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

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
                   For the fiscal year ended December 29, 1996

                                       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 Form 10-K or any amendment to this
Form 10-K. [ X ]

     The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of April 7, 1997 was $192,507,000.

     The number of shares  outstanding  of the  registrant's  common stock as of
April 7, 1997 was 25,341,100.

                       DOCUMENTS INCORPORATED BY REFERENCE

     The registrant's definitive proxy statement to be filed with the Securities
and  Exchange  Commission  pursuant  to  Regulation  14A  relating to the Annual
Meeting of Shareholders scheduled to be held on May 22, 1997, is incorporated by
reference in Part III of this Form 10-K.

<PAGE>

                            FOAMEX INTERNATIONAL INC.

                                      INDEX

                                                                          Page
Part I
         Item  1.     Business                                              3
         Item  2.     Properties                                           11
         Item  3.     Legal Proceedings                                    11
         Item  4.     Submission of Matters to a Vote                      13
                            of Security Holders

Part II
         Item  5.     Market for Registrant's Common Equity and            13
                            Related Stockholder Matters
         Item  6.     Selected Consolidated Financial Data                 14
         Item  7.     Management's Discussion and Analysis                 15
                            of Financial Condition and Results
                            of Operations
         Item  8.     Financial Statements and Supplementary Data          22
         Item  9.     Changes in and Disagreements with Accountants        22
                            on Accounting and Financial Disclosure

Part III
         Item 10.     Directors and Executive Officers of the Registrant   22
         Item 11.     Executive Compensation                               22
         Item 12.     Security Ownership of Certain Beneficial Owners      22
                            and Management
         Item 13.     Certain Relationships and Related Transactions       22

Part IV
         Item 14.     Exhibits, Financial Statement Schedules              23
                            and Reports on Form 8-K

         Signatures                                                        30


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

                                       2
<PAGE>

PART I
ITEM l.  BUSINESS

General

         Foamex International Inc. (the "Company") is a holding company which is
engaged  primarily in the business of  manufacturing  and  distributing  quality
flexible  polyurethane  foam and foam  products.  The Company's  operations  are
conducted through its largest subsidiary, Foamex L.P., and through Foamex L.P.'s
wholly-owned  subsidiaries,  General Felt  Industries,  Inc.  ("General  Felt"),
Foamex Fibers, Inc. ("Foamex Fibers"), Foamex Canada Inc. ("Foamex Canada"), and
Foamex Latin America,  Inc. ("Foamex  Mexico").  The Company was incorporated in
1993 and is the successor of Foamex L.P.

         In  1995,  the  Company   announced  an  operational  plan  to  improve
profitability.  The  operational  plan  consisted  of  (i)  reducing  layers  of
management through  organizational  realignment,  (ii) the consolidation of foam
production,  fabrication  or branch  locations,  (iii)  implementing  additional
procedures  to  reduce  manufacturing  costs,   including  process  redesign  to
eliminate  non-value  added  operations,  (iv)  reducing  selling,  general  and
administrative  expenses  through cost  containment  and (v) reducing  inventory
levels through improved forecasting and the effect of plant  consolidations.  In
December 1995,  the Company  recorded  restructuring  and other charges of $41.4
million  relating  to  (i)  the   consolidation  of  thirteen  foam  production,
fabrication or branch  locations  (the "1995  restructuring  plan"),  (ii) other
charges,  primarily relating to merger and acquisition activities of the Company
and (iii) the completion of a 1993 restructuring  plan. During 1996, the Company
completed the  consolidation  of twelve foam  production,  fabrication or branch
locations; however, one of the facilities originally identified for closure will
continue to operate because of improved  economics and the lack of synergy to be
achieved from relocating the manufacturing process. In addition, the Company has
approved a plan to close two facilities  that were not originally  identified in
the  1995  restructuring  plan.  As a  result  of  these  changes  to  the  1995
restructuring plan and the favorable termination of certain lease agreements and
other  matters,  the Company  recorded a $6.5 million net  restructuring  credit
which  included a  restructuring  credit of $11.3  million  associated  with the
Company's  decision  not to close the  facility  identified  as part of the 1995
restructuring plan and $1.8 million of restructuring  credits relating primarily
to the  favorable  termination  of certain  lease  agreements  and other matters
associated  with  the  1995  restructuring  plan,  offset  by  $6.6  million  of
restructuring charges relating to the closure of two facilities during 1997 (the
"1996 restructuring  plan").  There can be no assurance that the Company will be
able to successfully complete its restructuring plans.

         During  1996,  the  Company  completed  the  sale  of its  Perfect  Fit
Industries,  Inc.  ("Perfect  Fit") and JPS Automotive  L.P. ("JPS  Automotive")
subsidiaries. Perfect Fit operated in the home comfort products business segment
and was  acquired in November  1993 for $69.1  million  which  included  364,820
shares of the  Company's  common stock valued at $5.5  million.  JPS  Automotive
operated in the automotive  textiles  business  segment and was acquired in June
1994 for $290.3  million which included the assumption and issuance of long-term
debt  by JPS  Automotive  of  approximately  $205.6  million.  The  consolidated
financial  statements  of  the  Company  have  been  restated  for  discontinued
operations  and includes a net loss of  approximately  $113.9  million (net of a
$34.9  million  income tax  benefit)  on the  disposal  of  Perfect  Fit and JPS
Automotive  which includes  provisions for operating losses during the phase-out
period.  As of February 26, 1997,  the Company has utilized $39.7 million of the
net  proceeds  from the sale of Perfect  Fit to reduce  long-term  debt by $38.6
million.

         The Private  Securities  Litigation Reform Act of 1995 provides a "safe
harbor"  for  forward-looking   statements  so  long  as  those  statements  are
identified as  forward-looking  and are  accompanied  by  meaningful  cautionary
statements  identifying  important  factors that could cause  actual  results to
differ  materially from those projected in such  statements.  In connection with
certain forward-looking  statements contained in this Annual Report on Form 10-K
and those  that may be made in the future by or on behalf of the  Company  which
are  identified  as  forward-looking,  the Company  notes that there are various
factors  that could cause  actual  results to differ  materially  from those set
forth  in any  such  forward-looking  statements,  such  as raw  material  price

                                       3

<PAGE>

increases,  general  economic  conditions,  the level of automotive  production,
carpet cushion  production and housing starts,  the implementation and estimated
annualized  savings  of  the  operational  plan  and  changes  in  environmental
legislation  and  environmental  conditions.   The  forward-looking   statements
contained in this Annual Report on Form 10-K were prepared by management and are
qualified  by, and  subject to,  significant  business,  economic,  competitive,
regulatory and other uncertainties and contingencies, all of which are difficult
or  impossible  to  predict  and many of which are  beyond  the  control  of the
Company.  Accordingly,  there  can  be no  assurance  that  the  forward-looking
statements contained in this Annual Report on Form 10-K will be realized or that
actual results will not be significantly  higher or lower.  The  forward-looking
statements  have not been audited by,  examined by,  compiled by or subjected to
agreed-upon  procedures  by  independent  accountants,  and no  third-party  has
independently  verified  or  reviewed  such  statements.  Readers of this Annual
Report on Form 10-K should  consider these facts in evaluating  the  information
contained  herein.  In addition,  the business and operations of the Company are
subject to  substantial  risks which  increase the  uncertainty  inherent in the
forward-looking  statements  contained in this Annual  Report on Form 10-K.  The
inclusion of the forward-looking  statements  contained in this Annual Report on
Form 10-K should not be regarded as a representation by the Company or any other
person that the  forward-looking  statements  contained in this Annual Report on
Form 10-K will be achieved.  In light of the  foregoing,  readers of this Annual
Report  on  Form  10-K  are  cautioned  not  to  place  undue  reliance  on  the
forward-looking statements contained herein.

         The  principal  executive  offices of the  Company  are located at 1000
Columbia Avenue,  Linwood,  Pennsylvania 19061 and its telephone number is (610)
859-3000.

         References  in this Annual  Report on Form 10-K to the  "Company"  mean
Foamex International Inc. and, where relevant, its subsidiaries.  The diagram on
the following page depicts the relationships  between the Company and certain of
its affiliates as of December 29, 1996.


                                       4
<PAGE>

                                 DIAGRAM OMITTED



A description of the diagram is as follows:

Trace  International  Holdings  Inc. and  subsidiaries  has a 44.7%  interest in
Foamex  International Inc. and a 1% non-managing general partnership interest in
Foamex L.P.

Foamex  International Inc. has a 99% limited partnership  interest in Foamex-JPS
Automotive  L.P. and a 100% corporate  interest in FJGP Inc. and FMXI, Inc. FJGP
Inc. has a 1% managing  general  partnership  interest in Foamex-JPS  Automotive
L.P. and FMXI,  Inc. has a 1% managing  general  partnership  interest in Foamex
L.P.

Foamex-JPS Automotive L.P. has a 98% limited partnership interest in Foamex L.P.
and a 100% corporate interest in Foamex-JPS Capital Corporation.

Foamex L.P.  has a 100%  corporate  interest in General Felt  Industries,  Inc.,
Foamex Canada Inc., Foamex Capital Corporation and Foamex Latin America, Inc.

General Felt  Industries,  Inc. has a 100%  corporate  interest in Foamex Fibers
Inc.

Foamex Latin America, Inc. has a 100% corporate interest in Grupo Foamex Mexico,
S.A.  de C.V.,  Foamex De Mexico  S.A.  de C.V and  Transformacion  De Espumas Y
Fieltros, S.A. de C.V.

                                       5

<PAGE>

Flexible Polyurethane Foam Products

         The  Company is a  manufacturer  and  distributor  of quality  flexible
polyurethane  foam and foam products to satisfy the specific needs of customers.
The Company's foam manufacturing and distribution facilities enable it to source
production  efficiently  and meet the needs of its  customers  throughout  North
America.  Such  facilities  are also  important for  satisfying  all of the foam
requirements of large national  customers in a timely and cost effective manner.
The Company's  operations are conducted  through its largest  subsidiary  Foamex
L.P., and through Foamex L.P.'s wholly-owned subsidiaries,  General Felt, Foamex
Fibers, Foamex Canada, and Foamex Mexico.

         The Company  operates in the foam  products  business  segment with net
sales being derived from four product  categories:  carpet  cushion,  cushioning
foams,  automotive  foams  and  technical  foams.  Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations provides net sales by
product category for the past three fiscal years.

         The Company  supplies  cushioning  foams to major bedding and furniture
manufacturers such as Sealy,  Simmons,  and Ethan Allen. The Company's packaging
foams are supplied to  distributors  and  manufacturers  of computers  and other
electronic  devices,  including  Seagate  Technology  and  CompUSA.  The Company
distributes  its  automotive  foam  products  to  domestic  original   equipment
manufacturers  ("OEMs") and major tier one suppliers  such as Lear  Corporation,
Johnson  Controls,  Inc.,  and  Delphi  Interiors  and  Lighting.  Many of these
relationships  allow the Company to work with customers  during the design phase
for new products and new applications for existing products,  thereby increasing
the likelihood that the Company will be a principal supplier for these products.

         The  introduction  of new  products and new  applications  for existing
products is an integral component of the Company's growth strategy. During 1996,
the Company introduced Reflex(TM) and Nexol(TM) for the cushioning and packaging
industries,  respectively.  These products were created using patented  variable
pressure foaming technology  ("VPF(TM)").  Reflex(TM)  materials,  which include
cushion  wraps and cushion  cores,  are  advanced  polymer  cushioning  products
designed to improve  comfort,  quality and durability in upholstered  furniture.
Nexol(TM)  expands the Company's  capabilities in meeting the special  packaging
requirements  of sensitive and fragile  products such as electronic  components.
Also,  during the past few years,  the Company  developed  new  automotive  foam
applications,  including  thermoformable  foam  headliners and energy  absorbing
foams, and introduced  ComfortWear(TM),  a branded, high resilience prime carpet
cushion. In addition,  the Company has developed,  and is the exclusive producer
of, a  reticulated  foam for the  precise  metering  of ink for  Hewlett-Packard
inkjet printers and the attendant replacement ink cartridges.

         Carpet Cushion

         The Company is one of the largest  manufacturers  and  distributors  of
prime,  bonded,  sponge  rubber and felt carpet  cushion in North  America.  The
Company also manufactures  synthetic "grass" turf, primarily for the residential
market. Synthetic turf is tufted from polypropylene yarn in a variety of colors,
textures and  qualities.  In  addition,  the Company  manufactures  a variety of
textured   carpeting  and  wall   coverings   primarily   using   solution  dyed
polypropylene staple fiber. Such needlepunch carpets have generally been used as
indoor/outdoor floor covering but, through the development of patterned products
and stylized color lines,  have found increasing  acceptance in both residential
and commercial applications.

         The Company developed ComfortWear(TM),  a quality prime carpet cushion,
which was introduced in February 1994 in conjunction with  significant  consumer
and  trade  promotions.  ComfortWear(TM)  currently  is sold in  retail  outlets
throughout the United States. ComfortWear(TM) is marketed through floor covering
retailers  in the  United  States  such as Sears,  New York  Carpet  World,  and
Carpetland USA.

                                       6
<PAGE>

         Cushioning Foams

         The Company is one of the largest  manufacturers of cushioning foams in
North America. These foams are used by the bedding industry in quilts,  toppers,
cores and border rolls for mattresses and by the furniture  industry for seating
products.  Cushioning  foams are  generally  sold in large volumes on a regional
basis because of high shipping costs. Due to its size and the strategic location
of its production  facilities,  the Company believes it will continue to have an
advantage over small  regional  producers in supplying  large national  accounts
with all of their foam requirements.

         The development and  introduction of value added products  continues to
be a Company  priority and has included (i) Reflex(TM)  and Nexol(TM)  discussed
below,  (ii)  viscoelastic  or "memory"  foams for the bedding  industry,  which
maintain their resiliency better than other foams and materials, and (iii) Latex
Plus,  a  urethane-based  replacement  for  latex,  a  material  used in bedding
products.   The  Company's  most  recent  product  introductions  have  included
Reflex(TM)  and  Nexol(TM)  for  the   cushioning   and  packaging   industries,
respectively,  which  were  created  using the  VPF(TM)  manufacturing  process.
Reflex(TM)  materials,  which  include  cushion  wraps and  cushion  cores,  are
advanced polymer  cushioning  products designed to improve comfort,  quality and
durability   in   upholstered   furniture.   Nexol(TM)   expands  the  Company's
capabilities  in meeting the special  packaging  requirements  of sensitive  and
fragile products such as electronic components.

         The  Company's  cushioning  foams  for  bedding  products  are  sold to
mattress customers,  such as Sealy Mattress Co., Simmons,  Serta, and Spring Air
Company,  both directly and through  independent  fabrication  operators located
across the United States.  Also, the Company supplies cut-to-size seat cushions,
backs and other pieces to the furniture industry, including to Berkline, Action,
and Schnadig.

         Automotive Foams

         The  Company  is  one  of  the  largest  suppliers  of  the  trim  foam
requirements  of  the  North  American   operations  of  American  and  Japanese
automotive  manufacturers.  Depending on the automotive  manufacturer and/or the
application, foam is supplied by the Company either directly to the manufacturer
or indirectly  through  sub-suppliers.  Automotive foams are used for trim pads,
door panel parts, headliners,  acoustical purposes, flame and adhesive laminates
and  rolls for  tri-lamination.  Tri-laminated  foam is  applied  to  automotive
fabrics  to form a  foam/fabric  composite  that  results  in cost  savings  and
aesthetic value for the automotive manufacturer.

         The domestic  automotive  manufacturers have narrowed their supply base
during recent years,  increasing  the percentage and dollar amount of components
that they  purchase from outside  suppliers.  As a result,  a smaller  number of
companies are supplying an increasing  percentage of these manufacturers' needs.
The Company  believes it has benefited from this trend,  which favors  suppliers
with quality  facilities  and products,  cost  efficient  plants,  long-standing
relationships,  strong  design,  technical and product  development  support and
broad product lines.  Management  believes this outsourcing trend will continue,
particularly  for components such as foam, trim and accessories that represent a
small portion of the overall cost of a vehicle.

         During  1996,  the  Company  entered  into a  strategic  alliance  with
Recticel,  s.a.  ("Recticel")  to design,  manufacture  and market  polyurethane
products for the automotive industry in order to meet the worldwide requirements
of the OEMs and the major tier one suppliers such as Lear  Corporation,  Johnson
Controls,  Inc., and Delphi  Interiors and Lighting.  Under this alliance,  both
companies   will  jointly   supply  the   automotive   suppliers  with  products
manufactured in North America by the Company and in Europe by Recticel.

         The Company  believes that the  automotive  manufacturers' just-in-time
inventory requirements will provide the Company with a competitive advantage due
to the  quality of the  Company's  foam  products,  its  flexible  manufacturing
capacity and its strategically located manufacturing  facilities that enable the
Company to minimize  shipping time and costs.  In addition,  management  expects

                                       7
<PAGE>

foam  usage  per  vehicle  to  increase  because  manufacturers  have  generally
increased their investment in upgrading  automobile and light truck interiors to
improve comfort, attractiveness, safety and noise absorption capabilities.

         The  Company's  new  product  development  and  flexible  manufacturing
capabilities   allow  it  to  produce  quality   products  to  satisfy  changing
specifications.  Examples of the Company's ability to react to changing industry
requirements  include  thermoformable   headliners,   tri-laminates  and  energy
absorbing  foams.  For  example,  the Company is one of the first  suppliers  to
introduce  a  thermoformable   headliner,   Custom  Fit(TM),   made  from  rigid
polyurethane  foam.  The use of foam  headliners is expected to continue to grow
due to concerns for automotive workers' safety caused by fiberglass  processing.
The Company  intends to continue  manufacturing  and  supplying  foam and fabric
components,  such as tri-laminated  material for automotive seating.  The use of
tri-laminates has become increasingly  prevalent due to significant cost savings
for manufacturers and improved  aesthetics for consumers.  Automotive  suppliers
are  increasingly  offering  integrated  systems  which lower  overall  cost and
improve  quality  relative to previous  sourcing  methods in which  individually
sourced components were assembled and installed by the OEMs.

         Automotive  manufacturers  are  increasingly  requiring the  production
facilities  of  their   suppliers  to  meet  certain  high  quality   standards.
Eventually,  all tier one and tier two automotive supplier facilities  worldwide
must adhere to the QS-9000 quality manufacturing  standards set by United States
automotive  manufacturers.  In 1996, the Company  completed QS-9000 and ISO-9001
certification for its eight facilities which supply the automotive industry. The
Company was one of the first polyurethane  manufacturers to be QS-9000 certified
which  demonstrates its commitment to producing the highest quality products and
meeting the needs of its customers.

         Technical Foams

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

         Reticulated foams are well suited for filtration,  reservoiring,  sound
absorption and sound transmission.  Industrial applications include carburetors,
computer  cabinets,  ink pad reservoirs,  high speed inkjet printers and speaker
grills.  Medical  applications  include oxygenators for  cardiopulmonary  bypass
surgery, instrument holders for sterilization, pre-op scrubbers impregnated with
anti-microbial  agents and EKG pads containing  conductive gels. Other technical
foams have unique characteristics such as flame retardancy and fluid absorption.
In addition,  felting and  lamination  with other foams or materials  give these
composites  specific  properties.  Additional  products  sold  within this group
include foams for refrigerated  supermarket  produce counters,  mop heads, paint
brushes, diapers and cosmetic applications.

         The Company utilizes advertising in trade journals and related media in
order to attract  customers and, more  generally,  to create an awareness of its
capabilities  for technical  foams. In addition,  due to the highly  specialized
nature  of most  technical  foams,  the  Company's  research  staff  works  with
customers to design, develop and manufacture each product to specification.

         Marketing and Sales

         The  Company  has a  marketing  and sales  force of  approximately  194
employees.  Product  business  managers direct sales efforts towards each of the
end-user markets (i.e., carpet cushion,  cushioning foams,  automotive foams and
technical foams).

         The  Company's  carpet  cushion  marketing  program  includes the broad
distribution of products to both the retail and wholesale levels.   Furthermore,

                                       8
<PAGE>

promotions,  marketing and advertising expenditures are important in positioning
the Company's carpet cushions as premium, trade branded products.

         Bedding  and  furniture  products  are sold  directly by the Company to
customers  and  also  through  third  party  independent  fabricators.  The  key
strategic elements supporting growth in these areas are a focus on marketing and
sales efforts,  high quality,  cost  competitive  products and low freight costs
through   optimal  plant   location.   Plant  locations  are  critical  in  this
regionalized line of business where the transportation  cost typically comprises
a significant portion of product cost.

         The Company has been a leading  supplier of automotive foam products to
the  automotive  industry for more than 30 years.  Automotive  foam products are
predominantly  sold directly  through a bidding process in which each customer's
requirements  for a particular  time period are awarded to a foam supplier.  The
Company has  consistently  been awarded  contracts with OEM's and major tier one
suppliers such as Lear Corporation, Johnson Controls, Inc., and Delphi Interiors
and Lighting.

         The Company  markets most of its  technical  foams through a network of
independent  fabrication and distribution companies in North America, the United
Kingdom, and South Korea. Such fabricators or distributors often further process
or  finish  these  products  to meet the  specific  needs of the  end-user.  The
Company's technical foams service unique end-user requirements and are generally
sold at relatively  high margins.  This line of business is  characterized  by a
diversity and complexity of both customers and applications.

         Customers

         During the past three fiscal years, no one customer  accounted for more
than  10.0% of the  Company's  net  sales.  However,  1996 net sales to the five
largest customers  comprised $225.4 million or 24.3% of the Company's net sales,
including  net sales to Lear  Corporation,  Johnson  Controls,  Inc.,  and Sealy
Mattress Co. of approximately $62.0 million,  $57.7 million and $42.1 million or
approximately 6.7%, 6.2% and 4.5% of net sales, respectively.

