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

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 28, 2003

                                       OR

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

                    Commission file number: 1-11432: 1-11436

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

       Delaware                                             05-0475617
       Delaware                                             22-3182164
-------------------------------                        -----------------------
(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: None
                                                            ----

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

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

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

     As  of  March  2,  2004,   there  were  1,000  shares  of  Foamex   Capital
Corporation's common stock outstanding.

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

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

<PAGE>


                                   FOAMEX L.P.
                           FOAMEX CAPITAL CORPORATION

                                      INDEX
<TABLE>
<CAPTION>

                                                                                                               Page
Part I
<S>                                                                                                             <C>
         Item  1.     Business                                                                                    3
         Item  2.     Properties                                                                                 10
         Item  3.     Legal Proceedings                                                                          10
         Item  4.     Submission of Matters to a Vote of Security Holders                                        12

Part II
         Item  5.     Market for Registrant's Common Equity and
                           Related Stockholder Matters                                                           12
         Item  6.     Selected Financial Data                                                                    12
         Item  7.     Management's Discussion and Analysis of
                           Financial Condition and Results of Operations                                         14
         Item  7a.    Quantitative and Qualitative Disclosures about Market Risk                                 28
         Item  8.     Financial Statements and Supplementary Data                                                28
         Item  9.     Changes in and Disagreements with Accountants
                           on Accounting and Financial Disclosure                                                28
         Item  9a.    Controls and Procedures                                                                    28

Part III
         Item 10.     Directors and Executive Officers of the Registrant                                         29
         Item 11.     Executive Compensation                                                                     29
         Item 12.     Security Ownership of Certain Beneficial Owners
                           and Management                                                                        29
         Item 13.     Certain Relationships and Related Transactions                                             29
         Item 14.     Principal Accounting Fees and Services                                                     29

Part IV
         Item 15      Exhibits, Financial Statement Schedules
                           and Reports on Form 8-K                                                               29

         Signatures                                                                                              35
</TABLE>



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



                                       2
<PAGE>


PART I
ITEM l.  BUSINESS

General

     Foamex L.P.  (referred to in this document as "Foamex  L.P.,  we, us and/or
our"),  a  wholly-owned   subsidiary  of  Foamex   International  Inc.  ("Foamex
International"),  is engaged  primarily in the manufacturing and distribution of
flexible  polyurethane  and advanced  polymer foam products.  As of December 28,
2003,  our  operations  are  conducted  directly  and through  our  wholly-owned
subsidiaries,  Foamex Canada Inc. ("Foamex Canada"),  Foamex Latin America, Inc.
("Foamex  Mexico") and Foamex Asia,  Inc.  ("Foamex  Asia").  As of December 28,
2003,  Foamex  L.P.'s  partners  were FMXI,  Inc.  ("FMXI") with a 1.7% managing
general  partnership  interest  and Foamex  International  with a 98.3%  limited
partnership interest.

     Throughout  this Annual  Report on Form 10-K, we  incorporate  by reference
information from parts of other documents filed with the Securities and Exchange
Commission (the "SEC"). The SEC allows us to disclose  important  information by
referring to it in this manner, and you should review that information.

     We make our Annual Report on Form 10-K,  quarterly reports on Form 10-Q and
current  reports  on Form  8-K,  as well as any  amendments  to  those  reports,
available free of charge through our web site as soon as reasonably  practicable
after we electronically  file that material with, or furnish it to, the SEC. You
can learn more about us by  reviewing  our SEC filings on our web site.  Our SEC
reports,  available  through  www.sec.gov which is maintained by the SEC, can be
accessed through the investor  relations' page of our web site, which is located
at www.foamex.com/investor.php.

Segments

     We are the largest  manufacturer  and distributor of flexible  polyurethane
and  advanced  polymer  foam  products  in  North  America.   We  have  numerous
manufacturing  facilities  dedicated  to  specific  product  lines  as  well  as
facilities with the capability to support  multiple  product lines.  Each of our
business  segments has a customer base that is significantly  different from the
other  segments.  Our senior  executives  direct  sales  efforts for each of our
business segments.

     Our five business segments are described below.

       Foam Products

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

     Our bedding  products  are sold to mattress  manufacturers.  We also supply
cut-to-size  seat  cushions,  back  cushions and other  pieces to the  furniture
industry.  Furniture foams are sold directly to manufacturers as well as through
distributors.  The consumer products group sells therapeutic sleep products such
as mattress pads and bed pillows for the health care and consumer  markets and a
broad line of home furnishing products to retailers throughout North America.

     The development and introduction of value-added  products continues to be a
priority including products incorporating Reflex(R) and viscoelastic or "memory"
foams for the bedding  industry,  which  maintain their  resiliency  better than
other foams and materials. Reflex(R) materials include cushion wraps and cushion
cores and are advanced polymer cushioning  products designed to improve comfort,
quality and durability in upholstered furniture and bedding products.  Reflex(R)
was created using patented VPF(SM) manufacturing technology.


                                       3
<PAGE>


     Carpet Cushion Products

     We manufacture carpet cushion products,  which include rebond,  prime, felt
and rubber carpet padding. Prime carpet padding is made from virgin polyurethane
foam buns.  Rebond carpet padding is primarily made from recycled foam, which is
shredded  into small  pieces,  processed  and then bonded  using a  polyurethane
chemical   adhesive.   Rebond   manufacturing   requires  the  management  of  a
comprehensive  recycling  business  that  includes  an  extensive  internal  and
external  collection  network  from  the  automotive  and foam  industries  on a
worldwide basis. Our fiber operation  incorporates  both mechanical and chemical
bonding  techniques to produce high-end padding from virgin and recycled fibers.
We produce high-end rubber carpet padding utilizing synthetic rubber.

     Automotive Products

     We are one of the largest  suppliers of  polyurethane  foam products to the
North American automotive  industry.  Our product lines include:  foam rolls and
flame-laminated  composites,  to improve comfort and provide pleasing appearance
in seat covers and other interior soft-trim applications;  thermoformable foams,
to provide  structure and shape in various  substrate  applications;  acoustical
foams,  to reduce noise and improve sound  quality in the vehicle;  barrier foam
products,  which allow our customers to more efficiently process components with
low-pressure  injection-molding or foam-in-place  manufacturing methods;  molded
energy-absorbing  foams, to enhance occupant safety in vehicle crash situations;
and molded seating cushions.

     We supply  our  product  lines  through a range of tiers in the  automotive
industry supply chain, varying greatly depending on the specific application and
the original equipment manufacturer ("OEM"). Most frequently,  we supply to Tier
1 system integrators,  which in turn provide components and systems to the OEMs.
In  conjunction  with these  efforts,  we maintain  direct contact with OEMs for
material  specification  development,  appearance  approvals,  and  new  product
development initiatives.

     We maintain our position in the  automotive  industry  through a continuing
focus  on  new  product  development,   flexible  and  efficient   manufacturing
capabilities, and outstanding quality and service.

     Technical Products

     We are one of the foam industry's  prime  innovators and producers of foams
used for industrial,  specialty, consumer and transportation applications, which
we refer to as "Technical  Products."  Technical Products consist of reticulated
foams and other custom  polyester and polyether  foams  specially  formulated to
meet the needs of technical  customers.  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.  Other post processes such as felting,  coating or laminating to
other foams or materials give these composites specific properties.

     Reticulated foams particularly are well suited for fluid management such as
filtration,  reservoiring and sound attenuation;  non-reticulated foams are used
for energy  management  applications  such as sound  absorption  and  gasketing.
Industrial   applications   include  carburetors,   computer  cabinets,   inkpad
reservoirs,  high-speed inkjet printers and speaker grills. Medical applications
include  oxygenators  for  cardiopulmonary   surgery,   instrument  holders  for
sterilization, pre-op scrubbers impregnated with anti-microbial agents and foams
used in x-rays.  Other Technical  Products have unique  characteristics  such as
flame  retardancy  and fluid  absorption.  Additional  products sold within this
group include foams for refrigerated  supermarket  produce counters,  mop heads,
paint brushes and cosmetic applications.

     Due to the  highly  specialized  nature  of most  Technical  Products,  our
research  staff works with  customers to design,  develop and  manufacture  each
product to  specification.  In  addition,  we  advertise  in trade  journals and
related media to attract customers and, more generally, to increase an awareness
of our capabilities for Technical Products.


                                       4
<PAGE>


     Other

     Other  consists  primarily of certain  manufacturing  operations  in Mexico
City,  corporate  expenses  not  allocated  to the other  business  segments and
restructuring, impairment and other charges (credits).

Marketing and Sales

     Foam Products sells  directly to major bedding and furniture  manufacturers
and  also  through  third  party  independent   fabricators.   In  addition,  we
manufacture and distribute foam-based consumer products such as futons, pillows,
mattress pads and children's furniture to retail chains. Our foam-based consumer
products  sales  efforts  are  primarily  regionally  based.  The key  strategic
elements  supporting  growth in these areas are a focus on  marketing  and sales
efforts, high quality,  cost-competitive and innovative products and low freight
costs  through  optimal  plant  location.  Plant  locations are critical in this
regionalized  business  where the  transportation  cost  typically  comprises  a
significant portion of product cost.

     Carpet Cushion  Products sells carpet padding to distributors  and to major
home product and floor covering retail chains.

     Our  Automotive  Products  customer  base  includes all of the major Tier 1
interior system  integrators.  We compete for new business both at the beginning
of  development of new models and upon the redesign of existing  models.  Once a
foam producer has been  designated to supply parts for a new model program,  the
foam producer  usually  produces parts for the life of the program.  Competitive
factors in the market include product quality and  reliability,  cost and timely
service,  technical expertise and development capability, new product innovation
and customer service.

     We  market  our  Technical   Products  through  a  network  of  independent
fabrication and distribution  companies in North America, the United Kingdom and
Asia.  These  fabricators  or  distributors  often  further  process  or  finish
Technical  Products to meet the specific  needs of end users.  Our specialty and
technical foams service unique end user  requirements  and are generally sold at
relatively  high  margins.  This  business is  characterized  by a diversity and
complexity of both customers and applications.

International Operations

     Our  international  operations  are located in Canada,  Mexico and Asia. We
operate four  manufacturing  facilities in Canada to service our  cushioning and
automotive  customers and have five  facilities in Mexico serving the automotive
and cushioning industries. Four of the Mexican facilities are located within the
Mexican  free  trade  zones  close  to the U.S.  border  and  primarily  service
automotive customers. Our Mexico City facility services both automotive and foam
fabrication customers.

     We participate in a joint venture with fabrication  facilities in Singapore
and Thailand. In December 2001, we increased our non-controlling equity interest
in the joint venture to 70%. The joint venture installed its first foam pourline
during 2003.  This  pourline,  which was entirely  financed by the joint venture
entity, will reduce foam shipping costs for sales to the region and increase the
range of markets served.

     We  have  maintained  a  longstanding   relationship   with  Recticel  s.a.
("Recticel"), a leading manufacturer of flexible polyurethane foam in Europe. We
have in the past exchanged technical  information and expertise relating to foam
manufacturing with Recticel.

Major Customers

     Sales to Johnson  Controls,  which are  included  in  Automotive  Products,
accounted  for  approximately  16.3% of our net sales in 2003,  17.3% of our net
sales in 2002, and 15.7% of our net sales in 2001. No other  customer  accounted
for more than 10.0% of our net sales  during any of the past  three  years.  Net
sales to our five largest  customers  comprised  approximately  34.7% of our net
sales in  2003,  33.8% of our net  sales in 2002 and  35.0% of our net  sales in
2001.  The loss of any one of these  customers  could  have a  material  adverse
effect on our business.


                                       5
<PAGE>


Manufacturing and Raw Materials

     Our manufacturing and distribution  facilities are strategically located to
service our major  customers  because the high  freight  cost in relation to the
cost  of  the  foam  product  generally  results  in  distribution   being  most
cost-effective  within a 200 to 300 mile radius.  During 2003, we closed certain
carpet  padding  operations,  foam pouring  operations,  and a foam  fabrication
operation.

     Our fabrication  process involves cutting foam buns into various shapes and
sizes to meet customer specifications.  Fabricated foam is sold to customers and
is utilized by us to produce our  foam-based  consumer  products.  Scrap foam, a
byproduct of foam production and  fabrication,  is used to produce rebond carpet
padding.

     Raw materials account for a significant portion of our manufacturing costs.
The two principal  chemicals used in the  manufacture  of flexible  polyurethane
foam  are  toluene  diisocyanate,  or  "TDI,"  and  polyol.  We  generally  have
alternative suppliers for each major raw material. We believe that we could find
alternative sources of supply should we cease doing business with any one of our
major suppliers, although there may be some delay in replacing a major supplier,
especially a supplier of TDI and/or polyol.  There are a limited number of major
suppliers  of TDI and polyol.  Although we have not  experienced  a  significant
shortage  of  available  materials,  a  disruption  in our ability to obtain TDI
and/or polyol that continues for a significant  period of time could cause us to
suspend our manufacturing operations, which could have a material adverse effect
on our business and results of operations.

     The prices of TDI and polyol have  historically been cyclical and volatile.
The  prices of these raw  materials  are  influenced  by  demand,  manufacturing
capacity, oil prices and the current geopolitical  instability and its impact on
oil production and prices. We experienced increases in the average prices of raw
materials from major chemical  manufacturers in the year ended December 28, 2003
from the prior year. We attempt to offset raw material price  increases  through
selling price increases and manufacturing process efficiencies, but we were only
partially able to do so in the year ended  December 28, 2003. In the future,  we
may not be successful in  implementing  selling price increases to fully recover
raw material cost increases. Competitive pricing pressure may also require us to
adjust our selling prices or lose volume.

     A key material  needed in the manufacture of rebond carpet padding is scrap
foam. We internally generate a substantial portion of the scrap foam used in the
production of rebond carpet padding from our other operations. Historically, the
market price of rebond carpet  padding has  fluctuated  with the market price of
scrap foam.

Employees

     As  of  December  28,  2003,  we  employed   approximately  5,100  persons.
Approximately 1,300 of these employees are located outside the United States and
approximately  1,700 employees are covered by collective  bargaining  agreements
with labor  unions.  These  agreements  expire on various dates through 2006. We
consider relations with our employees to be good.

Competition

     The flexible  polyurethane foam industry is highly  competitive with price,
quality and service being significant  competitive  factors.  Our competitors in
the polyurethane foam industry include E. R. Carpenter Company,  Leggett & Platt
Incorporated,  Hickory Springs Manufacturing Company,  Vitafoam,  Inc., Flexible
Foam Products,  Inc.,  Future Foam, Inc. and The Woodbridge Group. None of these
competitors individually competes in all of the business segments in which we do
business.

Patents and Trademarks

     We own various  patents and trademarks  registered in the United States and
in numerous  foreign  countries.  The  registered  processes  and products  were
developed  through  ongoing  research  and  development  activities  to  improve
quality, reduce costs and expand markets through development of new applications
for  flexible  polyurethane  foam  products.  While we consider  our patents and
trademarks  to be a  valuable  asset,  we do not  believe


                                       6
<PAGE>


that our  competitive  position is  dependent on patent  protection  or that our
operations are dependent upon any individual patent, trademark or tradename.

Research and Development

     We believe we have a leading  research and  development  capability  in the
flexible  polyurethane  foam  industry.  Our primary  research  and  development
facility is located in Eddystone,  Pennsylvania.  Expenditures  for research and
development  amounted to $3.6  million for 2003,  $4.8 million for 2002 and $3.1
million for 2001.

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

Risk Factors

     In addition to the other  information  in this Annual  Report on Form 10-K,
investors  should  carefully  consider the following  factors about us.  Certain
statements   in   "Risk   Factors"   are   forward-looking    statements.    See
"Forward-Looking Information."

Our substantial debt could impair our financial condition.

     We  continue  to be highly  leveraged  and have  substantial  debt  service
obligations.  As of December 28, 2003,  our total  long-term  debt and revolving
credit borrowings were approximately $745.6 million and our partners' deficiency
was approximately  $325.1 million. As of December 28, 2003, we had approximately
$46.8 million in revolving loan availability and approximately  $20.9 million in
outstanding  letters of credit. We may also incur additional debt in the future,
subject to certain limitations contained in our debt instruments.

     The degree to which we are leveraged could have important consequences. For
example:

     o    our ability to obtain  additional  financing in the future for working
          capital,   capital  expenditures,   acquisitions,   general  corporate
          purposes or other purposes may be limited;

     o    a  significant  portion  of our  cash  flow  from  operations  must be
          dedicated to the payment of interest and principal on our debt,  which
          reduces the funds available for operations;

     o    some of our  debt is and  will  continue  to be at  variable  rates of
          interest,  which may result in higher interest expense in the event of
          increases in interest rates or inability to achieve certain  financial
          conditions; and

     o    our debt agreements contain,  and any agreements to refinance our debt
          likely will contain,  financial  and  restrictive  covenants,  and our
          failure to comply  with them may result in an event of default  which,
          if not cured or waived, could have a material adverse effect on us.

If we are unable to comply with our financial covenants,  our bank lenders could
cause all amounts  outstanding  under the Senior  Secured  Credit  Facility  and
Secured Term Loan to be due and payable immediately.

     On August 18,  2003,  Foamex L.P.  and its bank  lenders  executed a $240.0
Million  Senior  Secured  Credit  Facility (the "$240.0  Million  Senior Secured
Credit  Facility")  and an $80.0 million  Secured Term Loan with another  lender
(the "Secured Term Loan"),  which,  among other things,  requires Foamex L.P. to
meet a financial  covenant.  Under the Senior  Secured  Credit  Facility and the
Secured Term Loan,  Foamex L.P. is subject to a fixed charge


                                       7
<PAGE>


coverage  ratio,  as  defined,  of 1.00.  If we are  unable to  comply  with the
financial  covenant,  the bank lenders could cause all amounts outstanding under
the Senior Secured  Credit  Facility and Secured Term Loan to be due and payable
immediately.  In addition,  any event of default or declaration of  acceleration
under one debt instrument  could also result in an event of default under one or
more of Foamex  L.P.'s  other debt  instruments,  which  unless cured or waived,
would  have a material  adverse  effect on us and could  impair  our  ability to
continue as a going concern.

We may not be able to  generate  sufficient  cash flow to meet our debt  service
obligations.

     Our  ability  to  generate  sufficient  cash flow from  operations  to make
scheduled  payments on our debt  service  obligations  will depend on our future
financial  performance,   which  will  be  affected  by  a  range  of  economic,
competitive and business factors,  many of which are outside of our control. Our
annual debt service  obligations will increase by $2.3 million per year for each
1%  increase  in interest  rates,  based on the  balance of  variable  rate debt
outstanding as of December 28, 2003.  Our estimated debt service  obligation for
2004 is $81.1  million,  based on levels of debt and interest rates in effect at
December 28, 2003. In addition,  Foamex L.P.'s 13 1/2% senior subordinated notes
(the "13 1/2% Senior Subordinated Notes"), currently in the face amount of $51.6
million,  are due on August 15, 2005. If we do not generate sufficient cash flow
from  operations  to  satisfy  our  debt  service  obligations,  we may  have to
undertake  alternative financing plans, such as refinancing or restructuring our
debt,  selling assets,  reducing or delaying  capital  investments or seeking to
raise  additional  capital.  We may not be able to refinance or restructure  our
debt  or  sell  assets  on a  timely  basis,  on  acceptable  terms  or at  all.
Furthermore,  the proceeds of any  refinancing,  restructuring or asset sale may
not  generate  sufficient  cash flow to meet our debt  service  obligations.  In
addition, we may not be able to obtain additional financing on acceptable terms,
if at all, or may not be  permitted  to obtain  additional  financing  under the
terms of our various debt instruments then in effect.  Our inability to generate
sufficient  cash flow to satisfy our debt service  obligations,  or to refinance
our obligations on commercially  reasonable terms, would have a material adverse
effect on our business, financial condition and results of operations.

We may incur more debt, which could exacerbate the risks described above.

     We and  our  subsidiaries  may be  able  to  incur  substantial  additional
indebtedness  in the future.  The Senior Secured Credit  Facility,  Secured Term
Loan and the  indentures  relating to Foamex L.P.'s 10 3/4% senior secured notes
due 2009 (the "10 3/4% Senior Secured Notes"), 9 7/8% senior  subordinated notes
due   2007  (the  "9 7/8%  Senior  Subordinated   Notes")   and  13 1/2%  Senior
Subordinated  Notes  due 2005  restrict  Foamex  L.P.  and its  subsidiaries  in
incurring additional indebtedness, but do not fully prohibit Foamex L.P. and its
subsidiaries  from  doing so. If new debt is added to our and our  subsidiaries'
current debt levels, the related risks, including those described above, that we
and they now face could intensify, which could have a material adverse effect on
us.

The price and availability of raw materials account for a significant portion of
our  manufacturing  costs.  We have  experienced  significant  increases  in raw
material costs and may continue to do so.

     The  two  principal   chemicals   used  in  the   manufacture  of  flexible
polyurethane foam are toluene diisocyanate,  or "TDI," and polyol. The prices of
TDI and polyol are  influenced  by demand,  manufacturing  capacity  and oil and
natural gas prices.  Historically,  the price of raw materials has been cyclical
and  volatile,  and  our  principal  suppliers  of  raw  materials  used  in the
manufacture of flexible polyurethane foam have significantly increased the price
of raw materials several times over the past several years.

     We attempt to offset raw material  price  increases  through  selling price
increases and manufacturing process efficiencies,  but we were not able to fully
do so in 2003. Our suppliers of TDI and polyol,  as well as our other suppliers,
may  increase  raw  material  prices  in the  future  and we may  not be able to
implement  additional  selling price increases to fully offset raw material cost
increases. This could have a material adverse effect on our business,  financial
condition and results of operations.


                                       8
<PAGE>


We depend on a limited number of suppliers of TDI and polyol.

     There are a limited number of major  suppliers of TDI and polyol.  Although
we have not  experienced  a  significant  shortage  of  available  materials,  a
disruption  in our  ability to obtain TDI and/or  polyol  that  continues  for a
significant  period  of  time  could  cause  us  to  suspend  our  manufacturing
operations,  which  could have a material  adverse  effect on our  business  and
results of operations.

We must effectively manage our other operating expenses.

     In  addition  to our  ability to  effectively  increase  selling  prices in
response to raw material  cost  increases,  we must manage and control our other
operating  expenses.  If we are unable to achieve  reductions in other operating
expenses and in our selling,  general and  administrative  expenses,  this could
have a material adverse effect on our business,  financial condition and results
of operations.

We rely on a few large customers for a significant portion of our net sales.

     A few of our customers are material to our business and  operations.  Sales
to our five largest customers together accounted for approximately  34.7% of our
net sales in 2003, 33.8% of our net sales in 2002, and 35.0% of our net sales in
2001. Sales to Johnson Controls,  our largest  customer,  accounted for 16.3% of
our net  sales in 2003,  17.3% of our net  sales in 2002,  and  15.7% of our net
sales in 2001. The loss, or a substantial  decrease in the amount,  of purchases
by any of our major customers could adversely affect our financial  position and
results of operations.

Our  customers'  financial  condition may have a material  adverse effect on our
business, financial condition and results of operations.

     In  the  ordinary  course  of  business,  we  extend  trade  credit  to our
customers.  In the event our customers,  in the aggregate or certain significant
customers,  are not able to pay us for our products on a timely basis or at all,
this could have a material adverse effect on our business,  financial  condition
and results of operations.

We could incur significant costs if we are unable to renew leases for certain of
our manufacturing facilities.

     We lease certain of our foam pouring facilities. In the event we are unable
to renew our leases at these  facilities,  we could incur  significant  costs in
relocating  our  manufacturing  operations.  Such costs could include the actual
removal and  relocation of equipment and  inventory,  the lost  production  time
associated  with the transition,  relocation of certain key employees,  training
employees at the relocated  manufacturing  facilities,  and additional costs for
preparing the new locations for operations.  In addition,  we may not be able to
secure the required permits at an optimal  location.  If we were unable to renew
leases and were forced to relocate,  the costs  associated  with such relocation
could have a material  adverse effect on our business,  financial  condition and
results of operations.

We are subject to extensive federal, state, local and foreign environmental laws
and regulations.

     Our past and present business operations and the past and present ownership
and  operation  of our real  property  are  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,   the  discharge  or  emission  of  materials  into  the
environment and the remediation of environmental contamination. We are currently
remediating  soil and groundwater  contamination in excess of state standards at
several  of our  current  and  former  facilities.  Further,  we  are  currently
designated  a  Potentially  Responsible  Party,  or "PRP," by the United  States
Environmental Protection Agency, or "EPA", or by state environmental agencies or
by other PRPs  relating to 11 sites.  We have  accrued our  estimated  costs for
remediation of these sites.  If there are additional  sites or our estimates are
not correct, there could be a material adverse effect on our financial condition
and results of operations.  We cannot predict what environmental  legislation or
regulations  will be enacted  in the  future,  how  existing  or future  laws or
regulations will be administered or interpreted or what environmental conditions
may be found to exist on our properties.  Compliance with more stringent laws or
regulations,  as well as more vigorous  enforcement  policies


                                       9
<PAGE>


of the  regulatory  agencies or stricter  interpretation  of existing  laws, and
discovery  of new  conditions  may require us to make  additional  expenditures,
which may be material.

Our business is cyclical.

     The polyurethane foam business is cyclical to the extent that our customers
are in cyclical industries.  We are especially subject to the cyclical nature of
the  automotive,  housing,  technology and furniture and bedding  industries.  A
protracted  downturn  in the  businesses  of  our  customers  in  any  of  these
industries, either simultaneously or sequentially, could have a material adverse
effect on our results of operations.

ITEM 2.  PROPERTIES

     As of December 28, 2003, we maintained 56  manufacturing  and  distribution
facilities.  Total  floor  space  in  use  at our  17  owned  manufacturing  and
distribution facilities is approximately 3.4 million square feet and total floor
space in use at our 39  leased  manufacturing  and  distribution  facilities  is
approximately  4.5 million  square feet.  Forty-seven  of these  facilities  are
located  throughout 33 cities in the United States,  four facilities are located
in Canada,  and five facilities are located in Mexico. We have approximately 1.9
million square feet of idle space of which approximately 1.1 million is leased.

     The lease for one of our foam  pouring  facilities  expires in 2004.  It is
conceivable  that this  lease may not be  extended  or  renewed.  Like any other
lease, if we are unable to extend or renew this lease, the costs associated with
a relocation  could have a material  adverse  effect on our business,  financial
condition, cash flow and results of operations. Except as described above, we do
not anticipate  any problem in renewing or replacing any of the leases  expiring
in 2004.

