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 January 2, 2005

                                       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 31, 2005, 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>                                                                                                <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                                        11

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                                         13
         Item  7a.    Quantitative and Qualitative Disclosures about Market Risk                                 27
         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
         Item 9b.     Other Information                                                                          29

Part III
         Item 10.     Directors and Executive Officers of the Registrant                                         30
         Item 11.     Executive Compensation                                                                     30
         Item 12.     Security Ownership of Certain Beneficial Owners
                           and Management                                                                        30
         Item 13.     Certain Relationships and Related Transactions                                             30
         Item 14.     Principal Accounting Fees and Services                                                     30

Part IV
         Item 15      Exhibits, Financial Statement Schedules
                           and Reports on Form 8-K                                                               30

         Signatures                                                                                              36

</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>

<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 January 2, 2005,
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 January 2, 2005,  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 quilting rolls,  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),  Sensus(R),  Quiltflex(R),
Resilitex(R)  and other  viscoelastic  "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>



<PAGE>


     Carpet Cushion Products

     We manufacture and distribute carpet cushion products, which include prime,
rebond, felt and rubber carpet padding. Prime carpet padding is made from virgin
polyurethane  foam,  which is formed  into buns and sliced into  sheets.  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 felt 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.

     Technical Products

     We are one of the  industry's  prime  innovators and suppliers of specialty
foam material, which we refer to as "Technical Products," for a diverse array of
markets  and  industries.  Technical  Products  can be  tailored  to meet a wide
variety of energy and fluid  management  challenges and are found in automotive,
industrial,   electronics,  consumer,  medical,  and  other  markets.  Technical
Products are commonly used in applications such as gasketing and sealing systems
for  automobiles,   inkjet  printer  cartridges,   rollers  in  digital  imaging
equipment,  noise and vibration damping for computer disc drives,  air and fluid
filtration in cars and aircraft,  medical devices,  and numerous  consumer items
such as sponges, mops, paint brushes and cosmetic applicators. Due to the highly
specialized nature of most Technical Products,  a technical staff of engineering
and research and development experts work with customers to design,  develop and
manufacture products to meet specific requirements. We provide technical support
from product  conceptualization  through  prototyping  and  production  and work
closely with the product developers,  engineers, brand managers and research and
development  staffs  of both  major  OEMs  in  specific  markets  and  with  the
industry's  premier foam  fabricators to deliver  innovative  solutions to their
product needs and challenges.

     Other

     Other  consists   primarily  of  certain   manufacturing   and  fabrication
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


                                       4
<PAGE>


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 foam products 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.  Although we own 70% of the joint venture,  we do not control this
entity.  The joint venture  installed its first foam pourline  during 2003. This
pourline,  which was entirely financed by the joint venture entity, reduces 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  12.5% of our net sales in 2004,  16.3% of our net
sales in 2003, and 17.3% of our net sales in 2002. 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  29.6% of our net
sales in 2004,  34.7% of our net sales in 2003,  33.8% of our net sales in 2002.
The loss of any one of these customers  could have a material  adverse effect on
our business.

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.

     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.


                                       5
<PAGE>


     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. There are a limited number
of major suppliers of 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.  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 and natural gas prices and the current  geopolitical  instability
and its impact on oil  production and prices.  We experienced  increases of more
than 20% in the price of raw materials  from major chemical  manufacturers  from
the first  quarter of 2004 to the fourth  quarter  of 2004.  Our major  chemical
suppliers  further  increased the price of polyol by approximately 15% effective
in January 2005 and  increased  prices for both TDI and polyol by  approximately
10% effective in March 2005. 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  January  2, 2005.  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  January  2,  2005,  we  employed   approximately   5,500   persons.
Approximately  1,500 of these  employees are located  outside the United States,
including  approximately 1,000 covered by collective  bargaining agreements with
labor  unions.  Approximately  1,100  United  States  employees  are  covered by
collectively  bargaining agreements at 8 facilities.  These agreements expire on
various dates through 2008. 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.,  Crest Foam  Industries,  Inc., Wm. T.
Burnett & Co. 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  that our  competitive
position  is  dependent  upon  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 $2.8  million in 2004,  $3.6  million for 2003 and $4.8
million for 2002.


                                       6
<PAGE>


     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 January  2, 2005,  our total  long-term  debt and  revolving
credit borrowings were approximately $750.5 million and our partners' deficiency
was  approximately  $355.6 million.  As of January 2, 2005, we had approximately
$25.0 million in revolving loan availability and approximately  $22.1 million in
outstanding  letters of credit. We may also incur additional debt in the future,
subject to certain limitations contained in our debt agreements.

     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 our  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 "Senior  Secured Credit  Facility")
and an $80.0 million  Secured Term Loan with another lending group (the "Secured
Term Loan"), which, among other things, requires Foamex L.P. to meet a financial
covenant.  On  November 3, 2004,  Foamex L.P.  entered  into  amendments  to the
financing  agreements with the existing  lenders under the Senior Secured Credit
Facility  and the  Secured  Term  Loan to  provide  up to $54.0  million  of new
financing,  the proceeds of which could be used only to  repurchase  prior to or
repay  Foamex  L.P.'s 13 1/2% senior  subordinated  notes  currently in the face
amount of $51.6 million (the "13 1/2% Senior Subordinated  Notes") due on August
15, 2005 and certain fees related to the new  financing.  The lenders  under the
Senior Secured  Credit  Facility have agreed to lend up to $15.0 million under a
new junior term loan with a floating  interest rate based upon either LIBOR,  as
defined,  reset monthly plus 6.00% or a Base Rate, as defined, plus 4.00% with a
maturity  date of April 30, 2007.  The lenders under the Secured Term Loan would
lend up to an  additional  $39.0 million with  interest  rates  identical to the
rates under the existing  Secured Term Loan. The Secured Term Loan maturity date
was also


                                       7
<PAGE>



extended to April 1, 2009.  Under the Senior  Secured  Credit  Facility  and the
Secured Term Loan, as amended, Foamex L.P. is subject to a fixed charge coverage
ratio, as defined,  of 1.00 measured  quarterly.  On March 15, 2005, the lenders
executed  waivers to the Senior  Secured  Credit  Facility  and the Secured Term
Loan, which waived  compliance with the fixed charge coverage ratio for the four
consecutive quarter period ended January 2, 2005. On March 31, 2005, Foamex L.P.
entered into  amendments  with the  existing  lenders  under the Senior  Secured
Credit  Facility  and the  Secured  Term Loan which  modified  the fixed  charge
coverage  ratio for the first quarter of 2005 through the first quarter of 2006,
at which  time the  fixed  charge  coverage  ratio  will be 1.00 for the  second
quarter of 2006 and thereafter,  and permit  borrowing of up to $25.0 million of
the  additional  $39.0  million  commitment  under the  Secured  Term Loan,  the
proceeds of which would be used to repay revolving loans.. Foamex L.P.'s ability
to comply  with the  revised  covenant  will be  substantially  dependent  on an
improved gross profit margin and lower administrative costs. If we are unable to
comply with the revised  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.  .
For the last three  fiscal  years we have not  generated  enough  cash flow from
operations   sufficient  to  pay  our  debt  service   obligations  and  capital
expenditures.  Our annual debt service obligations will increase by $2.4 million
per year  for each 1%  increase  in  interest  rates,  based on the  balance  of
variable rate debt outstanding as of January 2, 2005. Our estimated debt service
obligation  for 2005 is $136.2  million,  based on  levels of debt and  interest
rates in effect at January 2, 2005. As described in the previous risk factor, we
have arranged for additional  borrowings  under the Secured Term Loan and junior
term loan in the  aggregate  amount of up to $54.0  million to repay the 13 1/2%
Senior  Subordinated  Notes.  If we do not  generate  sufficient  cash flow from
operations  to  satisfy  our  other  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,  as amended, the
Secured Term Loan, as amended,  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  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


                                       8
<PAGE>


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 2004.  Our major  chemical  suppliers  implemented  price  increases of
approximately 15% for polyol effective January 15, 2005 and of approximately 10%
for both TDI and  polyol  effective  in March  2005.  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.  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.