         Manufacturing and Raw Materials

         The Company produces bulk and fabricated flexible  polyurethane foam at
46 locations in North America with a total of  approximately  6.8 million square
feet of  floor  space.  Management  believes  that the  Company's  manufacturing
facilities are well suited for their intended purposes and are in good condition
(see "Properties").  The manufacturing  facilities are strategically  located to
service their major customers since high freight cost in relation to the cost of
the foam product  generally  results in  distribution  being most cost effective
within 200 to 300 miles from each facility.

         In  1996,  raw  materials   accounted  for  approximately  74%  of  the
manufacturing costs of the Company.  The two principal chemicals in polyurethane
foam, toulene diisocyanate  ("TDI") and polyol,  accounted for approximately 52%
of raw material cost. The Company's largest supplier of raw materials is The Dow
Chemical Company.  The Company generally has alternative  chemical suppliers for
each major raw material and the Company  believes that it could find alternative
sources  of supply  should  it cease  doing  business  with any one of its major
suppliers.  The price of TDI and polyol is influenced  by demand,  manufacturing
capacity and oil and natural gas prices.

         The  Company's  principal  suppliers  of  raw  materials  used  in  the
manufacturing of foam increased the price of raw materials  several times during
1995 and  1994.  In  response,  the  Company  increased  selling  prices,  where
possible,  for cushioning,  automotive and technical foam products  depending on

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<PAGE>

the  product.  The 1995 results of  operations  were  adversely  affected by the
delays in, or the inability  to,  implement  selling  price  increases to offset
these  raw  material  cost  increases.   The  Company  did  not  experience  any
significant price increases during 1996; however, there can be no assurance that
chemical  suppliers  will not increase raw material  costs in the future or that
the Company will be able to implement selling price increases to offset any such
raw material cost increases.

     The Company is subject to  extensive  and changing  environmental  laws and
regulations.  See "Legal Proceedings -- Environmental Matters" and "Management's
Discussion  and Analysis of Financial  Condition  and Results of  Operations  --
Environmental Matters."

         Employees

         As of December 29, 1996, the Company employed 4,453 persons, with 3,972
of such  employees  involved in  manufacturing,  287 in  administration  and 194
involved  in sales  and  marketing.  Approximately  728 of these  employees  are
located outside the United States. Also,  approximately 1,338 of these employees
are  covered  by  collective  bargaining  agreements  with labor  unions,  which
agreements expire on various dates from 1997 through 2001. The Company considers
relations with its employees to be good.

         Competition

         The flexible  polyurethane  foam industry is highly  competitive.  With
respect to flexible polyurethane foam,  competition is based primarily on price,
quality of  products  and  service.  The  Company's  larger  competitors  in the
polyurethane  foam industry include E. R. Carpenter  Company,  Crain Industries,
Inc.,  Hickory  Springs  Manufacturing  Company,  Vitafoam,  Inc.,  General Foam
Corporation,  Flexible Foam Products, Inc., and Crest Foam Industries, Inc. None
of such  competitors  compete  in all of the  product  categories  in which  the
Company does business.

         International and Domestic Operations and Export Sales

         The Company has manufacturing  operations in the United States, Canada,
and Mexico.  Net sales to  customers in foreign  markets in 1996,  1995 and 1994
were $76.0  million  (8.2% of net sales),  $73.3 million (8.5% of net sales) and
$66.6 million (8.0% of net sales), respectively.

         Patents and Trademarks

         The Company owns various patents and trademarks registered domestically
and in numerous foreign  countries.  The registered  processes and products were
developed  through  on-going  research  and  development  activities  to improve
quality,  reduce  costs  and  expand  markets  through  the  development  of new
applications for flexible  polyurethane foam products.  The Company uses several
trademarks and tradenames for product identification,  the majority of which are
used in the carpet  cushion  and  technical  foams  product  lines.  The Company
believes its business is not dependent upon any individual patent,  trademark or
tradename.

         Research and Development

         The  Company  believes  it  has  a  leading  research  and  development
capability in the flexible polyurethane foam industry. This capability gives the
Company a significant  advantage in the on-going development of new products and
new applications for existing products. The Company has research and development
facilities  located in Hayward,  California;  Dalton,  Georgia;  and  Eddystone,
Pennsylvania  employing  approximately 28 full-time employees.  Expenditures for
research and development amounted to $2.5 million, $3.2 million and $2.7 million
for 1996, 1995 and 1994, respectively.

         The Company and  Recticel,  have  exchanged  know-how,  trade  secrets,
engineering  and other data,  designs,  specifications,  chemical  formulations,
technical  information,  market  information and drawings which are necessary

                                       10
<PAGE>

or  useful  for  the  manufacture,  use  or  sale  of  foam  products  and it is
anticipated  that  they  will  continue  to do so in the  future.  The  Company,
Recticel,  and Beamech Group Limited,  an unaffiliated  third party ("Beamech"),
have  an  interest  in a  Swiss  corporation  that  develops  new  manufacturing
technology  for the  production  of  polyurethane  foam  including  the  VPF(TM)
manufacturing  process.  The  Company,  Recticel,  and their  affiliates  have a
royalty-free license to use technology developed by the Swiss corporation.

ITEM 2.  PROPERTIES

         As of December 29, 1996, the Company  conducted its operations  through
59 manufacturing and distribution  facilities,  of which 18 are owned and 41 are
leased.  Total floor space in use at the owned  manufacturing  and  distribution
facilities is approximately 3.7 million square feet and total floor space in use
at the leased  manufacturing  and distribution  facilities is approximately  3.5
million square feet.  Fifty-one of these  facilities are located in 36 cities in
the United States, five facilities are located in two cities in Canada and three
facilities  are located in three  cities in Mexico.  The 1997 annual base rental
with respect to such leased  facilities  is  approximately  $7.4  million  under
leases  expiring from 1997 to 2005.  The Company does not anticipate any problem
in renewing or replacing any of such leases  expiring in 1997. In addition,  the
Company  has  approximately  1.1  million  square  feet of idle  space  of which
approximately 0.5 million is leased.

         The  Company  maintains  administrative  and sales  offices in Linwood,
Pennsylvania; Hayward, California; Chicago, Illinois; and New York, New York.

ITEM 3.  LEGAL PROCEEDINGS

         Environmental Matters

         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.  During 1996,  expenditures  in connection  with the
Company's compliance with federal,  state, local and foreign  environmental laws
and  regulations  did  not  have a  material  adverse  effect  on the  Company's
operations, financial position, capital expenditures or competitive position. As
of December 29, 1996, the Company has  environmental  accruals of  approximately
$4.1 million for environmental  matters.  In addition,  as of December 29, 1996,
the  Company  has  receivables  of   approximately   $0.9  million  relating  to
indemnification   for  environmental   liabilities,   net  of  an  allowance  of
approximately  $1.0 million  relating to potential  disagreements  regarding the
scope of the  indemnification.  The Company believes that realization of the net
receivables established for indemnification is probable.

         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 and TDI, principal raw materials used in
the  manufacturing  of  foam.  The  Company  completely  eliminated  the  use of
chlorofluorocarbons  and  methylchloroform  by the end of  1995.  The  1990  CAA
Amendments   also  may result  in the  imposition  of more  stringent  standards
regulating air emissions from the use of these  chemicals by  polyurethane  foam
manufacturers, but these standards have not yet been promulgated.

         The Company has reported to appropriate  state  authorities that it has
found soil  contamination in excess of state standards at facilities in Orlando,
Florida; La Porte, Indiana; Conover, North Carolina;  Cornelius, North Carolina;
Fort Wayne,  Indiana;  Philadelphia,  Pennsylvania;  and at a former facility in
Dallas, Texas and groundwater  contamination in excess of state standards at the
Orlando, Conover,  Philadelphia, and Cornelius facilities. The Company has begun
remediation  and is  conducting  further  investigations  into the extent of the
contamination  at  these  facilities  and,   accordingly,   the  extent  of  the
remediation  that may ultimately be required.  The actual cost and the timetable
of any such remediation cannot be predicted with any degree of certainty at this

                                       11
<PAGE>

time.  The Company,  based on engineering  estimates of the remaining  potential
remediation  costs for these  facilities,  has  accruals of $3.2 million for the
estimated  cost of completing  remediation  and  established a net receivable of
$0.9 million on the basis of indemnifications  by Trace International  Holdings,
Inc. ("Trace  Holdings") and Recticel Foam Corporation  ("RFC")  associated with
the partnership  formation of Foamex L.P. The Company has completed  remediation
of soil  contamination at a former Trenton,  New Jersey  manufacturing  facility
closed in October  1993 and is awaiting  final  closure  approvals  from the New
Jersey Department of Environmental  Protection regarding the remediation of soil
contamination  and monitoring of  groundwater  at the former  Trenton  facility.
Also, the Company has completed remediation at its Mesquite,  Texas facility and
is awaiting a  certificate  of  completion  under the Texas  Voluntary  Clean Up
program.

         Federal  regulations  require  that by the end of 1998 all  underground
storage tanks  ("USTs") be removed or upgraded in all states to meet  applicable
standards.  The  Company  has six USTs that will  require  removal or  permanent
in-place closure by the end of 1998. Due to the age of these tanks,  leakage may
have  occurred  resulting in soil and possibly  groundwater  contamination.  The
Company  has accrued  $0.4  million for the  estimated  removal and  remediation
costs,  if any,  associated  with  these  USTs.  However,  the  full  extent  of
contamination,  and accordingly,  the actual cost of such remediation  cannot be
predicted with any degree of certainty at this time.  The Company  believes that
its USTs do not pose a significant  risk of environmental  liability  because of
its  monitoring  practices for USTs and  conditional  approval for the permanent
in-place closure for certain USTs. However, there can be no assurances that such
USTs will not result in significant  environmental  liability in the future. 

         The Company has been  designated  as a  Potentially  Responsible  Party
("PRP") by the United States  Environmental  Protection  Agency (the "EPA") with
respect to thirteen sites with an estimated  total  liability to the Company for
the thirteen sites of less than approximately  $0.5 million.  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, the participation of the Company is considered to be immaterial.

         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,  management
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 material.

         Legal Proceedings

         As of March  21,  1997,  the  Company  and Trace  Holdings  were two of
multiple defendants in actions filed on behalf of approximately 5,000 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. Five 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  700 residents of Australia,  New Zealand,  England,  and Ireland.
During 1995, the Company and Trace Holdings were granted summary  judgements 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.  In addition,  two of the cases filed on
behalf of the 903 foreign  plaintiffs  were  dismissed  on the grounds  that the
cases could not be brought in the United States courts. This decision is subject
to appeal.  The  Company  believes  that the number of suits and  claimants  may
increase.  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 Holdings.  Neither the Company nor Trace Holdings  recommended,
authorized,  or approved the use of its foam for these purposes. 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 Trace Holdings, and without taking into

                                       12
<PAGE>

account  potential  indemnity from the  manufacturers  of  polyurethane  covered
breast  implants,  management  believes that the disposition of 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 or Trace Holdings'  consolidated
financial  position or results of operations.  In addition,  the Company is also
indemnified  by  Trace  Holdings  for  any  such  liabilities  relating  to foam
manufactured  prior  to  October  1990.  Although  Trace  Holdings  has paid the
Company's  litigation  expenses  to date  pursuant to such  indemnification  and
management  believes Trace Holdings  likely will be in a position to continue to
pay such expenses,  there can be no absolute  assurance that Trace Holdings will
be able to provide such indemnification.  Based on information available at this
time with respect to the potential  liability,  and without  taking into account
the  indemnification  provided by Trace  Holdings and the  coverage  provided by
Trace Holdings' and the Company's liability insurance, the Company believes that
the proceedings  should not ultimately result in any liability that would 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.

         During  1996,  the  Richard  Lee Cobble et al v.  Steve  Cansler et al.
                             --------------------------------------------------
lawsuit was settled without liability to the Company.

         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.

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

         None

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

         The Company's  common stock is traded through the National  Association
of Securities Dealers,  Inc. National Market System (the "NMS") under the symbol
"FMXI".

         The  following  table  sets  forth the high and low bid  prices for the
common stock on the NMS based on information supplied by NASDAQ.

                                                 High                Low
1997
     Quarter Ended March 30, 1997               22 1/8             15

1996
     Quarter Ended December 29, 1996            17 5/8             12 5/8
     Quarter Ended September 29, 1996           16 7/8             11 1/4
     Quarter Ended June 30, 1996                12 7/8              9
     Quarter Ended March 31, 1996                9 7/8              6 3/8

1995
     Quarter Ended December 31, 1995            10 5/8              6 3/8
     Quarter Ended October 1, 1995              11 3/8              7 1/8
     Quarter Ended July 2, 1995                  8 7/8              6 3/8
     Quarter Ended April 1, 1995                11                  7 1/2

     As of April 7, 1997, there were 170 holders of record of the common stock.

                                       13
<PAGE>

         The  Company  is a  corporation  and has  never  declared  or paid cash
dividends on its common stock.  The Company  presently  intends to retain future
earnings  to  support  the  growth  of its  business  and,  therefore,  does not
anticipate paying cash dividends in the foreseeable  future.  The payment of any
future  dividends  will be  determined  by the  Board of  Directors  in light of
conditions then existing,  including the Company's earnings, financial condition
and requirements,  restrictions in financing agreements, business conditions and
other factors.  The Company is a holding company whose assets consist  primarily
of its indirect  ownership of a 1% managing general  partnership  interest and a
98% limited  partnership  interest in Foamex L.P.  Consequently,  the  Company's
ability to pay  dividends is dependent  upon the earnings of Foamex L.P. and any
future subsidiaries of the Company and the distribution of those earnings to the
Company and loans or advances by Foamex L.P. and any such future subsidiaries of
the Company. The ability of Foamex L.P. and Foamex-JPS Automotive L.P. ("FJPS"),
the  owner of the 98%  limited  partnership  interest  in Foamex  L.P.,  to make
distributions  is  restricted  by  the  terms  of  their  respective   financing
agreements. Due to such restrictions, the Company is not expected to have access
to the cash flow generated by Foamex L.P. for the foreseeable future.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

         The following table presents selected historical consolidated financial
data of the Company and its predecessors,  after being restated for discontinued
operations for all periods  presented (see Note 3 to the consolidated  financial
statements).  The results of operations of acquired  businesses (as noted below)
are included from the dates of their respective acquisitions. The financial data
should be read in  conjunction  with the financial  statements and related notes
thereto of the Company included elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>

                                                                         Fiscal Year (1)(2)
                                            1996 (3)        1995 (4)         1994          1993 (5)        1992
                                                          (thousands except for earnings per share)
<S>                                          <C>            <C>             <C>            <C>           <C>     
Statements of Operations Data:
   Net sales                                 $926,351       $862,834        $833,660       $684,310      $501,751
   Income (loss) from continuing
      operations                               32,492        (50,750)         22,211         (5,440)       22,011
   Earnings (loss) per share from
      continuing operations (6)                 1.27          (1.92)           0.83              -             -

Balance Sheet Data (at period end):
   Total assets                              $619,846       $748,242        $786,895       $612,124      $340,900
   Long-term debt                             483,344        514,954         502,980        414,445       285,762
   Stockholders' equity (deficit)             (58,103)        29,383          92,145         64,306       (39,061)
<FN>
(1)     The Company has a 52 or 53 week fiscal year ending on the Sunday closest
        to the end of the calendar year. Each fiscal year presented was 52 weeks
        with the exception of 1992 which was 53 weeks.

(2)     Fiscal  years 1993  through  1995 have been  restated  for  discontinued
        operations.

(3)     Includes  restructuring  credits  of  $6.5  million  (see  Note 4 to the
        consolidated financial statements).

(4)     Includes restructuring and other charges of $41.4 million (see Note 4 to
        the consolidated financial statements).

(5)     Includes the results of  operations  of General  Felt and Great  Western
        from March 23, 1993 and May 1, 1993,  respectively,  and thus may not be
        comparable to other periods.

(6)     In December  1993, the Company  completed an initial public  offering of
        common stock, therefore,  earnings (loss) per share for 1993 and 1992 is
        not applicable.
</FN>
</TABLE>

                                       14
<PAGE>

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

         Foamex  International  Inc.  (the  "Company")  operates in the flexible
polyurethane  foam and foam  products  industry.  The Company's  operations  are
conducted through its largest  subsidiary Foamex L.P., and through Foamex L.P.'s
wholly-owned  subsidiaries,  General Felt  Industries,  Inc.  ("General  Felt"),
Foamex Fibers, Inc. ("Foamex Fibers"), Foamex Canada Inc. ("Foamex Canada"), and
Foamex Latin America, Inc. ("Foamex Mexico"). The following discussion should be
read in conjunction with the consolidated financial statements and related notes
thereto of the Company included in this report.

         On April 7,  1997,  the  Company  announced  that it has  initiated  an
evaluation  of its current  capital  structure,  with the  intention of reducing
interest expense and improving financing flexibility.  There can be no assurance
however,  that the Company will be able to successfully  reduce interest expense
or  improve  financing   flexibility  and  the  impact  it  would  have  on  the
consolidated financial statements.

         During 1996, the Company sold Perfect Fit  Industries,  Inc.  ("Perfect
Fit") and JPS  Automotive  L.P.  ("JPS  Automotive")  which  comprised  the home
comfort products and automotive textile business segments,  respectively, of the
Company. The consolidated financial statements of the Company have been restated
for  discontinued  operations  and includes a net loss of $113.9 million (net of
$34.9  million  income tax benefit) on the disposal of these  business  segments
which includes provisions for operating losses during the phase-out period. (See
Note 3 to the consolidated financial statements for further discussion).

         The  Company's  results of  operations  have been  affected  by various
factors,  including the implementation of an operational plan in 1995 to improve
profitability  and  unrecovered  raw material cost  increases  during 1995.  The
operational  plan  consisted  of  (i)  reducing  layers  of  management  through
organizational   realignment,   (ii)  the   consolidation  of  foam  production,
fabrication or branch locations,  (iii)  implementing  additional  procedures to
reduce  manufacturing  costs,  including process redesign to eliminate non-value
added operations,  (iv) reducing selling,  general and  administrative  expenses
through cost  containment  and (v) reducing  inventory  levels through  improved
forecasting  and the  effect of plant  consolidations.  In  December  1995,  the
Company  recorded  restructuring  and other charges of $41.4 million relating to
(i) the  consolidation  of  thirteen  foam  production,  fabrication  or  branch
locations  (the  "1995  restructuring  plan"),  (ii)  other  charges,  primarily
relating  to merger and  acquisition  activities  of the  Company  and (iii) the
completion of a 1993 restructuring  plan. During 1996, the Company completed the
consolidation  of twelve  foam  production,  fabrication  or  branch  locations;
however,  one of the  facilities  originally  identified for closure in the 1995
restructuring  plan will continue to operate  because of improved  economics and
the lack of synergy to be achieved from relocating the manufacturing process. In
addition,  the Company has approved a plan to close two facilities that were not
originally  identified  in the 1995  restructuring  plan.  As a result  of these
changes to the 1995 restructuring plan and the favorable  termination of certain
lease  agreements  and other  matters,  the Company  recorded a $6.5 million net
restructuring  credit which  included a  restructuring  credit of $11.3  million
associated with the Company's  decision not to close the facility  identified as
part of the 1995  restructuring  plan and $1.8 million of restructuring  credits
relating primarily to the favorable  termination of certain lease agreements and
other  matters  associated  with the 1995  restructuring  plan,  offset  by $6.6
million of  restructuring  charges  relating  to the  closure of two  facilities
during 1997 (the "1996 restructuring  plan"). There can be no assurance that the
Company will be able to successfully complete its restructuring plans.

         The Company's  automotive foam customers are  predominantly  automotive
original  equipment  manufacturers or other automotive  suppliers.  As such, the
sales of these  product  lines are  directly  related  to the  overall  level of
passenger car and light truck  production in North America.  Also, the Company's
sales are  sensitive  to sales of new and  existing  homes,  changes in personal
disposable  income  and  seasonality.  The  Company  typically  experiences  two
seasonally  slow periods  during each year, in early July and in late  December,
due to scheduled plant shutdowns and holidays.

                                       15
<PAGE>

RESULTS OF OPERATIONS

1996 Compared to 1995

         Net sales for 1996 were $926.4 million as compared to $862.8 million in
1995,  an increase of $63.6 million or 7.4%.  Carpet  cushion net sales for 1996
increased  7.5% to $291.3  million from $271.0  million in 1995 primarily due to
increased  selling prices initiated during the second quarter of 1996 as well as
increased volume of shipments due to improved carpet sales.  Cushioning foam net
sales for 1996  increased  7.4% to $332.9  million  from $310.0  million in 1995
primarily due to increased net sales volume from both new and existing customers
of bedding related products, increased selling prices initiated at the beginning
of 1996 and a full year of results  for a company  acquired  in April 1995 which
manufactures  cushioning products.  Automotive foam net sales for 1996 increased
5.5% to $231.9  million from $219.8 million in 1995 primarily due to a continued
increase in net sales of  tri-laminates  and composite  headliners and increased
selling prices initiated at the beginning of 1996.  Technical foam net sales for
1996  increased  13.4% to $70.3 million from $62.0 million in 1995 primarily due
to increased selling prices and increased net sales volume.

         Gross profit as a percentage  of net sales  increased to 16.5% for 1996
from  11.7% in 1995  primarily  due to  selling  price  increases  and  improved
material and production efficiencies, which includes (i) selling price increases
during 1996 to offset the adverse  affect of the 1995 and 1994 raw material cost
increases,   (ii)  reductions  in  customer  deductions  for  pricing  disputes,
promotional  programs  and other  matters and (iii)  reductions  in salaries and
other  overhead  costs   associated   with  the   implementation   of  the  1995
restructuring plan.