     We maintain  administrative offices in Linwood,  Pennsylvania and New York,
New York.

     Property  information by business  segment is not reported  because many of
our facilities produce products for multiple business segments.

ITEM 3. LEGAL PROCEEDINGS

     Litigation--Breast Implants

     As of  February  24,  2004,  we  and  Trace  International  Holdings,  Inc.
("Trace")  were two of multiple  defendants  in 529  actions  filed on behalf of
approximately  652 recipients of breast implants in various United States courts
and one Canadian provincial court, some of which allege substantial damages, but
most of which allege unspecified damages for personal injuries of various types.
Three of these  cases  seek to allege  claims on  behalf of all  breast  implant
recipients or other allegedly  affected parties,  but no class has been approved
or certified by the courts. During 1995, we, Foamex International and Trace were
granted  summary  judgments and  dismissed as  defendants  from all cases in the
federal courts of the United States and the state courts of California.  Appeals
for these  decisions were  withdrawn and the decisions are final.  The number of
pending  cases has steadily  declined over the last several years from a peak of
3,486  cases on behalf of  approximately  5,766  individuals.  Despite  the 1995
Summary  Judgment,  some cases  have been filed  against us and Trace in federal
courts.  These have been dismissed and, in many cases, the actions were re-filed
in state courts.  No cases relating to breast implants are pending against us or
Trace in federal courts at this time. None of Foamex International, we, or Trace
nor any of our  carriers  has paid to  settle  any  claims  relating  to  breast
implants,  and no judgment has ever been entered  against Foamex  International,
Trace, or us or any of our carriers in respect of these matters.

     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 us or from Trace.
Neither we nor Trace  recommended,  authorized,  or approved the use of foam for
these  purposes.  We are  also  indemnified  by Trace  for any such  liabilities
relating to foam manufactured  prior to October 1990.  Trace's insurance carrier
has continued to pay our litigation  expenses after Trace's filing of a petition
for  relief  under  the  Bankruptcy  Code on July 21,  1999.  Trace's  insurance
policies  continue to cover certain  liabilities of Trace,  but if


                                       10
<PAGE>


the limits of those policies are exhausted,  Trace will be unable to continue to
provide  additional  indemnification.  While it is not  feasible  to  predict or
determine the outcome of these actions, based on management's present assessment
of the merits of pending claims, without taking into account the indemnification
provided by Trace, the coverage provided by Trace's and our liability  insurance
and potential  indemnity from the  manufacturers of polyurethane  covered breast
implants,  management  believes  that it is not  reasonably  possible  that  the
disposition  of  the  matters  that  are  pending  or  that  may  reasonably  be
anticipated  to be  asserted  will  result  in a loss  that is  material  to our
consolidated  financial  position,  results  of  operations  or cash  flows.  If
management's assessment of our liability relating to these actions is incorrect,
these actions could have a material  adverse  effect on our financial  position,
results of operations and cash flows.

     Litigation--Other

     We and our  subsidiaries are party to various  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 our  financial  position or
results of operations.  If management's  assessment of the liability relating to
these actions is incorrect,  these actions could have a material  adverse effect
on our consolidated financial position, results of operations and cash flows. As
of December 28, 2003, we have accrued approximately $1.1 million for litigation,
claims  and  other  legal  matters  in  addition  to the  environmental  matters
discussed below.

Environmental and Health and Safety

     We are 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, the discharge
or  emission  of  materials  into  the  environment,   and  the  remediation  of
environmental contamination,  and as a result, are from time to time involved in
administrative and judicial  proceedings and inquiries relating to environmental
matters.  As of December 28, 2003, we had accruals of approximately $2.5 million
for  environmental  matters,  including  approximately  $2.3 million  related to
remediating and monitoring soil and groundwater  contamination and approximately
$0.2 million relating to PRP sites and other matters.

     On  August  31,  2002,   Environment  Canada,  the  Canadian  environmental
regulatory  agency,  finalized a rule which would require flexible  polyurethane
foam manufacturing operations to reduce methylene chloride (dichloromethane) air
emissions.  The  rule  establishes  a  50.0%  reduction  in  methylene  chloride
emissions  by December 1, 2004 and 100.0%  reductions  by January 1, 2007.  This
standard  will not require us to make  material  expenditures  for our  Canadian
plants.

     We have reported to the appropriate  state  authorities  that we have found
soil and/or  groundwater  contamination  in excess of state standards at certain
locations.  Seven sites are  currently  in various  stages of  investigation  or
remediation. Accordingly, the extent of contamination and the ultimate liability
is not  known  with  certainty  for  all  sites.  During  2000,  we  reached  an
indemnification  agreement  with the former owner of the  Morristown,  Tennessee
facility.  The  agreement  allocates the incurred and future  remediation  costs
between the former owner and us. The  estimated  allocation  of future costs for
the  remediation  of this  facility is not  significant,  based on current known
information.  The former owner was Recticel  Foam  Corporation,  a subsidiary of
Recticel.

     We have either  upgraded  or closed all  underground  storage  tanks at our
facilities in accordance with applicable regulations.

     The Comprehensive  Environmental Response,  Compensation and Liability Act,
or "CERCLA," and comparable  state laws impose  liability  without fault for the
costs of  cleaning  up  contaminated  sites on certain  classes of persons  that
contributed to the release of hazardous substances into the environment at those
sites, for example, by generating wastes containing  hazardous  substances which
were disposed at such sites. We are currently  designated as a PRP by the EPA or
by state  environmental  agencies or other PRPs, pursuant to CERCLA or analogous
state statutes,  with respect to 11 sites.  Estimates of total cleanup costs and
fractional  allocations  of liability  are often  provided by the EPA, the state
environmental  agency or the  committee  of PRPs with  respect to the  specified
site.  Based  on  these  estimates  (to  the  extent  available)  and  on  known
information,  in each case and in the  aggregate,  we


                                       11
<PAGE>


do not  expect  additional  costs,  if any,  to be  material  to our  results of
operations, financial position or cash flows.

     Although it is possible that new information or future  developments  could
require  us  to  reassess  the  potential   exposure  relating  to  all  pending
environmental  matters,  including those described  above,  management  believes
that, based upon all currently  available  information,  the resolution of these
environmental matters will not have a material adverse effect on our 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,
including the presence of previously unknown environmental contamination, may be
found  to  exist  or  a  reassessment  of  the  potential  exposure  to  pending
environmental  matters  may  be  necessary  due  to new  information  or  future
developments,  that may require expenditures not currently  anticipated and that
may be material.

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

     None

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

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

     (b)  As of  December  28,  2003,  there were two  holders of Foamex  L.P.'s
          equity securities.

     (c)  Listed below are the net cash receipts in accordance  with tax sharing
          agreements.  At December 28, 2003 and  December  29,  2002,  we have a
          liability of approximately  $0.3 million to our partners in accordance
          with the tax sharing agreement.

                                          Tax Sharing Distributions
                                          -------------------------
                                            2003             2002
                                          --------         --------
                                                (thousands)
     FMXI                                  $   -            $   -
     Foamex International                      -             (105)
                                           -----            -----
                                           $   -            $(105)
                                           =====            =====

Limitations on Distributions

     Our financing  agreements restrict our ability to make distributions to our
partners.

ITEM 6.  SELECTED FINANCIAL DATA

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

<TABLE>
<CAPTION>
                                                                         Fiscal Year (1)
                                                ----------------------------------------------------------------
                                                    2003          2002       2001 (2)        2000        1999
                                                -----------    ----------   ----------    ----------  ----------
                                                                           (thousands)
Statements of Operations Data
<S>                                             <C>            <C>          <C>           <C>         <C>
   Net sales                                    $1,304,560     $1,328,094   $1,252,904    $1,257,778  $1,294,639
   Income (loss) from continuing
     operations (3)(4)                          $  (27,413)    $  (27,204)  $   (2,261)   $   19,603  $   20,061


                                       12
<PAGE>


                                                                         Fiscal Year (1)
                                                ----------------------------------------------------------------
                                                    2003          2002       2001 (2)        2000        1999
                                                -----------    ----------   ----------    ----------  ----------
                                                                           (thousands)
Balance Sheet Data
   Total assets                                 $  665,155     $  695,283   $  767,650    $  753,584  $  783,218
   Long-term debt, classified as current (5)    $   96,065     $        -   $        -    $        -  $        -
   Long-term debt, excluding current portion    $  640,621     $  738,540   $  648,232    $  687,758  $  725,297
   Partners' deficiency                         $ (325,131)    $ (305,786)  $ (178,128)   $ (158,503) $ (160,481)
<FN>

(1)  We changed to a fiscal year from a calendar  year during 2002. We have a 52
     or  53-week  fiscal  year  ending on the  Sunday  closest to the end of the
     calendar  year.  The 2002 fiscal year included the 52 weeks ended  December
     29, 2002 after  adjustment  for December 31, 2001 which was included in the
     prior year.

(2)  Includes the results of  operations of General Foam  Corporation  from July
     25, 2001, the date it was acquired.

(3)  Includes net  restructuring,  impairment  and other charges  (credits),  as
     discussed in Note 5 to the consolidated  financial  statements  included in
     this  Annual  Report on Form 10-K.  Listed  below are the  pre-tax  charges
     (credits).

         2003 - $(1.8) million
         2002 - $ 4.8 million
         2001 - $36.1 million
         2000 - $ 6.3 million
         1999 - $10.5 million

(4)  The  provision  for income  taxes in 2000 and 1999  reflected  the  partial
     reversal of the deferred income tax valuation allowance recognized in 1998.

(5)  Revolving  credit  borrowings  under Foamex  L.P.'s $240.0  Million  Senior
     Secured  Credit  Facility are classified as current as required by Emerging
     Issues  Task  Force  Issue No.  95-22,  "Balance  Sheet  Classification  of
     Borrowings  Outstanding Under Revolving Credit Agreements that Include both
     a  Subjective  Acceleration  Clause  and a Lockbox  Arrangement  ("EITF No.
     95-22").
</FN>
</TABLE>



                                       13
<PAGE>


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

FORWARD-LOOKING STATEMENTS

     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 us  which  are
identified as forward-looking, we note that there are various factors that could
cause  actual  results  to differ  materially  from  those set forth in any such
forward-looking  statements,  such as the ability to implement  customer selling
price  increases in response to higher raw material  costs,  raw material  price
increases, general economic conditions, the interest rate environment, the level
of automotive production,  carpet production,  furniture and bedding production,
and housing starts, the completion of various restructuring/consolidation plans,
the achievement of management's  business plans,  our capital and debt structure
(including various financial covenants), litigation and changes in environmental
legislation  and  environmental  conditions.   The  forward-looking   statements
contained in this Annual Report on Form 10-K were prepared by management and are
qualified  by, and  subject to,  significant  business,  economic,  competitive,
regulatory and other uncertainties and contingencies, all of which are difficult
or impossible to predict and many of which are beyond our control.

     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,  our business  and  operations  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 us or any other  person that any of the
forward-looking  statements contained in this Annual Report on Form 10-K will be
achieved. In light of the foregoing,  readers of this Annual Report on Form 10-K
are  cautioned  not to place undue  reliance on the  forward-looking  statements
contained herein.

EXECUTIVE SUMMARY
Overview

     We operate in the flexible  polyurethane and advanced polymer foam products
industry.  Our  operations are conducted  directly and through our  wholly-owned
subsidiaries,  Foamex Canada,  Foamex Mexico and Foamex Asia.  Business segments
are listed below and business segment financial  information is included in Note
11 to  the  consolidated  financial  statements.  Please  see  Part  I,  Item  1
"Business"  for a more complete  description  of the  activities of our business
segments.

     An executive vice president heads each of our principal operating segments.
Each executive vice president is responsible for developing budgets and plans as
well as  directing  the  operations  of the  segment.  The  performance  of each
operating  segment is  measured  based upon income  from  operations,  excluding
restructuring,  impairment and other charges and corporate  overhead.  We do not
allocate  restructuring,  impairment  and other  charges to  operating  segments
because many of our facilities produce products for multiple segments.

     Foam  Products -  manufactures  and markets  cushioning  foams for bedding,
     furniture,  packaging and health care applications, and foam-based consumer
     products, such as mattress pads and children's furniture.

     Carpet Cushion Products - manufactures and distributes rebond,  prime, felt
     and rubber carpet padding.


                                       14
<PAGE>

     Automotive Products - distributes automotive foam products and laminates to
     major Tier 1 suppliers and original equipment manufacturers, or "OEMs".

     Technical  Products  -  manufactures  and  markets  reticulated  and  other
     specialty foams used for  reservoiring,  filtration,  gasketing and sealing
     applications.

     Other - primarily  consists of certain  manufacturing  operations in Mexico
     City,  corporate  expenses not allocated to the other business segments and
     restructuring, impairment and other charges (credits).

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

     A small  number of major  customers  produce a  significant  portion of our
sales.  In 2003,  our largest  customer  provided 16.3% of our net sales and our
five largest customers  provided 34.7% of our net sales. Two of the five largest
customers  are  customers  of the  Automotive  Products  segment  and  three are
customers of the Foam Products segment.

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

     Operations

     The  following  table  includes  key elements of our  financial  statements
expressed as a percentage of net sales for the years 1999 through  2003,  except
for net cash provided by (used for) operating  activities  which is expressed in
millions of dollars.

<TABLE>
<CAPTION>
                                      2003           2002            2001           2000             1999
                                    --------       --------        --------       --------         --------
<S>                                  <C>            <C>             <C>            <C>              <C>
Net Sales                            100.0%         100.0%          100.0%         100.0%           100.0%

Cost of Goods Sold                    89.0%          89.2%           85.8%          86.3%            86.1%

Gross Profit Margin                   11.0%          10.8%           14.2%          13.7%            13.9%

Selling, General and
   Administrative Expenses             6.2%           7.1%            6.3%           5.4%             5.8%

Operating Income Margin                4.9%           3.4%            5.0%           7.7%             7.3%

Interest and Debt
   Issuance Expense                    6.8%           5.2%            5.0%           6.0%             5.6%

Net Cash Provided by (Used
   For) Operating Activities          $18.1         $(49.6)         $108.7          $52.9            $68.6
</TABLE>

     As demonstrated by the table above,  our results in the last two years have
significantly  deteriorated  when  compared to the prior three years.  Our gross
profit margin has been reduced by approximately  three  percentage  points while
selling  general and  administrative  expenses and  interest  and debt  issuance
expense have both increased as a percentage of net sales, as well as in absolute
dollar terms. Net sales dollars have been relatively flat over the 5 year period
with 2003 representing an increase of less than one percent compared to 1999.

     Our management is focusing on restoring  former levels of  profitability by
concentrating on the following key areas:


                                       15
<PAGE>


     o    Managing raw material costs.

     o    Maintaining  selling  price  increases  to  customers  to recover  raw
          material and manufacturing cost increases.

     o    Controlling   and   reducing   labor  and   overhead   costs  both  in
          manufacturing and administration.

     o    Developing  new and more  consumer-focused  products  and entering new
          markets with increased profit potential.

     Our  major  chemical  suppliers  increased  the  cost of our raw  materials
several  times in late 2002.  Prices  stabilized  during 2003 but  average  unit
prices  for 2003 were  higher  than for 2002.  There  can be no  assurance  that
chemical  prices will not  increase  in 2004.  We manage raw  material  costs by
seeking  alternative  sources of supply,  locking in prices  when  possible  and
negotiating discounts and rebates for volume purchases.

     We have been only partially successful in raising selling prices to recover
raw material and other cost increases. Selling price increases, reduced cost and
increased mix of higher profit products are the major factors in restoring gross
profit margin  percentage to the 14% level experienced in 1999-2001 from the 11%
level of 2002 and 2003.

     We are  focused on reducing  both  manufacturing  costs and  administrative
expenses.  We  believe  that  our  manufacturing   operations  are  now  of  the
appropriate  scale and  location to meet demand for our  products as a result of
closing several facilities in 2002 and 2003. We believe that manufacturing costs
can be further  reduced  by  emphasizing  efficiency  and  better  supply  chain
management.  Our focus areas for further  reductions in administrative  expenses
are employee related costs and professional service fees. Effective February 10,
2004, the Chairman of Foamex International resigned by mutual agreement with the
Foamex International Board of Directors. As a result of this resignation, we may
close our New York office,  which was primarily  used by the former  Chairman of
Foamex International.

     In late  2003,  we began to market  an all foam  mattress  product  that is
vacuum packed in a box and designed to be carried home and self-installed by the
consumer.  We believe this product  provides the consumer with  convenience  and
price  advantages  when compared to  traditional  bedding  products.  We plan to
develop  and  market  additional  consumer  products  and enter  other  consumer
markets.  We  believe  that we can  achieve  higher  net sales and gross  profit
through this  approach.  We will also  continue our  development  efforts in our
other product offerings, especially our Technical Products.

     If we can  restore  our gross  profit  margin to 14% or more and reduce and
control  administrative costs, we may be able to restore operating income to the
level  experienced  in 1999 and 2000 and cash flow from  operations to the level
experienced in 1999,  2000 and 2001. At those levels we should be able to reduce
borrowings  and also  cash  interest  expense.  Our  next  large  required  debt
repayment is $51.6 million  principal of our 13 1/2% Senior  Subordinated  Notes
due August 15, 2005.

     Financing

     On August 18,  2003,  Foamex  L.P.  entered  into a $240.0  Million  Senior
Secured Credit Facility with a new group of lenders and a Secured Term Loan with
another lender.  Proceeds borrowed under these new facilities were used to repay
all  outstanding  balances under the Foamex L.P.  Amended  Credit  Facility (the
"Amended  Credit  Facility")  which was  terminated  as of August 18,  2003.  In
addition,  Foamex  Canada's  revolving  credit  facility  that  did not have any
outstanding  borrowings and had availability of  approximately  $5.9 million was
terminated as of August 18, 2003. The termination of the Amended Credit Facility
resulted in a write off of debt issuance costs of $12.9 million.

     The $240.0 Million Senior Secured Credit  Facility  consists of a revolving
credit facility with a maximum availability of $190.0 million and a term loan of
$50.0 million.  The revolving credit facility  includes a $50.0 million sublimit
for  letters of credit and  availability  is limited  to  eligible  amounts,  as
defined, of accounts receivable and


                                       16
<PAGE>



inventory.  At December  28,  2003,  Foamex L.P.  had  available  borrowings  of
approximately  $46.8 million and letters of credit outstanding of $20.9 million.
Borrowings under the term loan are limited to eligible amounts,  as defined,  of
equipment and real estate.  Substantially  all the assets of Foamex L.P. and its
domestic  subsidiaries  and Foamex  Canada are  pledged  as  collateral  for the
related borrowings.  Borrowings under the revolving credit facility and the term
loan bear  interest  at floating  rates  based upon and  including a margin over
either LIBOR or a Base Rate,  as defined.  At December  28,  2003,  the weighted
average interest rates were 4.53% and 4.42% for the revolving loans and the term
loan,  respectively.  The term loan requires quarterly  installment  payments of
approximately  $1.8 million.  All  borrowings  under the $240.0  Million  Senior
Secured Credit Facility will mature on April 30, 2007. The $240.0 Million Senior
Secured Credit  Facility  includes both a subjective  acceleration  clause and a
lockbox  arrangement  which  requires  all  lockbox  receipts  be used to  repay
revolving credit borrowings.  Accordingly, borrowings under the revolving credit
facility  are  classified  as current in the  accompanying  balance  sheet as of
December  28, 2003 as required  by EITF No. 95-22.

     The Secured Term Loan will mature on April 30, 2007.  Borrowings under this
facility  will bear  interest  at a rate that is 9.25%  plus the  greater of the
Reference Rate, as defined, or 4.25%. The minimum rate, which is in effect as of
December 28,  2003,  is 13.50%.  In addition,  Foamex L.P. is subject to a 1.00%
facility fee which is payable annually on the anniversary date. Borrowings under
the Secured Term Loan are  collateralized  by the same  collateral as the $240.0
Million Senior Secured Credit Facility.  An intercreditor  agreement governs the
distribution  of collateral  among the lenders under the $240.0  Million  Senior
Secured Credit Facility and the Secured Term Loan.

     Under the $240.0 Million  Senior  Secured  Credit  Facility and the Secured
Term Loan,  Foamex L.P. is subject to a minimum fixed charge  coverage ratio, as
defined,  of 1.00. For the two quarters  ended December 28, 2003,  Foamex L.P.'s
fixed charge  coverage ratio was 1.09.  Foamex L.P. is also subject to a maximum
annual  capital  expenditure  amount which was $17.7  million for the year ended
December 28, 2003 and will be $36.0 million for the year ending January 2, 2005.

     Our 13 1/2% Senior  Subordinated  Notes with a face value of $51.6  million
are due on August 15, 2005. We must generate sufficient cash flow to repay these
notes or we must obtain additional  financing.  We cannot determine at this time
if we will be able to obtain  financing at a reasonable  cost, or at all. The 13
1/2% Senior  Subordinated  Notes will be required to be  classified as a current
liability on our  consolidated  balance sheet  beginning in the third quarter of
2004.

CRITICAL ACCOUNTING POLICIES

     We prepared  the  consolidated  financial  statements  in  conformity  with
accounting  principles  generally  accepted in the United States of America.  As
such, we are required to make certain estimates, judgments, and assumptions that
we believe are reasonable based upon the information available. These estimates,
judgments  and  assumptions  affect  the  reported  amounts  of the  assets  and
liabilities and revenues and expenses.  Our significant  accounting policies are
discussed in Note 2 to the  consolidated  financial  statements.  The accounting
policies  which we believe are the most  critical to aid in fully  understanding
and evaluating our reported  financial  results and which require  management to
exercise judgment include the following:

     Revenue Recognition

     We record  net sales  when  product  title  and the  risks and  rewards  of
ownership passes to the customer,  the sales price is fixed and determinable and
collection is reasonably  assured.  Products are shipped FOB shipping point. Net
sales are reduced by allowances  for estimated  discounts,  returns and customer
rebates  based on our  experience.  Balances  for  allowances  and  rebates  are
reviewed at least quarterly and are adjusted if warranted.

     Accounts Receivable and Allowance for Uncollectible Accounts

     We actively monitor  customer  payments in conjunction with customer credit
evaluations.  Accordingly,  an estimate of uncollectible  accounts is maintained
and  is  based  on  historical   collection  experience  and  specific


                                       17
<PAGE>


customer  collection issues. A significant change in the financial  condition of
one or more of our larger  customers  could have a  material  adverse  impact on
future financial results.

     Long-Lived Assets

     We have a significant  investment in long-lived assets consisting primarily
of property,  plant and equipment.  Impairment losses are recognized when events
indicate  that certain  long-lived  assets may be impaired  and a projection  of
future  undiscounted  cash  flows  generated  from the  assets are less than the
current  carrying value of the assets.  These cash flow projections are based on
the  combination  of historical  results  adjusted for  estimated  future market
conditions  and  operating  plans.  To the extent that these  estimates  change,
impairment  losses  could have a  material  adverse  impact on future  financial
results.

     Goodwill

     We evaluate the  recoverability  of goodwill on an annual basis as required
by Statement of Financial  Accounting  Standards  No. 142,  "Goodwill  and Other
Intangible Assets" ("SFAS No. 142"). We perform this annual evaluation as of the
first day of the fourth fiscal quarter,  or more frequently if events or changes
in  circumstances,  such as declining sales,  earnings or cash flows or material
adverse  changes in the business  climate,  indicate that the carrying  value of
goodwill  might be impaired.  Goodwill is considered to be impaired when the net
book value of a reporting unit exceeds it estimated fair value.  Fair values are
primarily   established   using  a  discounted   cash  flow   methodology.   The
determination  of discounted cash flows is based on businesses'  strategic plans
and long range planning forecasts.

     Self Insurance

     We are partially  self-insured  for a number of risks up to certain  limits
including  workers  compensation,  medical,  automobile  and general  liability.
Commercial  insurance  policies  are  carried  for  amounts  in  excess  of  the
self-insured  amounts.  Management exercises  significant judgment in estimating
the ultimate  liability for claims.  The services of an outside actuary are used
to  assist  management  in  their  evaluation  of  the  liability  for  workers'
compensation and automobile claims.

     Retiree Benefit Plans

     We provide  defined benefit pension plans that cover most of our employees.
Projected  benefit  obligations,  pension expense and amounts  included in other
comprehensive income are impacted by a number of assumptions.  These assumptions
include the discount  rate on projected  benefit  obligations,  and the expected
long-term rate of return on plan assets.  The discount rate on projected benefit
obligations enables us to state expected future cash flows at a present value on
the  measurement  date. We have little latitude in selecting this rate, as it is
required to represent the market rate for high-quality fixed income investments.
We  assumed  weighted  average  discount  rates of  7.25%,  7.00%  and  6.50% to
calculate  pension  expense  for  2001,  2002 and  2003,  respectively.  A 0.50%
reduction in this  assumption  would increase the interest  component of pension
expense by approximately $0.6 million.  To determine the expected long-term rate
of return on pension  plan assets,  we consider  the current and expected  asset
allocations, as well as historical and expected returns on various categories of
plan assets. We assumed that long-term returns on our pension plans were 9.0% in
2003, 2002 and 2001. A 0.50% reduction in this assumption would increase pension
expense  by  approximately  $0.4  million.  Amortization  of losses has been and
continues to be a significant component of pension expense and this amortization
is expected to increase by  approximately  $0.4 million in 2004. The losses have
resulted from actual returns that were less than the expected return assumption,
particularly  over the 2000-2002  period,  and funding levels that have not been
sufficient to offset the growth in benefit obligations.  In 2003, actual returns
were  significantly  higher than the expected  return  assumption  and we expect
pension  expense to decrease by $1.4 million to $1.8  million in 2004  primarily
because of the growth in plan assets. We anticipated funding of $11.8 million to
retiree benefit plans in 2004.


                                       18
<PAGE>

     Claims and Litigation

     We receive claims for damages that are outside of our insurance  coverages.
Management  evaluates these claims and records its estimate of liabilities  when
such  liabilities are considered  probable and an amount or reasonable range can
be estimated.

     Environmental Remediation

     We have a number of  manufacturing  facilities and certain idle  facilities
that require remediation of soil and/or groundwater  contamination.  As required
by applicable State and/or Federal compliance programs,  many of these sites are
in the monitoring stage that requires periodic sampling of contamination  levels
in conjunction with ongoing assessments of remediation actions. Accordingly, the
recognition  of  environmental  liabilities  requires  estimates  concerning the
duration of monitoring and  associated  costs,  often  projected to extend for a
number  of  years.  To  the  extent  that  these  estimates  change,  additional
environmental  costs could have a material  adverse  impact on future  financial
results.  See the section below entitled  "Environmental  Health and Safety" for
additional information.