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

     There  are a  limited  number  of  major  suppliers  of TDI and  polyol.  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  including  the  costs  for  ongoing  compliance  with  the
provisions  of  the  Sarbanes-Oxley  Act  of  2002  (the  "Act").  In  2004,  we
experienced an increase in selling,  general and administrative  expenses, which
include expenditures for compliance with Section 404 and other provisions of the
Act. We could incur additional significant costs in implementing improvements to
our internal  controls over financial  reporting.  If we incur such costs or are
otherwise  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  29.6% of our
net sales in 2004,  34.7% of our net sales in 2003 and 33.8% of our net sales in
2002. Sales to Johnson Controls,  our largest  customer,  accounted for 12.5% of
our net sales in 2004, 16.3% of our net sales in 2003 and 17.3% of our net sales
in 2002. 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.


                                       9
<PAGE>


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 as 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 12 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 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 January 2, 2005,  we  maintained 56  manufacturing  and  distribution
facilities.  Total  floor  space  in  use  at our  16  owned  manufacturing  and
distribution facilities is approximately 3.2 million square feet and total floor
space in use at our 40  leased  manufacturing  and  distribution  facilities  is
approximately  4.6 million  square feet.  Forty-seven  of these  facilities  are
located  throughout 34 cities in the United States,  four facilities are located
in Canada,  and five facilities are located in Mexico. We have approximately 1.4
million square feet of idle space.

     We do not anticipate any problem in renewing or replacing any of the leases
expiring in 2005.

     We maintain administrative offices in Linwood, Pennsylvania.

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

ITEM 3.  LEGAL PROCEEDINGS

     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 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 January 2, 2005, we have accrued  approximately  $1.1 million for litigation,
claims  and  other  legal  matters  in  addition  to the  environmental  matters
discussed below.


                                       10
<PAGE>


     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 January 2, 2005, we had accruals of  approximately  $2.0 million
for  environmental  matters,  including  approximately  $1.7 million  related to
remediating and monitoring soil and groundwater  contamination and approximately
$0.3 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, which we have  implemented,  and 100.0% reduction
by January 1, 2007.  This  standard  has not required and 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.

     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 12 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 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.

     Other

     In April 2004, we disclosed  certain  reportable  conditions  regarding our
internal  controls.  Subsequent to that disclosure,  we became the subject of an
informal  inquiry by the  Securities  and  Exchange  Commission  relating to our
internal controls. We are currently negotiating a settlement of this matter with
the staff of the Securities and Exchange Commission.

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

     None


                                       11
<PAGE>


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 January 2, 2005,  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  January  2, 2005 and  December  28,  2003,  we have a
          liability of approximately  $0.3 million to our partners in accordance
          with the tax sharing agreement.

                                        Tax Sharing Distributions
                                           2004              2003
                                        ----------        ----------
                                   (thousands)
           FMXI                           $   -               $   -
           Foamex International               -                   -
                                          -----               -----
                                          $   -               $   -
                                          =====               =====

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.  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)
                                                -------------------------------------------------------------------
                                                    2004           2003        2002        2001 (2)        2000
                                                -----------    ----------   ----------    ----------    -----------
                                                                           (thousands)
Statements of Operations Data
<S>                                             <C>            <C>          <C>           <C>           <C>
   Net sales                                    $1,266,394     $1,304,560   $1,328,094    $1,252,904    $1,257,778
   Income (loss) from continuing
     operations (3)(4)                          $  (25,031)    $  (27,413)  $  (27,204)   $   (2,261)   $   19,603

Balance Sheet Data
   Total assets                                 $  645,706     $  665,155   $  695,283    $  767,650    $   753,584
   Long-term debt, classified as current (5)    $  114,907     $   96,065   $        -    $        -    $         -
   Long-term debt, excluding current portion    $  568,461     $  633,621   $  738,540    $  648,232    $   687,758
   Partners' deficiency                         $ (355,591)    $ (325,131)  $ (305,786)   $ (178,128)   $  (158,503)
</TABLE>

(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 2004 fiscal year included the 53 weeks ended January 2,
     2005.  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 4 to the consolidated  financial  statements  included in
     this  Annual  Report on Form  10-K.  Listed  below are the  pretax  charges
     (credits).

                                       12
<PAGE>

       2004 - $  3.2 million
       2003 - $ (1.8) million
       2002 - $  4.8 million
       2001 -  $36.1 million
       2000 - $  6.3 million

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

(5)  Revolving  credit  borrowings  under Foamex  L.P.'s 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").

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 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 10 to the consolidated financial statements. Please see Part I,
Item 1 "Business" for a more complete description of the activities of our
business segments.


                                       13
<PAGE>


     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 prime,  rebond, felt
     and rubber carpet padding.

     Automotive Products - distributes automotive foam products and laminates to
     major Tier 1 suppliers and 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  and  fabrication
     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 net
sales.  In 2004,  our largest  customer  provided 12.5% of our net sales and our
five largest customers  provided 29.6% 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  2004,  except
for net cash provided by (used for) operating  activities  which is expressed in
millions of dollars.

<TABLE>
<CAPTION>
                                    2004        2003         2002         2001         2000            1999
                                  -------      -------      -------      -------      -------         ------
<S>                                <C>          <C>          <C>          <C>          <C>            <C>
Net Sales                          100.0%       100.0%       100.0%       100.0%       100.0%         100.0%

Cost of Goods Sold                  88.8%        89.0%        89.2%        85.8%        86.3%          86.1%

Gross Profit Margin                 11.2%        11.0%        10.8%        14.2%        13.7%          13.9%

Selling, General and
   Administrative Expenses           6.9%         6.2%         7.1%         6.3%         5.4%           5.8%

Operating Income Margin              4.1%         4.9%         3.4%         5.0%         7.7%           7.3%
</TABLE>



                                       14
<PAGE>


<TABLE>
<CAPTION>
                                    2004        2003         2002         2001         2000            1999
                                  -------      -------      -------      -------      -------         ------
Interest and Debt
<S>                                  <C>          <C>          <C>          <C>          <C>            <C>
   Issuance Expense                  6.1%         6.8%         5.2%         5.0%         6.0%           5.6%

Net Cash Provided by (Used
   for) Operating Activities        $0.2        $18.1       $(49.6)      $108.7        $52.9          $68.6
</TABLE>

     As demonstrated by the table above, our results significantly  deteriorated
in 2002 and improved only  marginally in 2003 and 2004.  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 six year  period  with 2004
representing a decrease of 2.2% compared to 1999.

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

     o    Developing  new  value-added  products  that  leverage  our  technical
          capability and entering new markets with increased profit potential.

     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.

     The cost of major chemical raw materials  increased several times effective
during  the  second  half  2004,  so that  the  weighted  average  cost of major
chemicals  was more than 20%  higher in the  fourth  quarter of 2004 than in the
first  quarter  of 2004.  Primarily  as a  result  of these  raw  material  cost
increases,  our gross profit  margin  declined to 8.7% in the fourth  quarter of
2004.  Our major  chemical  suppliers  further  increased the price of polyol by
approximately  15% effective in January 2005 and  increased  prices for both TDI
and  polyol  by  approximately  10%  effective  in March  2005.  There can be no
assurance that chemical prices will not further increase in 2005. In addition to
rising  prices,  some of the key  chemicals we use have been in short supply and
availability  may  continue  to be tight in the future.  We manage raw  material
costs by  negotiating  discounts  and rebates for volume  purchases  and seeking
alternative sources of supply.