         Income  from  operations  was $101.4  million for 1996 as compared to a
loss from operations of $10.6 million in 1995. The increase was primarily due to
an  increase  in  gross  profit  margins  as  discussed  above,  a  decrease  in
restructuring  and other  charges  (credits) of $47.9  million and a decrease in
selling,  general  and  administrative  expenses  of $11.6  million  for 1996 as
compared to 1995. The decrease in restructuring  and other charges  (credits) is
comprised of the $41.4  million  charge for  restructuring  and other charges in
1995 plus the net  restructuring  credit of $6.5  million in 1996.  The 1996 net
restructuring credit is comprised of a $11.3 million credit due to the Company's
decision not to close a facility which was part of the 1995  restructuring  plan
and $1.8 million of credits relating  primarily to the favorable  termination of
lease  agreements  and other matters  relating to the 1995  restructuring  plan,
offset  by  $6.6  million  of   restructuring   charges  relating  to  the  1996
restructuring  plan which  primarily  consists of the closure of two  facilities
during 1997. The decrease in selling, general and administrative expenses is the
result  of  reductions  in  the   provision   for   uncollectible   accounts  of
approximately  $3.9 million,  salaries and employee costs of approximately  $5.9
million and a reduction of approximately $2.0 million in environmental  accruals
offset by increases in selling expenses  associated with the increased net sales
volume.

         Income from continuing  operations was $32.5 million or $1.27 per share
for 1996 as compared to a loss from  continuing  operations  of $50.8 million or
$1.92 loss per share in 1995. The increase is primarily due to the reasons cited
above and a decrease in the average weighted shares  outstanding  resulting from
the  purchase of  treasury  stock  offset by an  increase  in interest  and debt
issuance  expense of $1.0  million.  The increase in interest and debt  issuance
expense is primarily due to (i) the amount of interest allocated to discontinued
operations in 1996 as compared to 1995 (see Note 3 to the consolidated financial
statements) and (ii) an increase in the accretion of the Discount Debentures (as
defined  herein) offset by a $2.3 million  increased  benefit from interest rate
swap agreements.

         The  1996  effective  income  tax rate for  continuing  operations  was
approximately  33.9% which included a net benefit of approximately  $3.0 million
associated  with the  reversal of valuation  allowances  offset by the impact of
permanent   differences  and  other  matters.  The  reversal  of  the  valuation
allowances  resulted from a  determination  in 1996 that a subsidiary that files
separate  federal income tax returns would more likely than not have  sufficient
taxable  income  to  utilize  its net  operating  loss  carryforwards  and other
deferred income tax assets as a result of improved  continuing  operations which
are expected to continue and its  divesture  of a subsidiary  that  historically
incurred taxable losses.

                                       16
<PAGE>

         The loss from  discontinued  operations of $114.5 million (net of $35.1
million  income tax  benefit) in 1996 relates to the net loss on the sale of the
home comfort products and automotive  textile business  segments which consisted
primarily of the net assets of Perfect Fit and JPS Automotive, respectively, and
the operating income (loss) of both entities  through their  respective  closing
dates.  The JPS  Automotive  sale is subject to a  post-closing  purchase  price
adjustment  which is expected to be finalized during the second quarter of 1997.
See Note 3 to the consolidated financial statements for further discussion.

         The extraordinary loss on early  extinguishment of debt of $1.1 million
(net of $0.8 million income tax benefit)  primarily  relates to the write-off of
debt  issuance  costs  and  redemption   premiums   associated  with  the  early
extinguishment  of  $30.6  million  of  long-term  debt.  See  Note  11  to  the
consolidated financial statements for further discussion.

         Operating  results in 1997 are  expected  to be  influenced  by various
internal and external factors.  These factors include,  among other things,  (i)
continued  implementation  of the  operational  plan to  improve  the  Company's
profitability,  (ii) the  completion of the Company's  evaluation of its current
capital structure,  (iii) raw material price increases, if any, by the Company's
chemical suppliers and (iv) the Company's success in passing on to its customers
selling  price  increases to recover such raw material cost  increases,  if any.
Also,  effective in January  1997,  the  Company's  operations  in Mexico became
subject to highly  inflationary  accounting  for financial  reporting  purposes.
Translation adjustments resulting from fluctuations in the exchange rate between
the  Mexican  Peso  and the  U.S.  dollar  will  be  included  in the  Company's
consolidated  statement  of  operations  as  compared  to  stockholders'  equity
(deficit).  Large  fluctuations  in the Mexican Peso exchange rate could have an
adverse impact on the Company's results of operations.

1995 Compared to 1994

          Net sales for 1995 were $862.8  million as compared to $833.7  million
in 1994, an increase of $29.1 million or 3.5%. Carpet cushion net sales for 1995
decreased  7.4% to $271.0  million from $292.5  million in 1994 primarily due to
reduced net sales volume of certain carpet cushion products  resulting from weak
carpet sales and a change in product mix to carpet  cushion  with lower  selling
prices.  In addition,  carpet cushion selling prices were under pressure from an
excess supply of low priced scrap foam,  the primary  component of rebond carpet
cushion.  Cushioning  foam net sales for 1995  increased  7.2% to $310.0 million
from $289.2  million in 1994  primarily due to the April 1995  acquisition  of a
company which  manufactures  cushioning  products and increased  selling  prices
offset by a reduction in net sales volume due to competitive  pricing  pressures
and reduced demand for certain  cushioning  foam products.  Automotive  foam net
sales for 1995  increased  11.0% to $219.8  million from $198.0  million in 1994
primarily  due to increased  net sales  volume of  tri-laminates  and  composite
headliner products offset by a reduction in net sales volume of other automotive
foam  products.  Technical  foam net  sales  for 1995  increased  14.8% to $62.0
million from $54.0 million in 1994 primarily due to increased selling prices and
increased net sales volume.

          Gross profit as a percentage of net sales  decreased to 11.7% for 1995
from 17.1% for 1994.  This  unfavorable  relationship  was  primarily due to net
unrecovered  raw material cost increases of  approximately  $25.0 million during
1995. In addition,  the decrease in gross profit margins for 1995 as compared to
1994 was also  associated  with (i)  approximately  $7.7  million  of  increased
customer deductions for pricing disputes,  promotion programs and other matters,
(ii)   approximately  $3.5  million  of  increased  employee  benefits  accruals
associated  with  insurance  and  pension  plans  and  other   accruals,   (iii)
approximately  $1.5 million of inventory  write-offs  associated with scrap foam
inventory and discontinued or slow moving product lines, (iv) an increase in net
sales of automotive  tri-laminates,  which have a  lower-margin  than other foam
products,  (v) under utilization of manufacturing  capacities due to reduced net
sales volume of certain  product lines and (vi) carpet  cushion  selling  prices
remaining  under  pressure from an excess  supply of low priced scrap foam,  the
primary component of rebond carpet cushion.

                                       17
<PAGE>

         A loss  from  operations  of $10.6  million  was  incurred  for 1995 as
compared  to income of $80.2  million  for 1994.  The  decrease  in income  from
operations  was primarily due to (i) the reduction in gross profit  margins as a
percentage of net sales as discussed above, (ii) an increase in selling, general
and  administrative  expenses  of $7.7  million  for  1995 as  compared  to 1994
including  an  increase  of $3.7  million  in the  provision  for  uncollectible
accounts  and  (iii)  restructuring  and  other  charges  of $41.4  million  (as
discussed below).

         In  1995,  the  Company  approved  the  1995   restructuring   plan  to
consolidate  thirteen  foam  production,  fabrication  or  branch  locations  to
concentrate  resources as a result of industry  conditions  and better  position
itself  to  achieve  its  strategic  growth  objectives.  The  Company  recorded
restructuring and other charges of $41.4 million which were comprised of charges
of $35.6  million  associated  with the  consolidation  of the foam  production,
fabrication or branch locations,  $2.2 million associated with the completion of
the  1993  restructuring  plan and  $3.6  million  associated  with  merger  and
acquisition  activities  of the Company.  The  components  of the $35.6  million
restructuring  charge include:  $16.7 million for fixed asset writedowns,  $15.1
million for plant closure and operating  lease  obligations and $3.8 million for
personnel  reductions.  The $3.8 million cost for personnel reductions primarily
represents  severance and employee benefit costs associated with the elimination
of manufacturing and administrative  personnel.  (See Note 4 to the consolidated
financial statements for further discussion).

         A net loss of $53.1  million or $2.01 loss per share was  incurred  for
1995 as compared to net income of $26.1 million or $0.98 per share for 1994. The
decrease is primarily  due to (i) the reasons  cited above,  (ii) an increase in
interest and debt issuance  expense of $7.7 million and an effective  income tax
benefit of 19.4% for 1995 as compared to an  effective  income tax  provision of
38.6% for 1994. The increase in interest and debt issuance  expense is primarily
due to the issuance of the debt  instruments in connection  with the acquisition
of JPS Automotive in June 1994.  The reduction in the effective  income tax rate
is primarily due to establishing  valuation  allowances for net operating losses
and deferred tax assets of subsidiaries  which file separate  federal income tax
returns and had a history of taxable losses.

Liquidity and Capital Resources

         Liquidity

         The  Company's  operating  cash  requirements  consist  principally  of
working capital  requirements,  scheduled  payments of principal and interest on
outstanding indebtedness and capital expenditures of the operating subsidiaries.
The Company believes that cash flow from operating activities,  cash on hand and
periodic   borrowings  under  Foamex  L.P.'s  revolving  credit  agreement,   if
necessary, will be adequate to meet operating cash requirements.  The ability to
meet the operating cash  requirements of Foamex L.P. could be impaired if Foamex
L.P.  was to fail to comply with any of the  covenants  contained  in the Foamex
L.P. credit facility (the "Foamex L.P. Credit Facility") and such  noncompliance
was not  cured by Foamex  L.P.  or waived by the  lenders.  Foamex  L.P.  was in
compliance  with the covenants in the Foamex L.P. Credit Facility as of December
29, 1996 and expects to be in compliance  with the covenants for the foreseeable
future.  The ability of Foamex L.P. and of Foamex-JPS  Automotive L.P. ("FJPS"),
the  owner  of a 98%  limited  partnership  interest  in  Foamex  L.P.,  to make
distributions  to the  Company is  restricted  by the terms of their  respective
financing agreements;  therefore,  the Company is not expected to have access to
the cash flow generated by Foamex L.P. for the foreseeable future.

         Cash and cash equivalents  increased $18.9 million during 1996 to $22.2
million at December 29, 1996 from $3.3  million at December  31, 1995  primarily
due to net sale  proceeds  received  from the sale of JPS  Automotive  which are
subject to post-closing  adjustments and improved operating  results,  offset by
the  increased  use of cash and cash  equivalents  by the  operating  assets and
liabilities of the Company, capital expenditures,  scheduled debt repayments and
the  purchase of  treasury  stock.  Cash and cash  equivalents  decreased  $37.5
million  during 1995 to $3.3 million at December 31, 1995 from $40.8  million at
January  1,  1995  primarily  due  to  capital   expenditures,   scheduled  debt
repayments,  purchase of treasury stock and the  acquisition of a  manufacturing
company in April 1995.  Working  capital  increased $45.0 million during 1996 to
$136.6  million at  December  29, 1996 from $91.6  million at December  31, 1995
primarily due to improved  operating  results and the net sale proceeds received

                                       18
<PAGE>

from the sale of JPS  Automotive  offset by  working  capital  used for  capital
expenditures   and  purchases  of  treasury  stock.  Net  operating  assets  and
liabilities (comprised of accounts receivable, inventories and accounts payable)
increased  $21.3 million during 1996 to $144.3 million at December 29, 1996 from
$123.0  million at December  31, 1995  primarily  due to  increases  in accounts
receivable  and  inventories  offset  by  increases  in  accounts  payable.  The
increases in accounts  receivable and inventories are primarily  associated with
the  improved  operating  results of the  Company.  In  addition,  raw  material
inventories  increased  due to increased  year end purchases  associated  with a
potential cost increase that did not occur.  The increase in accounts payable is
primarily  associated  with the year end purchase of raw  material  inventories.
Working capital decreased $24.3 million during 1995 to $91.6 million at December
31,  1995 from  $115.9  million  at  January  1, 1995  primarily  due to (i) the
reduction of cash and cash  equivalents as discussed  above and (ii) an increase
in  accrued   restructuring   charges.  Net  operating  assets  and  liabilities
(comprised of accounts  receivable,  inventories and accounts payable) decreased
$10.1  million to $123.0  million at  December  31,  1995 as  compared to $133.1
million at January 1, 1994.  The  decrease  was  primarily  due to a decrease in
inventories.  The 1996 and 1995 restructuring plans include  approximately $16.8
million of cash charges of which $10.3  million has been incurred as of December
29, 1996.

         As of December 29,  1996,  there were no  revolving  credit  borrowings
under the Foamex L.P. Credit Facility with unused  availability of approximately
$33.3 million which includes approximately $11.7 million associated with letters
of credit  outstanding  which are supported by the Foamex L.P. Credit  Facility.
Borrowings  by Foamex  Canada as of December  29, 1996 were $3.7  million  under
Foamex  Canada's   revolving  credit  agreement  with  unused   availability  of
approximately $0.7 million at an interest rate of 5.25%.

         Cash Flow from Operating Activities

         Cash flow from continuing  operations was $41.3 million,  $25.5 million
and  $48.1  million  in 1996,  1995  and  1994,  respectively.  Cash  flow  from
continuing  operations  increased  in 1996 as  compared to 1995  primarily  as a
result of improved  operating  results from continuing  operations  offset by an
increased use of cash by the operating  assets and  liabilities.  Cash flow from
continuing  operations  decreased  in 1995 as  compared to 1994  primarily  as a
result of the reduction in operating results from continuing operations.

          Cash Flow from Investing Activities

          From  the   beginning  of  1994  through   1996,   the  Company  spent
approximately $66.9 million on capital improvements.  The expenditures included:
(i) installation of new variable pressure foaming technology  ("VPF(TM)") in the
Verona,  Mississippi and Orange,  California facilities;  (ii) initiation of the
construction  of a facility  in Mexico  City,  Mexico to  improve  manufacturing
efficiencies  and to meet the  growing  demand  for  foam  products;  and  (iii)
installation  of more efficient  foam  production  line systems and  fabricating
equipment  in a number of  manufacturing  facilities.  The  Company  expects  to
maintain capital  expenditures at the current levels for the foreseeable  future
by focusing spending  primarily on the maintenance of existing  equipment and on
the installation of the VPF(TM) manufacturing process.

          During 1996, the Company  received net sale proceeds of  approximately
$59.5 million in connection with the sale of Perfect Fit ($42.7 million) and the
sale of JPS Automotive  ($16.8  million).  The Perfect Fit sale was finalized in
1996 and the net sale proceeds were used to repurchase  long-term debt (see Note
11 to the  consolidated  financial  statements)  and for the  payment of certain
retained liabilities,  with the remainder held as restricted cash as of December
29, 1996 for the  repurchase  of  additional  long-term  debt during 1997. As of
February 26, 1997,  the Company has  repurchased  approximately  $8.0 million of
long-term debt with restricted cash. The JPS Automotive sale price is subject to
post-closing  adjustment  which is  expected to be  finalized  during the second
quarter of 1997.

          In April 1995, the Company acquired certain assets and assumed certain
liabilities of manufacturers  of synthetic  fabrics for the carpet and furniture
industries  for  an  aggregate  consideration  of  approximately  $8.0  million,
including  related  fees and expenses of  approximately  $0.3  million,  with an
initial cash payment of $7.2 million.

                                       19

<PAGE>

         In March  1994,  the  Company  acquired  Transformacion  De  Espumas  Y
Fieltros,  S.A.  de C.V.  ("TEFSA")  for an  aggregate  purchase  price  of $4.5
million,  including related fees and expenses of approximately $0.4 million,  to
be paid over a three year period with an initial cash  payment of $1.7  million.
During 1996 and 1995, the Company made scheduled cash payments of  approximately
$0.8 million in each year in accordance with the purchase  agreement.  The final
payment of approximately $0.8 million will be made in April 1997.

         Cash Flow from Financing Activities

         As of December 29, 1996, the Company had repurchased  long-term debt of
approximately  $30.6 million with the net proceeds from the sale of Perfect Fit.
In addition,  the Company had repurchased  long-term debt of approximately  $8.0
million  through  February  26,  1997  with  restricted  cash.

         During 1996,  Foamex Mexico  borrowed $1.5 million under two promissory
notes that bear  interest at LIBOR  (5.69% at December  29,  1996) plus 3/8% and
mature on June 30, 1997.  During 1994,  the Company  borrowed  $97.0  million in
connection with the acquisition of JPS Automotive which included a $40.0 million
term loan under the Foamex L.P.  Credit  Facility and $57.0 from the issuance of
Senior Secured Discount Debentures due 2004 (the "Discount  Debentures") by FJPS
and  Foamex-JPS  Capital  Corporation  ("FJCC").  These  borrowings  are further
discussed in Note 8 to the consolidated financial statements.

         During 1996 and 1995, the Company  purchased 624,700 shares and 929,700
shares of its common stock, respectively,  for an aggregate cost of $6.3 million
and $7.2  million,  respectively,  under  programs  authorized  by the  Board of
Directors to purchase up to 3.0 million shares of the Company's common stock.

Interest Rate Swap Agreements

         The Company  enters into  interest  rate swaps to lower  funding  costs
and/or to manage  interest costs and exposure to changing  interest  rates.  The
Company does not hold or issue financial  instruments for trading purposes.  The
Company has an interest rate swap agreement,  as amended, with a notional amount
of $150.0 million through December 2001.  Under the swap agreement,  the Company
has made variable payments based on LIBOR through December 1996 and is obligated
to make  fixed  payments  at 5.30%  per  annum for the  twelve  months  ended in
December  1997 and variable  payments at a rate equal to LIBOR for the remainder
of the  agreement,  in exchange for fixed  payments by the swap partner at 5.81%
per annum through  December  1996,  and 6.50% per annum for the remainder of the
agreement,  payable semiannually in arrears. The swap partner has the ability to
terminate the swap  agreement  after the December 1997 payment if the LIBOR rate
the Company is to pay for any period  thereafter  is equal to or less than 4.50%
per annum.  Interest expense will be subject to fluctuations in LIBOR during the
term of the swap agreement  except during 1997. The Company is exposed to credit
loss in the event of nonperformance by the swap partner; however, the occurrence
of this event is not anticipated.

         Also, the Company has an interest rate swap agreement,  as amended, for
a notional  amount of $150.0  million  through  December  2001.  Under this swap
agreement,  the Company has made variable  payments based on LIBOR with a cap of
5.50% per annum and a floor of 4.75% per annum for the six months  ended in June
1995,  variable  payments based on LIBOR with a floor of 4.75% per annum for the
six months ended in December  1995,  fixed payments at a rate of 5.81% per annum
for the twelve  months  ended in December  1996 and is  obligated  to make fixed
payments  at a rate of 5.30% per annum for the twelve  months  ended in December
1997 and variable payments based on LIBOR for the remainder of the agreement, in
exchange  for  variable  payments by the swap  partner at the rate of LIBOR plus
0.80% per annum for the six  months  ended in June  1995,  LIBOR  plus 0.72% per
annum for the six months ended in December 1995,  LIBOR plus 2.45% per annum for
the six months ended in June 1996, LIBOR plus 2.39% per annum for the six months
ended in December  1996 and fixed  payments at 6.50% per annum for the remainder
of the term of the agreement,  payable semiannually in arrears. The swap partner
has the ability to terminate the swap agreement  after the December 1997 payment

                                       20

<PAGE>

if the LIBOR rate the Company is to pay for any period thereafter is equal to or
less than 4.50% per annum. The Company is exposed to credit loss in the event of
nonperformance by the swap partner; however, the occurrence of this event is not
anticipated.  Interest  expense will be subject to  fluctuations in LIBOR during
the term of the  swap  agreement  except  during  1997.  The  effect  of the two
interest  rate swaps  described  above was a  favorable  adjustment  to interest
expense of $3.7 million,  $1.4 million and $3.0 million for 1996, 1995 and 1994,
respectively.

Environmental Matters

         The Company is subject to extensive and changing environmental laws and
regulations.  Expenditures to date in connection  with the Company's  compliance
with  such  laws and  regulations  did not have a  material  adverse  effect  on
operations,  financial position,  capital expenditures or competitive  position.
The  amount  of  liabilities   recorded  by  the  Company  in  connection   with
environmental  matters as of December 29, 1996 was $4.1 million. In addition, as
of  December  29,  1996,  the Company has net  receivables  of $0.9  million for
indemnification  of environmental  liabilities from former owners, net of a $1.0
million allowance relating to potential disagreements regarding the scope of the
indemnification.  Although  it  is  possible  that  new  information  or  future
developments could require the Company to reassess its potential exposure to all
pending environmental matters, including those described in the footnotes to the
Company's  consolidated  financial  statements,  management believes that, based
upon all currently  available  information,  the  resolution of all such pending
environmental  matters will not have a material  adverse effect on the Company's
operations, financial position, capital expenditures or competitive position.

Inflation and Other Matters

         There was no significant impact on the Company's operations as a result
of inflation during the prior three year period. See "Results of Operations 1995
versus 1994" for a discussion of the impact of raw material price increases.  In
some circumstances,  market conditions or customer  expectations may prevent the
Company from  increasing  the price of its  products to offset the  inflationary
pressures that may increase its costs in the future.

New Accounting Pronouncements

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings  Per
Share".  SFAS 128 specifies  new standards  designed to improve the earnings per
share ("EPS")  information  provided in financial  statements by simplifying the
existing computational  guidelines,  revising the disclosure  requirements,  and
increasing the comparability of EPS data on an international  basis. Some of the
changes made to simplify  the EPS  computations  include:  (i)  eliminating  the
presentation  of primary EPS and replacing it with basic EPS, with the principal
difference  being that common stock  equivalents are not considered in computing
basic EPS, (ii)  eliminating  the modified  treasury  stock method and the three
percent materiality provision and (iii) revising the contingent share provisions
and the  supplemental  EPS data  requirements.  SFAS 128 also  makes a number of
changes to existing disclosure requirements. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997.
The Company has not yet determined the impact of the implementation of SFAS 128.