LIQUIDITY AND CAPITAL RESOURCES

     Our operating cash requirements consist principally of accounts receivable,
inventory and accounts payable requirements,  scheduled payments of interest and
principal  on  outstanding  indebtedness,  capital  expenditures,  and  employee
benefit plans. We believe that cash flow from our operating activities,  cash on
hand and periodic  borrowings under our credit facility will be adequate to meet
liquidity  requirements for the next 12 months.  Scheduled principal payments on
our debt are not significant until the second half of 2005. The ability of us to
make  distributions  to Foamex  International  is restricted by the terms of our
financing agreements.

     Cash and cash  equivalents  were $6.6 million at December 28, 2003 compared
to $4.4 million at December 29, 2002.  Working  capital at December 28, 2003 was
$18.7 million and the current ratio was 1.06 to 1 compared to working capital at
December  29,  2002 of  $118.0  million  and a  current  ratio of 1.59 to 1. The
decrease in working  capital is  primarily  due to the  requirement  to classify
$96.1 million of borrowings  under the  revolving  credit  portion of its $240.0
Million Senior Secured  Credit  Facility as current in accordance  with EITF No.
95-22 (see Note 7 to the consolidated financial statements).

     Total  long-term debt and revolving  credit  borrowings at December 28 2003
was $745.6  million,  a $7.0 million  increase  from  December  29, 2002.  As of
December 28 2003, there were revolving credit  borrowings of $96.1 million under
the $240.0 Million Senior Secured Credit  Facility with $46.8 million  available
for  borrowings  and $20.9 million of letters of credit  outstanding.  Revolving
credit borrowings at December 28, 2003 reflect working capital requirements.

     On  November  15,  2002,  Foamex  L.P.  and its bank  lenders  executed  an
amendment to the Amended Credit Facility.  Under the amendment,  Foamex L.P. was
subject to minimum net worth,  minimum EBDAIT,  as defined,  and maximum capital
expenditure  covenants  through  periods  ended  December 28, 2003.  The minimum
EBDAIT  covenant was tested  monthly,  on a  cumulative  basis,  beginning  with
December  2002.  Foamex L.P.  was in  compliance  with the revised  covenants at
December  29, 2002 and  throughout  2003 until the Amended  Credit  Facility was
terminated on August 18, 2003.

     On August 18,  2003,  Foamex  L.P.  entered  into a $240.0  Million  Senior
Secured Credit Facility with a new group of lenders and a Secured Term Loan with
another lender.  Proceeds borrowed under these new facilities were used to repay
all  outstanding  balances under the Foamex L.P.  Amended  Credit  Facility (the
"Amended  Credit  Facility").  In addition,  Foamex  Canada's  revolving  credit
facility that did not have any  outstanding  borrowings and had  availability of
approximately $5.9 million was terminated. The termination of the Amended Credit
Facility  resulted  in a write off of debt  issuance  costs of $12.9  million in
2003.

     The $240.0 Million Senior Secured Credit  Facility  consists of a revolving
credit facility with a maximum availability of $190.0 million and a term loan of
$50.0 million.  The revolving credit facility  includes a $50.0 million sublimit
for  letters of credit and  availability  is limited  to  eligible  amounts,  as
defined,  of accounts  receivable and


                                       19
<PAGE>


inventory.  Borrowings under the term loan are limited to eligible  amounts,  as
defined,  of equipment and real estate.  Substantially  all the assets of Foamex
L.P. and its domestic  subsidiaries  and Foamex Canada are pledged as collateral
for the related  borrowings.  Borrowings under the revolving credit facility and
the term loan bear interest at floating  rates based upon and including a margin
over either LIBOR or a Base Rate, as defined. At December 28, 2003, the weighted
average interest rates were 4.53% and 4.42% for the revolving loans and the term
loan,  respectively.  The term loan requires quarterly  installment  payments of
approximately  $1.8 million.  All  borrowings  under the $240.0  Million  Senior
Secured Credit Facility will mature on April 30, 2007.

     The Secured Term Loan will mature on April 30, 2007.  Borrowings under this
facility  bear  interest at a rate that is 9.25% plus the  greater of  Reference
Rate, as defined,  or 4.25%. The minimum rate, which is in effect as of December
28, 2003, is 13.50%. In addition, Foamex L.P. is subject to a 1.00% facility fee
which is payable annually on the anniversary date.  Borrowings under the Secured
Term Loan are collateralized by the same collateral as the $240.0 Million Senior
Secured Credit Facility. An intercreditor  agreement governs the distribution of
collateral  among the lenders under the $240.0  Million  Senior  Secured  Credit
Facility and the Secured Term Loan.

     Under the $240.0 Million  Senior  Secured  Credit  Facility and the Secured
Term Loan,  Foamex L.P. is subject to a minimum fixed charge  coverage ratio, as
defined,  of 1.00. For the two quarters  ended December 28, 2003,  Foamex L.P.'s
fixed charge  coverage ratio was 1.09.  Foamex L.P. is also subject to a maximum
annual  capital  expenditure  amount which was $17.7  million for the year ended
December 28, 2003 and will be $36.0 million for the year ending January 2, 2005.

     Effective May 1, 2002, Foamex L.P. completed a series of interest rate swap
transactions  with notional  amounts  aggregating  $300.0  million.  Foamex L.P.
designated, documented and accounted for these interest rate swaps as fair value
hedges of its 10 3/4%  Senior  Secured  Notes due April 1, 2009.  The risk being
hedged in these  transactions was the change in fair value of the 10 3/4% Senior
Secured Notes based on changes in the benchmark interest rate, LIBOR. The effect
of these interest rate swap  transactions was to convert the fixed interest rate
on the 10 3/4% Senior  Secured  Notes to floating  rates reset twice per year to
correspond with the interest payment dates for the 10 3/4% Senior Secured Notes.
On September 18, 2002,  Foamex L.P. unwound the interest rate swap  transactions
in exchange for a net cash  proceeds of $18.4  million,  including  $3.6 million
realized through lower effective interest rates while the swap transactions were
in effect. The unwinding  resulted in a deferred credit of $14.8 million,  which
is being amortized over the term of the 10 3/4% Senior Secured Notes,  using the
effective interest rate method.

     As discussed above, our 13 1/2% Senior Subordinated Notes with a face value
of $51.6 million are due on August 15, 2005. We must  generate  sufficient  cash
flow to repay these notes or obtain additional financing.  We may not be able to
obtain financing at a reasonable cost, or at all.

     Cash Flow from Operating Activities

     Cash provided by operating activities in 2003 was $18.1 million compared to
cash used of $49.6 million in the 2002.  Cash  provided by operating  activities
consisted  principally of  depreciation  and  amortization  of $26.0 million and
amortization  and write off of $17.4  million  of costs  associated  with  debt,
reduced  by our net loss of  $27.4  million.  We also  had  cash  costs of $11.3
million to pay restructuring liabilities.

     Cash Flow from Investing Activities

     Cash used in  investing  activities  totaled  $8.6  million for 2003.  Cash
requirements  included  capital  expenditures  of $6.5  million and  capitalized
software  development costs of $3.3 million.  Cash used for investing activities
in 2002 included capital  expenditure of $15.6 million and capitalized  software
development costs of $8.0 million.  Estimated capital  expenditures for 2004 are
approximately $10.0 million. In addition,  we expect to spend approximately $4.2
million for  internally  developed  software in 2004,  a portion of which may be
capitalized.

     Cash Flow from Financing Activities

     Cash used for  financing  activities  was $7.2 million in 2003  compared to
cash  provided by of $60.0  million in 2002.  During  2003,  we utilized  $130.0
million of  proceeds  from new term loans and an increase  in  revolving  credit


                                       20
<PAGE>


borrowings  of $44.2  million to repay  $162.2  million of term loans  under our
former Amended Credit Facility and to pay $11.9 million of debt issuance costs.

     Contractual Obligations

     Our  contractual  obligations  as of  December  28,  2003 are  shown in the
following table:

<TABLE>
<CAPTION>
                                                            Payment due by Period
                                        -------------------------------------------------------------------
Contractual Obligations                  Total       2004       2005-06          2007-08    2009 and beyond
-----------------------                 -------    --------    ---------      ------------  ---------------
                                                              (millions of dollars)
Long-Term Debt, including
<S>                                     <C>         <C>          <C>            <C>    <C>      <C>
   Capital Leases                       $732.2      $  8.9       $ 67.7         $349.6 (1)      $306.0
Interest (2)                            $297.5      $ 72.2       $135.8         $ 73.0          $ 16.5
Operating Leases                        $ 44.9      $ 14.1       $ 16.7         $  8.2          $  5.9
Purchase Obligations (3)                $592.5      $224.7       $125.9         $122.9          $119.0
Restructuring Liabilities               $  9.7      $  3.9       $  1.9         $  1.3          $  2.6
Employee Benefits and Other (4)

<FN>
(1)  Includes  $96.1  million of  revolving  credit  borrowings  due in 2007 but
     classified as current in the consolidated balance sheet to comply with EITF
     95-22. See Note 7 to the consolidated financial statements.

(2)  Includes interest applicable only to borrowings outstanding at December 28,
     2003  computed  using  interest  rates in effect as of  December  28,  2003
     through  the due  dates of the  borrowings  as  defined  by the  applicable
     financing agreements.

(3)  Includes  outstanding  purchase  orders and other  commitments  to purchase
     minimum quantities of materials or services.

(4)  We have obligations to provide employee benefits  including those under our
     defined benefit and defined  contribution  retirement plans and our medical
     benefit plan. In addition,  we are partially  self-insured  for a number of
     risks including  workers'  compensation,  automobile and general liability.
     Due to the many  variables  involved,  accurate  estimates  of these future
     obligations  cannot  be  made.  In 2003,  payments  for  these  obligations
     aggregated approximately $34.6 million.
</FN>
</TABLE>

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                Carpet
                                   Foam         Cushion       Automotive     Technical
                                 Products       Products       Products      Products        Other        Total
                                 --------       --------      ----------     ---------     --------    ----------
2003                                                        (dollars in thousands)
<S>                              <C>            <C>            <C>            <C>          <C>         <C>
Net sales                        $507,586       $208,855       $447,068       $117,450     $ 23,601    $1,304,560
Income (loss) from operations    $ 43,983       $  5,395       $ 33,399       $ 32,115     $(50,456)   $   64,436
Depreciation and amortization    $ 11,002       $  3,275       $  2,815       $  2,931     $  6,022    $   26,045
Income (loss) from operations
   as a percentage of net sales       8.7%           2.6%           7.5%          27.3%      n.m.(a)          4.9%

2002
Net sales                        $471,005       $234,001       $466,718       $124,124     $ 32,246    $1,328,094
Income (loss) from operations    $ 45,466       $  1,239       $ 34,146       $ 35,185     $(71,459)   $   44,577
Depreciation and amortization    $ 13,632       $  5,904       $  3,721       $  2,815     $  5,520    $   31,592
Income (loss) from operations
   as a percentage of net sales       9.7%           0.5%           7.3%          28.3%      n.m.(a)          3.4%


                                       21
<PAGE>

                                                Carpet
                                   Foam         Cushion       Automotive     Technical
                                 Products       Products       Products      Products        Other        Total
                                 --------       --------      ----------     ---------     --------    ----------
2001                                                        (dollars in thousands)
Net sales                        $499,668       $230,965       $377,753       $111,043     $ 33,475    $1,252,904
Income (loss) from operations    $ 81,144       $  7,422       $ 27,040       $ 32,692     $(85,133)   $   63,165
Depreciation and amortization    $ 11,018       $  5,390       $  4,150       $  2,670     $ 10,760    $   33,988
Income (loss) from operations
   as a percentage of net sales      16.2%           3.2%           7.2%          29.4%      n.m.(a)          5.0%
</TABLE>

(a) Not meaningful.

     Business  segment results include  revenues and costs that are specifically
identifiable and costs shared by business  segments have been allocated based on
utilization.  At the end of 2003,  we changed our  measure of segment  operating
income to exclude an  allocation  of corporate  overhead,  as our  management no
longer evaluates the performance of our segments using this  allocation.  Rather
we now  attempt  to manage  and  control  these  costs  independent  of  segment
performance.  Segment  results  for 2002 and 2001 have been  adjusted to reflect
this change for comparative purposes.

2003 Compared to 2002

     Net sales for 2003 decreased 2% to $1,304.6  million from $1,328.1  million
in 2002.  An  increase  in Foam  Products  net sales  were  more than  offset by
decreases in the other  segments.  Selling price  increases in all segments were
more than  offset,  in the  aggregate,  by  reductions  in  volume.  The  volume
reductions were primarily due to the requirement to increase  selling prices and
plant closures as we shifted away from unprofitable business.

     Gross  profit was $143.7  million,  or 11.0%,  in 2003  compared  to $143.7
million,  or 10.8%,  in 2002.  Gross profit margin has improved  throughout 2003
from the depressed levels experienced in the second half of 2002 as we have been
successful at recovering some of the raw material cost increases  experienced in
the second half of 2002 and we have realized manufacturing cost savings.

     Income from  operations for 2003 was $64.4  million,  or 4.9% of net sales,
which  represented a 45% increase from the $44.6 million,  or 3.4% of net sales,
reported for 2002. Selling general and  administrative  expenses decreased $13.3
million, or 14%, due primarily to lower employee costs and professional fees. In
2002,  we incurred  $4.9  million of  organizational  and  transaction  costs in
connection  with  a  proposed  public  offering  of  a  subsidiary,   which  was
subsequently  terminated,  and a proposed  sale of the Carpet  Cushion  products
segment.  Restructuring,  impairment and other credits discussed below were $1.8
million in 2003, while we recorded  restructuring,  impairment and other charges
of $4.8 million in 2002.

     Foam Products

     Foam Products net sales for 2003 increased 8% to $507.6 million from $471.0
million in 2002  primarily  due to increases in selling  prices to customers and
increased volumes of consumer products,  partially offset by decreases in volume
in other markets.  Income from operations decreased 3%, to $44.0 million in 2003
from  $45.5  million  in 2002,  primarily  due to  increases  in the cost of raw
materials. Income from operations was 8.7% of net sales in 2003, and 9.7% of net
sales in 2002.

     Carpet Cushion Products

     Carpet Cushion  Products net sales for 2003 decreased 11% to $208.9 million
from $234.0 million in 2002. Average selling prices increased but were more than
offset by an  approximate  16% decline in volumes,  as we closed  several carpet
cushion  facilities in 2002 and 2003 to focus this  business on more  profitable
markets.  Income from operations  increased $4.2 million, or 335%, primarily due
to cost  containment  from the  streamlining  of operations  and higher  selling
prices. Income from operations represented 2.6% of net sales in 2003 and 0.5% of
net sales in 2002.


                                       22
<PAGE>


     Automotive Products

     Automotive  Products net sales for 2003 decreased 4% to $447.1 million from
$466.7 million in 2002.  Sales declined  throughout the second half of 2003 as a
major  customer  decreased its  purchases  from us in an effort to diversify its
supplier  base.  While  some of this  business  has been  recovered  from  other
customers, automotive products net sales were just over $100 million per quarter
in the second half of 2003,  which is an annual rate of more than $60.0  million
less than the 2002 net sales. For the full year 2003, volumes were down about 1%
and average  selling  prices were down about 3% due to lower fabric costs passed
on to customers.  Income from operations  decreased $0.7 million,  or 2%, as the
lower sales were partially offset by lower manufacturing costs, resulting from a
plant  closure  in early 2003 and labor and  overhead  reductions.  Income  from
operations represented 7.5% of net sales in 2003 and 7.3% of net sales in 2002.

     Technical Products

     Net sales for  Technical  Products in 2003  decreased 5% to $117.5  million
from  $124.1  million  in 2002  primarily  due to a  decrease  in  volume  of 9%
partially  offset  by  an  increase  in  average  selling  prices.  Income  from
operations  decreased 9% to $32.1  million in 2003  compared to $35.2 million in
2002 due to higher raw  material  and  overhead  costs.  Income from  operations
represented 27.3% of net sales in 2003 and 28.3% of net sales in 2002.

     Other

     Other  primarily  consists of certain  manufacturing  operations  in Mexico
City,  corporate  expenses not allocated to business segments and restructuring,
impairment and other charges.  The $8.6 million,  or 27%,  decrease in net sales
associated with this segment  primarily  resulted from the Mexico City operation
and was primarily due to a decline in the consumer products  business.  The loss
from operations was $50.5 million in 2003 and included restructuring, impairment
and other credits of $1.8 million,  discussed below. The loss from operations in
2002 was $71.5 million, including restructuring, impairment and other charges of
$4.8 million,  discussed below.  Corporate  overhead expenses and employee costs
decreased $7.8 million in 2003 compared to 2002.

     Restructuring, Impairment and Other Charges

     In 2003, we recorded  restructuring credits of $1.8 million consisting of a
$3.2 million reduction in the liability  primarily for severance and termination
benefits no longer required as the actions  contemplated under the related plans
have been substantially  completed,  and a charge of $1.1 million for additional
lease  termination  costs for a closed  facility  as a result of changes in real
estate market conditions. Additionally, we recorded a $0.3 million restructuring
charge reported in the Other segment as a result of an employee termination plan
for approximately 300 employees at our Mexico City operations. The actions under
this plan were substantially completed in 2003.

     In 2002,  we recorded net  restructuring,  impairment  and other charges of
$4.8 million.  Fourth quarter  charges of $10.0 million  included  severance and
other  termination  benefits for  approximately 200 employees and exit costs and
remaining  lease  payments  related  to  the  reorganization  of  executive  and
corporate management and the closure of six operations.  Approximately 60 of the
planned  terminations  occurred during 2002 with the remainder occuring in 2003.
The charges also  included  $2.5  million of asset  impairments,  primarily  for
leasehold  improvements  and  machinery  and  equipment  in the  Carpet  Cushion
Products  segment.  Earlier in 2002, we recorded  restructuring,  impairment and
other credits of $5.2 million including a reversal of approximately $3.7 million
from the reevaluation of the 2001 Operational Reorganization Plan.

     Interest and Debt Issuance Expense

     Interest  and debt  issuance  expense  was  $88.4  million  in 2003,  which
represented a 27% increase from 2002 expense of $69.7 million. The 2003 and 2002
periods  include  charges  of  $12.9  million  and $4.9  million,  respectively,
relating  to the  write  off  of  debt  issuance  costs  as a  result  of  early
extinguishment  of debt. Higher average debt levels,  higher effective  interest
rates and higher  amortization  of debt issuance  costs all  contributed  to the
increase in 2003.


                                       23
<PAGE>

     Income from Equity Interest in Joint Ventures

     The income  from an equity  interest  in an Asian  joint  venture  was $1.2
million in 2003 and $1.6  million in 2002.  Income from an equity  interest in a
joint  venture in Eastern  Europe was $0.3  million in 2003 and $0.1  million in
2002.

     Other Income (Expenses), Net

     Other  expense,  net was $3.4  million in 2003  compared to $2.0 million in
2002. We incurred  foreign currency  transaction  losses of $2.7 million in 2003
compared to foreign currency transaction losses of $2.3 million in 2002.

     Provision for Income Taxes

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

     Cumulative Effect of Accounting Change

     The  cumulative  effect of  accounting  change in 2002  includes a goodwill
impairment charge of $72.0 million as a result of the adoption of SFAS No. 142.

2002 Compared to 2001

     Net sales for 2002 increased 6.0% to $1,328.1 million from $1,252.9 million
in 2001.  The  increase  was  primarily  attributable  to improved  sales in the
Automotive  Products and  Technical  Products  segments,  partially  offset by a
decrease  in the Foam  Products  segment.  The  improvement  in sales  partially
reflected the impact of sales related to the acquisition  discussed in Note 3 to
the consolidated financial statements.

     The gross profit margin was $143.7  million,  or 10.8%, in 2002 compared to
$178.5 million, or 14.2%, in 2001 primarily as a result of increases in the cost
of our major  chemical raw materials  during the second half of 2002.  The gross
profit margin was further reduced by higher  manufacturing  costs principally in
the Foam Products segment,  unfavorable yields,  higher  manufacturing  overhead
expenses and unfavorable  production mix. We are seeking to improve gross profit
margins  through  customer  selling price  increases,  selective  elimination of
unprofitable  customer  accounts and products,  and reductions in  manufacturing
overhead expenses.

     Income from operations for 2002 was $44.6 million,  which represented a 29%
decrease from the $63.2 million  reported for 2001.  Income from  operations was
3.4% of net sales in 2002 compared to 5.0% of net sales in 2001. The decrease is
attributable  to the  reduced  gross  profit  margins  as  discussed  above.  In
addition,  selling,  general  and  administrative  expenses  increased  by $15.0
million,  or 19%,  which  included  $3.6  million  of  organizational  costs  in
connection  with  a  proposed   public  offering  of  a  subsidiary   which  was
subsequently  terminated.  Selling,  general and  administrative  expenses  also
included $1.3 million of transaction  costs associated with the proposed sale of
our Carpet  Cushion  Products  segment which was  subsequently  terminated.  The
remainder of the increase was primarily due to higher professional  service fees
for  information   technology  and  accounting  services  and  employee  related
expenses,  partially offset by reduced goodwill  amortization and lower bad debt
expense.  Partially  offsetting  the  decrease  in gross  profit  and  increased
selling,  general and administrative  expenses was a decline of $31.3 million in
restructuring, impairment and other charges which is more fully discussed below.


                                       24
<PAGE>


     Foam Products

     Foam Products net sales for 2002 decreased 6% to $471.0 million from $499.7
million in 2001. The decrease primarily  reflected  reduction in business from a
major  bedding  manufacturer  and the slow recovery of sales after an odor issue
caused by defective  chemicals from a major supplier in late 2001. Foam Products
gross  profit  margin was 12.3% in 2002,  down from 18.8% in 2001.  Income  from
operations  decreased  44%, to $45.5 million in 2002 from $81.1 million in 2001,
primarily  due to  increased  raw  material  costs,  lower net sales and  higher
manufacturing  costs. Income from operations was 9.7% of net sales in 2002, down
from 16.2% of net sales in 2001.

     Carpet Cushion Products

     Carpet  Cushion  Products net sales for 2002 increased 1% to $234.0 million
from $231.0  million in 2001. We were able to increase our market share in spite
of market  weakness and overcome the loss of sales to one large retail  customer
that exited the carpet  business.  Income  from  operations,  which  principally
reflected higher raw material and other operating costs during 2002 and included
expenses  of $1.3  million  in 2002  associated  with the  proposed  sale of the
business which was  subsequently  terminated,  represented  0.5% of net sales in
2002 and 3.2% of net sales in 2001.

     Automotive Products

     Automotive Products net sales for 2002 increased 24% to $466.7 million from
$377.8 million in 2001.  The  improvement  primarily  reflected a continued high
build rate for new cars and new  product  programs.  We were  informed  that our
largest  customer intends to reduce its purchases of certain products from us in
2003 to diversify its supply base.  Automotive  Products gross profit margin was
8.4% in 2002 and 2001 and  reflects  the  impact of higher  raw  material  costs
offsetting the  contribution  from increased net sales.  Income from  operations
represented 7.3% of net sales in 2002 and 7.2% of net sales in 2001.

     Technical Products

     Net sales for Technical  Products in 2002  increased 12% to $124.1  million
from $111.0 million in 2001.  Higher sales  partially  reflected  sales from the
acquisition  of  General  Foam  Corporation  in  July  2001  (see  Note 3 to the
consolidated financial statements). Income from operations increased 8% to $35.2
million in 2002  compared to $32.7  million in 2001.  The decrease  reflects the
contribution from higher net sales offset by higher material costs and the costs
related to a proposed public offering of a subsidiary as described above. Income
from  operations  represented  28.3% of net sales in 2002  compared  to 29.4% in
2001.

     Other

     Other  primarily  consists of certain  manufacturing  operations  in Mexico
City,  corporate  expenses not allocated to business segments and restructuring,
impairment and other charges.  The 4% decrease in net sales associated with this
segment  primarily  resulted  from the  Mexico  City  operation.  The loss  from
operations was $71.5 million in 2002 and included restructuring,  impairment and
other  charges,  discussed  below.  The loss from  operations  in 2001 was $85.1
million, including restructuring, impairment and other charges of $36.1 million,
discussed  below.  Corporate  overhead  expenses and employee costs increased by
$16.1 million in 2002.

     Restructuring, Impairment and Other Charges

     In 2002,  we recorded net  restructuring,  impairment  and other charges of
$4.8 million.  Fourth quarter  charges of $10.0 million  included  severance and
other  termination  benefits for  approximately 200 employees and exit costs and
remaining  lease  payments  related  to  the  reorganization  of  executive  and
corporate management and the closure of six operations.  Approximately 60 of the
planned  terminations  occurred  during  2002.  The charges also  included  $2.5
million of asset impairments, primarily for leasehold improvements and machinery
and  equipment  in the Carpet  Cushion  Products  segment.  Earlier in 2002,  we
recorded restructuring, impairment and other credits of $5.2 million including a
reversal  of  approximately  $3.7  million  from  the  reevaluation  of the 2001
Operational Reorganization Plan.


                                       25
<PAGE>


     In 2001, we recorded  restructuring,  impairment and other charges of $36.1
million, primarily related to our 2001 Operational Reorganization Plan including
plant facility  closures,  reductions in management and support  personnel,  and
cost  reductions in purchasing and logistics.  The charge included an impairment
charge of $13.8 million (net of anticipated  proceeds of $4.6 million) to reduce
certain assets,  primarily leasehold improvement and equipment,  included within
the Foam Products and Carpet Cushion  Products  segments to their estimated fair
values.  Approximately  700 employee  terminations  including  plant  personnel,
support staff and executives and management were originally  planned pursuant to
the  2001  Operational  Reorganization  Plan.  The  subsequent  reevaluation  of
facilities closures reduced the number of planned  terminations to approximately
500. Approximately 340 employees were terminated in 2002.

     Interest and Debt Issuance Expense

     Interest  and debt  issuance  expense  was  $69.7  million  in 2002,  which
represented a 10% increase from 2001 expense of $63.2 million.  The increase was
attributable  to higher  amortization  of debt  issuance  cost.  We  capitalized
interest of $0.3 million in 2002 compared to $1.4 million in 2001.

     Income from Equity Interest in Joint Ventures

     The income  from an equity  interest  in an Asian  joint  venture  was $1.6
million in both 2002 and 2001.  We have a 70%  ownership  interest  in the joint
venture since December 2001. Previously our ownership interest was 49%.

     Provision for Income Taxes

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

     Cumulative Effect of Accounting Change

     The  cumulative  effect of  accounting  change in 2002  includes a goodwill
impairment charge of $72.0 million as a result of the adoption of SFAS No. 142.