     We have been only partially successful in raising selling prices to recover
raw material and other cost increases.  Further selling price increases, reduced
costs and increased mix of higher profit products are major factors in restoring
gross profit margin percentages to the levels experienced in 1999-2001. At those
levels we should be able to reduce  borrowings  and also cash interest  expense,
although  there is no assurance we will be  successful in our efforts to achieve
those levels of gross profit margins.

     We are  focused on reducing  both  manufacturing  costs and  administrative
expenses.  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,  although we have  experienced  large  increases in
professional   fees  in  conjunction   with  our  efforts  to  comply  with  the
requirements of Section 404 of the Sarbanes-Oxley  Act of 2002. In addition,  we
will explore the potential sales of non-strategic assets during 2005.

     Financing

     Our Senior  Secured  Credit  Facility  initially  consisted  of a revolving
credit  facility with a maximum  availability  of $190.0  million and an initial
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


                                       15
<PAGE>


and  inventory.  At January 2, 2005,  Foamex L.P. had  available  borrowings  of
approximately  $25.0 million and letters of credit outstanding of $22.1 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 January  2, 2005,  the  weighted
average  interest  rates  were 6.00% for both the  revolving  loans and the term
loan. The term loan requires  quarterly  installment  payments of  approximately
$1.8 million. Borrowings under the Senior Secured Credit Facility will mature on
April 30, 2007.

     The Secured  Term Loan had an  original  maturity  date of April 30,  2007.
Borrowings  under this  facility  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 was
in effect as of December 28, 2003,  is 13.50%.  The rate in effect at January 2,
2005 was 14.50%. In addition,  Foamex L.P. is subject to a 1.00% facility fee on
the initial $80.0 million term loan which is payable annually on the anniversary
date.  Borrowings  under the Secured  Term Loan are  collateralized  by the same
collateral as the Senior Secured Credit  Facility.  An  intercreditor  agreement
governs  the  distribution  of  collateral  among the  lenders  under the Senior
Secured Credit Facility and the Secured Term Loan.

     Under the 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
measured quarterly.  For the two quarters ended December 28, 2003, Foamex L.P.'s
fixed charge  coverage  ratio was 1.09.  Amendments to the Senior Secured Credit
Facility and Secured Term Loan executed on November 3, 2004 allowed  Foamex L.P.
to  exclude  certain  charges   aggregating   approximately   $3.7  million  and
approximately   $1.0  million  in  the  first  and  second   quarters  of  2004,
respectively,  from the computation of the fixed charge coverage ratio.  For the
four quarters ended January 2, 2005,  Foamex L.P.'s fixed charge  coverage ratio
was 0.98.  The lenders  have agreed to waive  compliance  with the fixed  charge
coverage  ratio for that  period.  On March 31, 2005,  Foamex L.P.  entered into
amendments  with the existing  lenders under the Senior Secured Credit  Facility
and the Secured Term Loan that set lower  minimum fixed charge  coverage  ratios
through  April 2,  2006 and  permit  borrowing  of up to  $25.0  million  of the
additional $39.0 million  commitment,  discussed  below,  under the Secured Term
Loan, the proceeds of which would be used to repay revolving loans.  Foamex L.P.
incurred  fees  and  expenses  for  the  waivers  and   amendments   aggregating
approximately  $1.0  million.  Foamex L.P. is also  subject to a maximum  annual
capital expenditure amount which was $36.0 million for the year ended January 2,
2005 and will be $46.8 million for the year ending January 1, 2006.

     There can be no assurance that we will be successful in achieving our plans
or complying  with the fixed  charge  coverage  ratio,  as there are a number of
factors  beyond our control,  including  raw material  cost changes and customer
acceptance of selling price increases that are necessary for us to be successful
and  we  have  limited  borrowing   capacity  and  access  to  capital  markets.
Additionally, compliance with the amended fixed charge coverage ratio may not be
met if business  conditions are not as anticipated  or other  unforeseen  events
impact results unfavorably. In the event that such noncompliance appears likely,
or occurs,  we will seek the  lenders'  further  approval of  amendments  to, or
waivers  of,  such  covenants.  Historically,  we have been able to  renegotiate
financial  covenants and/or obtain waivers.  Management  currently believes that
obtaining  waivers  and/or  amendments  in  the  future  may  be  difficult.  If
amendments  or waivers are not  obtained,  Foamex  L.P.  would be in default and
lenders could demand immediate  payment of Foamex L.P.'s  outstanding debt under
the Senior  Secured  Credit  Facility and Secured Term Loan. In addition,  it is
possible  that the  holders of Foamex  L.P.'s  Senior  Secured  Notes and Senior
Subordinated  Notes could also demand immediate  payment.  We may not be able to
secure  additional  financing  at a  reasonable  cost,  or at all.  The  lack of
financing  would have a material  adverse  effect on our financial  position and
could impair our ability to continue as a going concern.

     Our 13 1/2% Senior  Subordinated  Notes with a face value of $51.6  million
are due on August 15, 2005.  We may,  from time to time,  directly or indirectly
make  purchases of these notes or our other public debt in the open market or in
private  transactions.  On November 3, 2004,  Foamex L.P. entered into financing
agreements  with the existing  lenders under the Senior Secured Credit  Facility
and the Secured Term Loan to provide up to $54.0 million of new  financing,  the
proceeds of which could be used only to repurchase prior to or repay the 13 1/2%
Senior  Subordinated  Notes at  maturity  and  certain  fees  related to the new
financing.  The lenders under the Senior Secured Credit  Facility have agreed to
lend up to $15.0 million  under a new junior term loan with a floating  interest
rate based upon LIBOR, as defined, reset monthly plus 6.00% with a maturity date
of April 30, 2007.  The lenders  under


                                       16
<PAGE>



the Secured Term Loan would lend up to an additional $39.0 million with interest
rates  identical to the rates underthe  existing  Secured Term Loan. The Secured
Term Loan  maturity  date was also  extended  to April 1,  2009.  The  financing
commitment  under  the  Secured  Term Loan  requires  the  payment  of an unused
commitment  fee at the rate of 1.5% per annum and a funding fee equal to 2.5% of
the amount  borrowed with a minimum funding fee of  approximately  $0.6 million.
The  amendments  permit Foamex L.P. to reduce the financing  commitments  by any
cash proceeds, as defined in the amendments,  generated from certain sources. If
Foamex  L.P. is unable to meet its  minimum  fixed  charge  coverage  ratio,  as
amended, the financing  commitments under the Senior Secured Credit Facility and
the  Secured  Term  Loan  may not be  available  to  repay  the 13  1/2%  Senior
Subordinated  Notes  when due.  Withdrawal  of these  commitments  would  have a
material  adverse effect on our financial  position and could impair our ability
to continue as a going concern.

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

     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 pass 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. Balances for allowances and rebates are reviewed at least quarterly and
are adjusted if warranted.  Shipping and handling costs are included in costs of
goods sold.

     Accounts Receivable and Allowance for Uncollectible Accounts

     We actively monitor  customer  payments in conjunction with customer credit
evaluations.  Accordingly,  a reserve for  estimated  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 our larger  customers  could have a  material  adverse  impact on
future financial results.