         In October 1996, the American Institute of Certified Public Accountants
issued   Statement  of  Position   ("SOP")  96-1,   "Environmental   Remediation
Liabilities",  which provides  guidance on specific  accounting  issues that are
present in the recognition, measurement, display and disclosure of environmental
remediation liabilities.  SOP 96-1 is effective for fiscal years beginning after
December 15, 1996. Accordingly, the Company will adopt SOP 96-1 during the first
quarter of 1997.  Management  believes that the adoption of this  statement will
not have a material impact on its results of operations or financial position.

                                       21
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Foamex International Inc. and Subsidiaries:
             Report of Independent Accountants                             F-2
             Consolidated  Balance  Sheets as of December  29, 1996
             and December 31, 1995                                         F-3
             Consolidated  Statements of Operations  for the years
             ended 1996,  1995,  and 1994                                  F-5
             Consolidated  Statements  of Cash Flows for the years 
             ended  1996,  1995,  and 1994                                 F-6
             Consolidated Statements of Stockholders' Equity (Deficit)
             for the years ended 1996, 1995, and 1994                      F-7
             Notes to Consolidated Financial Statements                    F-8

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

          Not applicable.

PART III

          The information required by this Part III (Items 10, 11, 12 and 13) is
hereby  incorporated by reference from the Company's  definitive proxy statement
which is  expected  to be filed  pursuant to  Regulation  14A of the  Securities
Exchange  Act of 1934 not later than 120 days  after the end of the fiscal  year
covered by this report.


                                       22

<PAGE>

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

(a)       Financial statements

          The financial statements listed in the accompanying Index to Financial
          Statements are filed as part of this Annual Report on Form 10-K.

(b)       Reports on Form 8-K.

             Form 8-K,  dated  December 11, 1996,  reporting  the closing of the
             sale of JPS  Automotive  on December 11, 1996 pursuant to Item 2 of
             Form 8-K.

(c)       Exhibits

3.1(a)    - Restated Certificate of Incorporation of the Company.

3.2(a)    - By-laws of the Company.

4.1(b)    -  Indenture,  dated as of June 3, 1993,  among Foamex L.P. and Foamex
          Capital Corporation  ("FCC"),  as joint and several obligors,  General
          Felt,  as   Guarantor,   and  Shawmut   Bank,   National   Association
          ("Shawmut"),  as trustee, relating to $160,000,000 principal amount of
          9 1/2% Senior Secured Notes due 2000, including form of Senior Secured
          Note.

4.2(a)    - First Supplemental  Indenture,  dated as of November 18, 1993, among
          the  Company and FCC, as  Issuers,  General  Felt and Perfect  Fit, as
          Guarantors  and Shawmut,  as trustee,  relating to the Senior  Secured
          Notes.

4.3(a)    - Second Supplemental Indenture,  dated as of December 14, 1993, among
          the Company and FCC, as Issuers, the Company, General Felt and Perfect
          Fit, as  Guarantors  and Shawmut,  as trustee,  relating to the Senior
          Secured Notes.

4.3.1(p)  - Third  Supplemental  Indenture,  dated as of August 1, 1996,  by and
          among the Foamex  L.P and FCC,  as  Issuers,  the  Company,  as parent
          guarantor,  General Felt, as  guarantor,  Perfect Fit, as  withdrawing
          guarantor, and Fleet National Bank ("Fleet"), as trustee,  relating to
          the Senior Secured Notes.

4.4(b)    - Company Pledge  Agreement,  dated as of June 3, 1993, by Foamex L.P.
          in favor of Shawmut,  as trustee for the holders of the Senior Secured
          Notes.

4.5(b)    - Company Pledge Agreement,  dated as of June 3, 1993, by FCC in favor
          of Shawmut, as trustee for the holders of the Senior Secured Notes.

4.6(b)    - Subsidiary  Pledge  Agreement,  dated as of June 3, 1993, by General
          Felt in favor of  Shawmut,  as trustee  for the  holders of the Senior
          Secured Notes.

4.7(b)    - Company Security Agreement, dated as of June 3, 1993, by Foamex L.P.
          and FCC in favor of Shawmut,  as trustee for the holders of the Senior
          Secured Notes.

4.8(b)    - Subsidiary Security Agreement,  dated as of June 3, 1993, by General
          Felt in favor of  Shawmut,  as trustee  for the  holders of the Senior
          Secured Notes.

4.9(b)    - Collateral Assignment of Patents and Trademarks, dated as of June 3,
          1993,  by Foamex L.P. in favor of Shawmut,  as trustee for the holders
          of the Senior Secured Notes.

4.10(b)   - Collateral Assignment of Patents and Trademarks, dated as of June 3,
          1993,  by FCC in favor of  Shawmut,  as trustee for the holders of the
          Senior Secured Notes.

4.11(b)   - Collateral Assignment of Patents and Trademarks, dated as of June 3,
          1993, by General Felt in favor of Shawmut,  as trustee for the holders
          of the Senior Secured Notes.

4.12(c)   - Indenture, dated as of October 13, 1992, among Foamex L.P., FCC, and
          The  Connecticut  National Bank, as trustee,  relating to $150,000,000
          principal  amount of 11 1/4% Senior Notes due 2002,  including form of
          Senior Note.

                                       23
<PAGE>

4.13(d)   - First Supplemental Indenture, dated as of March 23, 1993, among
          Foamex L.P. and FCC, as joint and several obligors, General Felt, as
          Guarantor, and Shawmut Bank Connecticut, National Association
          (formerly The Connecticut National Bank) ("Shawmut Connecticut"), as
          trustee, relating to the Senior Notes.

4.14(a)   - Second Supplemental Indenture, dated as of November 18, 1993, among
          Foamex L.P. and FCC, as Issuers, General Felt and Perfect Fit, as
          Guarantors, and Shawmut Connecticut, as trustee, relating to the
          Senior Notes.

4.15(a)   - Third Supplemental Indenture, dated as of December 14, 1993, among
          Foamex L.P. and FCC, as Issuers, the Company, General Felt and Perfect
          Fit, as Guarantors, and Shawmut Connecticut, as trustee, relating to
          the Senior Notes.

4.16(j)   - Fourth Supplemental Indenture, dated as of October 31, 1994, among
          Foamex L.P. and FCC as Issuers, the Company as Parent Guarantor,
          General Felt and Perfect Fit as Guarantors, and Shawmut Connecticut,
          as Trustee, relating to the Senior Notes.

4.17(p)   - Fifth Supplemental Indenture, dated as of August 1, 1996, by and
          among Foamex L.P. and FCC as guarantor, Perfect Fit, as withdrawing
          guarantors, and Fleet, as trustee, relating to the Senior Notes.

4.18(c)   - Indenture, dated as of October 13, 1992, among Foamex L.P., FCC and
          Shawmut, as trustee, relating to $126,000,000 principal amount of 11 %
          Senior Subordinated Debentures due 2004, including form of Senior
          Subordinated Debenture.

4.19(d)   - First Supplemental Indenture, dated as of March 23, 1993, among
          Foamex L.P. and FCC, as joint and several obligors, General Felt, as
          Guarantor, and Shawmut, as trustee, relating to the Senior
          Subordinated Debentures.

4.20(a)   - Second Supplemental Indenture, dated as of November 18, 1993, among
          Foamex L.P. and FCC, as Issuers, General Felt and Perfect Fit, as
          Guarantors, and Shawmut, as trustee, relating to the Senior
          Subordinated Debentures.

4.21(b)   - Third Supplemental Indenture, dated as of December 14, 1993, among
          Foamex L.P. and FCC, as Issuers, the Company, General Felt and Perfect
          Fit, as Guarantors, and Shawmut, as trustee, relating to the Senior
          Subordinated Debentures.

4.22(p)   - Fourth Supplemental Indenture, dated as of August 1, 1996, by and
          among Foamex L.P. and FCC, as Issuers, the Company, as parent, General
          Felt, as guarantor, Perfect Fit, as withdrawing guarantor, and Fleet,
          as trustee relating to the Senior Subordinated Debentures.

4.23(i)   - Indenture, dated as of June 28, 1994, among FJPS and FJCC, as
          Issuers, the Company, as guarantor, and Shawmut Connecticut, as
          trustee, relating to $116,745,000 principal amount of Senior Secured
          Discount Debentures due 2004, including form of Senior Secured
          Discount Debenture.

4.24(j)   - Pledge Agreement, dated as of June 28, 1994, made by FJPS in favor
          of Shawmut, as collateral agent for the holders of the Senior Secured
          Discount Debentures.

4.25(i)   - Senior Note, dated June 28, 1994, in the aggregate principal amount
          of $87,943,103.14 due July 1, 2006, executed by FJPS to Foamex L.P.

4.26(t)   - Consent, Waiver and Amendment Agreement, dated December 11, 1996,
          between FJPS and Foamex L.P. 4.27(p) - Commitment letter, dated July
          9, 1996, from The Bank of Nova Scotia to Foamex Canada Inc. 4.28(p) -
          Third Amended and Restated Credit Agreement, dated as of July 30,
          1996, among Foamex L.P., General Felt, Trace Foam Company, Inc.
          ("Trace Foam"), FMXI, Inc. ("FMXI"), Citibank, N.A., The Bank of Nova
          Scotia, the institutions from time to time parties thereto as lenders,
          the institutions parties thereto as issuing banks and Citibank, N.A.
          and The Bank of Nova Scotia, as Administrative Agents (the "Credit
          Agreement").

4.29(q)   - First Amendment to Third Amended and Restated Credit Agreement,
          dated September 30, 1996, among Foamex L.P., General Felt, Trace Foam,
          FMXI, Citibank, N.A., The Bank of Nova Scotia, the institutions from
          time to time parties thereto as lenders, the institutions from time to
          time parties as lenders, the parties thereto as issuing banks and
          Citibank, N.A. and The Bank of Nova Scotia, as Administrative Agents.

                                       24
<PAGE>

4.30(t)   - Second Amendment to Third Amended and Restated Credit Agreement,
          dated as of November 27, 1996, among Foamex L.P., General Felt, Trace
          Foam, FMXI, Citibank, N.A., The Bank of Nova Scoria, the institutions
          from time to time parties thereto as lenders, the institutions parties
          thereto as issuing banks and Citibank, N.A. and The Bank of Nova
          Scotia, as Administrative Agents.

4.31(a)   - Guaranties, dated November 18, 1993, executed by each of Foamex
          L.P., General Felt, and Perfect Fit, as guarantor, respectively, in
          favor of Citibank, N.A., as Administrative Agent, for the ratable
          benefit of the lenders and the issuing banks, guaranteeing the
          obligations of one another under the Credit Agreement.

4.32(a)   - Guaranty, dated November 18, 1993, executed by FCC in favor of
          Citibank, N.A., as Administrative Agent, for the ratable benefit of
          the lenders and the issuing banks, guaranteeing the obligations of
          Foamex L.P., General Felt, and Perfect Fit under the Credit Agreement.

4.33(i)   - Amended and Restated Guaranty, dated as of June 28, 1994, executed
          by the Company in favor of Citibank, N.A. and The Bank of Nova Scotia,
          as Administrative Agents, for the ratable benefit of the lenders and
          the issuing banks under the Credit Agreement.

4.34(n)   - First Amendment to Amended and Restated Guaranty, dated June 30,
          1995, executed by the Company in favor of Citibank, N.A. and The Bank
          of Nova Scotia, as Administrative Agents, for the ratable benefit of
          the lenders and the issuing banks under the Credit Agreement.

4.35(n)   - Second Amendment to Amended and Restated Guaranty, dated February
          27, 1996, executed by the Company in favor of Citibank, N.A. and The
          Bank of Nova Scotia, as Administrative Agents, for the ratable benefit
          of the lenders and the issuing banks under the Credit Agreement.

4.36(t)   - Third Amendment to Amended and Restated Guaranty, dated November 27,
          1996, executed by the Company in favor of Citibank, N.A. as Collateral
          Agent, for the ratable benefit of the lenders and the issuing banks
          under the Credit Agreement.

4.37(a)   - Security Agreements, dated November 18, 1993, executed by each of
          Foamex L.P., General Felt, Perfect Fit, and FCC, respectively, and
          Citibank N.A., as Administrative Agent for the lenders and the issuing
          banks under the Credit Agreement.

4.38(i)   - Amendatory Agreement, dated as of June 28, 1994, among Foamex L.P.,
          General Felt, Perfect Fit, FCC, and Citibank, N.A., as collateral
          agent under the Credit Agreement.

4.39(p)   - Amendatory Agreement, dated as of July 30, 1996, among Foamex L.P.,
          General Felt, FCC, and Citibank, N.A., as collateral agent under the
          Credit Agreement.

4.40(a)   - Intercreditor Agreement, dated as of November 18, 1993, by and
          between Citibank, N.A., as Administrative Agent under the Credit
          Agreement and Shawmut, as trustee under the Foamex L.P. Senior Secured
          Note Indenture.

4.41(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").

4.42(a)   - Marely Loan Commitment Agreement, dated as of December 14, 1993, by
          and between the Company and Marely s.a. ("Marely").

4.43(a)   - DLJ Loan Commitment Agreement, dated as of December 14, 1993, by and
          between the Company and DLJ Funding, Inc. ("DLJ Funding") .

4.44(p)   - Promissory Note, dated July 7, 1996, in the aggregate principal
          amount of $4,372,516 executed by Trace Holdings to Foamex L.P.

10.1(a)   - Registration Rights Agreement, dated as of December 14, 1993, by and
          among the Company and GBNY and, for certain limited purposes as set
          forth therein, Trace Holdings and Trace Foam.

10.2(a)   - Registration Rights Agreement, dated as of December 14, 1993, by and
          among the Company and RFC and, for certain limited purposes as set
          forth therein, Trace Holdings and Trace Foam.

10.3(a)   - Registration Rights Agreement, dated as of December 14, 1993, by and
          between the Company and Rallis.

                                       25
<PAGE>
10.4(a)   - Registration Rights Agreement, dated as of December 14, 1993, by and
          among the Company and DLJ Funding and, for certain limited purposes as
          set forth therein, Trace Holdings and Trace Foam.
10.5(a)   - Registration Rights Agreement, dated as of December 14, 1993, by and
          between the Company and FCD Sub, Inc.
10.6(a)   - Registration Rights Agreement, dated as of December 14, 1993, by and
          among the Company and Marely and, for certain limited purposes as set
          forth therein, Trace Holdings and Trace Foam.
10.7(a)   - Registration Rights Agreement, dated as of December 14, 1993, by and
          between the Company and Trace Foam.
10.8(a)   - Registration Rights Agreement, dated as of December 14, 1993, by and
          between the Company and Trace Holdings.
10.9(a)   - Registration Rights Agreement, dated as of November 18, 1993, by and
          among the Company and the Investors which are signatories thereto.
10.10(i)  - Warrant Registration Rights Agreement, dated as of June 28, 1994, by
          and among the Company, DLJ Funding and Smith Barney Inc.
10.11(h)  - Warrant Agreement, dated as of June 28, 1994, between the Company
          and Shawmut.
10.12(t)  - Revised Confirmation Letter Agreements, dated as of January 7, 1997,
          by and between Foamex L.P. and Citibank, N.A.
10.13(t)  - Assignment Agreement, dated as of December 16, 1996, among Foamex
          L.P., FCC, and Salomon Brothers Holdings Company Inc ("Salomon
          Holdings").
10.14(d)  - Reimbursement Agreement, dated as of March 23, 1993, between Trace
          Holdings and General Felt.
10.15(d)  - 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 Blackell, and Prefoam AG
          relating to foam technology sharing arrangement.
10.16(e)  - Asset Transfer Agreement, dated as of October 2, 1990, between Trace
          Holdings and Foamex L.P. (the "Trace Holdings Asset Transfer
          Agreement").
10.17(e)  - First Amendment, dated as of December 19, 1991, to the Trace
          Holdings Asset Transfer Agreement.
10.18(e)  - Amended and Restated Guaranty, dated as of December 19, 1991, made
          by Trace Foam in favor of Foamex L.P.
10.19(e)  - Asset Transfer Agreement, dated as of October 2, 1990, between RFC
          and Foamex L.P. (the "RFC Asset Transfer Agreement").
10.20(e)  - First Amendment, dated as of December 19, 1991, to the RFC Asset
          Transfer Agreement.
10.21(e)  - Schedule 5.03 to the RFC Asset Transfer Agreement (the "5.03
          Protocol").
10.22(d)  - The 5.03 Protocol Assumption Agreement, dated as of October 13,
          1992, between RFC and Foamex L.P.
10.23(d)  - Letter Agreement between Trace Holdings and Recticel regarding the
          Recticel guaranty, dated as of July 22, 1992.
10.24(i)  - Supply Agreement, dated June 28, 1994, between Foamex L.P. and the
          Company.
10.25(i)  - First Amended and Restated Tax Sharing Agreement, dated as of
          December 14, 1993, among Foamex L.P., Trace Foam, FMXI, and the
          Company.
10.26(i)  - Tax Sharing Agreement, dated as of June 28, 1994, among FJPS and the
          Company.
10.27(t)  - Tax Distribution Advance Agreement, dated as of December 11, 1996,
          by and between Foamex L.P. and FJPS.
10.28(d)  - Trace Foam Management Agreement between Foamex L.P. and Trace Foam,
          dated as of October 13, 1992.
10.29(i)  - Affirmation Agreement re: Management Agreement, dated as of December
          14, 1993 between Foamex L.P. and Trace Foam.

                                       26
<PAGE>
10.30(m)  - Aircraft Purchase Agreement, dated as of August 22, 1995, by and
          between Trace Aviation Corp. ("Trace Aviation") and Foamex Aviation
          Inc. ("Foamex Aviation").
10.31(m)  - Aircraft Sale, Lease and Operating Agreement, dated as of August 22,
          1995, by and between Trace Aviation and Trace Holdings.
10.32(m)  - Assumption/Aircraft Security Agreement, dated as of August 22, 1995,
          by and between Foamex Aviation and the CIT Group/Equipment Financing,
          Inc. ("CIT Group").
10.33(m)  - Collateral Assignment of Aircraft Leases and Aircraft Use
          Agreements, dated as of August 22, 1995, by and between Foamex
          Aviation and CIT Group.
10.34(m)  - Guaranty by the Company in favor of CIT Group, dated as of August
          22, 1995.
10.35(m)  - Aviation Guaranty Indemnity Agreement, dated as of August 22, 1995,
          by and between the Company and Trace Holdings.
10.36(e)(o) - Salaried Incentive Plan of Foamex L.P. and Subsidiaries.
10.37(e)(o) - Trace Holdings 1987 Nonqualified Stock Option Plan.
10.38(e)(o) - Equity Growth Participation Program.
10.39(j)(o) - General Felt Industries, Inc. Retirement Plan for Salaried
          Employees, effective as of January 1, 1995.
10.40(e)(o) - Foamex L.P. Salaried Retirement Plan (formerly known as the Foamex
          L.P. Products, Inc. Salaried Employee Retirement Plan), as amended,
          effective July 1, 1984.
10.41(e)(o) - Foamex L.P. 401(k) Savings Plan dated January 1, 1989.
10.42(l)(o) - Foamex/GFI 401(k) Savings Plan dated July 1, 1995.
10.43(a)(o) - The Company's 1993 Stock Option Plan.
10.44(a)(o) - The Company's Non-Employee Director Compensation Plan.
10.45(a)(o) - Employment Agreement, dated as of May 6, 1993, by and between
          Foamex L.P. and Rallis.
10.46(f)(o) - Employment Agreement, dated as of February 1, 1994, by and between
          Foamex L.P. and William H. Bundy.
10.47(n)(o) - Employment Agreement, dated as of June 26, 1995, by and between
          Foamex L.P. and Salvatore J. Bonanno
10.48(k)(o) - Bonus Agreement, dated as of May 7, 1993, between the Company and
          Robert Hay.
10.49(a)  - Amended and Restated Put Option Agreement, dated as of December 14,
          1993, by and between Trace Holdings and Rallis.
10.50(f)  - Stock Purchase Agreement, dated as of December 23, 1993, by and
          between Transformacion de Espumas y Fieltros, S. A. de C.V., the
          stockholders which are parties thereto, and Foamex L.P.
10.51(g)  - Asset Purchase Agreement, dated as of May 25, 1994, by and among JPS
          Automotive, JPS Textile Group, Inc., the Company, JPS Auto Inc., and
          JPS Converter & Industrial Corp.
10.52(r)  - Agreement and Plan of Merger, as amended, dated as of June 11, 1996,
          by and among, PFI Subsidiary, Inc., PFI Acquisition Corp., Jody B.
          Vitale, Perfect Fit, General Felt, and Foamex L.P.
10.53(s)  - Equity Purchase Agreement, dated as of August 28, 1996, by and among
          JPSGP Inc., FJPS, and Collins & Aikman Products Co.
10.54(u)  - Amendment No. 1 to Equity Purchase Agreement, by and among JPSGP
          Inc., FJPS, the Company and Collins and Aikman Products Co., dated as
          of December 11, 1996.
21        - Subsidiaries of the Registrant.
23.1      - Consent of Independent Accountants of Coopers & Lybrand L.L.P.
________________
          (a)  Incorporated herein by reference to the Exhibit to the Company's
               Registration Statement on Form S-1, Registration No. 33-69606.

          (b)  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.

                                       27
<PAGE>

          (c)  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.

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

          (e)  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.

          (f)  Incorporated herein by reference to the Exhibit to the Form 10-K
               of the Company for fiscal 1993.

          (g)  Incorporated herein by reference to the Exhibit to JPS
               Automotive's Registration Statement on Form S-1, Registration No.
               33-75510.

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

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

          (j)  Incorporated herein by reference to the Exhibit to the Form 10-K
               of the Company for fiscal 1994.