OTHER

Environmental Health and Safety

     We are 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, the discharge
or  emission  of  materials  into  the  environment,   and  the  remediation  of
environmental contamination,  and as a result, are from time to time involved in
administrative and judicial  proceedings and inquiries relating to environmental
matters.  As of December 28, 2003, we had accruals of approximately $2.5 million
for  environmental  matters  including  approximately  $2.3  million  related to
remediating and monitoring soil and groundwater  contamination and approximately
$0.2 million  relating to sites where we had been  designated  as a  Potentially
Responsible  Party or "PRP" by the EPA or a state  authority and other  matters.
Additional  losses,  if any, in excess of amounts currently  accrued,  cannot be
reasonably  estimated at this time.  If there are  additional  matters or if any
current estimates are incorrect, there could be a material adverse effect on our
financial position, results of operations and cash flows.


                                       26
<PAGE>

     On  August  31,  2002,   Environment  Canada,  the  Canadian  environmental
regulatory  agency,  finalized a rule which would require flexible  polyurethane
foam manufacturing operations to reduce methylene chloride (dichloromethane) air
emissions.  The  rule  establishes  a  50.0%  reduction  in  methylene  chloride
emissions  by December 1, 2004 and 100.0%  reductions  by January 1, 2007.  This
standard  will not require us to make  material  expenditures  for our  Canadian
plants.

     We have reported to the appropriate  state  authorities  that we have found
soil and/or  groundwater  contamination  in excess of state standards at certain
locations.  Seven sites are  currently  in various  stages of  investigation  or
remediation. Accordingly, the extent of contamination and the ultimate liability
is not  known  with  certainty  for  all  sites.  During  2000,  we  reached  an
indemnification  agreement  with the former owner of the  Morristown,  Tennessee
facility.  The  agreement  allocates the incurred and future  remediation  costs
between the former owner and us. The  estimated  allocation  of future costs for
the  remediation  of this  facility is not  significant,  based on current known
information.  The former owner was Recticel  Foam  Corporation,  a subsidiary of
Recticel.

     We have either  upgraded  or closed all  underground  storage  tanks at our
facilities in accordance with applicable regulations.

     The CERCLA and comparable state laws impose liability without fault for the
costs of  cleaning  up  contaminated  sites on certain  classes of persons  that
contributed to the release of hazardous substances into the environment at those
sites, for example, by generating wastes containing  hazardous  substances which
were disposed at such sites. We are currently  designated as a PRP by the EPA or
by state  environmental  agencies or other PRPs, pursuant to CERCLA or analogous
state statutes,  with respect to 11 sites.  Estimates of total cleanup costs and
fractional  allocations  of liability  are often  provided by the EPA, the state
environmental  agency or the  committee  of PRPs with  respect to the  specified
site.  Based  on  these  estimates  (to  the  extent  available)  and  on  known
information,  in each case and in the  aggregate,  we do not  expect  additional
costs,  if any, to be material to liquidity,  results of operations or financial
position.

     Although it is possible that new information or future  developments  could
require  us  to  reassess  the  potential   exposure  relating  to  all  pending
environmental  matters,  including those described  above,  management  believes
that, based upon all currently  available  information,  the resolution of these
environmental matters will not have a material adverse effect on our 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,
including the presence of previously unknown environmental contamination, may be
found  to  exist  or  a  reassessment  of  the  potential  exposure  to  pending
environmental  matters  may  be  necessary  due  to new  information  or  future
developments,  that may require expenditures not currently  anticipated and that
may be material.

Claims and Litigation

     We and our  subsidiaries are party to various  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 our financial position, results
of  operations or cash flows.  If  management's  assessment  is incorrect,  such
actions  could  have a material  adverse  effect on our  consolidated  financial
position,  results of operations and cash flows. As of December 28, 2003, we had
accrued  approximately  $1.1 million for  litigation  and other legal matters in
addition to the environmental matters discussed above.

Inflation, Raw Material Costs and Other Matters

     On  average,  inflation  rates  for the  domestic  economy  continue  to be
relatively low. Although long-term  inflation rates are difficult to predict, we
believe we have the flexibility in operations and capital  structure to maintain
a competitive position.  The prices of the two principal chemicals used by us in
manufacturing,  TDI and  polyol,  are  influenced  by demand  and  manufacturing
capacity. In addition, the prices of TDI and polyol are significantly influenced
by  crude  oil  production  and  prices  and  by  world  political  instability,
particularly  in the  Middle  East.  Results  for 2003 and 2002 were  negatively
impacted by higher  average costs for raw  materials.  In 2001, the beginning of
the economic  slowdown resulted in excess  manufacturing  capacity for the major
chemical


                                       27
<PAGE>


suppliers.  This, coupled with declining oil prices, resulted in lower costs for
raw materials in 2001. We experienced significant increases in the prices of raw
material  from major  chemical  manufacturers  during 2002. We sought to recover
these cost increases  through  manufacturing  process  efficiencies  and selling
price increases,  but were only partially able to do so during 2003 and 2002. We
may not be successful in  implementing  further selling price increases to fully
recover raw material cost increases and competitive pricing pressure may require
us to adjust selling prices or lose volume.  Results of operations have been and
could  be  adversely  affected  by  delays  in  implementing,  or  inability  to
implement,  additional  selling  price  increases  to offset raw  material  cost
increases.  Additionally,  we must reduce and control  our other  operating  and
corporate  expenses including  selling,  general and administrative  expenses to
offset raw material cost  increases.  A failure to recover cost increases  could
result in debt covenant violations which may lead to lenders demanding immediate
payment of our  outstanding  debt and impair our  ability to continue as a going
concern.

     The lease for one of our foam  pouring  facilities  expires in 2004.  It is
conceivable  that this  lease may not be  extended  or  renewed.  Like any other
lease, if we are unable to extend or renew this lease, the costs associated with
a relocation  could have a material  adverse  effect on our business,  financial
condition, cash flow and results of operations.

ITEM 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our debt securities with variable interest rates are subject to market risk
for changes in interest rates. On December 28, 2003,  indebtedness with variable
interest rates totaled $231.3 million.  On an annualized  basis, if the interest
rates on these  debt  instruments  increased  by 1.0%,  interest  expense  would
increase by approximately $2.3 million.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     An index to the financial  statements and financial  statement schedules is
included in Item 15(a).

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

       None

ITEM 9a.  CONTROLS AND PROCEDURES

     Evaluation of Disclosure Controls

     Foamex L.P.  maintains  disclosure  controls and  procedures (as defined in
Rule 13a-14(c) and 15d-14(c) of the Securities  Exchange Act of 1934, as amended
(the "Exchange Act")) that are designed to ensure that  information  required to
be disclosed in reports filed under the Exchange  Act, as amended,  is recorded,
processed,  summarized  and  reported  within the  specified  time  periods.  In
designing and  evaluating  the disclosure  controls and  procedures,  management
recognizes  that any controls and  procedures,  no matter how well  designed and
executed, can provide only reasonable assurance of achieving the desired control
objectives.

     Foamex L.P.  carried out an evaluation,  under the supervision and with the
participation  of management,  including the Chief  Executive  Officer and Chief
Financial  Officer,  on the  effectiveness of the design and operation of Foamex
L.P.'s disclosure  controls and procedures  pursuant to the Exchange Act rule as
of the end of the fiscal period covered by this report on Form 10-K.  Based upon
that evaluation, each of the Chief Executive Officer and Chief Financial Officer
concluded that Foamex L.P.'s disclosure controls and procedures are effective in
providing reasonable assurance that material information required to be included
in Foamex  L.P.'s  Exchange Act reports is made known to  management on a timely
basis during the period when Foamex L.P.'s periodic reports are being prepared.


                                       28
<PAGE>


     Changes in Internal Controls

     Foamex L.P.  determined during the fourth quarter of 2003 that the value of
certain  in-transit  raw material  inventory was overstated due to a calculation
error made during a transition to a new module of an enterprise wide transaction
processing  software package in February 2003. This error was reported to Foamex
L.P.'s  auditors and to the audit committee of Foamex  International's  Board of
Directors.  As a result,  Foamex L.P. restated its financial statements for each
of the three  quarters of 2003 for this error and other  adjustments  previously
identified by management that were not individually or in the aggregate material
to the respective  periods.  Foamex L.P. has instituted  procedures  intended to
ensure  that  the  value  of the  in-transit  raw  material  inventory  is  more
effectively monitored.

     Except as  discussed  above,  there  have been no  significant  changes  in
internal  control over  financial  reporting  that  occurred  during the quarter
covered by this report that has materially  affected or is reasonably  likely to
materially affect, our internal control over financial reporting.

PART III

     The information  required by this Part III (Items 10, 11, 12, 13 and 14) is
not  applicable  since  Foamex  L.P.  is a  wholly-owned  subsidiary  of  Foamex
International.

PART IV
ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  Financial statements.

<TABLE>
<CAPTION>
<S>                                                                                                            <C>
     Foamex L.P.  and Subsidiaries
       Independent Auditors' Report                                                                           F-2
       Consolidated Balance Sheets as of December 28, 2003 and December 29, 2002                              F-3
       Consolidated Statements of Operations for the years ended December 28, 2003,
         December 29, 2002 and December 31, 2001                                                              F-5
       Consolidated Statements of Cash Flows for the years ended December 28, 2003
         December 29, 2002 and December 31, 2001                                                              F-6
       Consolidated Statements of Partners' Deficiency for the years ended December 28, 2003
         December 29, 2002 and December 31, 2001                                                              F-7
       Notes to Consolidated Financial Statements                                                             F-8

     Foamex Capital Corporation
       Independent Auditors' Report                                                                          F-36
       Balance Sheets as of December 28, 2003 and December 29, 2002                                          F-37
       Notes to Balance Sheets                                                                               F-38

     Foamex L.P. and Subsidiaries Financial Statement Schedule
       Schedule II - Valuation and Qualifying Accounts                                                        S-2
</TABLE>

(b)  Reports on Form 8-K.

     None

(c)  Exhibits.

2.1(k)         - Transfer  Agreement,  dated as of  February  27,  1998,  by and
                 between Foam Funding LLC and Foamex L.P.
2.2(k)         - Asset Purchase Agreement, dated as of February 27, 1998, by and
                 among Foamex  Carpet Cushion,  Inc. ("Foamex  Carpet"),  Foamex
                 International Inc. ("Foamex  International"  or the "Company"),
                 Foam  Funding LLC and General Felt Industries,  Inc.  ("General
                 Felt").

                                       29
<PAGE>


3.1(a)         - Certificate of Limited Partnership of Foamex L.P.
3.2.1(a)       - Fourth Amended and Restated Agreement of Limited Partnership of
                 Foamex L.P., dated as of December 14, 1993,  by and among FMXI,
                 Inc. and Trace Foam  Company, Inc.,  as general  partners,  and
                 Foamex   International,   Inc.  as   a  limited   partner  (the
                 "Partnership Agreement").
3.2.2(b)       - First  Amendment to the Partnership  Agreement,  dated June 28,
                 1994.
3.2.3(c)       - Second  Amendment  to the  Partnership  Agreement,  dated  June
                 12,1997.
3.2.4(h)       - Third  Amendment to the Partnership  Agreement,  dated December
                 23, 1997.
3.2.5(k)       - Fourth Amendment to the Partnership  Agreement,  dated February
                 27, 1998.
3.2.6(r)       - Fifth Amendment to the Partnership  Agreement,  dated March 26,
                 2002.
3.3(i)         - Certificate of Incorporation of FMXI.
3.4(i)         - By-laws of FMXI.
3.5(e)         - Certificate of Incorporation of Foamex Capital Corporation.
3.6(e)         - By-laws of Foamex Capital Corporation.
3.9(s)         - Certificate of Incorporation of Foamex Asia, Inc.
3.10(s)        - By-laws of Foamex Asia, Inc.
3.11(s)        - Certificate of Incorporation of Foamex Latin America, Inc.
3.12(s)        - By-laws of Foamex Latin America, Inc.
3.13(s)        - Certificate of Incorporation of Foamex Mexico, Inc.
3.14(s)        - By-laws of Foamex Mexico, Inc.
3.15(s)        - Certificate of Incorporation of Foamex Mexico II, Inc.
3.16(s)        - By-laws of Foamex Mexico II, Inc.
4.1(c)         - Indenture, dated as of June 12, 1997, by and among Foamex L.P.,
                 FCC, the  subsidiary  guarantors  and The Bank of New  York, as
                 trustee,  relating  to  $150,000,000 principal amount of 9 7/8%
                 Senior Subordinated  Notes due  2007,  including  the  form  of
                 Senior Subordinated Note and Subsidiary Guarantee.
4.1.3(h)       - First  Amendment to  Indenture,  dated as of December 23, 1997,
                 between  Foamex  LLC  and  The  Bank  of  New York, as trustee,
                 relating to the 9 7/8% Senior Subordinated Notes due 2007.
4.1.3(k)       - Second Supplemental  Indenture,  dated as of February 27, 1998,
                 among Foamex L.P. and Foamex Capital Corporation,  as joint and
                 several obligors, General Felt Industries, Inc., Foamex Fibers,
                 Inc., and Foamex LLC, as withdrawing guarantors,  and  The Bank
                 of   New York,  as  trustee,  relating  to  the  9 7/8%  Senior
                 Subordinated Notes due 2007.
4.1.4(r)       - Third  Supplemental  Indenture,  dated  as of March  25,  2002,
                 between Foamex  Carpet Cushion LLC and The Bank of New York, as
                 trustee,  relating to  the 9 7/8% Senior Subordinated Notes due
                 2007.
4.2.3(r)       - Second  Supplemental  Indenture,  dated as of March  25,  2002,
                 between Foamex Carpet  Cushion LLC and The Bank of New York, as
                 trustee, relating to the 13 1/2% Senior Subordinated  Notes due
                 2005.
4.3.1(h)       - Indenture,  dated as of December 23, 1997,  by and among Foamex
                 L.P., Foamex Capital Corporation,  the  subsidiary  guarantors,
                 Crain Holdings Corp., as intermediate obligator,  and  The Bank
                 of  New York, as  trustee, relating  to  $98,000,000  principal
                 amount of 13 1/2% Senior Subordinated Notes due 2005, including
                 the form of Senior Subordinated Note and Subsidiary Guarantee.
4.3.1(k)       - First  Supplemental  Indenture,  dated as of February 27, 1998,
                 among  Foamex  L.P. and Foamex  Capital  Corporation,  as joint
                 and several  obligors,  General Felt Industries,  Inc.,  Foamex
                 Fibers, Inc. and  Foamex LLC, as  withdrawing guarantors, Crain
                 Industries, Inc., as withdrawing intermediate obligor, and  The
                 Bank of New York,  as trustee,  relating  to the 13 1/2% Senior
                 Subordinated Notes due 2005.
4.3.1(r)       - Indenture,  dated as  of March 25,  2002,  among  Foamex  L.P.,
                 Foamex Capital  Corporation, the  Guarantors party  thereto and
                 U.S. Bank  National  Association,  as  trustee,  including   as
                 exhibits thereto,  the form of note,  relating to  $300,000,000
                 principal  amount  of  10 3/4%  Senior  Secured Notes due 2009,
                 including form of Senior Secured Note and Subsidiary Guaranty.
4.3.2(r)       - Pledge and Security Agreement, dated as of March 25, 2002, made
                 by  Foamex  L.P.  and   U.S.  Bank   National  Association,  as
                 collateral agent.
4.3.3(r)       - Patent  Security  Agreement,  dated as of March  25,  2002,  by
                 Foamex  L.P.  in  favor of U.S. Bank  National  Association, as
                 collateral agent.

                                       30
<PAGE>


4.3.4(r)       - Trademark  Security  Agreement,  dated as of March 25, 2002, by
                 Foamex  L.P. in  favor of U.S.  Bank  National  Association, as
                 collateral agent.
4.3.5(r)       - Copyright  Security  Agreement,  dated as of March 25, 2002, by
                 Foamex  L.P.  in  favor of U.S. Bank  National  Association, as
                 collateral agent.
4.3.6(r)       - Registration  Rights  Agreement,  dated  as of March 25,  2002,
                 among Foamex L.P.,  Foamex Capital  Corporation, the Guarantors
                 party  thereto  and  Credit  Suisse  First  Boston Corporation,
                 Salomon  Smith  Barney  Inc., Scotia  Capital (USA) Inc., Bear,
                 Stearns & Co.  Inc., and  Jefferies & Company, Inc., as initial
                 purchasers.
4.15.1(v)      - Credit  Agreement,  dated as of August 18,  2003,  among Foamex
                 L.P. as a Borrower  and  Guarantor, Foamex  International Inc.,
                 FMXI,  Inc.,  Foamex  Canada Inc., Foamex Capital  Corporation,
                 Foamex Latin America,  Inc., Foamex Mexico, Inc., Foamex Mexico
                 II, Inc.,  Foamex Asia,  Inc. and Foamex Carpet  Cushion LLC as
                 Guarantors, the financial institutions party  thereto from time
                 to   time  as   lenders  and  Bank  of  America,  N.A.  as  the
                 Administrative Agent.
4.15.2(v)      - Pledge and  Security  Agreement,  dated as of August 18,  2003,
                 among  Foamex L.P. and Bank of America, N.A. as  Administrative
                 Agent.
4.15.3(w)      - Amendment  No. 1 to Credit  Agreement,  dated as of December 1,
                 2003,  among  Foamex  L.P.,  as  Borrower,  the  affiliates  of
                 Borrower  party  hereto,  the lenders party hereto, and Bank of
                 America, N.A. as Administrative Agent.
4.16.1(v)      - Credit  Agreement,  dated as of August 18,  2003,  among Foamex
                 L.P. as a Borrower and Guarantor,  Foamex  International  Inc.,
                 FMXI,  Inc.,  Foamex Canada Inc., Foamex  Capital  Corporation,
                 Foamex  Latin  America,  Inc.,  Foamex  Mexico,   Inc.,  Foamex
                 Mexico II, Inc.,  Foamex Asia,  Inc.  and Foamex Carpet Cushion
                 LLC  as  Guarantors,  the  financial institutions party thereto
                 from time to time  as  lenders   and  Silver   Point   Finance,
                 LLC  as  the Administrative Agent.
4.16.2(v)      - Pledge and  Security  Agreement,  dated as of August 18,  2003,
                 among   Foamex   L.P.   and   Silver  Point   Finance,  LLC  as
                 Administrative Agent.
4.16.3(w)      - Amendment  No. 1 to Credit  Agreement,  dated as of December 1,
                 2003,  among  Foamex  L.P.,  as  Borrower,  the  affiliates  of
                 Borrower  party  hereto,  the  lenders party hereto, and Silver
                 Point Finance, LLC as Administrative Agent.
4.17.1(v)      - Intercreditor  Agreement,  dated  as of August 18, 2003,  among
                 Bank  of  America,  N.A.,  as  Senior  Bank  Agent  and  Senior
                 Collateral  Agent,  Silver  Point Finance, LLC, as Senior Term
                 Loan B Agent  and as  future  Senior  Collateral  Agent after a
                 Discharge  of Senior Bank Lender Claims has occurred, U.S. Bank
                 National Association, as trustee and collateral agent under the
                 Indenture  referred  to  below,  and  Foamex  L.P., a  Delaware
                 limited partnership.
10.1(d)        - Reimbursement  Agreement,  dated as of March 23, 1993,  between
                 Trace Holdings and General Felt Industries, Inc.
10.2(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
                 Blackwell, and Prefoam AG relating to a foam technology-sharing
                 arrangement.
10.3(e)        - Asset Transfer Agreement,  dated as of October 2, 1990, between
                 Trace   International  Holdings,  Inc.  ("Trace Holdings")  and
                 Foamex L.P. (the "Trace Holdings Asset Transfer Agreement").
10.4(e)        - First  Amendment,  dated as of December 19, 1991,  to the Trace
                 Holdings Asset Transfer Agreement.
10.5(e)        - Amended and Restated  Guaranty,  dated as of December 19, 1991,
                 made by Trace Foam Company,  Inc.  ("Trace  Foam")  in favor of
                 Foamex L.P.
10.6(e)        - Asset Transfer Agreement,  dated as of October 2, 1990, between
                 Recticel  Foam  Corporation  ("RFC")  and Foamex L.P. (the "RFC
                 Asset Transfer Agreement").
10.7(e)        - First  Amendment,  dated as of December  19,  1991,  to the RFC
                 Asset Transfer Agreement.
10.10.5(g)     - The Foamex  L.P.  Hourly  Pension  Plan  (formerly  "The Foamex
                 Products  Inc.  Hourly  Employee Retirement  Plan"), as amended
                 December 31, 1995.
10.10.6(g)+    - Foamex L.P. 401(k) Savings Plan effective October 1, 1997.
10.10.12(q)+   - Foamex Supplemental  Executive Retirement Plan, effective as of
                 May 15, 2001.
10.10.13(q)+   - Split   Dollar  Life   Insurance   Agreement   Between   Foamex
                 International Inc. and  Marshall S. Cogan, dated as of December
                 31, 2001.


                                       31
<PAGE>


10.11.4(n)+    - Termination and Release  Agreement dated as of January 30, 2001
                 by and between Foamex International and John G. Johnson, Jr.
10.11.5(q)+    - Termination and Release Agreement dated as of December 6, 2001,
                 by and between the Foamex International and John Televantos.
10.11.1(m)+    - Employment  Agreement,  dated  as of January  1,  1999,  by and
                 between Foamex International and Marshall S. Cogan.
10.11.8(q)+    - First Amendment to Employment  Agreement,  dated as of December
                 31, 2001, by and between Foamex International Inc. and Marshall
                 S. Cogan.
10.11.10(u)+   - Severance Agreement and Release, dated as of November 23, 2002,
                 by and between Foamex International and Theodore J. Kall.
10.11.11(u)+   - Severance Agreement and Release,  dates as of January 31, 2003,
                 by and between Foamex International and Pratt W. Wallace, Jr.
10.11.12*      - Form of Foamex International Inc. Code of Ethics  for Director,
                 Officer, Senior Management and Certain Other Employees.
10.11.13(w)+   - Amended and Restated  Employment  Agreement,  dated January 27,
                 2004,  by  and  between  Foamex  International  and  Thomas  E.
                 Chorman.
10.11.14(w)+   - Amended and Restated  Employment  Agreement,  dated January 26,
                 2004, by and between Foamex International and K. Douglas Ralph.
10.16.1(k)     - Supply Agreement, dated as of February 27, 1998, by and between
                 Foamex L.P. and General Felt (as assigned to Foamex Carpet).
10.16.2(k)     - Administrative   Services  Agreement,  dated as of February 27,
                 1998, by and between Foamex L.P. and General Felt (as  assigned
                 to Foamex Carpet).
10.17(e)+      - Salaried Incentive Plan of Foamex L.P. and Subsidiaries.
10.18(e)+      - Equity Growth Participation Program.
10.19(f)+      - The Foamex L.P.  Salaried Pension Plan (formerly,  "The General
                 Felt Industries, Inc. Retirement Plan for Salaried Employees"),
                 effective as of January 1, 1995.
10.22(l)+      - Foamex  International  Amended and  Restated  1993 Stock Option
                 Plan.
10.23(a)+      - Foamex International Non-Employee Director Compensation Plan.
10.24(o)+      - Foamex  International  Equity  Incentive Plan for  Non-Employee
                 Directors.
10.25(o)+      - Foamex International Key Employee Incentive Bonus Plan.
10.26(p)+      - Agreement with Consultant,  dated April 24, 2001 by and between
                 Robert J. Hay and Foamex L.P.
10.29(t)+      - Foamex International 2002 Stock Award Plan.
10.17.2(j)     - Loan Agreement between Hua Kee Company Limited and Foamex Asia,
                 Inc., dated as of July 8, 1997.
10.18.1(p)     - Joint  Venture  Agreement  between Hua Kee Company  Limited and
                 Foamex Asia, Inc. amended and restated as of December 3, 2001.
10.44(s)+      - Agreement with Consultant, dated August 8, 2002, by and between
                 Raymond E. Mabus, Jr. and Foamex International.
21*            - Subsidiaries of Foamex L.P.
31.1*          - Certification  of Chief Executive  Officer  pursuant to Section
                 302 of the Sarbanes-Oxley Act of 2002.
31.2*          - Certification  of Chief Financial  Officer  pursuant to Section
                 302 of the Sarbanes-Oxley Act of 2002.
32.1*          - Certification  of Chief Executive  Officer  pursuant to Section
                 906 of the Sarbanes-Oxley Act of 2002.
32.2*          - Certification  of Chief Financial  Officer  pursuant to Section
                 906 of the Sarbanes-Oxley Act of 2002.

---------------------------------
*      Filed herewith.

+      Management contract or compensatory plan or arrangement.

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


                                       32
<PAGE>

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

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

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

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

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

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

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

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

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

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

(n)  Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
     International for the quarterly period ended March 31, 2001.

(o)  Incorporated herein by reference to the Appendix to Foamex  International's
     definitive amended and restated proxy statement, dated July 12, 2001.

(p)  Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
     International for the quarterly period ended June 30, 2001.

(q)  Incorporated  herein by  reference  to the Exhibit to the Annual  Report on
     Form 10-K of Foamex  International  for the fiscal year ended  December 31,
     2001.

(r)  Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
     L.P. and FCC for the quarterly period ended March 31, 2002.

(s)  Incorporated  herein by reference to the Exhibit to Amendment  No. 1 to the
     Registration Statement of Foamex L.P. and FCC on Form S-4, Registration No.
     333-90632, filed October 22, 2002.

                                       33
<PAGE>

(t)  Incorporated  herein by reference  to Appendix C to Foamex  International's
     definitive proxy statement dated April 30, 2002.

(u)  Incorporated  herein by  reference  to the Exhibit to the Annual  Report on
     Form 10-K of Foamex  International  for the fiscal year ended  December 29,
     2002.

(v)  Incorporated  herein by reference  to the Exhibit to the Current  Report on
     Form 8-K of the  Company  reporting  an event that  occurred  on August 18,
     2003.

(w)  Incorporated  herein by  reference  to the Exhibit to the Annual  Report on
     Form 10-K of Foamex  International  for the fiscal year ended  December 28,
     2003.

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
Securities and Exchange Commission upon request.



                                       34
<PAGE>




                                   SIGNATURES

     Pursuant to the  requirements of Section 13 of the Securities  Exchange Act
of 1934,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized as of the 5th day of March 2004.