     Long-Lived Assets

     Net property,  plant and  equipment  totaled  $141.5  million at January 2,
2005.  Property and equipment held for use is grouped for impairment  testing at
the lowest level for which there are identifiable cash flows. Impairment testing
of the asset group occurs whenever events or changes in  circumstances  indicate
that the  carrying  amount of the assets  may not be  recoverable.  Foamex  L.P.
assesses  recoverability  by comparing the carrying amount of the asset group to
the  estimated  undiscounted  future cash flows  expected to be generated by the
assets.  If an asset group is considered  impaired,  the  impairment  loss to be
recognized  would be measured as the amount by which the asset group's  carrying
amount  exceeds  its fair  value.  Estimated  future  cash  flows  are  based on
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


                                       17
<PAGE>


carrying  value of goodwill  might be  impaired.  Goodwill is  considered  to be
impaired when the net book value of a reporting  unit exceeds its 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  up to certain  limits for a number of risks
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.

     Benefit Plans

     We maintain 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.  Key assumptions
include the discount  rates to determine  benefit  obligations  and the expected
long-term  rate of return on plan assets.  Discount  rates are applied to future
cash  flows to  measure  benefit  obligations  on a present  value.  We  assumed
weighted average discount rates of 7.00%,  6.50% and 6.00% to calculate  pension
expense in 2002, 2003 and 2004, respectively.  Based on pension plan obligations
at year-end  2004,  a 0.50%  reduction  in the discount  rate  assumption  would
increase pension expense by approximately  $0.8 million.  The estimated increase
is primarily attributable to the impact on the pension expense component for the
amortization  of net losses,  discussed  below.  Based on pension plan assets at
year-end 2004, a 0.50% reduction in the expected rate of return assumption would
increase pension expense by approximately $0.5 million.  The amortization of net
actuarial  losses  remains a  significant  component of pension  expense for the
Company.  The net loss position of the pension plans was primarily the result of
declining  discount  rates and  accumulated  returns  on  pension  assets  below
expected  returns,  principally  in periods  before  2003.  The pension  expense
component  for the  amortization  of net  actuarial  losses  is  expected  to be
approximately  $3.2  million in 2005.  We  anticipate  funding  $7.4  million to
retiree benefit plans in 2005.

     Claims and Litigation

     We  receive  claims for  damages  that are not  covered  by our  insurance.
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 cash requirements consist principally of accounts receivable, inventory
and  accounts  payable,   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  agreements  will be  adequate  to meet  liquidity
requirements  for the next 12 months.  In addition,  we will  explore  potential
sales  of  non-strategic   assets  during  this  period.  Our  ability  to  make
distributions  to  Foamex  International  is  restricted  by  the  terms  of our
financing agreements.


                                       18
<PAGE>


     Cash and cash  equivalents were $5.3 million at January 2, 2005 compared to
$6.6  million at December  28,  2003.  Working  capital at January 2, 2005 was a
negative  $54.0  million and the current ratio was 0.85 to 1 compared to working
capital at December 28, 2003 of $11.7  million and a current ratio of 1.04 to 1.
The decrease in working capital is primarily due to the  reclassification of the
$52.2 million of 13 1/2% Senior  Subordinated  Notes due August 15, 2005 as they
mature in less than one year, and the establishment of a valuation  allowance on
the current portion of deferred tax assets.

     Total long-term debt and revolving credit borrowings at January 2, 2005 was
$750.5 million, a $4.9 million increase from December 28, 2003. As of January 2,
2005, there were revolving credit  borrowings of $114.9 million under the Senior
Secured  Credit  Facility with $25.0 million  available for borrowings and $22.1
million of letters of credit outstanding. Revolving credit borrowings at January
2, 2005 reflect working capital requirements.

     On August 18,  2003,  Foamex  L.P.  entered  into a Senior  Secured  Credit
Facility  with a new  group of  lenders  and a Secured  Term  Loan with  another
lending group.  Proceeds  borrowed under these new facilities were used to repay
all outstanding  balances under 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 in 2003.

     The Senior  Secured  Credit  Facility  initially  consisted  of a revolving
credit  facility with a maximum  availability  of $190.0  million and an initial
term loan of $50.0  million.  On November 3, 2004,  the lenders under the Senior
Secured Credit Facility agreed to lend up to an additional $15.0 million under a
new junior term loan.  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. 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 January 2, 2005, the weighted average interest rates were 6.00% for
both the revolving loans and the term loan. The margin for borrowings  under the
revolving  credit  facility  and the term  loan  increased  by 0.25% in 2004 and
increased by an  additional  0.25% as of March 31, 2005.  The term loan requires
quarterly  installment payments of approximately $1.8 million.  Borrowings under
the  junior  term loan can be used only  repay the 13 1/2%  Senior  Subordinated
Notes at maturity and will bear interest at a floating rate based upon LIBOR, as
defined plus 6.00%. All borrowings under the Senior Secured Credit Facility will
mature on April 30, 2007.  The 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 required by EITF No. 95-22.

     The Secured Term Loan had an original  maturity  date of April 30, 2007. On
November 3, 2004, the lenders agreed to lend up to an additional  $39.0 million,
the proceeds of which could be used only to repurchase  prior to or repay the 13
1/2% Senior  Subordinated  Notes at maturity and certain fees related to the new
financings.  The lenders  also agreed to extend the maturity of the Secured Term
Loan to April 1, 2009.  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 was in effect as of December 28, 2003, is 13.50%.  The rate
in effect at January 2, 2005 was 14.50%. In addition,  Foamex L.P. is subject to
a 1.00%  facility  fee on the initial  $80.0  million term loan which is payable
annually on the anniversary date, a 1.5% commitment fee on the unused portion of
the $39.0 million  additional  commitment and a funding fee equal to 2.5% of the
amount  borrowed  with a minimum  funding  fee of  approximately  $0.6  million.
Borrowings under the Secured Term Loan are collateralized by the same collateral
as the Senior Secured Credit Facility.  An intercreditor  agreement  governs the
distribution  of collateral  among the lenders under the Senior  Secured  Credit
Facility and the Secured Term Loan.

     Under the Senior  Secured  Credit  Facility and the Secured  Term Loan,  as
amended, Foamex L.P. is subject to a fixed charge coverage ratio, as defined, of
1.00 measured  quarterly.  For the two quarters ended December 28, 2003,  Foamex
L.P.'s fixed charge  coverage  ratio was 1.09.  Amendments to the Senior Secured
Credit  Facility  and Secured  Term Loan  executed  on November 3, 2004  allowed
Foamex L.P. to exclude certain charges  aggregating


                                       19
<PAGE>


approximately  $3.7  million  and  approximately  $1.0  million in the first and
second quarters of 2004, respectively,  from the computation of the fixed charge
coverage ratio. For the four quarters ended January 2, 2005, Foamex L.P.'s fixed
charge  coverage ratio was 0.98 and the lenders have agreed to waive  compliance
with the fixed charge coverage ratio for that period.  On March 31, 2005, Foamex
L.P.  entered into amendments with the existing lenders under the Senior Secured
Credit  Facility and the Secured Term Loan that set lower fixed charge  coverage
ratios through April 2, 2006 and permit  borrowing of up to $25.0 million of the
additional $39.0 million commitment under the Secured Term Loan, the proceeds of
which would be used to repay  revolving  loans.  Foamex L.P.  incurred  fees and
expenses for the waivers and amendments aggregating  approximately $1.0 million.
Foamex L.P. is also subject to a maximum annual capital expenditure amount which
was $36.0  million for the year ended  January 2, 2005 and will be $46.8 million
for the year ending January 1, 2006.

     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.