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

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

          (m)  Incorporated herein by reference to the Exhibit to the Form 10-Q
               of the Company for the quarterly period ended October 1, 1995.

          (n)  Incorporated herein by reference to the Exhibit to the Form 10-K
               of Foamex L.P. for fiscal 1995.

          (o)  A management contract or compensatory plan or arrangement
               required to be filed as an Exhibit pursuant to Item 14(c) of this
               report.

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

          (q)  Incorporated herein by reference to the Exhibit to the Form 10-Q
               of Foamex L.P. for the quarterly period ended September 29, 1996.

          (r)  Incorporated herein by reference to the Exhibit to the Form 8-K
               of Foamex L.P. reporting an event which occurred on June 11,
               1996.

          (s)  Incorporated herein by reference to the Exhibit to the Form 8-K
               of Foamex International Inc. reporting an event which occurred on
               August 28, 1996.

          (t)  Incorporated herein by reference to the Exhibit to the Form 10-K
               of Foamex L.P. for fiscal 1996.

          (u)  Incorporated herein by reference to the Exhibit to the Form 8-K
               of Foamex International Inc. reporting an event which occurred on
               December 11, 1996.

                                       28
<PAGE>

          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.

(d)       Schedules

          The schedules listed in the accompanying Index to Financial  Statement
          Schedules are filed as part of this Annual Report on Form 10-K.


                                       29
<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  on the 7th day of
April, 1997.

                                      FOAMEX INTERNATIONAL INC.


                                       By: /s/ Marshall S. Cogan
                                          Marshall S. Cogan
                                          Chairman of the Board and
                                          Chief Executive Officer

            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,            April 7, 1997
    Marshall S. Cogan        Chief Executive Officer
                             and Director


/s/ Robert J. Hay            Chairman Emeritus                 April 7, 1997
    Robert J. Hay            and Director


/s/ John Rallis              President, Chief                  April 7, 1997
    John Rallis              Operating Officer and
                             Director


/s/ Kenneth R. Fuette        Senior Vice President             April 7, 1997
    Kenneth R. Fuette        of Finance (Chief Financial
                             Officer and Chief
                             Accounting Officer)


/s/ Salvatore J. Bonanno     Director                          April 7, 1997
    Salvatore J. Bonanno

                                       30
<PAGE>


/s/ Etienne Davignon         Director                          April 7, 1997
    Etienne Davignon


/s/ Andrea Farace            Director                          April 7, 1997
    Andrea Farace


/s/ Stuart J. Hershon        Director                          April 7, 1997
    Stuart J. Hershon


/s/ John V. Tunney           Director                          April 7, 1997
    John V. Tunney


                                       31

<PAGE>

                            FOAMEX INTERNATIONAL INC.
                          INDEX TO FINANCIAL STATEMENTS



     Index to Consolidated Financial Statements                       F-1

     Report of Independent Accountants                                F-2

     Consolidated Balance Sheets as of December 29, 1996
     and December 31, 1995                                            F-3

     Consolidated Statements of Operations for the years
     ended 1996, 1995, and 1994                                       F-5

     Consolidated Statements of Cash Flows for the years
     ended 1996, 1995, and 1994                                       F-6

     Consolidated Statements of Stockholders' Equity 
     (Deficit) for the years ended 1996, 1995, and 1994               F-7

     Notes to Consolidated Financial Statements                       F-8

                                      F-1
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS


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

We have audited the consolidated  financial  statements and financial  statement
schedules of Foamex  International  Inc. and subsidiaries (the "Company") listed
in Item 14 of this Form 10-K. 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 and financial  statement
schedules based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards 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.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated financial position of the Company as of
December 29, 1996 and December 31, 1995, and the  consolidated  results of their
operations  and their cash flows for each of the three years in the period ended
December 29, 1996 in conformity with generally accepted  accounting  principles.
In addition,  in our opinion,  the financial  statement  schedules,  referred to
above, when considered in relation to the basic financial  statements taken as a
whole, present fairly, in all material respects,  the information required to be
included therein.





COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 26, 1997

                                      F-2
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                                 December 29,     December 31,
ASSETS                                               1996            1995
                                                          (thousands)
CURRENT ASSETS:
    Cash and cash equivalents                       $22,203         $3,322
    Restricted cash                                  12,143             --
    Accounts receivable, net of allowance for
      doubtful accounts of $6,328 and $9,138        126,573        113,716
    Inventories                                     102,610         89,952
    Deferred income taxes                            21,765         12,625
    Due from related parties                          1,866          1,644
    Other current assets                             19,944         25,033
                                                  ---------       --------

            Total current assets                    307,104        246,292
                                                   --------       --------
PROPERTY, PLANT AND EQUIPMENT:
    Land and land improvements                        9,674          4,632
    Buildings and leasehold improvements             78,082         78,169
    Machinery, equipment and furnishings            199,993        190,708
    Construction in progress                         20,784          7,985
                                                  ---------      ---------

            Total                                   308,533        281,494

    Less accumulated depreciation and
      amortization                                 (113,160)       (98,176)
                                                   --------       --------

      Property, plant and equipment, net            195,373        183,318
COST IN EXCESS OF ASSETS ACQUIRED, NET               82,471         89,605

DEBT ISSUANCE COSTS, NET                             18,628         22,770

NET ASSETS OF DISCONTINUED OPERATIONS                    --        191,188

OTHER ASSETS                                         16,270         15,069
                                                  ---------      ---------

TOTAL ASSETS                                       $619,846       $748,242
                                                   ========       ========


         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 29,    December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                         1996             1995
                                                                   (thousands except share data)
<S>                                                                     <C>            <C>   
CURRENT LIABILITIES:
    Short-term borrowings                                               $3,692         $2,199
    Current portion of long-term debt - unrelated parties               14,505          9,281
    Accounts payable                                                    84,930         80,624
    Accrued employee compensation                                        7,302          8,116
    Accrued interest                                                     9,012          9,694
    Accrued restructuring charges                                        6,300         16,287
    Other accrued liabilities                                           44,782         28,483
                                                                     ---------      ---------

      Total current liabilities                                        170,523        154,684

LONG-TERM DEBT - UNRELATED PARTIES                                     477,527        509,414

LONG-TERM DEBT - RELATED PARTIES                                         5,817          5,540

DEFERRED INCOME TAXES                                                    6,290         24,996

ACCRUED RESTRUCTURING CHARGES                                            4,043          3,773

OTHER LIABILITIES                                                       13,749         20,452
                                                                     ---------      ---------

    Total liabilities                                                  677,949        718,859
                                                                     ---------      ---------

COMMITMENTS AND CONTINGENCIES                                               --             --
                                                                     ---------      ---------

STOCKHOLDERS' EQUITY (DEFICIT):
    Preferred Stock, par value $1.00 per share:
      Authorized 5,000,000 shares - none issued                             --             --
    Common Stock, par value $.01 per share:
      Authorized 50,000,000 shares
      Issued 26,753,262 and 26,715,960 shares, respectively;
      Outstanding 25,198,862 and 25,786,260 shares, respectively           267            267
    Additional paid-in capital                                          84,579         84,015
    Retained earnings (accumulated deficit)                           (120,174)       (37,039)
    Other                                                               (9,312)       (10,693)
                                                                     ---------      ---------
                                                                       (44,640)        36,550
    Common Stock held in treasury, at cost:
      1,554,400 shares and 929,700, respectively                       (13,463)        (7,167)
                                                                     ---------      ---------

      Total stockholders' equity (deficit)                             (58,103)        29,383
                                                                     ---------      ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                  $619,846       $748,242
                                                                     =========      =========
</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 1996, 1995, and 1994
<TABLE>
<CAPTION>
                                                        1996           1995           1994
                                                        (thousands except per share amounts)
<S>                                                   <C>            <C>            <C>     
NET SALES                                             $926,351       $862,834       $833,660

COST OF GOODS SOLD                                     773,119        762,085        691,265
                                                     ---------      ---------      ---------

GROSS PROFIT                                           153,232        100,749        142,395

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                            58,329         69,913         62,245

RESTRUCTURING AND OTHER CHARGES (CREDITS)               (6,541)        41,417             --
                                                     ---------      ---------      ---------

INCOME (LOSS) FROM OPERATIONS                          101,444        (10,581)        80,150

INTEREST AND DEBT ISSUANCE EXPENSE                      53,900         52,878         45,131

OTHER INCOME, NET                                        1,617            461          1,147
                                                     ---------      ---------      ---------

INCOME (LOSS) FROM CONTINUING OPERATIONS
    BEFORE PROVISION (BENEFIT) FOR INCOME TAXES         49,161        (62,998)        36,166

PROVISION (BENEFIT) FOR INCOME TAXES                    16,669        (12,248)        13,955
                                                     ---------      ---------      ---------

INCOME (LOSS) FROM CONTINUING OPERATIONS                32,492        (50,750)        22,211
                                                     ---------      ---------      ---------

DISCONTINUED OPERATIONS:

INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
    NET OF INCOME TAXES                                   (584)        (2,370)         3,919

LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS,
    INCLUDING PROVISIONS FOR OPERATING LOSSES
    DURING THE PHASE-OUT PERIOD, NET OF INCOME
    TAXES                                             (113,896)            --             --
                                                     ---------      ---------      ---------

INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
    NET OF INCOME TAXES                               (114,480)        (2,370)         3,919
                                                     ---------      ---------      ---------

INCOME (LOSS) BEFORE EXTRAORDINARY LOSS                (81,988)       (53,120)        26,130

EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
    OF DEBT, NET OF INCOME TAXES                        (1,147)            --             --
                                                     ---------      ---------      ---------

NET INCOME (LOSS)                                     $(83,135)      $(53,120)       $26,130
                                                     =========      =========      =========

EARNINGS (LOSS) PER SHARE:

CONTINUING OPERATIONS                                    $1.27         $(1.92)         $0.83

DISCONTINUED OPERATIONS                                  (4.47)         (0.09)          0.15

EXTRAORDINARY LOSS                                       (0.05)          0.00           0.00
                                                     ---------      ---------      ---------

EARNINGS (LOSS) PER SHARE                               $(3.25)        $(2.01)         $0.98
                                                     =========      =========      =========

WEIGHTED AVERAGE NUMBER
    OF SHARES OUTSTANDING                               25,616         26,472         26,684
                                                     =========      =========      =========
</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 1996, 1995, and 1994
<TABLE>
<CAPTION>
                                                                    1996           1995           1994
                                                                                (thousands)
OPERATING ACTIVITIES:
<S>                                                               <C>            <C>             <C>    
   Net income (loss)                                              $(83,135)      $(53,120)       $26,130
   Adjustments to reconcile net income (loss) to net
     cash provided by operating activities:
     Depreciation and amortization                                  22,353         23,302         22,108
     Amortization of debt issuance costs and debt discount          13,903         12,192          6,468
     Net loss on disposal of discontinued operations               110,137             --             --
     Net loss (income) from discontinued operations                  4,343          2,370         (3,919)
     Asset writedowns and other charges (credits)                   (7,364)        16,677             --
     Provision for uncollectible accounts                              704          4,627            878
     Deferred income taxes                                          14,903        (10,667)         9,914
     Other, net                                                     (3,642)           (72)           453
   Changes in operating assets and liabilities,
     net of acquisitions and discontinued operations
     Accounts receivable                                           (13,723)        (1,604)       (24,677)
     Inventories                                                   (13,078)        14,146        (21,790)
     Accounts payable                                                4,306         (2,726)        49,039
     Accrued restructuring charges                                  (7,405)        17,284         (3,469)
     Other assets and liabilities                                   (1,048)         3,048        (13,031)
                                                                 ---------      ---------      ---------

        Net cash provided by continuing operations                  41,254         25,457         48,104
        Net cash provided by discontinued operations                16,491          4,133          6,471
                                                                 ---------      ---------      ---------
        Net cash provided by operating activities                   57,745         29,590         54,575
                                                                 ---------      ---------      ---------

INVESTING ACTIVITIES:
   Capital expenditures                                            (23,344)       (22,348)       (21,201)
   Acquisitions, net of cash acquired                                 (841)        (8,113)        (1,712)
   Proceeds from sale of discontinued operations                    59,452             --             --
   Increase in restricted cash                                     (12,143)            --             --
   Discontinued operations investing activities                     (5,490)       (19,411)      (290,014)
   Other investing activities                                       (1,276)         2,495         (1,910)
                                                                 ---------      ---------      ---------

        Net cash provided by (used for) investing activities        16,358        (47,377)      (314,837)
                                                                 ---------      ---------      ---------

FINANCING ACTIVITIES:
   Net proceeds from (repayments of) short-term borrowings           1,493         (1,685)           537
   Net proceeds from (repayments of) revolving loans                    --         (3,000)         3,000
   Proceeds from long-term debt-unrelated parties                    1,500             --         97,000
   Repayments of long-term debt-unrelated parties                  (38,887)        (9,356)        (3,256)
   Debt issuance costs                                                  --           (184)        (9,116)
   Purchase of treasury stock                                       (6,296)        (7,167)            --
   Discontinued operations financing activities                    (12,406)         1,674        179,655
   Other financing activities                                         (626)             --           (687)
                                                                 ---------      ---------      ---------

        Net cash provided by (used for) financing activities       (55,222)       (19,718)       267,133
                                                                 ---------      ---------      ---------

Net increase (decrease) in cash and cash equivalents                18,881        (37,505)         6,871

Cash and cash equivalents at beginning of period                     3,322         40,827         33,956
                                                                 ---------      ---------      ---------

Cash and cash equivalents at end of period                         $22,203         $3,322        $40,827
                                                                 =========      =========      =========
</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' EQUITY (DEFICIT)
                       For the Years 1996, 1995, and 1994
<TABLE>
<CAPTION>
                                                                                 Retained
                                                                Additional       Earnings
                                               Common Stock      Paid-in        (Accumulated                    Treasury
                                              Shares  Amount     Capital          Deficit)         Other          Stock
                                                                        (thousands)
<S>                                          <C>        <C>        <C>           <C>             <C>      
Balances at January 2, 1994                  26,684     $267       $80,566       $ (10,049)      $ (6,478)

Issuance of warrants                                                 3,000
Stock option compensation                                               75
Stock options exercised                                                 10
Additional pension liability                                                                           86
Foreign currency translation adjustment                                                            (1,435)
Other                                                                  (27)
Net income                                                                          26,130
                                             ------     ----       -------       ---------       --------  

Balances at January 1, 1995                  26,684      267        83,624          16,081         (7,827)

Issuance of common stock                         32        -           316
Stock option compensation                                               75
Increase in note receivable from
    principal stockholder                                                                          (1,373)
Additional pension liability                                                                       (1,974)
Foreign currency translation adjustment                                                               481
Purchase of treasury stock                                                                                    $ (7,167)
Net loss                                                                           (53,120)
                                             ------     ----       -------       ---------       --------     -------- 

Balances at December 31, 1995                26,716      267        84,015         (37,039)       (10,693)      (7,167)

Issuance of common stock                         22        -           165
Stock option compensation                                              297
Stock options exercised                          15        -           102
Additional pension liability                                                                        1,427
Foreign currency translation adjustment                                                               (46)
Purchase of treasury stock                                                                                      (6,296)
Net loss                                                                           (83,135)
                                             ------     ----       -------       ---------       --------     -------- 

Balances at December 29, 1996                26,753     $267       $84,579       $(120,174)      $ (9,312)    $(13,463)
                                             ======     ====       =======       =========       ========     ========

</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

         Foamex International Inc. (the "Company") is a significant manufacturer
and marketer of flexible  polyurethane  foam and foam  products in North America
through Foamex L.P., a 99% owned subsidiary.  The Company's products include (i)
foam for carpet cushion and other carpet  products,  (ii)  cushioning  foams for
furniture,  bedding,  packaging and health care, (iii) foams for automotive trim
and accessories and (iv) technical foams for filtration,  consumer  products and
packaging.

         During 1996, the Company sold Perfect Fit  Industries,  Inc.  ("Perfect
Fit") and JPS  Automotive  L.P.  ("JPS  Automotive")  which  comprised  the home
comfort products and automotive textile business segments,  respectively, of the
Company. The consolidated financial statements of the Company have been restated
for  discontinued  operations  and includes a net loss of $113.9 million (net of
$34.9  million  income tax benefit) on the disposal of these  business  segments
which includes provisions for operating losses during the phase-out period. (See
Note 3 for further discussion).

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Consolidation

         The  consolidated  financial  statements  include  the  accounts of the
Company and all subsidiaries  that the Company directly or indirectly  controls,
either  through  majority  ownership or  otherwise,  other than the home comfort
products and  automotive  textile  business  segments which are accounted for as
discontinued  operations.  Intercompany accounts and transactions for continuing
operations have been eliminated in consolidation.

         The   consolidated   financial   statements   have  been  restated  for
discontinued operations.  The accompanying notes present amounts related only to
continuing operations.

         Fiscal Year

         The  Company's   fiscal  year  ends  on  the  Sunday   closest  to  the
thirty-first day of December.  Fiscal years 1996, 1995 and 1994 were composed of
fifty-two weeks and ended on December 29, 1996, December 31, 1995 and January 1,
1995, respectively.

         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 of assets and  liabilities at the
date of the  financial  statements  and the  reported  amounts of  revenues  and
expenses  during the reported  period.  Actual  results  could differ from those
estimates.  (See  Notes 3, 4, 9, 10,  16,  17 and 18 and Cost in  Excess  of Net
Assets Acquired below.)

         Cash Equivalents

         The Company  considers all highly liquid  investments  with an original
maturity  of three  months or less when  purchased  to be cash  equivalents.  On
December  29, 1996 and December 31,  1995,  cash and cash  equivalents  included
$19.6  million  and  $2.7  million,   respectively,   of  repurchase  agreements
collateralized by U.S. Government securities.

                                      F-8
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Restricted Cash

         As  of  December  29,  1996,  the  Company  had   restricted   cash  of
approximately  $12.1 million.  This cash was derived from the net sales proceeds
relating  to the sale of Perfect  Fit and is  restricted  by Foamex  L.P.'s debt
agreements.  As of February 26, 1997,  the Company has used  approximately  $8.4
million of the  restricted  cash to  repurchase  approximately  $8.0  million of
outstanding indebtedness.

         Inventories

         Inventories are stated at the lower of cost or market.  The cost of the
inventories 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  twenty to
thirty-five  years,  and the range for machinery,  equipment and  furnishings is
five to twelve 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 the years ended 1996, 1995 and
1994 was $19.1  million,  $19.1  million and $16.8  million,  respectively.  For
income tax purposes, the Company uses accelerated depreciation methods.

         Cost of  maintenance  and  repairs is  charged to expense as  incurred.
Renewals and improvements are capitalized.  Upon retirement or other disposition
of items of plant and equipment,  the cost and related accumulated  depreciation
are removed from the accounts and any gain or loss is included in operations.

         Debt Issuance Costs

         Debt issuance costs consist of amounts incurred in obtaining  long-term
financing.  These costs are being  amortized  over the term of the related  debt
using the interest method.  Accumulated amortization as of December 29, 1996 and
December 31, 1995 was approximately $8.8 million and $6.7 million, respectively.

         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 a forty year period.  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 from  operations  based on a going  concern  basis.
Accumulated  amortization  as of  December  29, 1996 and  December  31, 1995 was
approximately $11.6 million and $9.0 million, respectively.

         Environmental Matters

         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

                                      F-9
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

         Postretirement and Postemployment Benefits

         The Company accrues  postretirement  benefits throughout the employees'
active service  periods until they attain full  eligibility  for those benefits.
Also, the Company accrues postemployment  benefits when it becomes probable that
such  benefits  will be paid  and when  sufficient  information  exists  to make
reasonable estimates of the amounts to be paid.

         Foreign Currency Accounting

         The financial statements of foreign  subsidiaries,  except in countries
treated as highly inflationary,  have been translated into U.S. dollars by using
the year end exchange rates for the assets and liabilities and average  exchange
rates for the statements of operations.  Currency  translation  adjustments  are
included  in  other   stockholders'   equity   (deficit)  until  the  entity  is
substantially sold or liquidated.  For operations in countries treated as highly
inflationary,  certain financial  statement amounts are translated at historical
exchange  rates,  with all other assets and  liabilities  translated at year end
exchange rates.  These  translation  adjustments are reflected in the results of
operations  and are  insignificant  for all  periods  presented.  Also,  foreign
currency  transaction  gains  and  losses  are  insignificant  for  all  periods
presented.  The effect of foreign  currency  exchange rates on cash flows is not
material.

         Interest Rate Swap Agreement

         The  differential  to be paid or received  under an interest  rate swap
agreement is recognized  as an adjustment to interest and debt issuance  expense
in the current period as interest rates change.

         Income Taxes

         Income taxes are  accounted for under the  liability  method,  in which
deferred  income  taxes are  provided  for  temporary  differences  between  the
financial  reporting  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.

         Earnings (Loss) Per Share

         Earnings  (loss) per share for 1996 was computed  based on the weighted
average  number of shares  actually  outstanding  plus the shares  that would be
outstanding  assuming the exercise of dilutive  stock options and warrants which
are considered to be common stock  equivalents.  The number of shares that would
be issued from the  exercise of stock  options has been reduced by the number of
shares that could have been  purchased  from the proceeds at the average  market
price of the Company's common stock. For 1995 and 1994, common stock equivalents
have not been included since the effect would be antidilutive and/or immaterial.

         Reclassifications

         Certain amounts in the 1995 and 1994 consolidated  financial statements
have been reclassified to conform with the current year's presentation.