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


                                        By:    /s/  K. Douglas Ralph
                                               -------------------------------
                                        Name:  K. Douglas Ralph
                                        Title: Executive Vice President and
                                               Chief Financial Officer


                                        FOAMEX CAPITAL CORPORATION


                                        By:    /s/  K. Douglas Ralph
                                               -------------------------------
                                        Name:  K. Douglas Ralph
                                        Title: Executive Vice President and
                                               Chief Financial 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 as of the dates indicated:

Signature                           Title                          Date


/s/ Thomas E. Chorman               Director of FMXI and FCC       March 5, 2004
---------------------------
Thomas E. Chorman


/s/  George L. Karpinski            Director of FMXI and FCC       March 5, 2004
---------------------------
George L. Karpinski



                                       35
<PAGE>


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


       Financial Statements of Registrants

<TABLE>
<CAPTION>
         Foamex L.P.
<S>                                                                                                               <C>
           Independent Auditors' Report                                                                         F-2
           Consolidated Balance Sheets as of December 28, 2003 and December 29, 2002                            F-3
           Consolidated Statements of Operations for the years ended December 29, 2002 and
              December 31, 2001 and 2000                                                                        F-5
           Consolidated Statements of Cash Flows for the years ended December 28, 2003,
              December 29, 2002 and December 31, 2001                                                           F-6
           Consolidated Statements of Partners' Deficiency for the years ended December 28, 2003,
              December 29, 2002 and December 31, 2001                                                           F-7
           Notes to Consolidated Financial Statements                                                           F-8

         Foamex Capital Corporation
           Independent Auditors' Report                                                                        F-36
           Balance Sheets as of December 28, 2003 and December 29, 2002                                        F-37
           Notes to Balance Sheets                                                                             F-38
</TABLE>



                                      F-1
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


To the Partners of Foamex L.P.
Linwood, Pennsylvania

We have audited the accompanying  consolidated balance sheets of Foamex L.P. and
subsidiaries  (the  "Company"),  an indirect  wholly-owned  subsidiary of Foamex
International  Inc.,  as of December 28, 2003 and  December  29,  2002,  and the
related  consolidated  statements  of  operations,   cash  flows  and  partners'
deficiency  for each of the three years in the period  ended  December 28, 2003.
Our audits also included the consolidated financial statement schedule listed in
the Index at Item 15a. These consolidated  financial statements and consolidated
financial statement schedule are the responsibility of the Company's management.
Our  responsibility  is to express an  opinion on these  consolidated  financial
statements and consolidated financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 28, 2003
and December 29, 2002, and the results of its operations and its cash flows for
each of the three years in the period ended December 28, 2003 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for goodwill and other intangible assets in
2002.


/s/ DELOITTE & TOUCHE LLP

March 9, 2004
Parsippany, New Jersey



                                      F-2
<PAGE>



                          FOAMEX L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              December 28,           December 29,
                                                                                 2003                    2002
                                                                              ------------           ------------
ASSETS                                                                                  (thousands)
CURRENT ASSETS
<S>                                                                            <C>                    <C>
    Cash and cash equivalents                                                  $  6,610               $  4,363
    Accounts receivable, net of allowance for doubtful
      accounts and discounts of $10,505 in 2003 and $10,311 in 2002             181,288                191,546
    Inventories                                                                  95,882                 98,010
    Other current assets                                                         27,287                 22,558
                                                                               --------               --------

            Total current assets                                                311,067                316,477
                                                                               --------               --------

PROPERTY, PLANT AND EQUIPMENT
    Land and land improvements                                                    6,818                  7,272
    Buildings and leasehold improvements                                        117,265                119,582
    Machinery, equipment and furnishings                                        289,528                287,847
    Construction in progress                                                      1,069                  3,868
                                                                               --------               --------

            Total                                                               414,680                418,569
    Less accumulated depreciation and amortization                             (251,830)              (236,531)
                                                                               --------               --------

       Property, plant and equipment, net                                       162,850                182,038

GOODWILL                                                                        126,258                125,321

DEBT ISSUANCE COSTS, net of
accumulated amortization of $10,648 in 2003 and
$14,079 in 2002                                                                  27,195                 36,827

SOFTWARE COSTS, net of accumulated amortization of
$3,603 in 2003 and $2,634 in 2002                                                 9,767                  8,254

INVESTMENTS IN AND ADVANCES TO AFFILIATES                                        14,503                 13,109

OTHER ASSETS                                                                     13,515                 13,257
                                                                               --------               --------


TOTAL ASSETS                                                                   $665,155               $695,283
                                                                               ========               ========
</TABLE>


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

                                      F-3
<PAGE>


                          FOAMEX L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               December 28,         December 29,
                                                                                  2003                  2002
                                                                               ------------         ------------
LIABILITIES AND PARTNERS' DEFICIENCY                                                     (thousands)
CURRENT LIABILITIES
<S>                                                                             <C>                  <C>
    Revolving credit borrowings                                                 $  96,065            $       -
    Current portion of long-term debt                                               8,937                   46
    Accounts payable                                                               98,310               87,394
    Accrued employee compensation and benefits                                     28,331               26,330
    Accrued interest                                                               12,376               14,173
    Accrued restructuring                                                           3,911               14,424
    Accrued customer rebates                                                       18,077               18,813
    Cash overdrafts                                                                12,688               17,737
    Other accrued liabilities                                                      13,510               17,665
    Deferred income taxes                                                             163                1,864
                                                                                ---------            ---------

      Total current liabilities                                                   292,368              198,446

LONG-TERM DEBT                                                                    640,621              738,540

ACCRUED EMPLOYEE BENEFITS                                                          43,348               48,022

ACCRUED RESTRUCTURING                                                               5,837                8,347

OTHER LIABILITIES                                                                   8,112                7,714
                                                                                ---------            ---------

    Total liabilities                                                             990,286            1,001,069
                                                                                ---------            ---------

COMMITMENTS AND CONTINGENCIES

PARTNERS' DEFICIENCY
    General partner                                                              (268,097)            (240,107)
    Limited partner                                                                     -                    -
    Accumulated other comprehensive loss                                          (47,813)             (56,458)
    Notes receivable from related party                                            (9,221)              (9,221)
                                                                                 --------            ---------
      Total partners' deficiency                                                 (325,131)            (305,786)
                                                                                 --------            ---------

TOTAL LIABILITIES AND PARTNERS' DEFICIENCY                                       $665,155            $ 695,283
                                                                                 ========            =========
</TABLE>


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

                                      F-4
<PAGE>




                          FOAMEX L.P. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                               FOR THE YEARS ENDED

<TABLE>
<CAPTION>
                                                                  December 28,      December 29,    December 31,
                                                                      2003              2002            2001
                                                                  ------------      ------------    ------------
                                                                                    (thousands)
<S>                                                               <C>               <C>             <C>
NET SALES                                                         $1,304,560        $1,328,094      $1,252,904

COST OF GOODS SOLD                                                 1,160,870         1,184,392       1,074,385
                                                                  ----------        ----------      ----------

GROSS PROFIT                                                         143,690           143,702         178,519

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                                          81,013            94,326          79,286

RESTRUCTURING, IMPAIRMENT AND OTHER
    CHARGES (CREDITS)                                                 (1,759)            4,799          36,068
                                                                  ----------        ----------      ----------

INCOME FROM OPERATIONS                                                64,436            44,577          63,165

INTEREST AND DEBT ISSUANCE EXPENSE                                    88,374            69,679          63,237

INCOME FROM EQUITY INTEREST IN JOINT VENTURE                           1,466             1,734           1,645

OTHER EXPENSE, NET                                                    (3,447)           (2,045)           (291)
                                                                  ----------        ----------      ----------

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES
    AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE                       (25,919)          (25,413)          1,282

PROVISION FOR INCOME TAXES                                             1,494             1,791           3,543
                                                                  ----------        ----------      ----------

LOSS BEFORE CUMULATIVE EFFECT OF
    ACCOUNTING CHANGE                                                (27,413)          (27,204)         (2,261)

CUMULATIVE EFFECT OF ACCOUNTING CHANGE                                     -           (71,966)              -
                                                                  ----------        ----------      ----------

NET LOSS                                                          $  (27,413)       $  (99,170)     $   (2,261)
                                                                  ==========        ==========      ==========
</TABLE>


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


                                      F-5
<PAGE>

                          FOAMEX L.P. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                               FOR THE YEARS ENDED

<TABLE>
<CAPTION>
                                                                    December 28,      December 29,     December 31,
                                                                       2003              2002              2001
                                                                    ------------      ------------     ------------
OPERATING ACTIVITIES                                                                  (thousands)
<S>                                                                   <C>               <C>             <C>
   Net loss                                                           $(27,413)         $(99,170)       $ (2,261)
   Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities:
     Depreciation and amortization                                      26,045            31,592          34,028
     Amortization of debt issuance costs, debt premium
        and debt discount                                                4,458             2,699           1,288
     Write off of debt issuance costs                                   12,928             4,892               -
     Asset impairment and other charges                                      -             2,503          13,811
     Cumulative effect of accounting change                                  -            71,966               -
     Loss on disposition of assets                                          30                 -             963
     Provision for uncollectible accounts                                2,115             2,336           5,479
     Retirement benefit funding greater than expense                      (892)           (1,604)         (1,752)
     Deferred income taxes                                                  21              (738)          1,068
     Other, net                                                              4                47               2
   Changes in operating assets and liabilities:
     Accounts receivable                                                 8,143           (20,421)         (9,578)
     Inventories                                                         2,128            (8,580)         15,177
     Accounts payable                                                   10,916           (41,362)         45,867
     Accrued restructuring                                             (13,023)           (2,225)         15,549
     Other assets and liabilities                                       (7,358)            8,447         (10,937)
                                                                      --------          --------        --------

        Net cash provided by (used in) operating activities             18,102           (49,618)        108,704
                                                                      --------          --------        --------

INVESTING ACTIVITIES
   Capital expenditures                                                 (6,543)          (15,582)        (22,482)
   Proceeds from sale of assets                                          1,237                21             600
   Repayment of note from Foamex International                               -                 -           2,500
   Acquisitions                                                              -                 -         (17,559)
   Decrease (increase) in revolving loan with Foamex International           -             2,490               -
   Other investing activities                                           (3,329)           (7,990)         (1,130)
                                                                      --------          --------        --------

        Net cash used in investing activities                           (8,635)          (21,061)        (38,071)
                                                                      --------          --------        --------

FINANCING ACTIVITIES
   Net proceeds from (repayments of) revolving loans                    44,242           (73,176)        (20,905)
   Proceeds from long-term debt                                        130,000           356,590               -
   Repayments of long-term debt                                       (164,020)         (190,450)         (8,538)
   Repayments of long-term debt-related party                                -           (31,590)        (15,795)
   Increase (decrease) in cash overdrafts                               (5,049)           13,664          (2,812)
   Debt issuance costs                                                 (11,880)          (29,981)         (2,578)
   Interest rate swaps                                                       -            14,821               -
   Distribution paid to partners                                          (513)                -          (3,861)
   Other financing activities                                                -               105          (5,958)
                                                                      --------          --------        --------

        Net cash provided by (used in) financing activities             (7,220)           59,983         (60,447)
                                                                      --------          --------        --------

Net increase (decrease) in cash and cash equivalents                     2,247           (10,696)         10,186

Cash and cash equivalents at beginning of period                         4,363            15,059           4,873
                                                                      --------          --------        --------

Cash and cash equivalents at end of period                            $  6,610          $  4,363        $ 15,059
                                                                      ========          ========        ========
</TABLE>


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


                                      F-6
<PAGE>


                          FOAMEX L.P. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIENCY


<TABLE>
<CAPTION>
                                                                  Accumulated                       Notes
                                                                     Other            Notes      Receivable
                                            General    Limited   Comprehensive      Receivable     Related
                                            Partners   Partners      Loss         from Partners     Party        Total
                                            --------   --------  -------------    -------------  ----------   ----------
                                                                          (thousands)
2001
<S>                                         <C>        <C>          <C>             <C>            <C>        <C>
Balance at January 1, 2001                  $(119,831) $     -      $(24,461)       $(4,990)       $(9,221)   $(158,503)
Net loss                                          (45)  (2,216)                                                  (2,261)
Minimum pension liability adjustment                                 (10,782)                                   (10,782)
Foreign currency translation adjustment                               (1,079)                                    (1,079)
                                                                                                              ---------
   Comprehensive loss                                                                                           (14,122)
Distributions and other                          (160)  (7,843)                                                  (8,003)
Repayment of note receivable from Foamex
   International                                                                       2,500                      2,500
Offset balance against Limited Partner
   deficit assumed by General Partner         (10,059)  10,059                                                        -
                                            ---------  -------      --------        --------       -------    ---------
Balances at December 31, 2001                (130,095)       -       (36,322)         (2,490)       (9,221)    (178,128)

2002
Net loss                                       (1,698) (97,472)                                                 (99,170)
Minimum pension liability adjustment                                 (18,267)                                   (18,267)
Foreign currency translation adjustment                               (1,869)                                    (1,869)
                                                                                                              ---------
   Comprehensive loss                                                                                          (119,306)
Distributions and other                            (5) (10,837)                                                 (10,842)
Repayment of revolving loan with Foamex
   International                                                                       2,490                      2,490
Offset balance against Limited Partner
   deficit assumed by General Partner        (108,309) 108,309                                                        -
                                            ---------  -------      --------        --------       -------    ---------
Balances at December 29, 2002                (240,107)       -       (56,458)              -        (9,221)    (305,786)

2003
Net loss                                         (469) (26,944)                                                 (27,413)
Minimum pension liability adjustment                                   2,033                                      2,033
Foreign currency translation adjustment                                6,612                                      6,612
                                                                                                              ---------
   Comprehensive loss                                                                                           (18,768)
Distributions and other                            (2)    (575)                                                    (577)
Offset balance against Limited Partner
   deficit assumed by General Partner         (27,519)  27,519                                                        -
                                            ---------  -------      --------        --------       -------    ---------
Balances at December 28, 2003               $(268,097) $     -      $(47,813)       $      -       $(9,221)   $(325,131)
                                            =========  =======      ========        ========       =======    =========
</TABLE>

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


                                      F-7
<PAGE>



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

1.   ORGANIZATION AND BASIS OF PRESENTATION

     Organization

     Foamex L.P., an indirect  wholly-owned  subsidiary of Foamex  International
Inc. ("Foamex International") operates in the flexible polyurethane and advanced
polymer foam products industry.  Foamex L.P.'s operations are conducted directly
and through its wholly-owned subsidiaries, Foamex Canada Inc. ("Foamex Canada"),
Foamex Latin America,  Inc.  ("Foamex  Mexico") and Foamex Asia,  Inc.  ("Foamex
Asia"). Foamex Carpet Cushion, Inc. ("Foamex Carpet") was converted to a limited
liability company and was contributed by Foamex  International to Foamex L.P. on
March 25, 2002. On December 30, 2002, Foamex Carpet distributed  certain assets,
liabilities and its business to Foamex L.P. Financial information concerning the
business segments of Foamex L.P. is included in Note 11.

     In 2002, Foamex L.P. changed its reporting period from a calendar year to a
52/53-week  fiscal year  ending on the Sunday  closest to January 1. Fiscal year
2003  included  the 52 weeks ended  December 28, 2003 while the fiscal year 2002
include the 52 weeks ended December 29, 2002,  after adjustment for December 31,
2001 which was included in the prior year.

     The Bank of Nova Scotia  owns  approximately  5.8 million  shares of Foamex
International's  outstanding  common stock, or approximately  23.6%. The Bank of
Nova  Scotia  also  owns  15,000  shares of  Foamex  International's  non-voting
non-redeemable  Series B convertible preferred stock. Each share of the Series B
Preferred  Stock can be  converted  into 100  shares  of Foamex  International's
common  stock,  but only if such  conversion  would not  trigger  a  "change  of
control" event as defined by certain debt  agreements of Foamex  International's
subsidiaries.  Ownership of more than 25% of the common stock would constitute a
"change of control".

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

     The consolidated  financial  statements include the accounts of Foamex L.P.
and all  majority-owned  subsidiaries where control exists. The equity method of
accounting  is used  for  investments  in  which  Foamex  L.P.  has  significant
influence, generally this represents ownership of at least 20% and not more than
50%. Foamex L.P. has a joint venture in Asia in which it increased its ownership
to 70% in late 2001. Foamex L.P. does not have control of this joint venture due
to the minority  shareholders'  substantive  participation  rights and therefore
uses the equity method of accounting.  All significant intercompany accounts and
transactions have been eliminated in consolidation.

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  and
disclosures  of contingent  assets and  liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Concentration of Credit Risk

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

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


                                      F-8
<PAGE>

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

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition, Discounts and Rebates

     Revenue from sales, net of discounts and estimated returns,  allowances and
customer rebates,  is recognized when product title and the risks and rewards of
ownership passes to the customer,  the sales price is fixed and determinable and
collection is reasonably assured. Products are shipped FOB shipping point.

Cash and Cash Equivalents

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

Accounts Receivable and Allowance for Uncollectible Accounts

     An  estimate  of  uncollectible  accounts  is  maintained  and is  based on
historical  collection  experience and specific  customer  collection  issues. A
significant  change in the  financial  condition of one or more of Foamex L.P.'s
larger customers could have a material adverse impact on future results.

Fair Value of Financial Instruments

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

     The carrying  amount and fair value of long-term debt and revolving  credit
borrowings  at  December  28,  2003 were  $745.6  million  and  $683.3  million,
respectively,  and at December 29, 2002 were $738.6 million and $490.3  million,
respectively.  The fair value of long-term debt is estimated using quoted market
prices, where available, or discounted cash flows. Fair value estimates are made
at a specific  point in time,  based on relevant  market  information  about the
financial  instruments.  These  estimates  are  subjective in nature and involve
uncertainties  and matters of  significant  judgment  and  therefore,  cannot be
determined with precision. Changes in assumptions could significantly affect the
estimates.

Inventories

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

Property, Plant and Equipment

     Property,  plant and equipment are stated at cost and are depreciated using
the  straight-line  method over the  estimated  useful lives of the assets.  The
range of useful lives  estimated for buildings is generally 20 to 35 years,  and
the range for machinery,  equipment and furnishings is 5 to 12 years.  Leasehold
improvements  are  amortized  over the  shorter  of the terms of the  respective
leases or the estimated useful lives of the leasehold improvements. Depreciation
expense  for 2003,  2002 and 2001 was $24.1  million,  $29.1  million  and $26.4
million, respectively.

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

Goodwill

     Foamex L.P. adopted  Statement of Financial  Accounting  Standards No. 142,
"Goodwill and Other Intangible  Assets" ("SFAS No. 142") on January 1, 2002 with
certain provisions adopted as of July 1, 2001. SFAS No.142 addresses the initial
recognition  and measurement of intangible  assets  acquired  outside a business
combination and


                                      F-9
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

the  recognition  and  measurement  of  goodwill  and  other  intangible  assets
subsequent  to their  acquisition.  Under SFAS No.  142,  goodwill  is no longer
amortized,  but is subject to annual  impairment  tests. The goodwill  resulting
from the acquisition discussed in Note 3 is not amortized.

     The goodwill  that arose form business  combinations  prior to July 1, 2001
was  amortized  through 2001 on a  straight-line  basis over 40 years.  Goodwill
amortization expense was $6.0 million in 2001.

     In accordance  with SFAS No. 142,  goodwill was tested for impairment  upon
adoption  of the  standard  and is  tested  annually  thereafter.  SFAS No.  142
requires that goodwill be tested for impairment  using a two-step  process.  The
first step is to identity a potential  impairment  and the second step  measures
the amount of the impairment loss, if any.  Goodwill is deemed to be impaired if
the carrying amount of a reporting  unit's  goodwill  exceeds its estimated fair
value.  Foamex L.P.'s initial  impairment test resulted in the recognition of an
impairment loss of $72.0 million recorded as a cumulative  effect of a change in
accounting principle retroactive to the first quarter of 2002 in accordance with
the  transitional  implementation  guidance  of SFAS  No.142.  Foamex  L.P.  has
completed  its annual  goodwill  impairment  tests as of September  29, 2003 and
September  30,  2002,  respectively,  with  no  recognition  of  any  additional
impairment.

     Goodwill at December 28, 2003 increased $0.9 million from December 29, 2002
as a result of  foreign  currency  translation  adjustments  reflected  below as
"Other".

     Goodwill balances include:

                                     Balance                         Balance
              Segments          December 29, 2002     Other    December 28, 2003
     ------------------------   -----------------   ---------  -----------------
                                 (thousands)
     Foam Products                   $ 74,269          $362         $ 74,631
     Carpet Cushion Products            2,497             -            2,497
     Automotive Products               34,686           575           35,261
     Technical Products                13,869             -           13,869
                                     --------          ----         --------
         Total                       $125,321          $937         $126,258
                                     ========          ====         ========

Debt Issuance Costs

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

Software Costs

     Foamex L.P.  expenses  costs incurred in the  preliminary  project stage of
developing or obtaining internal use software,  such as research and feasibility
studies, as well as costs incurred in the post-implementation/operational stage,
such as maintenance and training.  Capitalization of software  development costs
occurs  only  after  the  preliminary  project  stage  is  complete,  management
authorizes  the project,  and it is probable  that the project will be completed
and the software will be used for the function  intended.  Foamex L.P. is in the
process of  replacing  its  primary  financial  and  operating  information  and
transaction   processing   systems  and   anticipates   this   project  will  be
substantially  completed in 2005.  Capitalized  software costs  aggregated  $3.4
million, $7.0 million and $0.9 million in 2003, 2002 and 2001, respectively. The
capitalized  costs are  amortized on a  straight-line  basis over the  estimated
useful life of the software, which is generally five years or less.


                                      F-10
<PAGE>

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

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Long-Lived Assets

     Foamex L.P. reviews the carrying value of its long-lived  assets other than
goodwill whenever events or changes in circumstances  indicate that the carrying
value  of  an  asset  may  no  longer  be  appropriate.   Foamex  L.P.  assesses
recoverability  of the carrying  value of the asset by estimating the future net
cash flows expected to result from the asset, including eventual disposition. If
the future  undiscounted  net cash flows are less than the carrying value of the
asset,  an  impairment  loss is  recorded  equal to the  difference  between the
asset's carrying value and fair value.

Environmental Remediation

     Environmental  expenditures that relate to current operations are expensed.
Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue  generation,  are expensed.
Liabilities are recorded when environmental  assessments and/or remedial efforts
are probable and the costs can be reasonably estimated.  Amounts charged against
income were $0.5 million,  $1.1 million and $0.2 million in 2003, 2002 and 2001,
respectively.

Comprehensive Income (Loss)

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

Foreign Currency Translation

     The financial  statements of foreign subsidiaries have been translated into
U.S. dollars by using  period-end  exchange rates for the assets and liabilities
and the  average  exchange  rates for the  statements  of  operations.  Currency
translation  adjustments are included in accumulated other  comprehensive  loss.
Transaction  gains  (losses)  are  reflected  in other  income  (expense) in the
consolidated  statements  of  operations  and included  $(2.7)  million,  $(2.3)
million and $1.6 million in 2003, 2002 and 2001, respectively.

Research and Development

     Research and  development  costs are expensed as incurred.  Amounts charged
against  income were $3.6 million,  $4.8 million and $3.1 million in 2003,  2002
and 2001, respectively.

Self Insurance

     Foamex L.P. is partially  self-insured  for a number of risks up to certain
limits  including  workers'  compensation,   medical,   automobile  and  general
liability.  Commercial  insurance  policies are carried for amounts in excess of
the  self-insured  amounts.  Amounts  charged against income were $24.9 million,
$31.2 million and $25.6 million in 2003, 2002 and 2001, respectively.

Claims and Litigation

     Foamex L.P.  evaluates  claims for  damages  and  records  its  estimate of
liabilities  when such  liabilities  are  considered  probable  and an amount or
reasonable range can be estimated.

Income Taxes

     Income taxes are accounted for under the asset and liability method.  Under
this  method,  deferred  income taxes are  provided  for  temporary  differences
between  the  financial  reporting  basis and  income  tax  basis of assets  and
liabilities and for net operating loss carryforwards using the income tax rates,
under existing legislation, expected to


                                      F-11
<PAGE>

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

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

be in effect at the date such  temporary  differences  are  expected to reverse.
Deferred  income tax assets are  reduced  by a  valuation  allowance  when it is
considered more likely than not that a portion of the deferred income tax assets
will  not  be  realized  in a  future  period.  The  estimates  utilized  in the
recognition  of  deferred  income tax assets are  subject to  revision in future
periods.

     Foamex L.P.,  as a limited  partnership,  is not subject to Federal  income
taxes;  therefore no current or deferred  provision  has been  provided for such
taxes. However,  Foamex L.P. has provided for the income taxes of certain states
in which it is subject to taxes and for certain subsidiaries,  which are subject
to  Federal  and state  income  taxes and for  subsidiaries  located  in foreign
jurisdictions  that file  separate  tax returns.  The partners  will provide for
their  respective  shares of income or loss in their Federal or applicable state
income tax returns.  Foamex L.P. has a tax sharing  agreement  that provides for
the payment of  distributions to the partners for amounts that would be required
to be paid if Foamex L.P. were a corporation  filing  separate tax returns.  The
ability of Foamex L.P. to make such distributions is limited by the terms of its
credit agreement. See Note 7.

Accounting Changes

     In April 2002, the FASB issued Statement of Financial  Accounting Standards
No. 145,  "Rescission of FASB  Statements  No. 4, 44, and 64,  Amendment of FASB
Statement No. 13, and Technical Corrections" ("SFAS No. 145"). The provisions of
SFAS No. 145  related to the  rescission  of  Statement  4 are applied in fiscal
years beginning after May 15, 2002. Any gain or loss on  extinguishment  of debt
that was  classified as an  extraordinary  item in prior periods  presented that
does not meet the criteria in Opinion 30 for  classification as an extraordinary
item is reclassified.  Foamex L.P. has reclassified the extraordinary  charge of
$2.8 million previously reported in 2002.

     In June 2001, the FASB issued Statement of Financial  Accounting  Standards
No. 143,  "Accounting for Asset  Retirement  Obligations"  ("SFAS No. 143"). The
provisions  of SFAS No. 143 relate to financial  accounting  and  reporting  for
obligations associated with the retirement of tangible long-lived assets and the
associated  asset  retirement  costs.  Foamex L.P.  adopted  SFAS No. 143 at the
beginning of 2003 and the impact on its financial statements was not material.

     In June 2002, the FASB issued Statement of Financial  Accounting  Standards
No. 146,  "Accounting  for Costs  Associated  with Exit or Disposal  Activities"
("SFAS No.  146").  The  provisions of SFAS No. 146 require that a liability for
the cost associated with an exit or disposal activity be recognized and measured
initially at fair value only when the liability is incurred. Foamex L.P. adopted
SFAS No. 146 at the beginning of 2003, but since it had no  significant  exit or
disposal  activities  in  2003,  SFAS No.  146 had no  impact  on the  financial
statements.