     Cash Flow from Operating Activities

     Cash provided by operating  activities in 2004 was $0.2 million compared to
$18.1  million in 2003.  In 2004,  cash  provided  by  operations  consisted  of
approximately  $5.6 million of cash generated  from results of operations  after
adjusting  for non cash charges  included in net loss,  offset by  approximately
$5.4 million of cash  requirements  used to fund working  capital  needs,  other
operating  expenses and  restructuring  liabilities.  In 2003,  cash provided by
operations  consisted of  approximately  $17.3  million of cash  generated  from
results of operations  after adjusting for non cash charges included in net loss
and approximately  $13.8 million of cash generated from working capital accounts
offset by $13.0 million used to pay restructuring liabilities.

     Cash Flow from Investing Activities

     Cash used for investing  activities  totaled $5.2 million for 2004 compared
to $8.6 million in 2003. Cash requirements included capital expenditures of $5.5
million and capitalized software  development costs of $2.4 million.  These uses
were  partially  offset by proceeds from asset  disposals of $2.7 million.  Cash
used for  investing  activities  in 2003 included  capital  expenditure  of $6.5
million and capitalized  software  development costs of $3.3 million.  Estimated
capital  expenditures for 2005 are approximately $6 to $8 million.  In addition,
we expect to spend approximately $5 million for internally developed software in
2005, a portion of which may be capitalized.

     Cash Flow from Financing Activities

     Cash provided by financing  activities was $3.7 million in 2004 compared to
cash used of $7.2 million in 2003.  During 2004,  we utilized  $18.8  million of
increased  revolving credit borrowings to reduce long-term debt by $10.9 million
and to satisfy  working  capital  requirements.  During 2003, we utilized $130.0
million of  proceeds  from new term loans and an increase  in  revolving  credit
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.



                                       20
<PAGE>



     Contractual Obligations

     Our  contractual  obligations  as of  January  2,  2005  are  shown  in the
following table:

<TABLE>
<CAPTION>
                                                                   Payment due by Period
                                      --------------------------------------------------------------------------
Contractual Obligations                 Total          2005         2006-07          2008-09     2010 and beyond
-----------------------               ---------     ---------      ---------         -------     ---------------
                                                              (dollars in millions)
Long-Term Debt, including
<S>                                   <C>             <C>           <C>    <C>        <C>             <C>
   Capital Leases                     $  740.1        $ 60.4        $293.7 (1)        $380.0          $  6.0
Interest (2)                             296.7          79.4         143.0              73.8             0.5
Operating Leases                          71.4          16.2          22.1              14.2            18.9
Purchase Obligations (3)                 688.4         232.0         190.9             177.0            88.5
Restructuring Liabilities                  7.4           1.8           1.9               1.6             2.1
Employee Benefits and Other (4)
                                      --------        ------        ------            ------          ------
Total Contractual Obligations (5)     $1,804.0        $389.8        $651.6            $646.6          $116.0
                                      ========        ======        ======            ======          ======
</TABLE>

(1)  Includes  $114.9  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 6 to the consolidated financial statements.

(2)  Includes interest  applicable to borrowings  outstanding at January 2, 2005
     computed  using  interest rates in effect as of January 2, 2005 through the
     due  dates  of  the  borrowings  as  defined  by the  applicable  financing
     agreements plus interest on replacement  financing after the 13 1/2% Senior
     Subordinated Notes are repaid at maturity on August 15, 2005.

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

(4)  We also 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 2004,  payments for these obligations
     aggregated approximately $37.7 million.

(5)  Comprised of the following:

         Liabilities recorded on the balance sheet             $  760.6
         Commitments not recorded on the balance sheet          1,043.4
                                                               --------
                                                               $1,804.0

RESULTS OF OPERATIONS

                                                  Carpet
<TABLE>
<CAPTION>
                                     Foam         Cushion       Automotive     Technical
                                   Products       Products       Products       Products        Other         Total
                                   --------       --------      ----------     ---------      ---------    ----------
2004                                                        (dollars in thousands)
<S>                                <C>            <C>            <C>            <C>           <C>         <C>
Net sales                          $551,414       $209,182       $350,985       $124,146      $ 30,667    $1,266,394
Income (loss) from operations      $ 52,418       $  8,539       $ 19,245       $ 32,916      $(61,318)   $   51,800
Depreciation and amortization      $ 10,213       $  2,978       $  3,116       $  2,801      $  6,825    $   25,933
Income (loss) from operations
   as a percentage of net sales         9.5%           4.1%           5.5%          26.5%       n.m.(a)          4.1%

2003
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%
</TABLE>


                                       21
<PAGE>


<TABLE>
<CAPTION>
                                     Foam         Cushion       Automotive     Technical
                                   Products       Products       Products       Products        Other         Total
                                   --------       --------      ----------     ---------      ---------    ----------
2002                                                        (dollars in thousands)
<S>                                <C>            <C>            <C>            <C>           <C>         <C>
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%
</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.

2004 Compared to 2003

     Net sales for 2004 decreased 3% to $1,266.4  million from $1,304.6  million
in 2003. The decrease was primarily  attributable  to a $96.1 million decline in
net sales in the  Automotive  Products  segment due to lower  volume,  including
sourcing actions by major customers, partially offset by higher net sales in the
Foam Products and Technical Products segments.

     Gross profit was $141.8 million, or 11.2% of net sales, in 2004 compared to
$143.7 million, or 11.0% of net sales, in 2003. Gross profit margin has improved
primarily due to profit  improvement  as a result of better  product mix in Foam
Products and lower costs in Carpet Cushion  Products,  partially offset by lower
volume in the Automotive Products segment. However, gross profit margin declined
in the last six months of 2004 and in the fourth  quarter was 8.7%. We were only
partially able to recover raw material cost increases during 2004.

     Income from  operations for 2004 was $51.8  million,  or 4.1% of net sales,
which  represented a 20% decrease from the $64.4 million,  or 4.9% of net sales,
reported for 2003. A decline of $14.2 million in the Automotive Products segment
more than offset increases in the other operating segments. Selling, general and
administrative expenses increased $5.8 million, or 7%, principally due to a $3.0
million  net  charge  to bad  debt  expense  following  a  customer  bankruptcy,
litigation related costs and higher  professional fees primarily for information
technology  and the cost of our efforts under Section 404 of the  Sarbanes-Oxley
Act,  partially offset by lower corporate expense and employee costs as a result
of the closing of our New York City office.  Results  include net  restructuring
charges of $3.2 million in 2004 and net restructuring credits of $1.8 million in
2003. Restructuring items are discussed under "Other" below.

     Foam Products

     Foam Products net sales for 2004 increased 9% to $551.4 million from $507.6
million in 2003  primarily  due to higher  volumes of  value-added  products and
higher selling prices.  Income from operation  increased 19% to $52.4 million in
2004 from $44.0 million in 2003  principally as a result of improved  volume mix
and higher selling prices partially offset by higher raw material costs.  Income
from operations was 9.5% of net sales in 2004 and 8.7% of net sales in 2003.

     Carpet Cushion Products

     Carpet  Cushion  Products  net  sales  for  2004  of  $209.2  million  were
essentially  flat compared to 2003.  Income from  operations was $8.5 million in
2004  compared to $5.4 million in 2003 with the increase due  primarily to lower
material and operating  costs.  Income from  operations was 4.1% of net sales in
2004 and 2.6% of net sales in 2003.

     Automotive Products

     Automotive Products net sales for 2004 decreased 21% to $351.0 million from
$447.1  million in 2003  principally  as a result of lower volumes from sourcing
actions by major customers including a decrease in sales of


                                       22
<PAGE>


$54.4 million to our largest customer.  Income from operations  decreased 42% to
$19.2  million  compared to $33.4  million in 2003  primarily due to lower sales
volume and higher per unit labor and overhead costs.  Income from operations was
5.5% of net sales in 2004 and 7.5% of net sales in 2003.  We expect  that  sales
will increase during 2005 but may be substantially less than in 2003.