                                      F-10
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.       DISCONTINUED OPERATIONS

         On December 11, 1996, the Company completed the sale of its partnership
interests in JPS  Automotive  for a sale price of  approximately  $220.1 million
including $200.1 million of JPS Automotive's  indebtedness.  The sale is subject
to a post-closing adjustment which is expected to be finalized during the second
quarter of 1997.  The sale included  substantially  all of the net assets of the
automotive textiles business segment.  Actual and estimated transaction expenses
related to the sale  amounted to  approximately  $8.9  million.  The Company has
recorded a net loss on the sale of JPS Automotive of approximately $70.9 million
(net of $34.2 million  income tax benefit),  which includes the loss on disposal
and a net loss of $1.3 million (net of $0.7 million income tax benefit) relating
to operating losses during the phase-out period.

         During 1996, the Company  finalized the sale of the outstanding  common
stock of Perfect Fit, a wholly-owned  subsidiary,  for an adjusted sale price of
approximately  $44.2  million.  The sale included  substantially  all of the net
assets of the home comfort products  segment.  Actual and estimated  transaction
expenses related to the sale amounted to approximately $1.5 million. The Company
has recorded a loss on the sale of Perfect Fit of  approximately  $43.0 million,
which  includes the loss on disposal and a net loss of $2.4 million  relating to
operating  losses during the phase-out  period.  A valuation  allowance has been
provided  for the  capital  loss  relating  to the sale of Perfect Fit since the
Company has  determined  that capital  gain  taxable  income is not likely to be
sufficient  to recognize  the  deferred  tax asset  relating to the capital loss
carryforward.

         The Company's  financial  statements  have been restated to reflect the
discontinuation  of the home comfort  products and automotive  textile  business
segments.  In  addition  to  the  interest  and  debt  issuance  expense  of JPS
Automotive,  interest and debt issuance  expense was  allocated to  discontinued
operations  based on the estimated debt to be retired from the net proceeds from
the sale of Perfect Fit and JPS Automotive.  A summary of the operating  results
for the discontinued operations is as follows:
<TABLE>
<CAPTION>
                                                                      1996              1995           1994
                                                                                    (thousands)
<S>                                                                   <C>              <C>            <C>     
Sales                                                                 $244,305         $405,726       $254,174
Gross profit                                                            38,296           69,410         50,477
Income from operations                                                  17,072           28,009         24,026
Interest and debt issuance expense                                      16,905           28,575         16,463
Other expense                                                             (975)            (113)          (127)
Income (loss) from discontinued operations before income taxes            (808)            (679)         7,436
Provision (benefit) for income taxes                                      (224)           1,691          3,517
Income (loss) from discontinued operations, net of income taxes           (584)          (2,370)         3,919
<FN>
1    The Company's discontinued operations includes the operations of Perfect
     Fit through June 1996 and JPS Automotive through September 1996.
</FN>
</TABLE>

         Net assets of discontinued operations (excluding intercompany net
assets) at December 31, 1995 were as follows:

                                                 1995
                                             (thousands)
Current assets                                $100,574
Property, plant and equipment, net             142,863
Cost in excess of assets acquired, net         202,020
Other assets                                    10,642
                                              --------
   Total assets                                456,099
                                              --------

                                      F-11
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.       DISCONTINUED OPERATIONS (continued)

                                         1995
                                     (thousands)
Current liabilities                     49,202
Long-term debt                         204,463
Other liabilities                       11,246
                                      --------
   Total liabilities                   264,911
                                      --------
Net assets                            $191,188
                                      ========

4        RESTRUCTURING AND OTHER CHARGES (CREDITS)

         In  1995,  the  Company  approved  a  restructuring   plan  (the  "1995
restructuring  plan") to consolidate  thirteen foam  production,  fabrication or
branch locations to concentrate resources as a result of industry conditions and
better position itself to achieve its strategic growth  objectives.  The Company
recorded restructuring and other charges of $41.4 million which was comprised of
$35.6  million  associated  with  the  consolidation  of  the  foam  production,
fabrication or branch locations,  $2.2 million associated with the completion of
a  1993   restructuring  plan  and  $3.6  million  associated  with  merger  and
acquisition  activities  of the Company.  The  components  of the $35.6  million
restructuring  charge include:  $16.7 million for fixed asset writedowns (net of
estimated sale  proceeds),  $15.1 million for plant closure and operating  lease
obligations and $3.8 million for personnel reductions. The $3.8 million cost for
personnel  reductions  primarily represents severance and employee benefit costs
associated with the elimination of manufacturing and administrative personnel.

         In 1996,  the  Company  determined  to  continue  to operate one of the
facilities  originally  identified  for closure in the 1995  restructuring  plan
because  of  improved  economics  and the lack of synergy  to be  achieved  from
relocating the manufacturing  process.  In addition,  the Company has approved a
plan to close two  facilities  that were not  originally  identified in the 1995
restructuring  plan. As a result of these changes to the 1995 restructuring plan
and the favorable termination of certain lease agreements and other matters, the
Company  recorded a $6.5  million  net  restructuring  credit  which  included a
restructuring credit of $11.3 million associated with the Company's decision not
to close the facility identified as part of the 1995 restructuring plan and $1.8
million of restructuring credits relating primarily to the favorable termination
of certain lease agreements and other matters relating to the 1995 restructuring
plan, offset by $6.6 million of restructuring charges relating to the closure of
the two facilities during 1997 (the "1996 restructuring plan").

                                      F-12
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

         Generally,   the  1995  restructuring  plan  has  been  implemented  as
originally  contemplated.  The following  table sets forth the components of the
Company's restructuring and other charges:
<TABLE>
<CAPTION>

                                                         Asset       Plant Closure  Personnel
                                            Total      Writedowns     and Leases    Reductions      Other
                                                                      (millions)
<S>                                         <C>           <C>                                        <C>  
1995 restructuring charge                   $41.4         $16.7         $15.1         $3.8           $5.8
Asset writeoff/writedowns                   (25.1)        (20.9)           --           --           (4.2)
Cash spending                                (0.4)           --          (0.3)        (0.1)            --
                                            -----         -----         -----         ----           ----

Balances at December 31, 1995                15.9          (4.2)         14.8          3.7            1.6
Cash spending                                (9.9)           --          (6.6)        (2.0)          (1.3)
Cash proceeds                                 1.0           1.0            --           --             --
1996 restructuring charge                     6.6           2.4           4.1          0.1             --
Restructuring credits                       (13.1)         (9.7)         (2.8)        (0.4)          (0.2)
Asset adjustment for restructuring
         credits                              8.0           8.7          (0.6)          --           (0.1)
                                            -----         -----         -----         ----           ----

Balances at December 29, 1996                $8.5         $(1.8)         $8.9         $1.4            $--
                                            =====         =====         =====         ====           ====
</TABLE>

         As indicated in the table above, the accrued  restructuring  balance at
December  29,  1996,  will be used for  payments  relating to plant  closure and
leases  including  rundown  costs at the  facilities.  The $1.8 million of asset
writedowns  relates to estimated  proceeds and is included in noncurrent assets.
The Company expects to incur  approximately  $6.3 million of charges during 1997
with the remaining $4.0 million to be incurred  through 2001. As of December 29,
1996,  the Company has  terminated  approximately  270  employees  and  notified
approximately  40 employees in the  manufacturing  and  administrative  areas of
their impending  termination in connection with the 1996 and 1995  restructuring
plans.

5.       ACQUISITIONS

         In April 1995, the Company  acquired certain assets and assumed certain
liabilities of manufacturers  of synthetic  fabrics for the carpet and furniture
industries for aggregate consideration of approximately $8.0 million,  including
related fees and expenses of  approximately  $0.3 million,  with an initial cash
payment of $7.2  million.  The excess of the purchase  price over the  estimated
fair value of the net assets acquired was approximately $3.9 million.

         In March  1994,  the  Company  acquired  Transformacion  De  Espumas  Y
Fieltros S.A. de C.V. ("TEFSA") for an aggregate purchase price of approximately
$4.5 million, including related fees and expenses of approximately $0.4 million,
to be paid  over a three  year  period  with an  initial  cash  payment  of $1.7
million.  The excess of the purchase  price over the estimated fair value of the
assets  acquired  was $3.7  million.  During  1996 and 1995,  the  Company  made
scheduled  cash  payments of $0.8 million for each year in  accordance  with the
purchase agreement. The final payment will be made in April 1997.

         The acquisitions  were accounted for as purchases and the operations of
the acquired companies are included in the consolidated statements of operations
and cash flows from their  respective  dates of  acquisition.  The excess of the
purchase price over the estimated fair value of the net assets acquired is being
amortized using the straight-line method over forty years.

                                      F-13
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.       INVENTORIES

         Inventories consists of:
                                            December 29,     December 31,
                                               1996            1995
                                                    (thousands)
          Raw materials and supplies         $61,559         $49,963
          Work-in process                     13,453          14,451
          Finished goods                      27,598          25,538
                                            --------        --------
                  Total                     $102,610         $89,952
                                            ========        ========

7.       SHORT-TERM BORROWINGS

         Short-term  borrowings include  borrowings  outstanding under a line of
credit facility for Foamex Canada Inc. ("Foamex Canada") bearing interest at the
bank's prime rate (4.75% at December 29, 1996) plus 1/2%.  The weighted  average
interest rates on Foamex Canada's  short-term  borrowings  outstanding for 1996,
1995 and 1994 were 5.9%, 8.0% and 7.3%,  respectively.  Borrowings  under Foamex
Canada's  credit facility are due on demand and are  collateralized  by accounts
receivable,  property and inventories of Foamex Canada having an approximate net
carrying value of $17.1 million as of December 29, 1996. The unused amount under
this line of credit totaled $0.7 million as of December 29, 1996.

8.       LONG-TERM DEBT

         Long-term debt consists of:
<TABLE>
<CAPTION>
                                                                   December 29,     December 31,
                                                                       1996             1995
                                                                            (thousands)
<S>                                                                    <C>             <C>   
Unrelated parties:
9 1/2% Senior secured notes due 2000 (1)                             $106,793        $116,667
11 1/4% Senior notes due 2002 (1)                                     141,400         150,000
11 7/8% Senior subordinated debentures due 2004 (net of
         unamortized debt discount of $769 and $827) (1)              125,056         125,173
Senior secured discount debentures due 2004, Series B
         (net of unamortized debt discount of $35,864 and
         $46,364) (2)                                                  80,881          70,381
11 7/8% Senior subordinated debentures due 2004, Series B (3)           7,000           7,000
Industrial revenue bonds (4)                                            7,000           7,000
Foamex L.P. term loan (8.54% interest rate as of
         December 29, 1996)(4)                                         11,000          30,000
Other                                                                  12,902          12,474
                                                                     --------        --------
                                                                      492,032         518,695

Less current portion                                                   14,505           9,281
                                                                     --------        --------

Long-term debt--unrelated parties                                    $477,527        $509,414
                                                                     ========        ========

                                      F-14
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.       LONG-TERM DEBT (continued)

Related parties:
Subordinated note payable (net of unamortized
         debt discount of $1,198 and $1,475) (3)                     $  5,817        $  5,540
                                                                     ========        ========
<FN>
     (1)  Subsidiary debt of Foamex L.P. and Foamex Capital Corporation and
          guaranteed by the Company and General Felt Industries, Inc. ("General
          Felt").
     (2)  Subsidiary debt of Foamex-JPS Automotive L.P. and Foamex-JPS Capital
          Corporation and guaranteed by the Company.
     (3)  Subsidiary debt of Foamex L.P. and Foamex Capital Corporation and
          guaranteed by General Felt.
     (4)  Subsidiary debt of Foamex L.P.
</FN>
</TABLE>

         9 1/2% Senior Secured Notes due 2000 ("Senior Secured Notes")

         The Senior  Secured Notes were issued on June 3, 1993 and bear interest
at the rate of 9 1/2%  payable  semiannually  on each June 1 and December 1. The
Senior  Secured  Notes  mature on June 1,  2000.  The Senior  Secured  Notes are
collateralized  by a first-priority  lien on substantially  all of the assets of
Foamex L.P. except for receivables, real estate and fixtures. The Senior Secured
Notes may be redeemed at the option of Foamex L.P.,  in whole or in part, at any
time on or after June 1, 1998,  initially at 101.583% of their principal amount,
plus accrued  interest,  and declining to 100% on or after June 1, 1999.  During
1996, Foamex L.P.  repurchased $9.9 million of Senior Secured Notes with the net
proceeds from the sale of Perfect Fit (see Note 11).

         11 1/4% Senior Notes due 2002 ("Senior Notes")

         The  Senior  Notes  bear  interest  at  the  rate  of 11  1/4%  payable
semiannually  on each April 1 and October 1. The Senior  Notes mature on October
1, 2002. The Senior Notes may be redeemed at the option of Foamex L.P., in whole
or in part,  at any time on or after  October 1, 1997,  initially at 104.219% of
their principal amount, plus accrued interest, and declining to 100% on or after
October 1, 2000. In October 1994,  Foamex L.P. provided certain real property as
collateral  for the  Senior  Notes,  with a net book  value of $37.8  million at
December 29, 1996. During 1996,  Foamex L.P.  repurchased $8.6 million of Senior
Notes with the net proceeds from the sale of Perfect Fit (see Note 11).

         11 7/8% Senior Subordinated Debentures due 2004 ("Subordinated
         Debentures")

         The  Subordinated  Debentures  bear  interest  at the  rate  of 11 7/8%
payable semiannually on each April 1 and October 1. The Subordinated  Debentures
mature on October 1, 2004.  The  Subordinated  Debentures may be redeemed at the
option of Foamex L.P.,  in whole or in part,  at any time on or after October 1,
1997,  initially at 105.938% of their principal  amount,  plus accrued interest,
and declining to 100% on or after October 1, 2002. The  Subordinated  Debentures
are subordinated in right of payment to all senior  indebtedness,  including the
Senior Secured Notes and the Senior Notes. During 1996, Foamex L.P.  repurchased
$0.1 million of  Subordinated  Debentures with the net proceeds from the sale of
Perfect Fit (see Note 11).

                                      F-15
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.       LONG-TERM DEBT (continued)

         Senior Secured Discount Debentures due 2004 ("Discount Debentures")

         Discount  Debentures,  in the  aggregate  principal  amount  of  $116.7
million  ($57.0  million  initial  cash  proceeds)  were  issued  during 1994 by
Foamex-JPS Automotive L.P. ("FJPS") and Foamex-JPS Capital Corporation ("FJCC").
In connection  with this issuance,  the Company  issued  warrants to acquire 0.6
million  shares of the Company's  common stock to the purchasers of the Discount
Debentures  (see Note 15).  The  Discount  Debentures  are  collateralized  by a
first-priority lien granted by FJPS on a 43.44% limited partnership  interest in
Foamex L.P. and are  guaranteed  on a senior basis by the Company.  The original
issue discount of $59.7 million will be amortized using the weighted  average to
maturity  method over the life of the issue.  No cash interest is payable on the
Discount  Debentures  prior to January 1, 2000;  rather the Discount  Debentures
accrete on a daily  basis and  compound  semiannually  at the rate of 13.50% per
annum from the date of issuance through June 30, 1996, at the rate of 13.75% per
annum  from July 1, 1996  through  June 30,  1997 and at the rate of 14.00%  per
annum from July 1, 1997 through June 30, 1999,  in each case subject to increase
in the event the Discount  Debentures are not redeemed at the option of FJPS and
FJCC as described below. Thereafter,  interest accrues at the rate of 14.00% per
annum and is payable semiannually in cash commencing January 1, 2000.

         The Discount Debentures may be redeemed at the option of FJPS and FJCC,
in whole or in part, at any time after July 1, 1999,  initially at 110% of their
principal amount, plus accrued interest to the redemption date, and declining to
100% on or after July 1, 2002.  Prior to July 1, 1997, at the option of FJPS and
FJCC, (i) up to 50% of the original  aggregate  principal amount of the Discount
Debentures  will  be  redeemable  at a  redemption  price  equal  to 110% of the
Accreted  Value (as defined in the  indenture  with respect to such  debentures)
(the  "Discount  Debenture  Indenture")  of such  Discount  Debentures  and (ii)
additional Discount Debentures will be redeemable at a redemption price equal to
112% of the Accreted Value of such Discount  Debentures  from the proceeds of an
Equity Offering (as defined in the Discount Debenture  Indenture).  In addition,
at any time on or prior to July 1, 1997,  FJPS and FJCC may redeem all,  but not
less than all, of the outstanding  Discount  Debentures from the net proceeds of
an Equity-Linked  Offering (as defined in the Discount  Debenture  Indenture) at
the redemption prices set forth in the immediately  preceding sentence.  If FJPS
and FJCC do not  exercise  such  redemption  rights with at least 85% of the net
proceeds of an Equity Offering,  the rate at which the Discount Debentures shall
accrete and the interest rate on the Discount  Debentures will increase based on
a formula.

         During 1996, the Company received  consents from 100% of the holders of
the Discount  Debentures  for the waiver of certain  provisions  of the Discount
Debentures Indenture in connection with the sale of JPS Automotive.

        11 7/8% Senior Subordinated Debentures, Series B ("Series B Debentures")

         The Series B Debentures were issued July 30, 1993, by Foamex L.P. in an
exchange offer to holders of senior subordinated debentures issued in connection
with the  acquisition of General Felt on March 23, 1993. The Series B Debentures
have terms  substantially  similar to the Subordinated  Debentures,  except that
holders of the Series B  Debentures  are  entitled to receive  proceeds  from an
asset sale only if any  proceeds  remain after an offer to  repurchase  has been
made to the holders of the Subordinated Debentures. 

                                      F-16
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.       LONG-TERM DEBT (continued)

         Industrial Revenue Bonds ("IRBs")

         Two bond  issues  in the  principal  amount  of $1.0  million  and $6.0
million, maturing in 2005 and 2013, respectively,  are collateralized by certain
properties  which have an  approximate  net carrying  value of $11.3  million at
December 29, 1996 and letters of credit  approximating  $7.3  million.  The IRBs
bear  interest  at a variable  rate with  options  available  to Foamex  L.P. to
convert to a fixed rate.  The interest  rates on the IRBs were 4.85% and 4.0% at
December   29,  1996  for  the  $6.0  million  and  $1.0  million  bond  issues,
respectively.  The interest  rate on the $6.0  million bond issue varies  weekly
based on an interest rate that is indicative of current  bidside  yields on high
quality  short-term,  tax-exempt  obligations,  or if such  interest rate is not
available,  70.0% of the interest rate for thirteen week United States  Treasury
Bills.  The maximum  interest rate for either of the IRBs is 15.0% per annum. At
the time of a conversion to a fixed interest rate and upon  appropriate  notice,
the IRBs are redeemable at the option of the bondholders.

         Term and Revolving Loans

         Foamex L.P. has a credit agreement (the "Foamex L.P. Credit  Facility")
with a group of banks that provide for loans of up to $85.0  million of which up
to $40.0 million was available as a term loan payable in twenty equal  quarterly
installments  commencing October 1994 and up to $45.0 million is available under
a revolving line of credit which expires in June 1999. In 1994,  Foamex L.P. and
General Felt entered into a $40.0 million term loan under the Foamex L.P. Credit
Facility; no further term loan borrowings are available thereunder. During 1996,
Foamex L.P.  and General Felt used $12.0  million of the net  proceeds  from the
Perfect Fit sale to repay term loan borrowings. Borrowings under the Foamex L.P.
Credit Facility are collateralized by the accounts receivable of Foamex L.P. and
General Felt. Pursuant to the terms of the Foamex L.P. Credit Facility, borrowed
funds will bear  interest  at a  floating  rate equal to 1.0% per annum plus the
highest of (i) the base rate of The Bank of Nova Scotia,  as in effect from time
to time, (ii) a rate that is, generally,  0.5% per annum plus a fluctuating rate
generally equal to the rate on three month  certificates of deposit,  subject to
certain  adjustments,  plus a  fluctuating  rate  generally  equal to the annual
assessment rate paid by The Bank of Nova Scotia to the Federal Deposit Insurance
Corporation  or (iii) 0.5% per annum plus the federal  funds rate in effect from
time to time. At the option of the borrower,  portions of the outstanding  loans
under the Foamex L.P. Credit  Facility will be convertible  into Eurodollar rate
loans  bearing  interest at a rate  generally  equal to 3.0% per annum above the
average LIBOR rate of Citibank, N.A. and The Bank of Nova Scotia. As of December
29,  1996,  there  were  approximately   $11.7  million  in  letters  of  credit
outstanding  under the Foamex L.P.  Credit  Facility.  As of December  29, 1996,
there was unused  availability of  approximately  $33.3 million under the Foamex
L.P. Credit Facility.

         Subordinated Note Payable

         This note  payable  was  issued to John  Rallis  ("Rallis"),  the Chief
Operating  Officer of the Company,  on May 6, 1993 by Foamex L.P. in  connection
with the  acquisition  of Great  Western Foam Products  Corporation  and certain
related  entities and assets  (collectively,  "Great  Western").  The note bears
interest at a maximum rate of 6% per annum and the  principal  amount is payable
in three equal annual installments beginning May 6, 1999.

         Other

         As of December 29, 1996,  other debt is comprised  primarily of capital
lease  obligations,   equipment  financing   associated  with  an  aircraft  and
borrowings by Foamex Mexico.

                                      F-17
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.       LONG-TERM DEBT (continued)

         Interest Rate Swap Agreements

         The Company  enters into  interest  rate swaps to lower  funding  costs
and/or to manage  interest costs and exposure to changing  interest  rates.  The
Company does not hold or issue financial  instruments for trading purposes.  The
Company has an interest rate swap agreement,  as amended, with a notional amount
of $150.0 million through December 2001.  Under the swap agreement,  the Company
has made variable payments based on LIBOR through December 1996 and is obligated
to make  fixed  payments  at 5.30%  per  annum for the  twelve  months  ended in
December  1997 and  variable  payments  based on LIBOR for the  remainder of the
agreement, in exchange for fixed payments by the swap partner at 5.81% per annum
through  December  1996, and 6.50% per annum for the remainder of the agreement,
payable  semiannually in arrears.  The swap partner has the ability to terminate
the swap agreement after the December 1997 payment if the LIBOR rate the Company
is to pay for any  period  thereafter  is equal to or less than 4.50% per annum.
Interest expense will be subject to fluctuations in LIBOR during the term of the
swap agreement  except during 1997. The Company is exposed to credit loss in the
event of  nonperformance  by the swap partner;  however,  the occurrence of this
event is not anticipated.

