO FINANCIAL STATEMENT SCHEDULES


     Index to Financial Statement Schedules

     Schedule I - Condensed Financial Information of Registrant

     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
<PAGE>



                                                                    Schedule I

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    December 31,    December 31,
                                                                       2000            1999
                                                                    ------------    ------------
ASSETS                                                                     (thousands)
CURRENT ASSETS
<S>                                                                   <C>              <C>
    Cash and cash equivalents                                         $     15         $     13
    Intercompany receivables                                               308              382
    Other current assets                                                   215              161
                                                                      --------         --------
            Total current assets                                           538              556

OTHER ASSETS                                                                 1                1
                                                                      --------         --------

TOTAL ASSETS                                                          $    539         $    557
                                                                      ========         ========

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
    Accounts payable                                                  $     50         $     40
    Deferred income taxes                                                    -            1,140
    Other accrued liabilities                                            2,717            3,061
                                                                      --------         --------
      Total current liabilities                                          2,767            4,241

LONG-TERM LIABILITIES
    Revolving loan with consolidated subsidiary                          2,490              676
    Notes payable to consolidated subsidiary                             2,500            2,500
    Deficit in consolidated subsidiaries                               154,287          158,122
    Deferred income taxes                                                1,805                -
    Other liabilities                                                    1,359            1,399
                                                                      --------         --------
      Total liabilities                                                165,208          166,938
                                                                      --------         --------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
    Preferred Stock, par value $1.00 per share:
      Authorized 5,000,000 shares
      Issued 15,000 shares - Series B                                       15                -
    Common Stock, par value $.01 per share:
      Authorized 50,000,000 shares
      Issued 27,048,994 and 27,045,480 shares, respectively;
      Outstanding 23,559,994 and 25,056,480 shares, respectively           270              270
    Additional paid-in capital                                          96,275           87,475
    Accumulated deficit                                               (200,932)        (217,945)
    Accumulated other comprehensive loss                               (23,296)          (7,758)
    Other:
      Common Stock held in treasury, at cost:
        3,489,000 and 1,989,000 shares, respectively                   (27,780)         (19,202)
      Shareholder note receivable                                       (9,221)          (9,221)
                                                                      --------         --------

    Total stockholders' deficit                                       (164,669)        (166,381)
                                                                      --------         --------
      TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                     $    539         $    557
                                                                      ========         ========
</TABLE>


     See notes to consolidated financial statements, beginning on Page F-8.
                                   (continued)


                                      S-2
<PAGE>


                                                                     Schedule I
                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                       2000            1999               1998
                                                     ---------       ---------          --------
                                                     (amounts in thousands except per share amounts)
<S>                                                  <C>             <C>                <C>
INTERCOMPANY SALES                                   $      -        $     -            $ 12,619

COST OF GOODS SOLD                                          -              -              12,619
                                                     --------        -------            --------

GROSS PROFIT                                                -              -                   -

SELLING, GENERAL AND
    ADMINISTRATIVE EXPENSES                               961          1,417                (183)
                                                     --------        -------            --------

INCOME (LOSS) FROM OPERATIONS                           (961)         (1,417)                183

EQUITY IN EARNINGS (LOSS) OF
    CONSOLIDATED SUBSIDIARIES                         19,652          24,091             (18,260)

INTEREST EXPENSE                                         444           2,042               2,237

OTHER INCOME (EXPENSE)                                (1,047)              2              (7,326)
                                                     -------         -------            --------

INCOME (LOSS) BEFORE INCOME TAX
    AND EXTRAORDINARY LOSS                            17,200          20,634             (27,640)

INCOME TAX PROVISION                                     187             918              42,213
                                                     -------         -------            --------

INCOME (LOSS) BEFORE EXTRAORDINARY LOSS               17,013          19,716             (69,853)

EQUITY IN EXTRAORDINARY LOSS                               -               -              (1,917)
                                                     -------         -------            --------

NET INCOME (LOSS)                                    $17,013         $19,716            $(71,770)
                                                     =======         =======            ========

BASIC EARNINGS (LOSS) PER SHARE
   BEFORE EXTRAORDINARY LOSS                         $  0.69         $  0.79            $  (2.79)
   EXTRAORDINARY LOSS                                      -               -               (0.08)
                                                     -------         -------            --------
   NET EARNINGS (LOSS)                               $  0.69         $  0.79            $  (2.87)
                                                     =======         =======            ========

DILUTED EARNINGS (LOSS) PER SHARE
   BEFORE EXTRAORDINARY LOSS                         $  0.67         $  0.78            $  (2.79)
   EXTRAORDINARY LOSS                                      -               -               (0.08)
                                                     -------         -------            --------
   NET EARNINGS (LOSS)                               $  0.67         $  0.78            $  (2.87)
                                                     =======         =======            ========
</TABLE>

     Equity in extraordinary loss includes allocated income tax benefits of $1.3
million for 1998.