     Technical Products

     Net sales for  Technical  Products in 2004  increased 6% to $124.1  million
from $117.5  million in 2003 primarily due to higher unit volume and new product
introductions.  Income from  operations  increased  2% to $32.9  million in 2004
compared to $32.1 million in 2003 primarily due to new product introductions and
slightly higher overall pricing partially offset by higher selling,  general and
administrative  expenses.  Income from operations was 26.5% of net sales in 2004
and 27.3% of net sales in 2003.

     Other

     Other  primarily   consists  of  certain   manufacturing   and  fabrication
operations in Mexico City, corporate expenses not allocated to business segments
and restructuring  charges (credits).  The increase in net sales associated with
this segment resulted from our Mexico City operations.  The loss from operations
was $61.3  million  in 2004 and $50.5  million  in 2003 and  reflects  generally
higher  corporate  expenses in 2004 and includes  restructuring,  impairment and
other  charges of $3.2  million,  discussed  below.  During  2003,  we  recorded
restructuring credits of $1.8 million.

     Restructuring, Impairment and Other Charges

     In 2004, we recorded  restructuring,  impairment  and other charges of $3.2
million,  primarily  consisting of a $1.7 million  charge related to lease costs
and asset write offs in  connection  with the closing of our New York office,  a
$0.7 million charge related to the realignment of our automotive  operations and
an impairment charge of $0.6 million for an idle facility.

     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.

     Interest and Debt Issuance Expense

     Interest  and debt  issuance  expense  was  $76.7  million  in 2004,  which
represented a 13% decrease from 2003 expense of $88.4  million.  The decrease is
primarily due to lower  amortization  of debt issuance  costs,  which included a
write off of $12.9 million in 2003 associated with the refinancing of our credit
facilities

     Income from Equity Interest in Joint Ventures

     The income  from an equity  interest  in an Asian  joint  venture  was $0.5
million in 2004 and $1.2  million in 2003.  Income from an equity  interest in a
joint  venture in Eastern  Europe was $0.2  million in 2004 and $0.3  million in
2003.

     Other Income (Expenses), Net

     Other  expense,  net was $0.2  million in 2004  compared to $3.4 million in
2003. The 2004 period includes  foreign currency  transaction  losses related to
operations  in Mexico and Canada of $0.6  million  compared  to $2.7  million in
2003. Also included in 2004 were gains of $1.0 million on asset disposals.


                                       23
<PAGE>


     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  agreements  and
indentures.

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% of net sales, in 2003 compared to
$143.7 million, or 10.8% of net sales, 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.

     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


                                       24
<PAGE>


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   and  fabrication
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 occurring 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.

     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.


                                       25
<PAGE>


     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  agreements  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 January 2, 2005, we had accruals of  approximately  $2.0 million
for  environmental  matters  including  approximately  $1.7  million  related to
remediating and monitoring soil and groundwater  contamination and approximately
$0.3 million  relating to sites where we had been designated as a 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.

     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.

     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 12 sites.  Estimates of total cleanup costs and


                                       26
<PAGE>


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 our  results of  operations,  cash flows 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 January 2, 2005, 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 2004, 2003 and 2002 were negatively
impacted by higher average costs for raw materials.  We experienced  significant
increases in the prices of raw material from major chemical manufacturers during
2004 and 2002. We sought to recover these cost increases  through  manufacturing
process  efficiencies  and  selling  price  increases,  but were only  partially
successful.  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.

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 January 2, 2005,  indebtedness  with variable
interest rates totaled $239.3 million.  On an annualized  basis, if the interest
rates on these  debt  instruments  increased  by 1.0%,  interest  expense  would
increase by approximately $2.4 million.

     The  two  principal   chemicals  used  in  the  manufacturing  of  flexible
polyurethane  foam  are  TDI and  polyol.  The  prices  of TDI  and  polyol  are
influenced by demand,  manufacturing capacity and oil and natural gas prices. We
attempt to offset raw material price  increases  through selling price increases
and manufacturing process efficiencies.


                                       27
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

     We changed accountants during 2004. Detailed  information  required by this
item was  included in Current  Reports on Form 8-K and Form 8-K/A filed with the
Securities and Exchange Commission on April 2, 2004 and April 12, 2004.

ITEM 9a.  CONTROLS AND PROCEDURES

     Evaluation of Disclosure Controls and Procedures

     Our management,  with the  participation of our Chief Executive Officer and
Chief Financial Officer,  evaluated the effectiveness of our disclosure controls
and  procedures  as of the end of the period  covered by this report.  The Chief
Executive  Officer  and  Chief  Financial  Officer  concluded  that,  due to the
material weakness described below, our disclosure  controls and procedures as of
the end of the  period  covered by this  report  were not  effective  to provide
reasonable  assurance  that the  information  required to be  disclosed by us in
reports  filed  under  the  Securities  Exchange  Act of 1934  is (i)  recorded,
processed,  summarized  and reported  within the time  periods  specified in the
SEC's rules and forms and (ii)  accumulated and  communicated to our management,
including  the  Chief  Executive  Officer  and  Chief  Financial   Officer,   as
appropriate to allow timely decisions  regarding  disclosure.  A controls system
cannot provide absolute assurance that the objectives of the controls system are
met, and no  evaluation  of controls  can provide  absolute  assurance  that all
control  issues,  errors and instances of fraud,  if any,  within a company have
been detected.

     Management's Annual Report on Internal Control Over Financial Reporting

     We are  responsible for  establishing  and  maintaining  adequate  internal
control over financial  reporting as defined under Exchange Act Rules  13a-15(f)
and 15d-15(f).  Internal control over financial  reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the  transactions  and  dispositions  of  the  assets  of the  company;  provide
reasonable  assurance  that  transactions  are  recorded as  necessary to permit
preparation  of financial  statements  in  accordance  with  generally  accepted
accounting principles, and that the receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company;  and provide reasonable  assurance  regarding  prevention or timely
detection of  unauthorized  acquisition,  use, or  disposition  of the company's
assets that could have a material effect on the financial statements.

     Because of its  inherent  limitations,  internal  controls  over  financial
reporting  may not prevent or detect  misstatements.  Also,  projections  of any
evaluation  of  effectiveness  to future  periods  are  subject to the risk that
controls may become  inadequate  because of changes in  conditions,  or that the
degree of compliance with the policies or procedures may deteriorate.

     We are not an accelerated  filer as defined in Rule 12b-2 of the Securities
Act of 1934 and therefore are not required to complete a management's assessment
of  internal  control  over  financial  reporting  until our fiscal  year ending
December 31, 2006.  However,  our parent company,  Foamex  International,  is an
accelerated filer and therefore is required to complete  managements  assessment
of internal  controls  over  financial  reporting as of January 2, 2005.  Foamex
International has not completed management's  assessment of the internal control
over financial  reporting  required by Section 404 of the  Sarbanes-Oxley Act of
2002 and will avail itself of the SEC's 45-day  exemptive order to complete such
assessment as set forth in SEC Release No. 34-50754.  Therefore, as permitted by
the SEC exemptive  order,  Foamex  International  has not included in its Annual
Report  on Form  10-K  management's  annual  report  on  internal  control  over
financial  reporting  or the  related  attestation  report  of  its  independent
registered


                                       28
<PAGE>


public  accounting  firm.  However,  Foamex  International  has  identified  two
material weaknesses in its internal control over financial reporting. As defined
by the Public Company Accounting  Oversight Board ("PCAOB") in Auditing Standard
No. 2, a material  weakness  is a  significant  deficiency,  or  combination  of
significant  deficiencies,  that results in more than a remote likelihood that a
material  misstatement of the annual or interim financial statements will not be
prevented or detected.  Because Foamex International has identified two material
weaknesses, it will not be able to conclude in its management's annual report on
internal  control  over  financial  reporting  that its  internal  control  over
financial reporting is effective.