         Also, the Company has an interest rate swap agreement,  as amended, for
a notional  amount of $150.0  million  through  December  2001.  Under this swap
agreement,  the Company has made variable  payments based on LIBOR with a cap of
5.50% per annum and a floor of 4.75% per annum for the six months  ended in June
1995,  variable  payments based on LIBOR with a floor of 4.75% per annum for the
six months ended in December  1995,  fixed payments at a rate of 5.81% per annum
for the twelve  months  ended in December  1996 and is  obligated  to make fixed
payments  at a rate of 5.30% per annum for the twelve  months  ended in December
1997 and variable payments based on LIBOR for the remainder of the agreement, in
exchange  for  variable  payments by the swap  partner at the rate of LIBOR plus
0.80% per annum for the six  months  ended in June  1995,  LIBOR  plus 0.72% per
annum for the six months ended in December 1995,  LIBOR plus 2.45% per annum for
the six months ended in June 1996, LIBOR plus 2.39% per annum for the six months
ended in December  1996 and fixed  payments at 6.50% per annum for the remainder
of the term of the agreement,  payable semiannually in arrears. The swap partner
has the ability to terminate the swap agreement  after the December 1997 payment
if the LIBOR rate the Company is to pay for any period thereafter is equal to or
less than 4.50% per annum.  Interest  expense will be subject to fluctuations in
LIBOR during the term of the swap  agreement  except during 1997.  The effect of
the two  interest  rate swaps  described  above was a  favorable  adjustment  to
interest  expense of $3.7 million,  $1.4 million and $3.0 million for 1996, 1995
and 1994,  respectively.  The  Company is exposed to credit loss in the event of
nonperformance by the swap partner; however, the occurrence of this event is not
anticipated.

         Debt Restrictions and Covenants

         The  indentures,  credit  agreement and other  indebtedness  agreements
contain various covenants,  including  restrictions on payments of distributions
to the Company by its subsidiaries,  the incurrence of additional  indebtedness,
the sale of assets, mergers and consolidations and transactions with affiliates.
In addition,  certain  agreements  contain a provision  that,  in the event of a
defined change of control, 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 is the maintenance of net worth and interest  coverage ratios,
as  defined.  Under  the  most  restrictive  of the  distribution  restrictions,
approximately  $4.9  million  was  available  to be paid to the  Company  by its
subsidiaries as of December 29, 1996.

                                      F-18
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.       LONG-TERM DEBT (continued)

         During 1996,  the Company  received  consents  and/or  waivers from its
lenders  and  bondholders  in  connection  with the sale of Perfect  Fit and JPS
Automotive and other related matters.

         As of  December  29,  1996,  the  Company  was in  compliance  with the
covenants of the indentures, credit agreements and other indebtedness agreements
and expects to be in compliance with these covenants for the foreseeable future.

         Future Obligations on Long-Term Debt

         Scheduled maturities of long-term debt are shown below:

         Year End                                       Long-Term Debt
                                                         (thousands)
         1997                                             $ 14,260
         1998                                                4,770
         1999                                                6,108
         2000                                              107,401
         2001                                                3,109
         Thereafter                                        399,246
                                                          --------
         Total                                             534,894

         Less unamortized discount                          37,831
                                                          --------
         Total                                            $497,063
                                                          ========

         In  addition,  the  Company  has  approximately  $0.8  million of total
capital  lease  obligations  that are  payable  in 1997  through  2000 in annual
amounts of approximately $0.2 million.

9.       EMPLOYEE BENEFIT PLANS

         Defined Benefit Pension Plans

         The Company maintains noncontributory defined benefit pension plans for
salaried and certain hourly employees.  The salaried plan provides benefits that
are based  principally on years of credited  service and level of  compensation.
The hourly plans provide  benefits that are based  principally on stated amounts
for each year of credited service.

         Net periodic pension cost included the following components:

<TABLE>
<CAPTION>
                                               1996           1995              1994
                                                           (thousands)
<S>                                            <C>             <C>             <C>   
         Service cost                          $2,471          $2,087          $2,452
         Interest cost                          3,997           3,742           3,541
         Actual return on plan assets          (8,841)         (5,682)            624
         Net amortization and deferral          4,643           1,807          (4,649)
                                              -------         -------         -------
           Total                               $2,270          $1,954          $1,968
                                              =======         =======         =======
</TABLE>

                                      F-19
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.       EMPLOYEE BENEFIT PLANS (continued)

         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").  Plan  investments
consist primarily of corporate equity and debt securities, mutual life insurance
funds and cash  equivalents.  During  1996,  the  discount  rate was adjusted to
7.50%.  The  following  table  sets  forth the  funded  status of the  Company's
underfunded  plans and the amounts  recognized in the accompanying  consolidated
balance sheets as of December 29, 1996 and December 31, 1995:

<TABLE>
<CAPTION>
                                                      December 29,      December 31,
                                                         1996              1995
                                                                (thousands)
Actuarial present value of accumulated 
     benefit obligations:
<S>                                                      <C>              <C>    
Vested benefits                                          $55,336          $52,762
Nonvested benefits                                         2,137            1,916
                                                        --------         --------

Accumulated benefit obligations                          $57,473          $54,678
                                                        ========         ========

Total projected benefit obligations                      $58,775          $55,810
Fair value of plan assets                                 53,734           44,441
                                                        --------         --------
 Projected benefit obligations in excess
         of plan assets                                   (5,041)         (11,369)

Unrecognized net loss from past experience
         difference from that assumed and effect
         of changes in assumptions                         1,099            6,394
Additional minimum liability                              (2,694)          (5,265)
                                                        --------         --------

Accrued pension cost                                     $(6,636)        $(10,240)
                                                        ========         ========
</TABLE>

         Significant assumptions used in determining the plans' funded status
are as follows:

<TABLE>
<CAPTION>
                                                                  December 29,  December 31,
                                                                      1996         1995
<S>                                                                   <C>          <C>  
Expected long-term rates of return on plan assets                     9.50%        9.00%
Discount rates on projected benefit obligations                       7.50%        7.25%
Rates of increase in compensation levels (where applicable)           4.00%        4.00%
</TABLE>

                                      F-20

<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.       EMPLOYEE BENEFIT PLANS (continued)

         Defined Contribution Plan

         The Company  maintains a defined  contribution  plan which is qualified
under  Section  401(k) of the Code and is available  for eligible  employees who
elect to  participate  in the plan.  Employee  contributions  are  voluntary and
subject to certain limitations as imposed by the Code. During 1996 and 1995, the
Company  provided   contributions   amounting  to  a  25%  match  of  employees'
contributions  up to 4% of eligible  compensation.  The Company also provides an
additional  25%  match  of  employees'   contributions  up  to  4%  of  eligible
compensation  made to a fund which  invests in the Company's  common  stock.  In
addition,  the Company may make discretionary  contributions  amounting to a 25%
match of employees'  contributions up to 4% of eligible  compensation.  Prior to
1995,  Company  contributions  were  discretionary  and  provided a 50% match of
employees'  contributions  up to 3% of  eligible  compensation.  The expense for
these contributions for 1996, 1995 and 1994 was approximately $0.8 million, $0.7
million and $0.4 million, respectively.

         Postretirement Benefits

         In  addition  to  providing  pension  benefits,  the  Company  provides
postretirement  health care and life  insurance for eligible  employees.  During
1996,  certain  employees  accepted an early retirement  program  resulting in a
special  termination  loss of $0.6  million.  During 1995,  changes were made to
postretirement  benefits  offered  to  certain  employees  which  resulted  in a
curtailment  loss of $0.6  million.  These  plans are  unfunded  and the Company
retains the right, subject to existing agreements,  to modify or eliminate these
benefits.

         The  components  of  1996,  1995 and 1994  expense  for  postretirement
benefits are as follows:

<TABLE>
<CAPTION>
                                                 1996          1995          1994
                                                            (thousands)
<S>                                               <C>           <C>          <C> 
Service costs for benefits earned                 $12           $24          $172
Interest cost on liability                         67            83           192
Net amortization and deferral                     (53)          (13)          134
Special termination/curtailment loss              576           619            --
                                                -----         -----         -----
Net periodic postretirement benefit cost         $602          $713          $498
                                                =====         =====         =====
</TABLE>

         The accumulated  postretirement benefit obligation at December 29, 1996
and December  31, 1995  resulted in an unfunded  obligation  of $2.1 million and
$1.6 million, respectively.

         A 9% and 10% annual rate of increase in the per capita costs of covered
health care benefits was assumed for each of 1996 and 1995,  respectively.  This
rate was assumed to gradually  decrease to 5% by the year 2000.  Increasing  the
weighted  average  assumed health care cost trend rates by one percentage  point
would have an  insignificant  impact on the accumulated  postretirement  benefit
obligation  and service and interest  cost. The discount rate used was 7.50% and
7.25% as of December 29, 1996 and December 31, 1995, respectively.

                                      F-21
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.       EMPLOYEE BENEFIT PLANS (continued)

         Postemployment Benefits

         The  Company  provides  certain  postemployment  benefits  to former or
inactive  employees  and  their  dependents  during  the time  period  following
employment  but before  retirement.  At December 29, 1996 and December 31, 1995,
the Company's  liability for postemployment  benefits was insignificant for each
period.

         Other

         In  December  1994,  the  Company  changed  its method of  compensating
certain  employees for vacation,  which increased income from operations by $4.3
million for 1994.

10.      INCOME TAXES

         Income (loss) from continuing  operations  before  provision for income
taxes consists of the following:

<TABLE>
<CAPTION>
                                                                        1996              1995              1994
                                                                                       (thousands)
<S>                                                                    <C>              <C>               <C>    
         United States                                                 $46,075          $(62,015)         $34,240
         Foreign                                                         3,086              (983)           1,926
                                                                       -------          --------          -------

         Income (loss) from continuing operations
            before provision (benefit) for income taxes                $49,161          $(62,998)         $36,166
                                                                       =======          ========          =======

         The components of the total consolidated provision (benefit) for income
taxes are summarized as follows:

                                                                        1996              1995              1994
                                                                                       (thousands)

         Continuing operations                                         $16,669          $(12,248)         $13,955

         Discontinued operations                                       (35,129)            1,691            3,517

         Extraordinary loss on early extinguishment
             of debt                                                      (765)               -                 -
                                                                       -------          --------          -------

         Total consolidated provision (benefit) for
             income taxes                                             $(19,225)         $(10,557)         $17,472
                                                                       =======          ========          =======
</TABLE>

                                      F-22
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.      INCOME TAXES (continued)

         The  total  consolidated   provision  (benefit)  for  income  taxes  is
summarized as follows:
<TABLE>
<CAPTION>
                                                     1996           1995             1994
                                                                (thousands)
Current:
<S>                                                   <C>          <C>               <C>   
    Federal                                           $220         $(2,038)          $3,236
    State                                              760              --               --
    Foreign                                            786             457              805
                                                  --------        --------         --------

    Total current                                    1,766          (1,581)           4,041
                                                  --------        --------         --------

Deferred:
    Federal                                        (24,211)         (9,543)          10,259
    State                                           (2,729)            856            3,193
    Foreign                                            491            (289)             (21)
                                                  --------        --------         --------

    Total deferred                                 (20,991)         (8,976)          13,431
                                                  --------        --------         --------

    Total consolidated provision (benefit)
       for income taxes                           $(19,225)       $(10,557)         $17,472
                                                  ========        ========         ========
</TABLE>

         The  tax  effect  of  the  temporary  differences  that  give  rise  to
significant deferred tax assets and liabilities are:
<TABLE>
<CAPTION>
                                                               December 31,        December 31,
                                                                  1996                 1995
                                                                          (thousands)
<S>                                                             <C>                <C>     
Deferred tax assets:
     Inventory basis differences                                $  1,209           $  2,473
     Employee benefit accruals                                     6,247              7,733
     Allowances and contingent liabilities                         3,616              8,589
     Restructuring and plant closing accruals                      8,323             10,869
     Other                                                         6,301              2,518
     Net operating loss carryforwards                             37,483             20,190
     Capital loss carryforwards                                   16,561                 --
     Valuation allowance for deferred tax assets                 (23,064)           (16,979)
                                                                --------           --------

     Deferred tax assets                                          56,676             35,393
                                                                --------           --------

Deferred tax liabilities:
     Basis difference in property, plant and equipment            36,257             30,183
     Net deferred tax liabilities associated with
       discontinued operations                                        --             14,304
     Other                                                         4,944              3,277
                                                                --------           --------

     Deferred tax liabilities                                     41,201             47,764
                                                                --------           --------

Net deferred tax assets (liabilities)                           $ 15,475           $(12,371)
                                                                ========           ========
</TABLE>

                                      F-23
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.      INCOME TAXES (continued)

         The  Company  has  determined   that  taxable   capital  gains  in  the
foreseeable  future for  subsidiaries  that file a separate  federal  income tax
return  will  likely not be  sufficient  to  recognize  the  deferred  tax asset
associated  with  the  capital  loss  carryforward.   Accordingly,  a  valuation
allowance  has been  provided  for the deferred  tax asset  associated  with the
capital loss  carryforward  and certain other deferred tax assets.  During 1996,
the valuation  allowance for deferred tax assets increased by $6.1 million which
included a $16.6 million increase for the capital loss  carryforward,  offset by
$6.9 million decrease due to reversal of  preacquisition  temporary  differences
and $3.6 million for the reversal of valuation allowances which are reflected in
the  consolidated  statement  of  operations.   The  $6.9  million  reversal  of
preacquisition temporary differences was used to reduce cost in excess of assets
acquired.  As of December 29, 1996,  approximately  $1.8 million of deferred tax
assets are related to  preacquisition  activities  and if utilized  will further
reduce cost in excess of assets acquired.  At December 29, 1996, the Company has
$103.2  million of regular  tax net  operating  loss  carryforwards  for federal
income  tax  purposes  expiring  from  2003 to 2010 of which  $7.0  million  was
acquired in 1993 and is subject to  limitations.  In  addition,  the Company has
$47.3 million of capital loss carryforwards that expire in 2001.

         A  reconciliation  of the  statutory  federal  income  tax  rate to the
effective income tax rate on continuing operations is as follows:

<TABLE>
<CAPTION>
                                                          1996               1995              1994
                                                                         (thousands)
<S>                                                    <C>                <C>                <C>     
Statutory income taxes                                 $ 17,206           $(22,049)          $ 12,658
State income taxes, net of federal                        1,864             (2,095)             1,977
Limitation on the utilization of tax benefits                --              7,695                 --
Valuation allowance                                      (3,621)                --               (452)
Cost in excess of assets acquired                           644              1,010                926
Other                                                       576              3,191             (1,154)
                                                       --------           --------           --------

             Total                                     $ 16,669           $(12,248)          $ 13,955
                                                       ========           ========           ========
</TABLE>

11.      EXTRAORDINARY LOSS

         During 1996,  the Company used $31.3  million of the net proceeds  from
the sale of Perfect  Fit to  extinguish  debt of $30.6  million  and  redemption
premiums of $0.6  million.  The Company  wrote off $1.2 million of debt issuance
costs associated with the early  extinguishment of debt and incurred transaction
costs  of  $0.1  million.  The  early  extinguishment  of  debt  resulted  in an
extraordinary loss of $1.1 million (net of $0.8 million income tax benefit).

12.      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

                                      F-24
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.      COMMITMENTS AND CONTINGENCIES (continued)

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  1996  and  1995
restructuring plans) required under operating leases at December 29, 1996 are:

                                     Third Party              Related Party
                                        Leases                    Leases
                                                (thousands)
         1997                         $  7,874                  $  1,767
         1998                            6,164                     1,823
         1999                            4,866                     1,823
         2000                            3,812                     1,823
         2001                            2,883                     2,265
         Thereafter                      4,122                     5,800
                                       -------                   -------
             Total                     $29,721                   $15,301
                                       =======                   =======

         Rental   expense   charged  to  operations   under   operating   leases
approximated  $9.6 million,  $10.5 million and $10.3 million for 1996,  1995 and
1994,  respectively.  Substantially  all such  rental  expense  represented  the
minimum  rental  payments  under  operating  leases.  In  addition,  the Company
incurred  rental expense of  approximately  $1.7 million,  $3.5 million and $3.9
million  for 1996,  1995 and  1994,  respectively,  under  leases  with  related
parties.

13.      RELATED PARTY TRANSACTIONS AND BALANCES

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

         On July 7, 1996, Trace International  Holdings, Inc. ("Trace Holdings")
issued to Foamex L.P. a promissory  note for $4.4  million in  principal  amount
plus  accrued  interest of $0.4  million,  which is an extension of a promissory
note of Trace Holdings that was due in July 1996. The promissory note is due and
payable on demand or, if no demand is made,  July 7, 1997, and bears interest at
9.5%,  payable quarterly in arrears  commencing  October 1, 1996. The promissory
note is included in other stockholders' equity (deficit).

         In connection with the acquisition of Great Western, Foamex L.P. issued
a promissory note to Rallis (see Note 8) and entered into lease  agreements (see
Note 12) with Rallis and an affiliate of Rallis,  for the rental of former Great
Western  manufacturing  facilities  located  in  Orange,  Ontario  and  Hayward,
California  and a warehouse  facility  in Tigard,  Oregon.  Foamex L.P.  has the
option to purchase each of these properties from Rallis or such affiliate.

         Foamex L.P. was party to a lease  agreement  for an airplane with Trace
Aviation Corp. ("Trace Aviation"),  a subsidiary of Trace Holdings.  During 1995
and 1994,  Foamex  L.P.  paid Trace  Aviation  $1.6  million  and $2.7  million,
respectively, pursuant to the lease agreement. The lease agreement also provided
for the use of the airplane by Trace Holdings with  remuneration  to Foamex L.P.
based on actual usage of the plane. During 1995 and 1994, Trace Holdings paid to
Foamex  L.P.  $0.6  million  and $0.5  million,  respectively,  pursuant  to the
agreement. During August 1995, Foamex Aviation Inc. ("Aviation"), a wholly-owned
subsidiary of the Company,  acquired the aircraft  from Trace  Holdings for $3.0
million  in cash and the  assumption  of  $11.7  million  of  related  debt.  In
connection with the acquisition of the aircraft, the Foamex L.P. lease and other
agreements were terminated.

                                      F-25
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.      RELATED PARTY TRANSACTIONS AND BALANCES (continued)

         Foamex L.P. has a management service agreement with Trace Foam Company,
Inc.  ("Trace Foam"), a wholly-owned  subsidiary of Trace Holdings,  pursuant to
which Trace Foam provides general managerial services of a financial, technical,
legal,  commercial,  administrative and/or advisory nature to Foamex L.P. for an
annual fee of $1.75  million  and  reimbursement  of  expenses  incurred.  Trace
Holdings  rents  approximately  5,900  square  feet of  general,  executive  and
administrative  office  space  in  New  York,  New  York  from  Foamex  L.P.  on
substantially the same terms as Foamex L.P. leases such space from a third party
lessor.

         During 1995 and 1994, the Company purchased  approximately $2.5 million
and  $11.9  million,   respectively,   of  scrap  material  from  Recticel  Foam
Corporation  ("RFC"),  a former  partner of Foamex L.P. and whose  chairman is a
director of the Company,  under a minimum annual volume  agreement which expired
in June 1995.

14.      STOCK OPTION PLAN

         The  Company's  1993 Stock  Option Plan  provides  for the  granting of
nonqualified  ("NQSOs") and incentive stock options for up to 3.0 million shares
of common  stock to  officers  and  executive  employees  of the Company and its
subsidiaries  and affiliates,  the price and terms of each such option is at the
discretion of the Company,  except that the term cannot exceed ten years.  As of
December 29,  1996,  the stock  options  issued under the 1993 Stock Option Plan
vest equally over a five year period with a term of ten years.

         A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
                                                      1996                          1995                         1994
                                                           Weighted                         Weighed                        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           951,343            $7.64       2,033,800         $17.28       1,998,600         $17.63
   Granted                                 202,240             7.06         150,000           9.95         145,000          10.50
   Exercised                               (14,914)            6.88              --             --            (740)         13.50
   Forfeited                              (171,193)           10.80        (145,956)         14.59        (109,060)         14.70
   Canceled                                     --               --      (1,924,700)         17.15              --             --
   Granted in exchange offer                    --               --         838,199           6.88              --             --
                                        ----------           ------      ----------         ------      ----------         ------


Outstanding at end of year                 967,476            $6.97         951,343          $7.64       2,033,800         $17.28
                                        ==========           ======      ==========         ======      ==========         ======

Exercisable at end of year                 431,863            $6.94          20,140         $14.62         573,100         $18.69
                                        ==========           ======      ==========         ======      ==========         ======
</TABLE>

         The options  outstanding  at December  29, 1996 have an exercise  price
range of $6.88 to $10.25.  During 1996, the Company granted 202,240 options with
a weighted  average  market price on the date of grant of $12.13.  The aggregate
difference of $1.0 million  between the fair market value ("FMV") of the options
at the date of grant and the option  price is being  charged to expense over the
vesting period (five years) of the options.  During 1995, the Company  granted a
total of  150,000  options  which  include  (i) 15,000  options  with a weighted
average  market price on the date of grant of $9.50,  (ii) 85,000 options with a
weighted  average  market  price on the date of grant of $8.29 and (iii)  50,000
options  with a  weighted  average  market  price on the date of grant of $9.50.