     In May 2003, the FASB issued  Statement of Financial  Accounting  Standards
No. 150,  "Accounting for Certain Financial  Instruments with Characteristics of
both  Liabilities  and Equity" ("SFAS No. 150").  The provisions of SFAS No. 150
require that certain financial  instruments be classified as liabilities instead
of equity.  Foamex L.P. does not have any financial  instruments  subject to the
requirements of SFAS No. 150.

     In November 2002, the FASB issued FASB  Interpretation No. 45, "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees Of  Indebtedness of Others" ("FIN No. 45"). The provisions of FIN No.
45 clarify  the  requirements  of SFAS No. 5.  "Accounting  for  Contingencies,"
relating to the guarantor's accounting for and disclosure of certain guarantees.
The initial recognition and measurement  provisions of FIN No. 45 are applicable
to  guarantees  issued or modified  after  December 31, 2002 and the  disclosure
requirements are effective for financial statements of interim or annual periods
ended  after  December  15,  2002.  The  adoption of FIN No. 45 did not have any
impact on the results of operations or financial  position of Foamex L.P. and it
does not have any disclosure obligations under FIN No. 45 at December 28, 2003.

     In  January  2003,   the  FASB  issued  FASB   Interpretation   No.  46,  "
Consolidation of Variable Interest Entities" ("FIN No. 46") which was amended in
October 2003 and replaced with FIN No. 46R in January 2004. Foamex L.P. does not
believe that it has any "Variable  Interest  Entities" as defined by FIN No. 46R
and  accordingly,  the  adoption  of FIN No.  46R will not have an impact on its
financial statements.


                                      F-12
<PAGE>

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

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reclassifications

     Certain amounts from prior years have been reclassified to conform with the
current presentation.

3.   ACQUISITION

     On July 25, 2001, Foamex L.P.  purchased certain assets and assumed certain
liabilities of General Foam  Corporation,  a manufacturer of  polyurethane  foam
products for the automotive,  industrial,  and home  furnishings  markets,  at a
total cost of $18.5 million,  which resulted in goodwill of  approximately  $9.1
million.  The  business  was  acquired  due to its synergy  with  Foamex  L.P.'s
existing  business.  The  assets  purchased  primarily  included  inventory  and
machinery and equipment. The results of the acquired business have been included
in the  consolidated  financial  statements  since the date of acquisition.  The
effects of the acquisition on Foamex L.P.'s  consolidated  financial  statements
are not material.

4.   CUMULATIVE EFFECT OF ACCOUNTING CHANGE

     Included as a cumulative effect of accounting change in 2002 is a charge of
$72.0 million associated with the adoption of SFAS No. 142 (see Note 2).

5.   RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES

2003

     During 2003,  Foamex L.P.  recorded  restructuring  credits of $1.8 million
consisting of a $3.2 million reduction in the liability  primarily for severance
and termination  benefits no longer required as the actions  contemplated  under
the  related  plans  have  been  substantially  completed,  and a charge of $1.1
million for additional lease termination costs for a closed facility as a result
of changes in real estate market conditions.  Additionally, Foamex L.P. recorded
a $0.3 million restructuring charge reported in the Other segment as a result of
an employee  termination plan for approximately 300 employees at its Mexico City
operations. The actions under this plan were substantially completed in 2003.

2002

     In  the  fourth  quarter  of  2002,  Foamex  L.P.  recorded  restructuring,
impairment and other charges of $10.0 million relating to the  reorganization of
its  executive  and  corporate  management  and the closure of or  reduction  of
activities  at  six  operations.   The  charges  included  severance  and  other
termination  benefits for approximately 200 employees,  exit costs and remaining
lease payments. Also included in restructuring, impairment and other charges was
a  $2.5  million  asset  impairment   provision  to  reduce  certain   leasehold
improvements and machinery and equipment included in the Carpet Cushion Products
segment to their estimated fair values. The employees to be terminated  included
manufacturing hourly and salaried personnel, sales force personnel and executive
and administrative staff. Approximately 60 of these employees were terminated in
2002 and the remainder in 2003.

     Also in 2002,  Foamex L.P.  recorded  restructuring,  impairment  and other
credits of $5.2 million.  These credits resulted from a reevaluation of the 2001
Operational  Reorganization Plan discussed below and $2.1 million related to the
collection of deferred rent receivable which had been fully reserved for.

2001

     During  2001,  Foamex L.P.  recorded  restructuring,  impairment  and other
charges of $36.1  million,  primarily  related to its December 2001  Operational
Reorganization Plan. Included in the Operational  Reorganization Plan were plant
facility closures,  reductions in support function personnel and cost reductions
in purchasing and logistics.  The  Operational  Reorganization  Plan  originally
included  severance and termination  benefits for approximately 700 employees at
plants, in support functions and in executive management.  A reevaluation of the
plan in 2002 reduced


                                      F-13
<PAGE>

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

5.   RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES (continued)

the number of  facilities  to be closed and as a result the number of  employees
planned to be terminated was reduced to approximately 500.  Approximately 340 of
these   employees   were   terminated   in  2002  and  the  remainder  in  2003.
Restructuring,  impairment and other charges included an impairment provision of
$13.8 million (net of  anticipated  proceeds of $4.6 million) to reduce  certain
leasehold improvements and machinery and equipment included in the Foam Products
and Carpet Cushion Products segments to their estimated fair values.

     The 2001 Operational  Reorganization  Plan was  substantially  completed in
early 2003 and Foamex L.P.  completed all of the remaining facility closures and
personnel  reductions  related  to its  2002  restructuring  plan  during  2003.
Terminations of approximately 300 employees for both plans took place in 2003.

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

<TABLE>
<CAPTION>
                                                      Plant Closure   Personnel
                                          Total         and Leases    Reductions       Impairment          Other
                                        --------      -------------   ----------      ------------       ----------
     2001                                                            (millions)
<S>                                      <C>            <C>            <C>               <C>               <C>
     Balance at January 1, 2001           $ 9.2          $ 7.6          $1.8              $(0.2)            $  -
     2001 Operational Reorganization
       Plan                                35.4           10.6           8.3               13.4              3.1
     Adjustments and other                  0.7           (0.4)         (0.3)                 -              1.4
     Net cash receipts (spending)          (6.5)          (3.1)         (2.0)               0.6             (2.0)
     Asset impairment                     (13.8)             -             -              (13.8)               -
                                          -----          -----          ----              -----             ----
     Balance at December 31, 2001          25.0           14.7           7.8                  -              2.5

     2002
     2002 Restructuring Plan               10.0            2.2           4.5                2.5              0.8
     Adjustments and other                 (5.2)          (4.4)         (1.4)                 -              0.6
     Net cash receipts (spending)          (4.5)           0.1          (2.7)                 -             (1.9)
     Asset impairment                      (2.5)             -             -               (2.5)               -
                                          -----          -----          ----              -----             ----
     Balance at December 29, 2002          22.8           12.6           8.2                  -              2.0

     2003
     Adjustments                           (1.8)           0.2          (1.8)                 -             (0.2)
     Cash spending                        (11.3)          (4.8)         (5.5)                 -             (1.0)
                                          -----          -----          ----              -----             ----
     Balance at December 28, 2003         $ 9.7          $ 8.0          $0.9              $   -             $0.8
                                          =====          =====          ====              =====             ====
</TABLE>

     Foamex L.P.  expects to spend  approximately  $3.9 million during 2004 with
the balance to be spent through 2012, primarily for lease costs.

6.   INVENTORIES

     The components of inventory are listed below.

                                              December 28,     December 29,
                                                  2003             2002
                                              ------------     ------------
                                                      (thousands)
     Raw materials and supplies                 $61,855           $60,588
     Work-in-process                             16,484            16,737
     Finished goods                              17,543            20,685
                                                -------           -------
     Total                                      $95,882           $98,010
                                                =======           =======


                                      F-14
<PAGE>

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

7.   LONG-TERM DEBT AND REVOLVING CREDIT BORROWINGS

     The components of long-term debt are listed below.
<TABLE>
<CAPTION>
                                                                       December 28,          December 29,
                                                                          2003                  2002
                                                                       ------------          ------------
     Foamex L.P. Senior Secured Credit Facility                                   (thousands)
<S>                                                                     <C>                   <C>
       Term Loan (1)                                                    $ 48,214              $      -
     Foamex L.P. Secured Term Loan (1)                                    80,000                     -
     Foamex L.P. Amended Credit Facility
       Term Loan B (2)                                                         -                39,262
       Term Loan C (2)                                                         -                35,693
       Term Loan D (2)                                                         -                51,700
       Term Loan E (2)                                                         -                16,290
       Term Loan F (2)                                                         -                19,243
       Revolving credit facility (2)                                           -                51,823
     10 3/4% Senior Secured Notes due 2009 (3) (4)                       311,950               314,237
     9 7/8% Senior Subordinated Notes due 2007 (3)                       148,500               148,500
     13 1/2% Senior Subordinated Notes due 2005 (includes
       $1,543 and $2,486 of unamortized debt premium) (3)                 53,128                54,071
     Industrial revenue bonds                                              7,000                 7,000
     Other (net of unamortized debt discount of $93 in 2003
       and $137 in 2002)                                                     766                   767
                                                                        --------              --------
                                                                         649,558               738,586

     Less current portion                                                  8,937                    46
                                                                        --------              --------

     Long-term debt                                                     $640,621              $738,540
                                                                        ========              ========

     Revolving credit borrowings (1)                                    $ 96,065              $      -
                                                                        ========              ========
</TABLE>

(1)  Debt of Foamex L.P.,  guaranteed by Foamex  International,  FMXI,  Inc. and
     Foamex Canada.

(2)  Debt of Foamex L.P., guaranteed by Foamex International and FMXI, Inc.

(3)  Debt of Foamex L.P. and Foamex Capital Corporation.

(4)  Includes  $12.0  million  in 2003 and  $14.2  million  in 2002 of  deferred
     credits on interest rate swap transactions.

Senior Secured Credit Facility

     On August 18,  2003,  Foamex  L.P.  entered  into a $240.0  Million  Senior
Secured  Credit  Facility  with a new group of lenders and an $80.0 million term
loan facility with another lender.  Proceeds borrowed under these new facilities
were used to repay all outstanding balances under the Foamex L.P. Amended Credit
Facility  which was  terminated  as of August  18,  2003.  In  addition,  Foamex
Canada's revolving credit facility that did not have any outstanding  borrowings
and had availability of  approximately  $5.9 million was terminated as of August
18, 2003. The termination of the Amended Credit Facility resulted in a write off
of debt issuance costs of $12.9 million recorded in 2003.

     The $240.0 Million Senior Secured Credit  Facility  consists of a revolving
credit facility with a maximum availability of $190.0 million and a term loan of
$50.0 million.  The revolving credit facility  includes a $50.0 million sublimit
for  letters of credit and  availability  is limited  to  eligible  amounts,  as
defined, of accounts receivable and inventory. At December 28, 2003, Foamex L.P.
had available  borrowings of  approximately  $46.8 million and letters of credit
outstanding  of $20.9  million.  Borrowings  under the term loan are  limited to
eligible amounts,  as defined,  of equipment and real estate.  Substantially all
the assets of Foamex L.P. and its domestic  subsidiaries  and Foamex  Canada are
pledged as collateral for the related borrowings. Borrowings under the revolving
credit facility and the term loan bear interest at floating rates based upon and
including a margin over either LIBOR or a Base Rate, as


                                      F-15
<PAGE>

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

7.   LONG-TERM DEBT AND REVOLVING CREDIT BORROWINGS (continued)

defined.  At December 28, 2003, the weighted  average  interest rates were 4.53%
and 4.42% for the revolving loans and the term loan, respectively. The term loan
requires quarterly  installment  payments of approximately  $1.8 million,  which
commenced on September 30, 2003. All borrowings  under the $240.0 Million Senior
Secured Credit Facility will mature on April 30, 2007. The $240.0 Million Senior
Secured Credit  Facility  includes both a subjective  acceleration  clause and a
lockbox  arrangement  which  requires  all  lockbox  receipts  be used to  repay
revolving credit borrowings.  Accordingly, borrowings under the revolving credit
facility are  classified  as current in the  accompanying  consolidated  balance
sheet as of December  28,  2003 as required by Emerging  Issues Task Force Issue
No.  95-22,  "Balance  Sheet  Classification  of  Borrowings  Outstanding  Under
Revolving Credit Agreements that Include both a Subjective  Acceleration  Clause
and a Lockbox Arrangement" ("EITF No. 95-22").

     The $80.0  million term loan facility (the "Secured Term Loan") will mature
on April 30, 2007.  Borrowings  under this facility will bear interest at a rate
that is 9.25% plus the greater of the Reference Rate, as defined,  or 4.25%. The
minimum  rate,  which is in  effect as of  December  28,  2003,  is  13.50%.  In
addition,  Foamex  L.P.  is  subject  to a 1.00%  facility  fee which is payable
annually on the  anniversary  date.  Borrowings  under the Secured Term Loan are
collateralized  by the same  collateral  as the $240.0  Million  Senior  Secured
Credit  Facility.  An  intercreditor   agreement  governs  the  distribution  of
collateral  among the lenders under the $240.0  Million  Senior  Secured  Credit
Facility and the Secured Term Loan.

10 3/4% Senior Secured Notes

     The 10 3/4% Senior  Secured  Notes were  issued by Foamex  L.P.  and Foamex
Capital  Corporation  on March 25, 2002 and are due on April 1, 2009.  The notes
are guaranteed on a senior basis by all of Foamex L.P.'s  domestic  subsidiaries
that guarantee the $240.0 Million Senior Secured Credit Facility.  The notes are
secured on a second-priority basis (subject to permitted liens) on substantially
the same collateral that secures the obligations under the $240.0 Million Senior
Secured Credit  Facility and the Secured Term Loan.  The notes rank  effectively
junior to all senior  indebtedness  that is secured by first  priority liens and
senior in right of payment to all subordinated indebtedness. Interest is payable
April 1 and October 1. The notes may be  redeemed at the option of Foamex  L.P.,
in whole  or in  part,  at any time on or  after  April  1,  2006.  The  initial
redemption  is at 105.375% of their  principal  amount,  plus accrued and unpaid
interest,  if any,  thereon to the date of redemption and declining  annually to
100.0% on or after April 1, 2008.  Additionally,  on or before April 1, 2005, up
to 35.0% of the  principal  amount of the notes may be redeemed at a  redemption
price  equal to  110.750%  of the  principal  amount,  plus  accrued  and unpaid
interest, if any, thereon to the date of redemption with the net proceeds of one
or more equity offerings.

     Upon the  occurrence of a change of control,  as defined,  each holder will
have the right to  require  Foamex  L.P.  to tender for such notes at a price in
cash equal to 101.0% of the aggregate principal amount thereof, plus accrued and
unpaid interest, if any, if there is such a "change of control".

     Foamex  L.P.  was  required  to cause a  registration  statement  under the
Securities Act of 1933 to be effective within 180 days of March 25, 2002. Foamex
L.P. filed the  registration  statement,  but it was not effective until January
30,  2003 and  therefore  Foamex L.P.  was liable for  liquidated  damages  from
September 23, 2002 until the date the registration  statement became  effective.
The  liquidated  damages  were at the rate of $15,000  per week for the first 90
days, escalating by $15,000 per week for each additional 90 days. The liquidated
damages of $0.3 million were paid on April 1, 2003.

     Effective May 1, 2002, Foamex L.P. completed a series of interest rate swap
transactions  with notional  amounts  aggregating  $300.0  million.  Foamex L.P.
designated, documented and accounted for these interest rate swaps as fair value
hedges of its 10 3/4%  Senior  Secured  Notes due April 1, 2009.  The risk being
hedged in these  transactions was the change in fair value of its 10 3/4% Senior
Secured Notes based on changes in the benchmark interest rate, LIBOR. The effect
of these interest rate swap  transactions was to convert the fixed interest rate
on the senior secured notes to floating rates reset twice per year to correspond
with the  interest  payment  dates  for the 10 3/4%  Senior  Secured  Notes.  On
September 18, 2002,  Foamex L.P. unwound the interest rate swap  transactions in
exchange for net cash proceeds of $18.4 million, including $3.6 million realized
through lower effective interest


                                      F-16
<PAGE>

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


7.   LONG-TERM DEBT AND REVOLVING CREDIT BORROWINGS (continued)

rates while the swap  transactions were in effect.  The unwinding  resulted in a
deferred credit of $14.8 million which is being amortized through April 1, 2009,
using the effective interest rate method.

9 7/8% Senior Subordinated Notes

     The 9 7/8% Senior  Subordinated Notes were issued by Foamex L.P. and Foamex
Capital  Corporation  and  are  due  on  June  15,  2007.  The  notes  represent
uncollateralized  general obligations of Foamex L.P. and are subordinated to all
Senior  Debt,  as  defined in the  Indenture.  Interest  is payable  June 15 and
December 15. The notes may be redeemed at the option of Foamex L.P., in whole or
in part,  at any time on or after June 15, 2002.  The initial  redemption  is at
104.938% of their principal  amount,  plus accrued and unpaid interest,  if any,
thereon to the date of redemption  and declining  annually to 100.0% on or after
June 15, 2005.  At December 28, 2003,  the  redemption  price was 103.292%  plus
accrued and unpaid interest.

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

13 1/2% Senior Subordinated Notes

     The 13 1/2% Senior Subordinated Notes were issued by Foamex L.P. and Foamex
Capital  Corporation  and  are due on  August  15,  2005.  The  notes  represent
uncollateralized  general obligations of Foamex L.P. and are subordinated to all
Senior Debt, as defined in the Indenture.  Interest is payable  semiannually  on
February  15 and August 15.  The notes may be  redeemed  at the option of Foamex
L.P., in whole or in part, at any time on or after August 15, 2000.  The initial
redemption  was  106.75% of their  principal  amount,  plus  accrued  and unpaid
interest,  if any,  thereon to the date of redemption and declining  annually to
100.0% on or after August 15, 2004. At December 28, 2003, the  redemption  price
was 101.6875% plus accrued and unpaid interest.

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

Industrial Revenue Bonds ("IRBs")

     IRB debt  includes  a $1.0  million  bond that  matures  in 2005 and a $6.0
million  bond that  matures in 2013.  Interest is based on a variable  rate,  as
defined,  with options  available to Foamex L.P. to convert to a fixed rate.  At
December  28,  2003,  the  interest  rate was 1.20% on the $1.0 million bond and
1.32% on the $6.0 million bond. The maximum interest rate for either of the IRBs
is 15.0% per annum.

     If  Foamex  L.P.  exercises  its  option  to  convert  the bonds to a fixed
interest  rate  structure,  the  IRBs  are  redeemable  at  the  option  of  the
bondholders.  The obligations are  collateralized by certain  properties,  which
have an approximate net carrying value of $10.7 million at December 28, 2003.

Other

     Other debt includes a non-interest bearing promissory note with a principal
amount of $0.9 million at December 28, 2003 issued in connection with increasing
Foamex  L.P.'s  interest  in an Asian  joint  venture  to  70.0%  in  2001.  The
promissory note had unamortized discount of $0.1 million at December 28, 2003.


                                      F-17
<PAGE>

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

7. LONG-TERM DEBT AND REVOLVING CREDIT BORROWINGS (continued)

Related Party - Note Payable to Foam Funding LLC

     Foamex Carpet entered into a $70.2 million  promissory note payable to Foam
Funding LLC, a subsidiary of Trace International Holdings, Inc. ("Trace"), which
was formerly a major stockholder of Foamex International.  Principal was payable
in quarterly  installments  that began in June 1998 with a final  installment in
February  2004.  Interest was based on a variable rate equal to the sum of 2.25%
plus the  higher  of:  (i) the base rate of The Bank of Nova  Scotia or (ii) the
Federal Funds rate plus 0.5%. At the option of Foamex Carpet,  interest  payable
under the note was convertible into LIBOR based loans plus 3.25%.

     Amounts  outstanding  were  collateralized  by all of the  assets of Foamex
Carpet on a pari  passu  basis  with the  Foamex  Carpet  Credit  Facility.  All
obligations  under the note  payable to Foam  Funding LLC were paid on March 25,
2002.

Debt Covenants

     The indentures and other indebtedness  agreements contain certain covenants
that  limit,  among  other  things,  the  ability  of  Foamex  L.P.  (i)  to pay
distributions  or redeem  equity  interests,  (ii) to make  certain  restrictive
payments  or  investments,  (iii)  to  incur  additional  indebtedness  or issue
Preferred Equity Interests,  as defined, (iv) to merge,  consolidate or sell all
or substantially  all of its assets,  or (v) to enter into certain  transactions
with affiliates or related  persons.  In addition,  certain  agreements  contain
provisions  that, in the event of a defined  change of control or the occurrence
of an undefined material adverse change in the ability of the obligor to perform
its  obligations,  the  indebtedness  must be repaid,  in certain cases,  at the
option  of  the  holder.   Under  the  most   restrictive  of  the  distribution
restrictions,  as of December 28, 2003, Foamex L.P. was able to distribute funds
to its  partners,  only to the extent to enable its  partners  to meet their tax
payment liabilities and Foamex  International's  normal operating expenses of up
to $1.5  million  annually,  so long as no  default  or  event  of  default  has
occurred.

     On  November  15,  2002,  Foamex  L.P.  and its bank  lenders  executed  an
amendment to the Amended Credit Facility.  Under the amendment,  Foamex L.P. was
subject to minimum net worth,  minimum EBDAIT,  as defined,  and maximum capital
expenditure  covenants  through  periods  ending  December 28, 2003. The minimum
EBDAIT  covenant was tested  monthly,  on a  cumulative  basis,  beginning  with
December  2002.  Foamex L.P.  was in  compliance  with the revised  covenants at
December  29, 2002 and  throughout  2003 until the Amended  Credit  Facility was
terminated on August 18, 2003.  Under the $240.0  Million  Senior Secured Credit
Facility  and the Secured  Term Loan,  Foamex L.P. is subject to a fixed  charge
coverage  ratio,  as defined,  of 1.00.  For the two quarters ended December 28,
2003,  Foamex L.P.'s fixed charge  coverage ratio was 1.09.  Foamex L.P. is also
subject to a maximum annual capital  expenditure  amount which was $17.7 million
for the year ended  December  28,  2003 and will be $36.0  million  for the year
ending January 2, 2005.

Maturities of Long-Term Debt

     Scheduled  maturities  of long-term  debt as of December 28, 2003 are shown
below (thousands):

     2004                                                               $  8,937
     2005                                                                 60,578
     2006                                                                  7,143
     2007                                                                253,500
     2008                                                                      -
     Thereafter                                                          306,000
                                                                         -------
                                                                         636,158

     Unamortized debt premium/discount and fair value
        adjustment, net                                                   13,400
                                                                        --------

     Total                                                              $649,558
                                                                        ========


                                      F-18
<PAGE>

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

8.     RETIREE BENEFIT PLANS

Defined Benefit Pension Plans

     Foamex L.P. provides pension and survivor benefits for salaried and certain
hourly employees in the United States (the "Qualified  Pension Plan").  Salaried
employees are provided benefits that are based principally on the combination of
years of credited  service  and  compensation.  Hourly  employees  are  provided
benefits that are based  principally on stated amounts for each year of credited
service.  Certain employees in a wholly-owned  Canadian  subsidiary are provided
pension and survivor benefits.

     Effective  May 15,  2001, a  supplemental  executive  retirement  plan (the
"SERP")  was  established.  The  SERP  is  a  non-qualified  plan  and  provides
retirement  benefits to certain executives that supplement the benefits provided
under the Qualified Pension Plan.

Retiree Medical and Life Insurance Benefits

     Foamex L.P.  provides  postretirement  health care and life  insurance  for
eligible  employees,  limited  primarily  to one  manufacturing  facility in the
United States.  These plans are unfunded and benefits are paid as the claims are
submitted. The benefits are only provided until the participant becomes eligible
for Medicare.  Consequently,  the Medicare  Prescription  Drug,  Improvement and
Modernization  Act of 2003 will not impact the  obligations or expense of Foamex
L.P. Foamex L.P. retains the right, subject to existing agreements, to modify or
eliminate these benefits.

     The  measurement  date to determine  pension assets and  obligations is the
calendar year end.

     Change in  projected  benefit  obligations,  plan assets and funded  status
follows:

<TABLE>
<CAPTION>
                                                               Pension Benefits             Other Benefits
                                                              2003         2002           2003         2002
                                                           ----------   ----------     ---------    ----------
     Change in Benefit Obligations                                    (thousands)
<S>                                                        <C>          <C>             <C>           <C>
       Benefit obligations at beginning of year            $107,390     $ 95,962        $1,248        $  624
       Service cost                                           4,300        3,866            29            29
       Interest cost                                          7,086        6,556            76            82
       Amendments                                               257          157             -             -
       Benefits paid                                         (5,392)      (5,003)         (139)         (144)
       Plan participants' contributions                           -            -            15            19
       Actuarial loss                                        10,461        6,466             5           638
       Foreign currency exchange rate changes                   950           46             -             -
       Curtailment                                                -         (660)            -             -
                                                           --------     --------        ------        ------

       Benefit obligation at end of year                   $125,052     $107,390        $1,234        $1,248
                                                           ========     ========        ======        ======

     Change in Plan Assets
       Fair value of plan assets at
          beginning of year                                $ 60,085     $ 65,514        $    -        $    -
       Actual return on plan assets                          15,240       (7,350)            -             -
       Employer contribution                                  9,564        7,464           124           125
       Plan participants' contributions                           -            -            15            19
       Benefits paid                                         (5,392)      (5,003)         (139)         (144)
       Plan administrative expenses                            (438)        (591)            -             -
       Foreign currency exchange rate changes                   827           51             -             -
                                                           --------     --------        ------        ------

       Fair value of plan assets at end of year            $ 79,886     $ 60,085        $    -        $    -
                                                           ========     ========        ======        ======
</TABLE>

                                      F-19
<PAGE>

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

8.   RETIREE BENEFIT PLANS (continued)

<TABLE>
<CAPTION>
                                                               Pension Benefits             Other Benefits
     Funded Status and Net Amounts                            2003         2002           2003         2002
                                                           ----------   ----------     ---------    ----------
     Recognized in Consolidated Balance Sheets                          (thousands)
<S>                                                        <C>          <C>            <C>           <C>
       Funded status                                       $(45,166)    $(47,305)      $(1,234)      $(1,248)
       Unrecognized transition asset                           (365)        (440)            -             -
       Unrecognized prior service cost (benefit)                 92         (265)          (47)          398
       Unrecognized net actuarial loss (gain)                50,997       52,573           387           (53)
                                                           --------     --------       -------       -------
       Net amount recognized in consolidated
          balance sheets                                   $  5,558     $  4,563       $  (894)      $  (903)
                                                           ========     ========       =======       =======

     Amounts Recognized in the Consolidated
     Balance Sheets
       Prepaid benefit costs                               $    224     $    194       $     -       $     -
       Accrued benefit liability                            (39,896)     (42,983)         (894)         (903)
       Intangible assets                                        674          763             -             -
       Accumulated other comprehensive loss                  44,556       46,589             -             -
                                                           --------     --------       -------       -------
       Net amount recognized                               $  5,558     $  4,563       $  (894)      $  (903)
                                                           ========     ========       =======       =======
</TABLE>

     The accumulated benefit obligation for all defined benefit plans was $119.5
million at year-end 2003 and $102.6  million at year-end 2002.  Information  for
defined benefit plans with an accumulated  benefit  obligation in excess of plan
assets is listed below.