     The identification of the material weaknesses is based on findings to date.
Due to the incomplete status of management's  assessment,  Foamex  International
cannot be certain that  additional  material  weaknesses  will not be identified
prior to the filing of  management's  annual  report on  internal  control  over
financial reporting.

     The  first  identified  material  weakness  in our  internal  control  over
financial  reporting related to our accounting for labor and overhead  variances
to our  standard  costs,  which  should be  included  in our work in process and
finished  goods  inventories.  The material  weakness  could have  resulted in a
material  misstatement  of the carrying  value of our  inventory.  Management is
addressing  the  material  weakness by revising the process to account for labor
and overhead  variances.  The other  material  weakness,  which has no impact on
Foamex L.P.,  related to the  restatement  of the third  quarter 2004  financial
statements to correct an error in recording the valuation allowance  established
in that period for deferred income taxes. A portion of the valuation  allowance,
which was previously charged directly to stockholders' deficiency as a component
of  accumulated  other  comprehensive  loss,  should  have been  included in the
provision for income taxes increasing the net loss in the third quarter by $16.7
million but having no impact on total stockholders' deficiency.

     Changes in Internal Controls

     During the quarter we strengthened our internal controls over the following
areas.

     o    Information  Technology:  Segregation of Duties and Information System
          Users.  In the fourth  quarter of 2004 we  conducted a review of roles
          and responsibilities and user access within our information technology
          systems and identified certain users with  inappropriate  access. As a
          result,  we implemented  changes to tie user access to our information
          systems to user needs based on the roles and  responsibilities  of the
          user.  This  implementation  has  continued  into the first quarter of
          2005.  During the fourth  quarter we also  established a formal change
          management    process   to   ensure   that   when   employees   change
          responsibilities  or status their system access  requirements are also
          appropriately and promptly changed accordingly.

     o    Controls over Fixed Assets. Foamex L.P. did not have adequate policies
          to address the process for taking fixed assets inventories. During the
          fourth   quarter,   we  implemented  a  policy  with  respect  to  the
          identification of potentially idle assets and the communication of the
          need to assess the  recoverability  of such assets to the  appropriate
          company personnel for resolution or disposition.

     o    One Time Transactions and Significant Agreements.  During our internal
          control  review,  it was  determined  that  Foamex  L.P.  did not have
          adequate controls in place to insure the proper accounting for certain
          non-recurring  events and  significant  agreements.  During the fourth
          quarter, we implemented  comprehensive review processes and procedures
          for one-time events and  significant  agreements to insure more robust
          reviews and proper accounting.

     Other than as described  above, no change in Foamex L.P.'s internal control
over financial reporting occurred during the most recent fiscal quarter that has
materially affected,  or is reasonably likely to materially affect, our internal
control over financial reporting.

ITEM 9b.  OTHER INFORMATION

       None.


                                       29
<PAGE>

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
         Reports of Independent Registered Public Accounting Firms F-2
         Consolidated Balance Sheets as of January 2, 2005 and December 28, 2003                                F-4
         Consolidated Statements of Operations for the years ended January 2, 2005,
           December 28, 2003, and December 29, 2002                                                             F-6
         Consolidated Statements of Cash Flows for the years ended January 2, 2005,
           December 28, 2003 and December 29, 2002                                                              F-7
         Consolidated Statements of Partners' Deficiency for the years ended January 2, 2005,
           December 28, 2003 and December 29, 2002                                                              F-8
         Notes to Consolidated Financial Statements                                                             F-9

       Foamex Capital Corporation
         Reports of Independent Registered Public Accounting Firms                                             F-37
         Balance Sheets as of January 2, 2005 and December 28, 2003                                            F-39
         Notes to Balance Sheets                                                                               F-40

       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").
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(q)       -    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(r)        -    By-laws of Foamex Asia, Inc.


                                       30
<PAGE>


3.11(r)        -    Certificate of Incorporation of Foamex Latin America, Inc.
3.12(r)        -    By-laws of Foamex Latin America, Inc.
3.13(r)        -    Certificate of Incorporation of Foamex Mexico, Inc.
3.14(r)        -    By-laws of Foamex Mexico, Inc.
3.15(r)        -    Certificate of Incorporation of Foamex Mexico II, Inc.
3.16(r)        -    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(q)       -    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(q)       -    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(q)       -    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(q)       -    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(q)       -    Patent  Security  Agreement,  dated as of March 25, 2002, by
                    Foamex L.P. in favor of U.S. Bank National  Association,  as
                    collateral agent.
4.3.4(q)       -    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(q)       -    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(q)       -    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.
4.9.1(l)       -    Promissory  Note,  dated  June 12,  1997,  in the  aggregate
                    principal  amount of $5,000,000,  executed by Trace Holdings
                    to Foamex L.P.
4.9.2(l)       -    Promissory  Note,  dated  June 12,  1997,  in the  aggregate
                    principal  amount of $4,794,828,  executed by Trace Holdings
                    to Foamex L.P.


                                       31
<PAGE>




4.15.1(t)      -    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(t)      -    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(u)      -    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.
4.15.4(x)      -    Amendment and Waiver No. 2 to Credit Agreement,  dated as of
                    June  15,  2004,   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.
4.15.5(y)      -    Amendment No. 3 to Credit Agreement, dated as of November 3,
                    2004,  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.
4.15.6(z)      -    Waiver to  Credit  Agreement,  dated as of March  15,  2005,
                    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.
4.15.7(aa)     -    Amendment No. 4 to Credit  Agreement,  dated as of March 31,
                    2005,  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(t)      -    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(t)      -    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(u)      -    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.
4.16.4(x)      -    Amendment  No. 2 to Credit  Agreement,  dated as of June 15,
                    2004,  among Foamex L.P.,  as Borrower,  the  affiliates  of
                    Borrower party hereto,  the lenders party hereto, and Silver
                    Point Finance, LLC as Administrative Agent.
4.16.5(y)      -    Amendment No. 3 to Credit Agreement, dated as of November 3,
                    2004,  among Foamex L.P.,  as Borrower,  the  affiliates  of
                    Borrower party hereto,  the lenders party hereto, and Silver
                    Point Finance, LLC as Administrative Agent.
4.16.6(z)      -    Waiver to  Credit  Agreement,  dated as of March  15,  2005,
                    among Foamex L.P., as Borrower,  the  affiliates of Borrower
                    party hereto,  the lenders  party  hereto,  and Silver Point
                    Finance, LLC as Administrative Agent.
4.16.7(aa)     -    Amendment No. 4 to Credit  Agreement,  dated as of March 31,
                    2005,  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(t)      -    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.