                                      F-26

<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.STOCK OPTION PLAN (continued)

During 1994, the Company granted 145,000 options with a weighted  average market
price on the date of grant of $10.50.  Upon  completion  of the  initial  public
offering (the "IPO") in December 1993,  options were granted to purchase 248,600
shares of common stock at $13.50 per share and 1,750,000  shares of common stock
at prices ranging from $15.00 to $22.50 per share.  The aggregate  difference of
$373,000 between the FMV ($15 per share) of the options at the date of grant and
the $13.50  option  price is being  charged to expense  over the vesting  period
(five  years) of the options.  Total  compensation  expense  relating to options
amounted  to  approximately  $0.3  million,   $0.1  million  and  $0.1  million,
respectively, in each of 1996, 1995 and 1994, respectively.

         In December  1995,  the Stock  Option Plan  Committee  approved a stock
option exchange  program which permitted  optionees of record as of that date to
exchange  all options  previously  granted  for options  priced at the FMV share
price,  $6.875,  as of the close of  business  on that  date.  The number of new
options (the "New Options") to be exchanged for previously  granted options (the
"Old  Options") was  determined on the basis of the ratio of the FMV on December
6,  1995  to the  FMV or the  discount  share  value  of the  Old  Options  when
originally  granted.  New Options could not be exercised  until December 6, 1996
and expire upon the same terms as the Old Options.

         The weighted average remaining contractual lives of outstanding options
at December 29, 1996 was approximately 7.7 years.

         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 not have been significantly affected.

15.      STOCKHOLDERS' EQUITY (DEFICIT)

         Preferred Stock

         The  Company is  authorized  to issue 5.0 million  shares of  preferred
stock with a par value of $1.00 per share,  none of which has been  issued.  The
Board of  Directors  has the power to  establish  the powers,  preferences,  and
rights of each  series  which may afford  the  holders  of any  preferred  stock
preferences, powers and rights (including voting rights) senior to the rights of
the holders of common stock.

         Common Stock

         At December  29,  1996,  the Company had an aggregate of 4.8 million of
common stock shares  reserved for issuance in  connection  with its stock option
plan (3.0 million) and outstanding warrants (1.8 million).

         Warrants

         In  June  1994,  in  connection  with  the  issuance  of  the  Discount
Debentures,  the Company issued 116,745  warrants to purchase 0.6 million shares
of common  stock.  Each  warrant is  exercisable  on or before  July 1, 1999 for
5.1394  shares at a cash price of $11.52 per share upon  exercise.  The warrants
were valued by projecting the

                                      F-27
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.      STOCKHOLDERS' EQUITY (DEFICIT) (continued)

Company's  financial  results  for five  years.  These  financial  results  were
discounted at a rate of 18% to 20% and, with a projected price earnings ratio of
10-11x after five years,  yielded a value of approximately $25.70 per warrant or
$3.0 million in total. Accordingly, additional paid in capital was increased for
the cash received  attributable to the warrants and the associated debt reduced,
with such reduction to be amortized over the life of the debt.

         In  addition,   the  Company  has  outstanding   warrants  to  purchase
approximately  1.2  million  shares  of  common  stock at an  exercise  price of
approximately $12.30 per share at any time prior to October 1999.

         Treasury Stock

         During 1996 and 1995, the Company  purchased 624,700 and 929,700 shares
of its common  stock,  respectively,  for an aggregate  cost of $6.3 million and
$7.2 million, respectively,  under programs authorized by the Board of Directors
to purchase up to 3.0 million shares of the Company's common stock.

         Other

         The other component of stockholders'  equity (deficit)  consists of the
following:

<TABLE>
<CAPTION>
                                                       December 29,   December 31,   January 1,
                                                           1996           1995          1995
                                                                      (thousands)
<S>                                                       <C>            <C>            <C>   
Foreign currency translation adjustment                   $3,494         $3,448         $3,929
Additional pension liability, net of income taxes          1,445          2,872            898
Note receivable from Trace Holdings                        4,373          4,373          3,000
                                                         -------        -------        -------
                                                          $9,312        $10,693         $7,827
                                                         =======        =======        =======
</TABLE>

16.      ENVIRONMENTAL MATTERS

         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.  During 1996,  expenditures  in connection  with the
Company's compliance with federal,  state, local and foreign  environmental laws
and  regulations  did  not  have a  material  adverse  effect  on the  Company's
operations, financial position, capital expenditures or competitive position. As
of December 29, 1996, the Company has  environmental  accruals of  approximately
$4.1 million for environmental  matters.  In addition,  as of December 29, 1996,
the  Company has net  receivables  of  approximately  $0.9  million  relating to
indemnification   for  environmental   liabilities,   net  of  an  allowance  of
approximately  $1.0 million  relating to potential  disagreements  regarding the
scope of the  indemnification.  The Company  believes  that  realization  of the
net receivables established for indemnification is probable.

         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 and TDI, principal raw materials used in
the  manufacturing  of  foam.  The  Company  completely  eliminated  the  use of
chlorofluorocarbons  and  methylchloroform  by the end of  1995.  The  1990  CAA
Amendments  also  may  result  in the  imposition  of more  stringent  standards
regulating air emissions from the use of these  chemicals by  polyurethane  foam
manufacturers, but these standards have not yet been promulgated.

                                      F-28
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16.      ENVIRONMENTAL MATTERS (continued)

         The Company has reported to appropriate  state  authorities that it has
found soil and  groundwater  contamination  in excess of state standards at four
facilities and soil  contamination  in excess of state  standards at three other
facilities.  The  Company  has  begun  remediation  and  is  conducting  further
investigations  into the extent of the  contamination  at these  facilities and,
accordingly,  the extent of the remediation that may ultimately be required. The
actual cost and the timetable of any such  remediation  cannot be predicted with
any degree of certainty at this time.  As of December 29, 1996,  the Company has
environmental accruals of approximately $3.2 million for the remaining potential
remediation costs for these facilities based on engineering estimates.

         Federal  regulations  require  that by the end of 1998 all  underground
storage tanks  ("USTs") be removed or upgraded in all states to meet  applicable
standards.  The  Company  has six USTs that will  require  removal or  permanent
in-place closure by the end of 1998. Due to the age of these tanks,  leakage may
have  occurred  resulting in soil and possibly  groundwater  contamination.  The
Company has accrued $0.4 million for the estimated  removal and remediation,  if
any, associated with these USTs. However,  the full extent of contamination and,
accordingly,  the actual cost of such  remediation  cannot be predicted with any
degree of certainty at this time. The Company believes that its USTs do not pose
a  significant  risk  of  environmental   liability  because  of  the  Company's
monitoring  practices  for  USTs  and  conditional  approval  for the  permanent
in-place closure for certain USTs. However,  there can be no assurance that such
USTs will not result in significant environmental liability in the future.

         The Company has been  designated  as a  Potentially  Responsible  Party
("PRP") by the United States  Environmental  Protection  Agency (the "EPA") with
respect to thirteen sites with an estimated  total  liability to the Company for
the thirteen sites of less than approximately  $0.5 million.  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, the participation of the Company is considered to be immaterial.

         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,  management
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 material.

17.      LITIGATION

         As of February 26,  1997,  the Company and Trace  Holdings  were two of
multiple defendants in actions filed on behalf of approximately 5,000 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. Five 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  700 residents of Australia,  New Zealand,  England,  and Ireland.
During 1995, the Company and Trace Holdings 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.  In addition,  two of the cases filed on
behalf of 903 foreign  plaintiffs  were  dismissed on the grounds that the cases

                                      F-29
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.      LITIGATION (continued)

could not be brought in the United  States  courts.  This decision is subject to
appeal.  The  Company  believes  that the  number  of suits  and  claimants  may
increase.  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 Holdings.  Neither the Company nor Trace Holdings  recommended,
authorized or approved the use of its foam for these  purposes.  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 Trace Holdings, and without taking into
account  potential  indemnity from the  manufacturers  of  polyurethane  covered
breast  implants,  management  believes that the disposition of 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 or Trace Holdings'  consolidated
financial  position or results of operations.  In addition,  the Company is also
indemnified  by  Trace  Holdings  for  any  such  liabilities  relating  to foam
manufactured  prior  to  October  1990.  Although  Trace  Holdings  has paid the
Company's  litigation  expenses  to date  pursuant to such  indemnification  and
management  believes Trace Holdings  likely will be in a position to continue to
pay such expenses,  there can be no absolute  assurance that Trace Holdings will
be able to provide such indemnification.  Based on information available at this
time with respect to the potential  liability,  and without  taking into account
the  indemnification  provided by Trace  Holdings and the  coverage  provided by
Trace Holdings' and the Company's liability insurance, the Company believes that
the proceedings  should not ultimately result in any liability that would 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.

         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.

18.      FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

         Interest Rate Swap Agreements

         The  Company  has two  interest  rate  swap  agreements  involving  the
exchange of fixed and floating interest payment obligations without the exchange
of the underlying  principal  amounts.  At December 29, 1996, the total notional
principal amount of these interest rate swap agreements was $300.0 million.  The
counterparty to these agreements is a large international financial institution.
The interest  rate swap  agreements  subject the Company to financial  risk that
will vary during the life of these  agreements  in  relation to market  interest
rates.

         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.

                                      F-30

<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

         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.

         Disclosure about 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 as of
December 29, 1996 are as follows:

                                  Carrying Amount       Fair Value
                                              (thousands)

     Liabilities:
         Long-term debt                 $497,849        $533,041
                                    ============        ========

         Interest rate swaps        $         --          $3,160
                                    ============        ========

         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.

         The fair value of interest  rate swaps are based on the amount at which
the Company  would pay if the swaps were  settled,  as  determined  by estimates
obtained from dealers.

         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.

                                      F-31
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.      SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                        1996           1995           1994
                                                                                    (thousands)
<S>                                                                    <C>            <C>             <C>    
         Cash paid for interest                                        $44,472        $47,333         $42,734
                                                                       =======        =======         =======

         Cash paid (received) for income taxes, net                    $(2,855)      $  3,024         $ 6,711
                                                                       =======       ========         =======

         Noncash capital expenditures                                  $   165       $    378         $    --
                                                                       =======       ========         =======
</TABLE>

                                      F-32
<PAGE>

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20.      QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
                                                       First        Second         Third         Fourth
                                                     Quarter        Quarter       Quarter       Quarter
                                                            (thousands except per share amounts)
<S>                                                   <C>             <C>           <C>           <C>     
1996
         Net sales                                    $219,131        $240,447      $236,766      $230,007
         Gross profit                                   36,031          38,167        39,960        39,074
         Net income (loss)                               6,137         (31,707)      (66,623)        9,058
         Earning (loss) per share                         0.24           (1.24)        (2.61)         0.36

1995
         Net sales                                    $219,542        $215,350      $217,036      $210,906
         Gross profit                                   32,664          33,198        30,809         4,078
         Net income (loss)                               5,061           3,923           425       (62,529)
         Earnings (loss) per share                        0.19            0.15          0.02         (2.40)
</TABLE>

         During 1996, the Company recorded a net loss on the disposal of Perfect
Fit including  operating  losses during the  phase-out  period of  approximately
$43.0 million of which $39.3 million is reflected in the second  quarter of 1996
(see Note 3). Also,  during 1996 the Company  recorded an estimated  net loss on
the disposal of JPS Automotive  including  operating losses during the phase-out
period of approximately $70.9 million of which $69.7 million is reflected in the
third  quarter  of 1996 (see Note 3).  During the  fourth  quarter of 1996,  the
Company recorded a $6.5 million net restructuring  credit, which is described in
Note 4.

         During 1995, depressed industry conditions  necessitated the closing of
certain  facilities,  as more fully  described  in Note 4, which  resulted  in a
pre-tax  restructuring  charge of $41.4 million in December 1995 and resulted in
certain unusual charges,  consisting of inventory write-downs,  customer credits
and rollbacks.  Furthermore, the fourth quarter of 1995 included certain changes
in  estimates  related to recovery of  environmental  receivables  and  employee
benefit  accruals.  The unusual charges and change in estimates  decreased gross
profit by $13.4  million  and  increased  selling,  general  and  administrative
expenses by $4.9 million.

                                      F-33
<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 29,   December 31,
                                                                  1996           1995
ASSETS                                                                 (thousands)
<S>                                                               <C>            <C>   
CURRENT ASSETS:
    Cash and cash equivalents                                     $1,232         $2,680
    Intercompany receivables                                      10,516         15,220
    Deferred income taxes                                         15,045         12,625
    Other current assets                                           1,053          5,302
                                                               ---------      ---------
            Total current assets                                  27,846         35,827

INVESTMENT IN CONSOLIDATED SUBSIDIARIES                               --         42,662

OTHER ASSETS                                                         353            453
                                                               ---------      ---------

TOTAL ASSETS                                                     $28,199        $78,942
                                                               =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
    Accounts payable                                              $9,309        $13,153
    Other accrued liabilities                                      4,937            804
                                                               ---------      ---------
      Total current liabilities                                   14,246         13,957

LONG-TERM LIABILITIES:
    Notes payable to consolidated subsidiaries (1)                 8,000         12,000
    Deficit in consolidated subsidiaries                          62,429             --
    Deferred income taxes                                          1,627         23,602
                                                               ---------      ---------
      Total liabilities                                           86,302         49,559
                                                               ---------      ---------

COMMITMENTS AND CONTINGENCIES                                         --             --
                                                               ---------      ---------

STOCKHOLDERS' EQUITY (DEFICIT):
    Preferred Stock, par value $1.00 per share:
      Authorized 5,000,000 shares - none issued                       --             --
    Common Stock, par value $.01 per share:
      Authorized 50,000,000 shares
      Issued 26,753,262 and 26,751,960
         shares, respectively
      Outstanding 25,198,862 and 25,786,260
         shares, respectively                                        267            267
    Additional paid-in capital                                    84,579         84,015
    Retained earnings (accumulated deficit)                     (120,174)       (37,039)
    Other                                                         (9,312)       (10,693)
                                                               ---------      ---------
                                                                 (44,640)        36,550
    Common Stock held in Treasury, at cost:
      1,554,400 shares and 929,700, respectively                 (13,463)        (7,167)
                                                               ---------      ---------
      Total stockholders' equity (deficit)                       (58,103)        29,383
                                                               ---------      ---------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)       $28,199        $78,942
                                                               =========      =========
</TABLE>

(1)      During 1996, JPSGP, a wholly-owned  subsidiary of Foamex International,
         distributed its assets and liabilities to Foamex International. JPSGP's
         assets  primarily  consisted  of its  1%  partnership  interest  in JPS
         Automotive   and  a  $4.0   million   demand   note  due  from   Foamex
         International.

                 See notes to consolidated financial statements.
                                   (continued)

                                      S-2
<PAGE>

                                                                    Schedule I
                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                               1996           1995            1994
                                         (amounts in thousands except per share amounts)
<S>                                          <C>            <C>             <C>    
INTERCOMPANY SALES                           $179,791       $197,066        $61,297

COST OF GOODS SOLD                            179,791        197,066         61,297
                                            ---------      ---------      ---------

GROSS PROFIT                                       --             --             --

SELLING, GENERAL AND
    ADMINISTRATIVE EXPENSES                       709          5,004          4,152

RESTRUCTURING AND OTHER CHARGES                  (126)         2,168             --
                                            ---------      ---------      ---------

INCOME (LOSS) FROM OPERATIONS                    (583)        (7,172)        (4,152)

EQUITY IN EARNINGS (LOSS) OF
    CONSOLIDATED SUBSIDIARIES                  42,097        (57,904)        34,805

INTEREST EXPENSE                                  196             13             --

INTEREST INCOME                                    78            679            397
                                            ---------      ---------      ---------

INCOME (LOSS) BEFORE INCOME TAX
    AND EXTRAORDINARY LOSS                     41,396        (64,410)        31,050

INCOME TAX PROVISION (BENEFIT)                  8,904        (13,660)         8,839
                                                           ---------      ---------

INCOME (LOSS) FROM CONTINUING
    OPERATIONS                                 32,492        (50,750)        22,211

EQUITY IN DISCONTINUED OPERATIONS            (114,480)        (2,370)         3,919
                                            ---------      ---------      ---------

INCOME (LOSS) BEFORE EXTRAORDINARY LOSS       (81,988)       (53,120)        26,130

EQUITY IN EXTRAORDINARY LOSS                   (1,147)            --             --
                                            ---------      ---------      ---------

NET INCOME (LOSS)                            $(83,135)      $(53,120)       $26,130
                                            =========      =========      =========

EARNINGS (LOSS) PER SHARE:

    CONTINUING OPERATIONS                       $1.27         $(1.92)         $0.83
    DISCONTINUED OPERATIONS                     (4.47)         (0.09)          0.15
    EXTRAORDINARY LOSS                          (0.05)            --             --
                                            ---------      ---------      ---------

EARNINGS (LOSS) PER SHARE                      $(3.25)        $(2.01)         $0.98
                                            =========      =========      =========

WEIGHTED AVERAGE NUMBER
    OF SHARES OUTSTANDING
<FN>
1    Equity in discontinued  operation  includes allocated income tax provisions
     (benefits) of Foamex  International  of $(32.5)  million,  $4.3 million and
     $2.8 million for 1996, 1995 and 1994, respectively.

2    Equity in extraordinary loss includes an allocated income tax benefit of
     $0.8 million for 1996.
</FN>
</TABLE>

                See notes to consolidated financial statements.
                                   (continued)

                                      S-3
<PAGE>

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

                                                                     1996           1995           1994
<S>                                                                <C>            <C>             <C>    
OPERATING ACTIVITIES:                                                            (thousands)
    Net income (loss)                                              $(83,135)      $(53,120)       $26,130
    Adjustments to reconcile net income (loss)
      to net cash provided by operating activities:
      Deferred income taxes                                           8,904        (11,622)         5,603
      Equity in earnings of discontinued operations                 114,480          2,370         (3,919)
      Extraordinary loss                                              1,147             --             --
      Equity in earnings of consolidated subsidiaries               (42,097)        57,904        (34,805)
      Other                                                             357             35            522
    Changes in operating assets and liabilities,
     net of acquisitions:
      Intercompany receivables                                        2,702          4,049        (19,592)
      Intercompany accounts payable                                      --             --           (785)
      Accounts payable                                               (3,844)        (7,393)        20,371
      Other assets and liabilities                                    4,346         (3,541)        (4,180)
                                                                  ---------      ---------      ---------
         Net cash provided by (used for) operating activities         2,860        (11,318)       (10,655)
                                                                  ---------      ---------      ---------

INVESTING ACTIVITIES:
    Investment in consolidated subsidiaries                              --         (4,025)            --
    Proceeds from sale of discontinued operations                       179             --             --
    Other                                                             1,707          2,379         (1,494)
                                                                  ---------      ---------      ---------
         Net cash provided by (used for) investing activities         1,886         (1,646)        (1,494)
                                                                  ---------      ---------      ---------

FINANCING ACTIVITIES:
    Issuance of warrants                                                 --             --          3,000
    Note payable to consolidated subsidiary                              --          2,000             --
    Purchase of treasury stock                                       (6,296)        (7,167)            --
    Other                                                               102             --            (17)
                                                                  ---------      ---------      ---------
         Net cash provided by (used for) financing activities        (6,194)        (5,167)         2,983
                                                                  ---------      ---------      ---------

NET DECREASE IN CASH AND CASH EQUIVALENTS                            (1,448)       (18,131)        (9,166)

CASH AND CASH EQUIVALENTS AT
    BEGINNING OF PERIOD                                               2,680         20,811         29,977
                                                                  ---------      ---------      ---------

CASH AND CASH EQUIVALENTS AT
    END OF PERIOD                                                    $1,232         $2,680        $20,811
                                                                  =========      =========      =========
</TABLE>

Note:  During 1996, 1995 and 1994, the Company received  distributions  from its
consolidated  subsidiaries  of $1.7  million,  $2.4  million  and $3.2  million,
respectively, in accordance with tax sharing agreements.


                 See notes to consolidated financial statements.
                                   (continued)

                                      S-4
<PAGE>

                                                                   Schedule II

                   FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                                   (THOUSANDS)
<TABLE>
<CAPTION>
                                              Balance at   Charged to    Charged to                   Balance
                                             Beginning of  Costs and         other                    at End
                                               Period       Expenses     Accounts(1)    Deductions   of Period
<S>                                             <C>            <C>             <C>         <C>         <C>   
YEAR ENDED DECEMBER 29, 1996
    Allowance for Uncollectible Accounts        $4,839     $    704            $292        $1,911      $3,060
                                             =========     ========      ==========     =========     =======

    Reserve for Discounts                       $4,299     $     --         $12,190       $13,221      $3,268
                                             =========     ========      ==========     =========     =======

    Valuation Allowance                      $  16,979     $ 12,940      $   (6,855)(3) $      --     $23,064
                                             =========     ========      ==========     =========     =======


YEAR ENDED DECEMBER 31, 1995 (2)
    Allowance for Uncollectible Accounts        $2,324       $4,627            $324        $2,436      $4,839
                                             =========     ========      ==========     =========     =======

    Reserve for Discounts                       $1,382     $     --         $15,056       $12,139      $4,299
                                             =========     ========      ==========     =========     =======

    Valuation Allowance                        $13,172     $  7,695      $   (3,888)(3) $      --     $16,979
                                             =========     ========      ==========     =========     =======


YEAR ENDED JANUARY 1, 1995 (2)
    Allowance for Uncollectible Accounts        $2,898         $878            $146        $1,598      $2,324
                                             =========     ========      ==========     =========     =======

    Reserve for Discounts                       $1,326     $     --         $12,582       $12,526      $1,382
                                             =========     ========      ==========     =========     =======

    Reserve for Billing Adjustments               $140     $     --           $(140)    $      --     $13,172
                                             =========     ========      ==========     =========     =======

    Valuation Allowance                        $12,884        $(452)     $      740     $      --     $13,172
                                             =========     ========      ==========     =========     =======

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

(2)  Fiscal years 1995 and 1994 were restated for discontinued operations.

(3)  Represents an adjustment to cost in excess of net assets relating to the
     utilization of preacquisition deferred tax assets of General Felt.
</FN>
</TABLE>

                                      S-5