<TABLE>
<CAPTION>
                                                                  December 31, 2003          December 31, 2002
                                                                  -----------------          -----------------
                                                                                    (thousands)
<S>                                                                     <C>                       <C>
     Projected benefit obligation                                       $121,381                  $104,843
     Accumulated benefit obligation                                     $116,767                  $101,004
     Fair value of plan assets                                          $ 76,871                  $ 58,021
</TABLE>

     Components of Net Periodic Benefit Plan Cost

<TABLE>
<CAPTION>
                                                             Pension Benefits                  Other Benefits
                                                       ---------------------------      -------------------------
                                                        2003       2002      2001        2003      2002      2001
                                                       ------     ------    ------      ------    ------    ------
                                                                               (thousands)
<S>                                                    <C>        <C>       <C>          <C>       <C>       <C>
     Service cost                                      $4,300     $3,866    $3,666       $ 29      $ 29      $19
     Interest cost                                      7,086      6,556     6,158         76        82       60
     Expected return on plan assets                    (5,611)    (5,823)   (5,829)         -         -        -
     Amortization of transition assets                    (75)       (75)      (75)         -         -        -
     Amortization of prior service benefit               (109)      (140)     (177)        (6)       (6)      (6)
     Amortization of net loss (gain)                    3,090      1,643     1,163         16        15       (8)
     Curtailment                                            -       (162)        -          -         -        -
                                                       ------     ------    ------       ----      ----      ---

     Net periodic benefit plan cost                    $8,681     $5,865    $4,906       $115      $120      $65
                                                       ======     ======    ======       ====      ====      ===
</TABLE>

     Additional Information
<TABLE>
<CAPTION>

                                                                Pension Benefits             Other Benefits
                                                               2003         2002           2003         2002
                                                            ----------   ----------     ---------    ----------
                                                                                (thousands)
     Increase (decrease) in minimum liability
<S>                                                           <C>          <C>
       included in other comprehensive loss                   $(2,033)     $18,267           N/A           N/A
</TABLE>


                                      F-20
<PAGE>

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


8.   RETIREE BENEFIT PLANS (continued)

<TABLE>
<CAPTION>
                                                               Pension Benefits             Other Benefits
                                                          -----------------------     -----------------------
     Weighted-Average Assumptions Used                         December 31,                December 31,
                                                                                                      -
     to Determine Benefit Obligations                        2003         2002           2003         2002
                                                          ----------   ----------     ---------    ----------
<S>                                                            <C>          <C>           <C>          <C>
     Discount rate                                             6.0%         6.5%          6.0%         6.5%
     Expected long-term return on plan assets*                 9.0%         9.0%          N/A          N/A
     Rate of compensation increase                        3.5%-5.0%    4.0%-5.0%          N/A          N/A

     Weighted-Average Assumptions Used                        Pension Benefits             Other Benefits
                                                          ------------------------    -------------------------
     to Determine Annual Net Benefit Cost                    2003         2002           2003         2002
                                                          ----------   ----------     ---------    ----------
     Discount rate                                            6.5%         7.0%          6.5%          7.0%
     Expected long-term return on plan assets*                9.0%         9.0%           N/A          N/A
     Rate of compensation increase                       4.0%-5.0%    4.0%-7.0%           N/A          N/A
</TABLE>

*    The determination of the expected long-term rate of return is a combination
     of historical  returns and future return assumptions based on Foamex L.P.'s
     pension plan asset strategy as discussed below.

<TABLE>
<CAPTION>
                                                                                     Other Benefits
                                                                         -------------------------------------
     Assumed Health Care Cost Trend Rates                                December 31, 2003   December 31, 2002
                                                                         -----------------   -----------------
<S>                                                                            <C>                 <C>
     Health care cost trend rate assumed for next year                         12.0%               13.0%
     Rate to which the cost trend rate is assumed to
       decline (ultimate trend rate)                                            5.0%                5.0%
     Year that the rate reaches the ultimate trend rate                        2011                2011
</TABLE>

     Assumed  health  care cost  trend  rates have a  significant  effect on the
amounts  reported for the health care plans.  A  one-percentage  point change in
assumed health care cost trend rates would have the effects listed below.

     Assumed Health Care Cost Trend

<TABLE>
<CAPTION>
                                                            1% Point Increase         1% Point Decrease
                                                            -----------------         -----------------
                                                                              (thousands)
<S>                                                                 <C>                      <C>
     Effect on total of service cost and interest cost              $ 9                      $ (8)
     Effect on postretirement benefit obligation                    $90                      $(79)
</TABLE>

Funding,  Investment  Strategy,  Asset  Allocations and Risk Management for Plan
Assets.

     Pension plan assets are primarily  comprised of equity and debt securities,
including both U.S. and foreign  securities.  At year-end 2003,  common stock of
Foamex  International  totaled $2.1 million,  or 2.8% of the assets. At year-end
2002, common stock of Foamex International  totaled $1.3 million, or 2.4% of the
assets.  Pension plan assets from pension plans in Canada  totaled $5.5 million,
or 6.9% of assets at  year-end  2002 and $3.8  million,  or 6.4% of  assets,  at
year-end 2002.

<TABLE>
<CAPTION>
                                                  U. S. Plan Assets
                                       ---------------------------------------
                                       December 31, 2003     December 31, 2002
                                       -----------------     -----------------
<S>                                           <C>                   <C>
     Equity securities                        64%                   58%
     Debt securities                          30                    33
     Other                                     6                     9
                                             ---                   ---

     Total                                   100%                  100%
                                             ===                   ===
</TABLE>



                                      F-21
<PAGE>

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

8.   RETIREE BENEFIT PLANS (continued)

     Foamex  L.P.'s  funding  policy  for  the  Qualified  Pension  Plan  is  to
contribute 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 U.S.  Internal  Revenue  Code.  Funding  in 2004 is
estimated to be $11.8 million.

     For the U.S. pension plans, the investment strategy,  asset allocations and
risk management  strategies are detailed in the Investment Policy Statement (the
"IPS") of Foamex L.P. The IPS was developed in conjunction  with a comprehensive
review  and  assessment  of  current  and  projected   financial   requirements.
Investment  guidelines  are based on an investment  horizon of greater than five
years.  Key risk management  considerations  include asset  allocation and asset
class mix, control procedures and performance  monitoring and review.  Under the
IPS, the U.S. pension plan may use certain classes of hedge funds (derivatives),
but the amount of hedge funds is limited to less than 3% of U.S. plan assets.

     The strategic target of U.S. pension assets include 60% of equities and 40%
of debt securities and cash and cash equivalents. The amount of cash equivalents
is targeted to approximate one year of benefit payments to plan participants.

Defined Contribution Plan

     Foamex L.P. maintains a defined contribution plan, which is qualified under
Section 401(k) of the Internal Revenue Code ("401(k) Plan") and is available for
eligible employees who elect to participate. Under the terms of the 401(k) Plan,
Foamex L.P. partially matches certain employee contributions.  Expense for these
contributions was $0.9 million,  $1.0 million and $1.0 million in 2003, 2002 and
2001, respectively.

9.   INCOME TAXES

     The sources of income  (loss)  before the  provision  for income  taxes are
shown below.

<TABLE>
<CAPTION>
                                                                  2003            2002             2001
                                                              -----------     ------------     -----------
                                                                            (thousands)
<S>                                                            <C>            <C>                <C>
     United States                                             $(26,893)      $(30,158)          $(6,696)
     Foreign                                                        974          4,745             7,978
                                                               --------       --------           -------

     Income (loss) before provision for income taxes           $(25,919)      $(25,413)          $ 1,282
                                                               ========       ========           =======
</TABLE>

     A reconciliation  of the statutory federal income tax to income tax expense
is listed below.

<TABLE>
<CAPTION>
                                                                 2003             2002             2001
                                                             ------------     ------------     -----------
                                                                            (thousands)
<S>                                                            <C>             <C>               <C>
     Statutory income taxes                                    $(9,072)        $(8,895)          $   449
     State income taxes, net of federal benefit                   (831)           (810)             (368)
     Permanent difference on partnership income                  9,668          11,816             2,712
     Increase (decrease) in valuation allowance                    649             332              (526)
     Non-deductible amortization                                     -               -             1,391
     Impact of tax rate change                                      85               -                 -
     Other, net                                                    995            (652)             (115)
                                                               -------         -------           --------
     Total                                                     $ 1,494         $ 1,791           $ 3,543
                                                               =======         =======           =======
</TABLE>


                                      F-22
<PAGE>

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

9.   INCOME TAXES (continued)

     The provision for income taxes is summarized as follows:

<TABLE>
<CAPTION>
                                                         2003             2002             2001
                                                     ------------     ------------     -----------
     Current                                                           (thousands)
<S>                                                     <C>             <C>               <C>
       Federal                                          $    -          $    -            $    -
       State                                                60             226               239
       Foreign                                           1,286           2,423             2,594
                                                        ------          ------            ------
         Total current                                   1,346           2,649             2,833
                                                        ------          ------            ------

     Deferred
       Federal                                               -               -               576
       State                                                 -            (518)              320
       Foreign                                            (501)           (672)              340
                                                        ------          ------            ------
         Total deferred                                   (501)         (1,190)            1,236
                                                        ------          ------            ------

     Change in valuation allowance                         649             332              (526)
                                                        ------          ------            ------

     Total provision for income taxes                   $1,494          $1,791            $3,543
                                                        ======          ======            ======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                              December 28,        December 29,
                                                                                 2003                 2002
                                                                              ------------        ------------
                                                                                        (thousands)
<S>                                                                             <C>                  <C>
     Loss carryforwards and other                                               $ 3,602              $ 2,547
     Valuation allowance for deferred income tax assets                          (1,810)              (1,161)
                                                                                -------              -------
       Deferred income tax assets                                                 1,792                1,386
                                                                                -------              -------

     Deferred income tax liabilities
       Basis difference in property, plant and equipment                           (512)                (586)
       Investment in joint venture                                                 (771)                (771)
       Other                                                                     (2,175)              (1,674)
                                                                                -------              -------
       Deferred income tax liabilities                                           (3,458)              (3,031)
                                                                                -------              -------

     Net deferred income tax liabilities                                        $(1,666)             $(1,645)
                                                                                =======              =======
</TABLE>

     At December 28, 2003,  Foamex L.P. had $3.4 million of net  operating  loss
carryforwards  in a Mexican  subsidiary that expire in 2006 through 2013. A full
valuation allowance has been recorded at December 28, 2003 and December 29, 2002
due  to   uncertainty   regarding   utilization   of  the  net  operating   loss
carryforwards.

     Cumulative undistributed earnings of foreign subsidiaries for which no U.S.
income or foreign withholding taxes have been provided, amounted to $5.2 million
at December 28, 2003 and $13.4 million at December 29, 2002, respectively.  Such
earnings  are deemed to be  permanently  invested  by Foamex  L.P.  As such,  no
deferred tax liability has been recognized with regard to the remittance of such
earnings.  Further,  determination  of the amount of  unrecognized  deferred tax
liability with regard to such earnings is not practicable.

10.  PARTNERS' DEFICIENCY

     Foamex L.P. was formed as a Delaware  limited  partnership  on September 5,
1990, and initially capitalized on October 2, 1990, in accordance with a limited
partnership  agreement as amended  through  March 2002. As of December 28, 2003,
the partnership interests of Foamex L.P. are a 1.7% managing general partnership
interest  held by FMXI,  Inc. and a 98.3% limited  partnership  interest held by
Foamex International.


                                      F-23
<PAGE>

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


10.  PARTNERS' DEFICIENCY (continued)

Accumulated Other Comprehensive Loss

     The components of accumulated other comprehensive loss are listed below.

<TABLE>
<CAPTION>
                                                            2003               2002                   2001
                                                          -----------       -----------           -----------
                                                                             (thousands)
<S>                                                        <C>                <C>                   <C>
     Foreign currency translation adjustment               $ (3,257)          $ (9,869)             $ (8,000)
     Minimum pension liability                              (44,556)           (46,589)              (28,322)
                                                           --------           --------              --------
                                                           $(47,813)          $(56,458)             $(36,322)
                                                           ========           ========              ========
</TABLE>

11.    BUSINESS SEGMENTS

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

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

     Foam  Products  manufactures  and  markets  cushioning  foams for  bedding,
furniture,  packaging  and health  care  applications  and  foam-based  consumer
products,  such as  mattress  pads  and  children's  furniture.  Carpet  Cushion
Products  manufactures  and distributes  rebond,  prime,  felt and rubber carpet
padding.  Automotive Products supplies foam products and laminates to major tier
one  suppliers  and  original   equipment   manufactures.   Technical   Products
manufactures  and  markets  reticulated  and  other  specialty  foams  used  for
reservoiring, filtration, gasketing and sealing applications.

     The "other"  column in the table  below  represents  certain  manufacturing
operations in Mexico City,  corporate  expenses not allocated to other  business
segments and restructuring, impairment and other charges (credits) (see Note 5).
Asset and capital  expenditure  information by business  segment is not reported
because many of Foamex L.P.'s facilities  produce products for multiple business
segments.

     The accounting  policies of the business segments are the same as described
in Note 2.  Business  segment  results  include  revenues  and  costs  that  are
specifically  identifiable  and costs  shared  by  business  segments  have been
allocated  based on  utilization.  At the end of 2003,  Foamex L.P.  changed its
measure of segment operating income to exclude allocation of corporate overhead,
as  management  no longer  evaluates  the  performance  of  segments  using this
allocation.  Rather,  Foamex L.P.  attempts  to manage and  control  these costs
independent of segment performance.  Segment results for 2002 and 2001 have been
adjusted to reflect this change for comparative  purposes.  Geographic sales are
determined based on the location in which the sale originated.

     Sales to one customer, which are included in Automotive Products, accounted
for  approximately  16.3%,  17.3% and 15.7% of net sales in 2003, 2002 and 2001,
respectively.  No other  customer  accounted  for more  than  10.0% of net sales
during the periods presented.


                                      F-24
<PAGE>

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


11.  BUSINESS SEGMENTS (continued)

     Business segment results are presented below.

<TABLE>
<CAPTION>
                                              Carpet
                                   Foam       Cushion       Automotive      Technical
                                 Products     Products       Products        Products       Other         Total
                                 --------     --------      ----------      ---------     ---------   ------------
2003                                                        (thousands)
<S>                              <C>          <C>            <C>             <C>          <C>         <C>
Net sales                        $507,586     $208,855       $447,068        $117,450     $ 23,601    $1,304,560
Income (loss) from operations    $ 43,983     $  5,395       $ 33,399        $ 32,115     $(50,456)   $   64,436
Depreciation and amortization    $ 11,002     $  3,275       $  2,815        $  2,931     $  6,022    $   26,045

2002
Net sales                        $471,005     $234,001       $466,718        $124,124     $ 32,246    $1,328,094
Income (loss) from operations    $ 45,466     $  1,239       $ 34,146        $ 35,185     $(71,459)   $   44,577
Depreciation and amortization    $ 13,632     $  5,904       $  3,721        $  2,815     $  5,520    $   31,592

2001
Net sales                        $499,668     $230,965       $377,753        $111,043     $ 33,475    $1,252,904
Income (loss) from operations    $ 81,144     $  7,422       $ 27,040        $ 32,692     $(85,133)   $   63,165
Depreciation and amortization    $ 11,018     $  5,390       $  4,150        $  2,670     $ 10,760    $   33,988
</TABLE>

     Results by geographical area are presented below.

<TABLE>
<CAPTION>
                                                        United
                                                        States          Canada           Mexico      Consolidated
                                                       --------        --------         --------     ------------
2003                                                                           (thousands)
<S>                                                    <C>             <C>              <C>           <C>
Net sales                                              $989,075        $67,542          $247,943      $1,304,560
Property, plant and equipment, net                     $142,602        $ 5,003          $ 15,245      $  162,850

2002
Net sales                                              $981,927        $66,940          $279,227      $1,328,094
Property, plant and equipment, net                     $157,007        $ 3,898          $ 21,133      $  182,038

2001
Net sales                                              $966,614        $65,179          $221,111      $1,252,904
Property, plant and equipment, net                     $172,456        $ 4,006          $ 24,335      $  200,797
</TABLE>

12.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                         2003           2002              2001
                                                                     ------------   ------------      -----------
                                                                                     (thousands)
<S>                                                                    <C>            <C>              <C>
     Cash paid for interest                                            $72,785        $56,583          $63,593
                                                                       =======        =======          =======

     Cash paid for income taxes, net                                   $ 2,349        $ 2,222          $ 1,870
                                                                       =======        =======          =======

     Non cash - capital leases                                         $     -        $     -          $   299
                                                                       =======        =======          =======

     Non cash - debt exchanged for increased ownership
       in joint venture                                                $     -        $     -          $ 1,069
                                                                       =======        =======          =======
</TABLE>



                                      F-25
<PAGE>

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



13.  RELATED PARTY TRANSACTIONS AND BALANCES

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

Trace Promissory Notes

     On July 1, 1997,  Trace borrowed $5.0 million pursuant to a promissory note
with an aggregate principal amount of $5.0 million issued to Foamex L.P. on June
12, 1997. The promissory note was due and payable on demand or, if no demand was
made, on July 7, 2001, and bears interest at 2 3/8% plus  three-month  LIBOR, as
defined,  per annum payable quarterly in arrears  commencing October 1, 1997. On
June 12, 1997,  another  promissory  note issued to Foamex L.P. by Trace in July
1996 was amended.  The amended  promissory  note is an extension of a promissory
note of Trace that was due in July 1997. The aggregate  principal  amount of the
amended  promissory  note was  increased to  approximately  $4.8 million and the
maturity of the  promissory  note was  extended.  The  principal  was reduced by
approximately  $0.6 million  relating to a portion of the proceeds from the sale
of a corporate  aircraft  in 1999.  The  promissory  note was due and payable on
demand or, if no demand was made, on July 7, 2001,  and bears interest at 2 3/8%
plus three-month LIBOR, as defined, per annum payable quarterly in arrears.

     The  Trace  notes  are  included  in  the  other   component  of  partners'
deficiency.  Based on Trace's bankruptcy filing and financial  condition,  it is
not  probable  that  Trace  will be able to pay  the  aggregate  amount  of $9.2
million.  Upon the conclusion of the Trace bankruptcy  proceedings,  Foamex L.P.
will charge the uncollected  portion of the Trace notes to the general partners'
deficiency.  Accordingly,  Foamex L.P. has not  recorded any interest  income on
these notes since the Trace bankruptcy.

Trace Accounts Receivable

     At December 28, 2003 and December 29, 2002,  operating accounts  receivable
from Trace were approximately $3.4 million. These accounts receivable were fully
reserved for prior to 2001.

Foam Funding LLC Debt

     Foamex  L.P.  paid  interest on notes  payable to Foam  Funding LLC of $0.7
million  and $2.8  million  in 2002 and 2001,  respectively.  Foamex  L.P.  paid
principal  on notes  payable  to Foam  Funding  LLC of $31.6  million  and $15.8
million in 2002 and 2001, respectively.  This debt was fully repaid in 2002 (see
Note 7).

Other

     In 2002,  pursuant  to the  terms of an  existing  agreement,  Foamex  L.P.
acquired  5.0 % stock  interest  in Foamex de Mexico  S.A.  de C.V.  ("Foamex de
Mexico")  which had been held by the  general  director  of Foamex de Mexico for
$1.0 million.

     In 2001,  two  members of the board of  directors  of Foamex  International
provided  consulting  services  to Foamex  L.P.  for  which  fees paid were $0.2
million.  Also in 2001, one of these  directors  received a loan of $0.2 million
from Foamex  L.P.'s joint  venture in Asia.  The loan was evidenced by a 20-year
non-recourse  promissory note bearing  interest at 4.0% per annum secured by the
director's  5.0% interest in the value of Foamex  L.P.'s equity  interest in the
joint  venture in Asia.  Foamex L.P.  also  maintains an apartment  used by this
director.  Rent expense for this  facility  was $0.2  million in 2003,  2002 and
2001.

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

     Foamex  L.P.'s Pico Rivera,  California  facility was owned by Foam Funding
LLC and leased to Foamex L.P. The Pico Rivera facility was sold to a third party
during 2002.


                                      F-26
<PAGE>

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


13.  RELATED PARTY TRANSACTIONS AND BALANCES (continued)

     During December 2001, Foamex  International  entered into an agreement that
guarantees two  promissory  notes,  totaling $0.7 million,  payable to a foreign
affiliate that Foamex L.P. accounts for under the equity method.  The promissory
notes were  issued to a director  of Foamex  International  and an  employee  of
Foamex L.P.

     During 2002, a member of the Foamex International Board of Directors became
an officer of Foamex L.P. at an annual  salary of at least $0.4  million  plus a
target  annual bonus of 75.0% of base salary of which 80.0% is guaranteed in any
given year.  Additionally under the employment  agreement,  the director had the
right to terminate  employment  and receive  termination  benefits under certain
conditions,  including  Foamex  International's  failure to  purchase a business
owned  by  the  director.  Since  Foamex  International  did  not  enter  into a
definitive  agreement to purchase the business by October 31, 2002, the director
had the  option  to  terminate  the  employment  agreement  within  90 days  and
exercised the  termination  option in January 2003.  This director did not stand
for reelection at Foamex International's annual shareholders meeting held on May
23, 2003. During 2002, Foamex L.P. paid $0.5 million to the director's  business
for consulting services.

     Also during 2002,  Foamex L.P.  entered into an agreement  with a member of
Foamex  International's  Board of  Directors to provide  consulting  services in
connection with potential strategic business  opportunities in Asia at an annual
cost of $0.2  million.  Foamex  L.P.  also paid $0.5  million  in 2002 for legal
services  to a law firm in which  another  Foamex  International  director  is a
partner. That director resigned from the Board in late 2002.

14.  COMMITMENTS AND CONTINGENCIES

Operating Leases

     Foamex L.P. is obligated under various  noncancelable  lease agreements for
rental of facilities,  vehicles and other equipment.  Many of the leases contain
renewal  options  with  varying  terms and  escalation  clauses that provide for
increased  rentals based upon increases in the Consumer Price Index, real estate
taxes and lessors' operating expenses. Total minimum rental commitments required
under operating leases at December 28, 2003 are (thousands):

     2004                                           $14,076
     2005                                            10,191
     2006                                             6,472
     2007                                             4,930
     2008                                             3,321
     Balance                                          5,925
                                                    -------
     Total                                          $44,915
                                                    =======

     Rental expense charged to operations  under operating  leases  approximated
$18.8  million,  $23.4  million  and  $20.2  million  in 2003,  2002  and  2001,
respectively.  Substantially  all such rental  expense  represented  the minimum
rental payments under operating leases.

Contractual Commitments

     Foamex L.P. has entered into contracts for information  technology services
and certain raw materials that have minimum  purchase  commitments  estimated at
$105.2  million in 2004,  $57.1 million in 2005,  $66.4  million in 2006,  $63.4
million in 2007 and $59.5 million for each of the years 2008, 2009 and 2010.

Litigation

     Foamex L.P. is party to various 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 Foamex L.P.'s financial position or results of
operations. If


                                      F-27
<PAGE>

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

14.  COMMITMENTS AND CONTINGENCIES (continued)

management's assessment of our liability relating to these actions is incorrect,
these actions could have a material adverse effect on our consolidated financial
position, results of operations and cash flows.

     As of December 28, 2003, Foamex L.P. had accrued approximately $1.1 million
for litigation and other legal matters in addition to the environmental  matters
discussed below.

Environmental and Health and Safety

     Foamex L.P. is subject to extensive and changing federal,  state, local and
foreign environmental laws and regulations, including those relating to the use,
handling, storage, discharge and disposal of hazardous substances, the discharge
or  emission  of  materials  into  the  environment,   and  the  remediation  of
environmental contamination,  and as a result, are from time to time involved in
administrative and judicial  proceedings and inquiries relating to environmental
matters. As of December 28, 2003, Foamex L.P. had accruals of approximately $2.5
million for environmental matters,  including approximately $2.3 million related
to  remediating   and  monitoring  soil  and   groundwater   contamination   and
approximately  $0.2 million  related to sites where it has been  designated as a
Potentially  Responsible  Party, or "PRP", by the EPA or a state authority,  and
other  matters.  Additional  losses,  if any,  in  excess of  amounts  currently
accrued,  cannot be reasonably  estimated at this time. If there are  additional
matters or if our current  estimates  are  incorrect,  there could be a material
adverse effect on Foamex L.P.'s  financial  position,  results of operations and
cash flows.

     On  August  31,  2002,   Environment  Canada,  the  Canadian  environmental
regulatory  agency,  finalized a rule which would require flexible  polyurethane
foam manufacturing operations to reduce methylene chloride (dichloromethane) air
emissions.  The  rule  establishes  a  50.0%  reduction  in  methylene  chloride
emissions  by December 1, 2004 and 100.0%  reductions  by January 1, 2007.  This
standard  will not require  Foamex L.P. to make  material  expenditures  for its
Canadian plants.

     Foamex L.P. has reported to the appropriate  state authorities that we have
found soil and/or  groundwater  contamination  in excess of state  standards  at
certain locations.  Seven sites are currently in various stages of investigation
or  remediation.  Accordingly,  the  extent of  contamination  and the  ultimate
liability is not known with  certainty for all sites.  During 2000,  Foamex L.P.
reached an  indemnification  agreement with the former owner of the  Morristown,
Tennessee facility.  The agreement allocates the incurred and future remediation
costs  between the former  owner and Foamex L.P.  The  estimated  allocation  of
future costs for the remediation of this facility is not  significant,  based on
current known  information.  The former owner was Recticel Foam  Corporation,  a
subsidiary of Recticel.