     See notes to consolidated financial statements, beginning on Page F-8.
                                   (continued)



                                      S-3
<PAGE>


                                                                      Schedule I
                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                          2000           1999          1998
                                                                        --------       --------      --------
OPERATING ACTIVITIES                                                             (thousands)
<S>                                                                     <C>            <C>           <C>
    Net income (loss)                                                   $17,013        $19,716       $(71,770)
    Adjustments to reconcile net income (loss) to
      net cash provided by operating activities:
      Deferred income taxes                                                 665            164         45,189
      Equity in extraordinary loss                                            -              -          1,917
      Equity in (earnings) losses of consolidated subsidiaries          (19,652)       (24,091)        18,260
      Other                                                                  88            (34)         1,253
    Changes in operating assets and liabilities, net of acquisitions:
      Intercompany receivables                                               74          4,241          9,919
      Accounts payable                                                       10             40        (10,542)
      Other assets and liabilities                                          (34)        (3,176)         1,189
                                                                        -------        -------       --------
         Net cash used for operating activities                          (1,836)        (3,140)        (4,585)
                                                                        -------        -------       --------

INVESTING ACTIVITIES
    Investment in consolidated subsidiaries                                   -              -        (20,000)
    Distribution from subsidiaries                                            -         17,204         20,293
    Other                                                                     -            924              -
                                                                        -------        -------       --------
    Net cash provided by investing activities                                 -         18,128            293
                                                                        -------        -------       --------

FINANCING ACTIVITIES
    Proceeds from revolving loan with consolidated subsidiary             1,814            676              -
    Proceeds from (repayments of) note payable to consolidated
      subsidiary                                                              -         (2,490)         2,490
    Dividend payments                                                         -              -         (1,245)
    Repayments of tax distribution advance                                    -        (13,618)             -
    Proceeds from exercise of stock options                                  24            270            595
                                                                        -------        -------       --------
         Net cash provided by (used for) financing activities             1,838        (15,162)         1,840
                                                                        -------        -------       --------

NET INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS                                                          2           (174)        (2,452)

CASH AND CASH EQUIVALENTS AT
    BEGINNING OF PERIOD                                                      13            187          2,639
                                                                        -------        -------       --------

CASH AND CASH EQUIVALENTS AT
    END OF PERIOD                                                       $    15        $    13       $    187
                                                                        =======        =======       ========
</TABLE>

Note:During 1999 and 1998, the Company  received from (paid to) its consolidated
     subsidiaries   distributions   of   $(0.1)   million   and  $0.3   million,
     respectively, in accordance with tax sharing agreements. Also, during 1999,
     the Company received a special  distribution from its subsidiaries of $17.3
     million.  The proceeds were used to repay the tax distribution  advance and
     accrued interest to Foamex L.P.


     See notes to consolidated financial statements, beginning on Page F-8.


                                      S-4
<PAGE>


                                                                   Schedule II
                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                                   (thousands)

<TABLE>
<CAPTION>
                                                  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
<S>                                                 <C>            <C>              <C>            <C>            <C>
Allowance for Uncollectible Accounts                $ 7,474        $ 2,838          $     -        $ 2,619        $ 7,693
                                                    =======        =======          =======        =======        =======

Reserve for Discounts                               $ 2,075        $     -          $15,823 (1)    $15,665        $ 2,233
                                                    =======        =======          =======        =======        =======

Deferred Income Tax Asset Valuation Allowance       $73,826        $(6,939)         $ 4,293        $     -        $71,180
                                                    =======        =======          =======        =======        =======


YEAR ENDED DECEMBER 31, 1999
Allowance for Uncollectible Accounts                $ 9,790        $ 2,758          $     -        $ 5,074        $ 7,474
                                                    =======        =======          =======        =======        =======

Reserve for Discounts                               $ 1,840        $     -          $16,846 (1)    $16,611        $ 2,075
                                                    =======        =======          =======        =======        =======

Deferred Income Tax Asset Valuation Allowance       $85,250        $(7,300)         $(4,124)(2)    $     -        $73,826
                                                    =======        =======          =======        =======        =======


YEAR ENDED DECEMBER 31, 1998
Allowance for Uncollectible Accounts                $ 6,844        $ 2,611          $ 2,500 (1)    $ 2,165        $ 9,790
                                                    =======        =======          =======        =======        =======

Reserve for Discounts                               $ 1,238        $     -          $12,516 (1)    $11,914        $ 1,840
                                                    =======        =======          =======        =======        =======

Deferred Income Tax Asset Valuation Allowance       $13,407        $52,573          $19,270 (3)    $     -        $85,250
                                                    =======        =======          =======        =======        =======
<FN>

(1)  Adjustments reflect a reduction in net sales.

(2)  Represents  changes to valuation  allowance  established on deferred income
     tax assets related to minimum pension liability recognized in stockholders'
     deficit.

(3)  Includes an adjustment to reflect the  distribution  of valuation  reserves
     for  deferred  income  tax  assets  to  Trace  in  connection  with the GFI
     Transaction (see Note 13 to the consolidated financial statements).
</FN>
</TABLE>


                                      S-5
<PAGE>