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

     The Comprehensive  Environmental Response,  Compensation and Liability Act,
or "CERCLA," and comparable  state laws impose  liability  without fault for the
costs of  cleaning  up  contaminated  sites on certain  classes of persons  that
contributed to the release of hazardous substances into the environment at those
sites, for example, by generating wastes containing  hazardous  substances which
were disposed at such sites. Foamex L.P. is currently designated as a PRP by the
EPA or by state  environmental  agencies  or other  PRPs,  pursuant to CERCLA or
analogous state statutes,  with respect to 11 sites.  Estimates of total cleanup
costs and fractional allocations of liability are often provided by the EPA, the
state  environmental  agency  or the  committee  of  PRPs  with  respect  to the
specified site. Based on these estimates (to the extent  available) and on known
information,  in each case and in the  aggregate,  Foamex  L.P.  does not expect
additional  costs, if any, to be material to liquidity,  result of operations or
financial position.

     The  possibility   exists,   that  new  environmental   legislation  and/or
environmental  regulations may be adopted,  or other  environmental  conditions,
including the presence of previously unknown environmental contamination, may be
found  to  exist  or  a  reassessment  of  the  potential  exposure  to  pending
environmental  matters  may  be  necessary  due  to new  information  or  future
developments,  that may require expenditures not currently  anticipated and that
may be material.


                                      F-28
<PAGE>

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


15.  GUARANTOR INFORMATION

     The payment obligations of Foamex L.P. and Foamex Capital Corporation under
the 10 3/4% Senior  Secured  Notes are  guaranteed  by Foamex  L.P.'s 100% owned
domestic subsidiaries  ("Guarantors").  Such guarantees are full,  unconditional
and joint and several.  Separate financial  statements of the Guarantors are not
presented because Foamex L.P.'s management has determined that they would not be
material to investors.  The following presents condensed  consolidating  balance
sheets  as of  December  28,  2003  and  December  29,  2002  and the  condensed
consolidating  statements  of  operations  and cash  flows for the  years  ended
December 28, 2003, December 29, 2002 and December 31, 2001 of the Guarantors and
nonguarantors. The Guarantors include Foamex Carpet, Foamex Latin America, Inc.,
Foamex Mexico,  Inc.,  Foamex Mexico II, Inc. and Foamex Asia,  Inc. On December
30, 2002, Foamex Carpet distributed certain assets, liabilities and its business
to Foamex L.P. and accordingly,  Foamex Carpet is not included as a guarantor in
the financial  information  as of December 28, 2003 and for the year then ended.
The  nonguarantors  are Foamex  Canada Inc. and Grupo Foamex de Mexico,  S.A. de
C.V. and its subsidiaries.  The following  financial  information is intended to
provide information for the Guarantors and nonguarantors of Foamex L.P. based on
amounts derived from the financial statements of Foamex L.P.

                      Condensed Consolidating Balance Sheet
                             As of December 28, 2003

<TABLE>
<CAPTION>
                                                                    Foamex
                                                                    Capital     Foamex L.P.                       Consolidated
                                     Guarantors   Nonguarantors   Corporation    (Parent)      Eliminations       Foamex L.P.
                                     ----------   -------------   -----------   -----------    ------------       ------------
Assets                                                            (thousands of dollars)
<S>                                   <C>             <C>           <C>         <C>              <C>                <C>
 Current assets                       $   419         $31,859       $    1      $283,144         $ (4,356)          $311,067
 Investment in subsidiaries            10,513               -            -        43,598          (54,111)                 -
 Property, plant and equipment, net         -          19,736            -       143,114                -            162,850
 Goodwill                                   -           5,772            -       120,486                -            126,258
 Debt issuance costs                        -               -            -        27,195                -             27,195
 Other assets                          13,857           2,125            -        30,853           (9,050)            37,785
                                      -------         -------       ------      --------         --------           --------
   Total assets                       $24,789         $59,492       $    1      $648,390         $(67,517)          $665,155
                                      =======         =======       ======      ========         ========           ========

Liabilities and Partners' Deficiency
 Current liabilities                  $   585         $18,746       $    -      $277,393         $ (4,356)          $292,368
 Long-term debt                         4,957           4,851            -       639,863           (9,050)           640,621
 Other liabilities                          -           1,032            -        56,265                -             57,297
                                      -------         -------       ------      --------         --------           --------
   Total liabilities                    5,542          24,629            -       973,521          (13,406)           990,286
 Partners' deficiency                  19,247          34,863            1      (325,131)         (54,111)          (325,131)
                                      -------         -------       ------      --------         --------           --------
   Total liabilities and partners'
      deficiency                      $24,789         $59,492       $    1      $648,390         $(67,517)          $665,155
                                      =======         =======       ======      ========         ========           ========
</TABLE>


                      Condensed Consolidating Balance Sheet
                             As of December 29, 2002

<TABLE>
<CAPTION>
                                                                    Foamex
                                                                    Capital     Foamex L.P.                       Consolidated
                                     Guarantors   Nonguarantors   Corporation    (Parent)      Eliminations       Foamex L.P.
                                     ----------   -------------   -----------   -----------    ------------       ------------
Assets                                                            (thousands of dollars)

<S>                                   <C>             <C>           <C>         <C>              <C>                <C>
 Current assets                       $40,111         $28,481       $    1      $274,700         $(26,816)          $ 316,477
 Investment in subsidiaries             8,014               -            -        27,243          (35,257)                  -
 Property, plant and equipment, net     5,851          21,549            -       154,638                -             182,038
 Goodwill                               1,249           4,835            -       119,237                -             125,321
 Debt issuance costs                        -               -            -        36,827                -              36,827
 Other assets                          13,706           2,384            -        40,933          (22,403)             34,620
                                      -------         -------       ------      --------         --------           ---------

   Total assets                       $68,931         $57,249       $    1      $653,578         $(84,476)          $ 695,283
                                      =======         =======       ======      ========         ========           =========

Liabilities and Partners' Deficiency
 Current liabilities                  $41,401         $25,065       $    -      $158,674         $(26,694)          $ 198,446
 Long-term debt                           713               -            -       737,827                -             738,540
 Other liabilities                     23,623               -            -        62,863          (22,403)             64,083
                                      -------         -------       ------      --------         --------           ---------

   Total liabilities                   65,737          25,065            -       959,364          (49,097)          1,001,069
 Partners' deficiency                   3,194          32,184            1      (305,786)         (35,379)           (305,786)
                                      -------         -------       ------      --------         --------           ---------

   Total liabilities and partners'
 deficiency                           $68,931         $57,249       $    1      $653,578         $(84,476)          $ 695,283
                                      =======         =======       ======      ========         ========           =========
</TABLE>



                                      F-29
<PAGE>

<PAGE>

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

15.    GUARANTOR INFORMATION (continued)

                 Condensed Consolidating Statement of Operations
                      For the year ended December 28, 2003

<TABLE>
<CAPTION>
                                                                    Foamex
                                                                    Capital     Foamex L.P.                       Consolidated
                                     Guarantors   Nonguarantors   Corporation    (Parent)      Eliminations       Foamex L.P.
                                     ----------   -------------   -----------   -----------    ------------       ------------
                                                                 (thousands of dollars)
<S>                                   <C>            <C>            <C>         <C>              <C>               <C>
Net sales                             $     -        $105,604       $    -      $1,222,399       $(23,443)         $1,304,560

Cost of goods sold                          -          95,567            -       1,088,746        (23,443)          1,160,870
                                      -------        --------       ------      ----------       --------          ----------


   Gross profit                             -          10,037            -         133,653              -             143,690

Selling, general and administrative
   expenses                                 -           7,399            -          73,614              -              81,013

Restructuring, impairment and other
   charges (credits)                        -             320            -          (2,079)             -              (1,759)
                                      -------        --------       ------      ----------       --------          ----------

Income from operations                      -           2,318            -          62,118              -              64,436

Interest and debt issuance expense        234              25            -          88,303           (188)             88,374

Equity in undistributed earnings
   of affiliates                       (1,156)              -            -            (379)         3,001               1,466

Other expense, net                        190          (2,784)           -            (665)          (188)             (3,447)
                                      -------        --------       ------      ----------       --------          ----------

Loss before provision for income
   taxes                               (1,200)           (491)           -         (27,229)         3,001             (25,919)

Provision for income taxes                  -           1,310            -             184              -               1,494
                                      -------        --------       ------      ----------       --------          ----------

Net loss                              $(1,200)       $ (1,801)      $    -      $  (27,413)      $  3,001          $  (27,413)
                                      =======        ========       ======      ==========       ========          ==========
</TABLE>


                                      F-30
<PAGE>

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


15.  GUARANTOR INFORMATION (continued)

                 Condensed Consolidating Statement of Operations
                      For the year ended December 29, 2002

<TABLE>
<CAPTION>
                                                                 Foamex
                                                                 Capital       Foamex L.P.               Consolidated
                                     Guarantors   Nonguarantors  Corporation   (Parent)    Eliminations  Foamex L.P.
                                     ----------   -------------  -----------   ----------- ------------  ------------
                                                                 (thousands of dollars)
<S>                                    <C>          <C>             <C>        <C>          <C>           <C>
Net sales                              $240,616     $112,897        $    -     $1,143,150   $(168,569)    $1,328,094

Cost of goods sold                      221,947      100,676             -      1,030,338    (168,569)     1,184,392
                                       --------     --------        ------     ----------   ---------     ----------

   Gross profit                          18,669       12,221             -        112,812           -        143,702

Selling, general and administrative
   expenses                              12,371        6,881             -         75,074           -         94,326

Restructuring, impairment and other
   charges (credits)                        225            -             -          4,574           -          4,799
                                       --------     --------        ------     ----------   ---------     ----------
Income from operations                    6,073        5,340             -         33,164           -         44,577

Interest and debt issuance expense        4,046           44             -         66,268        (679)        69,679

Equity in undistributed earnings
   of affiliates                         (4,103)           -             -        (28,199)     34,036          1,734

Other income (expense), net                 496       (2,283)            -            421        (679)        (2,045)
                                       --------     --------        ------     ----------   ---------     ----------
Loss before provision for income
   taxes                                 (1,580)       3,013             -        (60,882)     34,036        (25,413)

Provision for income taxes                  (20)       1,751             -             60           -          1,791
                                       --------     --------        ------     ----------   ---------     ----------
Loss before cumulative effect of
   accounting change                     (1,560)       1,262             -        (60,942)     34,036        (27,204)

Cumulative effect of accounting change  (29,944)      (3,794)            -        (38,228)          -        (71,966)
                                       --------     --------        ------     ----------   ---------     ----------
Net loss                               $(31,504)    $ (2,532)       $    -     $  (99,170)  $  34,036     $  (99,170)
                                       ========     ========        ======     ==========   =========     ==========
</TABLE>



                                      F-31
<PAGE>


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


15.  GUARANTOR INFORMATION (continued)

                 Condensed Consolidating Statement of Operations
                      For the year ended December 31, 2001

<TABLE>
<CAPTION>
                                                                 Foamex
                                                                 Capital       Foamex L.P.               Consolidated
                                     Guarantors   Nonguarantors  Corporation   (Parent)    Eliminations  Foamex L.P.
                                     ----------   -------------  -----------   ----------- ------------  ------------
                                                                 (thousands of dollars)
<S>                                    <C>           <C>            <C>       <C>           <C>          <C>
Net sales                              $237,508      $112,102       $    -    $1,074,329    $(171,035)   $1,252,904

Cost of goods sold                      213,370        99,742            -       932,308     (171,035)    1,074,385
                                       --------      --------       ------    ----------    ---------    ----------

   Gross profit                          24,138        12,360            -       142,021            -       178,519

Selling, general and administrative
   expenses                              14,850         7,359            -        57,077            -        79,286

Restructuring, impairment and other
   charges (credits)                      2,264             -            -        33,804            -        36,068
                                       --------      --------       ------    ----------    ---------    ----------
Income from operations                    7,024         5,001            -        51,140            -        63,165

Interest and debt issuance expense        4,201           244            -        58,792            -        63,237

Equity in undistributed earnings
   of affiliates                          3,349             -            -         7,600       (9,304)        1,645

Other income (expense), net                (503)        1,610            -        (1,398)           -          (291)
                                       --------      --------       ------    ----------    ---------    ----------
Income before provision for income
   taxes                                  5,669         6,367            -        (1,450)      (9,304)        1,282

Provision for income taxes                  541         2,191            -           811            -         3,543
                                       --------      --------       ------    ----------    ---------    ----------
Net loss                               $  5,128      $  4,176       $    -    $   (2,261)   $  (9,304)   $   (2,261)
                                       ========      ========       ======    ==========    =========    ==========
</TABLE>


                                      F-32
<PAGE>


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

15   GUARANTOR INFORMATION (continued)

                 Condensed Consolidating Statement of Cash Flows
                      For the year ended December 28, 2003

<TABLE>
<CAPTION>
                                                                 Foamex
                                                                 Capital       Foamex L.P.               Consolidated
                                     Guarantors   Nonguarantors  Corporation   (Parent)    Eliminations  Foamex L.P.
                                     ----------   -------------  -----------   ----------- ------------  ------------
                                                                 (thousands of dollars)
Cash Flows from Operating Activities
<S>                                    <C>            <C>          <C>          <C>             <C>        <C>
 Net income (loss)                     $(1,200)       $(1,801)     $     -      $(27,413)       $3,001     $(27,413)
 Total adjustments to reconcile net
   income (loss) to net cash provided
   by operating activities               1,119          6,429            -        40,887        (2,920)      45,515
                                       -------        -------      -------      --------        ------     --------

 Net cash provided by operating
   activities                              (81)         4,628            -        13,474            81       18,102
                                       -------        -------      -------      --------        ------     --------

Cash Flows from Investing Activities
 Capital expenditures                        -         (1,740)           -        (5,806)        1,003       (6,543)
 Other                                      81              -            -        (1,089)       (1,084)      (2,092)
                                       -------        -------      -------      --------        ------     --------

 Net cash used in investing activities      81         (1,740)           -        (6,895)          (81)      (8,635)
                                       -------        -------      -------      --------        ------     --------

Cash Flows from Financing Activities
 Net proceeds from (repayments of)
   revolving loans                           -              -            -        44,242             -       44,242
 Proceeds from long-term debt                -              -            -       130,000             -      130,000
 Repayments of long-term debt                -              -            -      (164,020)            -     (164,020)
 Other, net                                  -              -            -       (17,442)            -      (17,442)
                                       -------        -------      -------      --------        ------     --------

 Net cash used in financing activities       -              -            -        (7,220)            -       (7,220)
                                       -------        -------      -------      --------        ------     --------

Net increase (decrease) in cash and
   cash equivalents                          -          2,888            -          (641)            -        2,247

Cash and cash equivalents at
   beginning of period                       -          1,781            1         2,581             -        4,363
                                       -------        -------      -------      --------        ------     --------

Cash and cash equivalents at
   end of period                       $     -        $ 4,669      $     1      $  1,940        $    -     $  6,610
                                       =======        =======      =======      ========        ======     ========
</TABLE>


                                      F-33
<PAGE>


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

15.    GUARANTOR INFORMATION (continued)

                 Condensed Consolidating Statement of Cash Flows
                      For the year ended December 29, 2002
<TABLE>
<CAPTION>
                                                                      Foamex
                                                                      Capital       Foamex L.P.               Consolidated
                                          Guarantors   Nonguarantors  Corporation   (Parent)    Eliminations  Foamex L.P.
                                          ----------   -------------  -----------   ----------- ------------  ------------
                                                                 (thousands of dollars)
Cash Flows from Operating Activities
<S>                                        <C>            <C>          <C>           <C>           <C>         <C>
   Net income (loss)                       $(31,504)      $(2,532)     $      -      $(99,170)     $34,036     $(99,170)
   Total adjustments to reconcile net
     income (loss) to net cash provided
     by operating activities                 42,126           454             -        41,107      (34,135)      49,552
                                           --------       -------      --------      --------      -------     --------
   Net cash used in operating
     activities                              10,622        (2,078)            -       (58,063)         (99)     (49,618)
                                           --------       -------      --------      --------      -------     --------

Cash Flows from Investing Activities
   Capital expenditures                        (414)       (2,000)            -       (13,267)          99      (15,582)
   Other                                        500             -             -       (24,182)      18,203       (5,479)
                                           --------       -------      --------      --------      -------     --------
   Net cash used in investing activities         86        (2,000)            -       (37,449)      18,302      (21,061)
                                           --------       -------      --------      --------      -------     --------

Cash Flows from Financing Activities
   Proceeds from long-term debt                   -             -             -       356,590            -      356,590
   Repayments of long-term debt             (32,090)       (1,304)            -      (261,822)           -     (295,216)
   Other, net                                19,468             -             -        (2,656)     (18,203)      (1,391)
                                           --------       -------      --------      --------      -------     --------
   Net cash provided by financing
         activities                         (12,622)       (1,304)            -        92,112      (18,203)      59,983
                                           --------       -------      --------      --------      -------     --------

Net increase (decrease) in cash and
   cash equivalents                          (1,914)       (5,382)            -        (3,400)           -      (10,696)

Cash and cash equivalents at
   beginning of period                        2,758         7,163             1         5,137            -       15,059
                                           --------       -------      --------      --------      -------     --------

Cash and cash equivalents at
   end of period                           $    844       $ 1,781      $      1      $  1,737      $     -     $  4,363
                                           ========       =======      ========      ========      =======     ========
</TABLE>


                                      F-34
<PAGE>

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


15.    GUARANTOR INFORMATION (continued)

                 Condensed Consolidating Statement of Cash Flows
                      For the year ended December 31, 2001

<TABLE>
<CAPTION>
                                                                      Foamex
                                                                      Capital       Foamex L.P.               Consolidated
                                          Guarantors   Nonguarantors  Corporation   (Parent)    Eliminations  Foamex L.P.
                                          ----------   -------------  -----------   ----------- ------------  ------------
                                                                 (thousands of dollars)
Cash Flows from Operating Activities
<S>                                        <C>              <C>        <C>          <C>           <C>         <C>
   Net income (loss)                       $ 5,128          $4,176     $      -     $(2,261)      $(9,304)    $ (2,261)
   Total adjustments to reconcile net
     income (loss) to net cash provided
     by (used in) operating activities      11,404           5,141            -      85,225         9,195      110,965
                                           -------          ------     --------     -------       -------     --------
   Net cash provided by
     operating activities                   16,532           9,317            -      82,964          (109)     108,704
                                           -------          ------     --------     -------       -------     --------

Cash Flows from Investing Activities
   Capital expenditures                       (273)         (1,368)           -     (20,950)          109      (22,482)
   Acquisition                                   -               -            -     (17,559)            -      (17,559)
   Other                                         -               -            -       1,970             -        1,970
                                           -------          ------     --------     -------       -------     --------
   Net cash used in investing activities      (273)         (1,368)           -     (36,539)          109      (38,071)
                                           -------          ------     --------     -------       -------     --------

Cash Flows from Financing Activities
   Net repayments of revolving loans             -               -            -     (20,905)            -      (20,905)
   Repayments of long-term debt            (15,795)         (2,607)           -      (5,931)            -      (24,333)
   Other, net                                  308               -            -     (15,517)            -      (15,209)
                                           -------          ------     --------     -------       -------     --------
   Net cash used in financing activities   (15,487)         (2,607)           -     (42,353)            -      (60,447)
                                           -------          ------     --------     -------       -------     --------

Net increase in cash and cash equivalents      772           5,342            -       4,072             -       10,186

Cash and cash equivalents at
   beginning of period                       1,986           1,821            1       1,065             -        4,873
                                           -------          ------     --------     -------       -------     --------

Cash and cash equivalents at
   end of period                           $ 2,758          $7,163     $      1     $ 5,137       $     -     $ 15,059
                                           =======          ======     ========     =======       =======     ========
</TABLE>


16.  SUBSEQUENT EVENT

     Effective February 10, 2004, Foamex  International's  Chairman resigned his
position by mutual agreement with Foamex International's Board of Directors.

     In connection with this resignation,  Foamex  International  entered into a
separation  agreement  with the former  Chairman  and Foamex L.P.  will record a
one-time charge of  approximately  $1.4 million in the first quarter of 2004 for
amounts  payable  under this  agreement,  none of which  relate to past  service
rendered  by the former  Chairman.  Additionally,  Foamex  L.P.  will record the
reversal of  approximately  $1.4 million  reflected  on the balance  sheet as of
December  28, 2003  related to various  retirement  provisions  contained  in an
employment agreement with Foamex International that are no longer payable to the
former Chairman under the terms of the separation agreement.


                                      F-35
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors of
Foamex Capital Corporation
Wilmington, Delaware

We have audited the accompanying balance sheets of Foamex Capital Corporation (a
wholly-owned  subsidiary of Foamex L.P.) (the "Company") as of December 28, 2003
and December 29, 2002. These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable assurance about whether the balance sheet
is free of material misstatement.  An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures in the balance sheet. An audit
also includes assessing the accounting principles used and significant estimates
made  by  management,   as  well  as  evaluating   the  overall   balance  sheet
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  such balance sheets present fairly,  in all material  respects,
the  financial  position of the Company at December  28, 2003 and  December  29,
2002, in conformity with accounting  principles generally accepted in the United
States of America.




/s/ DELOITTE & TOUCHE LLP

March 9, 2004
Parsippany, New Jersey


                                      F-36
<PAGE>




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


<TABLE>
<CAPTION>
                                                                December 28,          December 29,
                                                                   2003                  2002
                                                                ------------          ------------

<S>                                                               <C>                     <C>
CASH                                                              $1,000                  $1,000
                                                                  ======                  ======

COMMITMENTS AND CONTINGENCIES

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


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

                                      F-37
<PAGE>

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

1.   ORGANIZATION

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

2.   COMMITMENTS AND CONTINGENCIES

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

     10 3/4% Senior Secured Notes

     The 10 3/4% Senior  Secured  Notes were issued by Foamex L.P.  and FCC (the
"Issuers")  on  March  25,  2002 and are due on April 1,  2009.  The  notes  are
guaranteed on a senior basis by all of Foamex L.P.'s domestic  subsidiaries that
guarantee the $240.0  Million  Senior  Secured  Credit  Facility.  The notes are
secured on a second-priority basis (subject to permitted liens) on substantially
the same collateral that secures the obligations under the $240.0 Million Senior
Secured Credit  Facility and the Secured Term Loan.  The notes rank  effectively
junior to all senior  indebtedness  that is secured by first  priority liens and
senior in right of payment to all subordinated indebtedness. Interest is payable
April 1 and October 1. The notes may be  redeemed at the option of the  Issuers,
in whole  or in  part,  at any time on or  after  April  1,  2006.  The  initial
redemption  is at 105.375% of their  principal  amount,  plus accrued and unpaid
interest and  liquidated  damages,  as defined,  if any,  thereon to the date of
redemption  and  declining  annually  to  100.0%  on or  after  April  1,  2008.
Additionally, on or before April 1, 2005, up to 35.0% of the principal amount of
the notes  may be  redeemed  at a  redemption  price  equal to  110.750%  of the
principal amount,  plus accrued and unpaid interest and liquidated  damages,  as
defined,  if any, thereon to the date of redemption with the net proceeds of one
or more equity offerings.

     Upon the  occurrence of a change of control,  as defined,  each holder will
have the right to  require  the  Issuers  to tender for such notes at a price in
cash equal to 101.0% of the aggregate principal amount thereof, plus accrued and
unpaid interest, if any, if there is such a "change of control".


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

     The 9 7/8% Senior Subordinated Notes were issued by the Issuers and are due
on June 15, 2007. The notes represent  uncollateralized  general  obligations of
the  Issuers  and  are  subordinated  to all  Senior  Debt,  as  defined  in the
Indenture.  Interest  is  payable  June 15 and  December  15.  The  notes may be
redeemed at the option of the  Issuers,  in whole or in part,  at any time on or
after June 15, 2002.  The initial  redemption is at 104.938% of their  principal
amount,  plus accrued and unpaid  interest,  as defined,  if any, thereon to the
date of redemption  and declining  annually to 100.0% on or after June 15, 2005.
At December 28, 2003, the redemption  price was 103.292% plus accrued and unpaid
interest.

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

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

     The 13 1/2%  Senior  Subordinated  Notes were issued by the Issuers and are
due on August 15, 2005. The notes represent uncollateralized general obligations
of the Issuers and are subordinated to all Senior Debt, as defined


                                      F-38
<PAGE>



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

2.   COMMITMENTS AND CONTINGENCIES (continued)

in the Indenture. Interest is payable semiannually on February 15 and August 15.
The notes may be redeemed at the option of the Issuers,  in whole or in part, at
any time on or after August 15, 2000.  The initial  redemption  is at 106.75% of
their principal amount, plus accrued and unpaid interest, if any, thereon to the
date of redemption and declining annually to 100.0% on or after August 15, 2004.
At December 28, 2003, the redemption price was 101.6875% plus accrued and unpaid
interest.

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



                                      F-39
<PAGE>



                                   FOAMEX L.P.
                     INDEX TO FINANCIAL STATEMENT SCHEDULES


     Index to Financial Statement Schedules

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

<TABLE>
<CAPTION>
                                             Balance at      Charged to    Charged to                     Balance at
                                            Beginning of     Costs and        Other                          End of
                                                 Period       Expenses       Accounts     Deductions         Period
YEAR ENDED DECEMBER 28, 2003
<S>                                           <C>             <C>           <C>             <C>              <C>
Allowance for Uncollectible Accounts          $  7,963        $  2,115      $  (217)        $ 1,607          $ 8,254
                                              ========        ========      =======         =======          =======

Reserve for Discounts                         $  2,348        $      -      $13,429 (1)     $13,526          $ 2,251
                                              ========        ========      =======         =======          =======


YEAR ENDED DECEMBER 29, 2002
Allowance for Uncollectible Accounts          $  8,720        $  2,336      $     -         $ 3,093          $ 7,963
                                              ========        ========      =======         =======          =======

Reserve for Discounts                         $  2,220        $      -      $15,143 (1)     $15,015          $ 2,348
                                              ========        ========      =======         =======          =======


YEAR ENDED DECEMBER 31, 2001
Allowance for Uncollectible Accounts          $  7,693        $  5,479      $    88         $ 4,540          $ 8,720
                                              ========        ========      =======         =======          =======

Reserve for Discounts                         $  2,233        $      -      $15,198 (1)     $15,211          $ 2,220
                                              ========        ========      =======         =======          =======
</TABLE>


(1)  Adjustments reflect a reduction in net sales.


                                      S-2
<PAGE>