                                       32
<PAGE>


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(p)+   -    Foamex Supplemental  Executive Retirement Plan, effective as
                    of May 15, 2001.
10.11.11(s)+   -    Severance  Agreement  and  Release,  dates as of January 31,
                    2003,  by and  between  Foamex  International  and  Pratt W.
                    Wallace, Jr.
10.11.12v      -    Form  of  Foamex  International  Inc.  Code  of  Ethics  for
                    Director,  Officers,  Senior  Management  and Certain  Other
                    Employees.
10.11.13(u)+   -    Amended and Restated Employment Agreement, dated January 27,
                    2004,  by and  between  Foamex  International  and Thomas E.
                    Chorman.
10.11.14(u)+   -    Amended and Restated Employment Agreement, dated January 26,
                    2004,  by and between  Foamex  International  and K. Douglas
                    Ralph.
10.11.15+(x)   -    Separation Agreement and Release, dated as of June 19, 2004,
                    between Foamex International Inc. and John V. Tunney.
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(m)+      -    Foamex International  Amended and Restated 1993 Stock Option
                    Plan.
10.23(a)+      -    Foamex  International   Non-Employee  Director  Compensation
                    Plan.
10.24(n)+      -    Foamex  International Equity Incentive Plan for Non-Employee
                    Directors.
10.25(n)+      -    Foamex International Key Employee Incentive Bonus Plan.
10.26(o)+      -    Agreement  with  Consultant,  dated  April  24,  2001 by and
                    between Robert J. Hay and Foamex L.P.
10.30(w)+      -    Foamex  International  2002 Stock Award Plan, as Amended and
                    Restated.
10.17.2(j)     -    Loan  Agreement  between Hua Kee Company  Limited and Foamex
                    Asia, Inc., dated as of July 8, 1997.
10.18.1(o)     -    Joint Venture  Agreement between Hua Kee Company Limited and
                    Foamex  Asia,  Inc.  amended and  restated as of December 3,
                    2001.
10.44(r)+      -    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.


                                       33
<PAGE>


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.

(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 the Annual  Report on
     Form 10-K of Foamex  International  for the fiscal year ended  December 31,
     1998.

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

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

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

(p)  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.


                                       34
<PAGE>


(q)  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.

(r)  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.

(s)  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.

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

(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 28,
     2003.

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

(w)  Incorporated herein by reference to Foamex International's definitive proxy
     statement dated April 26, 2004.

(x)  Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
     International Inc. for the quarterly period ended June 27, 2004.

(y)  Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
     International Inc. for the quarterly period ended September 26, 2004.

(z)  Incorporated  herein by reference  to the Exhibit to the Current  Report on
     Form 8-K of Foamex L.P. reporting an event that occurred on March 15, 2005.

(aa) Incorporated  herein by  reference  to the Exhibit to the Annual  Report on
     Form 10-K of Foamex  International  for the fiscal  year  ended  January 2,
     2005.

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.


                                       35
<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 4th day of April 2005.

                                       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      April 4, 2005
---------------------------
Thomas E. Chorman


/s/  George L. Karpinski           Director of FMXI and FCC      April 4, 2005
---------------------------
George L. Karpinski


                                       36
<PAGE>

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


<TABLE>
<CAPTION>
       Financial Statements of Registrants
<S>                                                                                                        <C>
         Foamex L.P.
           Reports of Independent Registered Public Accounting Firms                                     F-2
           Consolidated Balance Sheets as of January 2, 2005 and December 28, 2003                       F-4
           Consolidated Statements of Operations for the years ended January 2, 2005,
              December 28, 2003, and December 29, 2002                                                   F-6
           Consolidated Statements of Cash Flows for the years ended January 2, 2005,
              December 28, 2003 and December 29, 2002                                                    F-7
           Consolidated Statements of Partners' Deficiency for the years ended January 2, 2005,
              December 28, 2003 and December 29, 2002                                                    F-8
           Notes to Consolidated Financial Statements                                                    F-9

         Foamex Capital Corporation
           Reports of Independent Registered Public Accounting Firms                                     F-37
           Balance Sheets as of January 2, 2005 and December 28, 2003                                    F-39
           Notes to Balance Sheets                                                                       F-40
</TABLE>


                                      F-1
<PAGE>


                        REPORT OF INDEPENDENT REGISTERED
                             PUBLIC ACCOUNTING FIRM


The Partners of
Foamex L.P.:

We have audited the accompanying  consolidated  balance sheet of Foamex L.P. and
subsidiaries  (the  "Company"),  an indirect  wholly-owned  subsidiary of Foamex
International  Inc.,  as  of  January  2,  2005  and  the  related  consolidated
statements of  operations,  cash flows and partners'  deficiency  for the fiscal
year then ended.  In  connection  with our audit of the  consolidated  financial
statements,  we also have audited the financial statement schedule listed in the
Index at Item 15(a) as of January  2, 2005 and for the fiscal  year then  ended.
These consolidated financial statements and financial statement schedule are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  consolidated  financial  statements  and  financial  statement
schedule based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of Foamex L.P. and
subsidiaries  as of January 2, 2005,  and the  results of their  operations  and
their  cash  flows for the  fiscal  year then  ended,  in  conformity  with U.S.
generally  accepted  accounting  principles.  Also, in our opinion,  the related
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.


/s/ KPMG LLP

Philadelphia, Pennsylvania
April 4, 2005



                                      F-2
<PAGE>


                        REPORT OF INDEPENDENT REGISTERED
                             PUBLIC ACCOUNTING FIRM


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

We have audited the accompanying  consolidated  balance sheet of Foamex L.P. and
subsidiaries  (the  "Company"),  an indirect  wholly-owned  subsidiary of Foamex
International  Inc.,  as of  December  28,  2003  and the  related  consolidated
statements of  operations,  cash flows and partners'  deficiency for each of the
two years in the period ended  December 28, 2003.  Our audits also  included the
consolidated  financial statement schedule for the years ended December 28, 2003
and  December  29,  2002  listed  in the  Index at Item 15.  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 the standards of the Public  Company
Accounting Oversight Board (United States). 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 consolidated  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 the results of its  operations  and its cash flows for each of the two 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-3
<PAGE>



                          FOAMEX L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                               January 2,           December 28,
                                                                                 2005                  2003
                                                                               ----------           ------------
ASSETS                                                                                    (thousands)
CURRENT ASSETS
<S>                                                                            <C>                    <C>
    Cash and cash equivalents                                                  $  5,347               $  6,610
    Accounts receivable, net of allowance for doubtful
      accounts and discounts of $9,001 in 2004 and $10,505 in 2003              182,740                181,288
    Inventories                                                                 100,029                 95,882
    Other current assets                                                         22,403                 27,287
                                                                               --------               --------

            Total current assets                                                310,519                311,067
                                                                               --------               --------

PROPERTY, PLANT AND EQUIPMENT
    Land and land improvements                                                    6,300                  6,818
    Buildings and leasehold improvements                                        113,592                117,265
    Machinery, equipment and furnishings                                        281,071                289,528
    Construction in progress                                                      1,783                  1,069
                                                                               --------               --------

            Total                                                               402,746                414,680
    Less accumulated depreciation and amortization                             (261,203)              (251,830)
                                                                               --------               --------

       Property, plant and equipment, net                                       141,543                162,850

GOODWILL                                                                        126,814                126,258

DEBT ISSUANCE COSTS, net of
accumulated amortization of $17,477 in 2004 and
$10,648 in 2003                                                                  21,152                 27,195

SOFTWARE COSTS, net of accumulated amortization of
$6,401 in 2004 and $3,603 in 2003                                                 9,325                  9,767

INVESTMENTS IN AND ADVANCES TO AFFILIATES                                        16,521                 14,503

OTHER ASSETS                                                                     19,832                 13,515
                                                                               --------               --------

TOTAL ASSETS                                                                   $645,706               $665,155
                                                                               ========               ========
</TABLE>


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


                                      F-4
<PAGE>



                          FOAMEX L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                January 2,           December 28,
                                                                                   2005                 2003
                                                                               -----------           -----------
LIABILITIES AND PARTNERS' DEFICIENCY                                                           (thousands)
CURRENT LIABILITIES
<S>                                                                             <C>                   <C>
    Revolving credit borrowings                                                 $ 114,907             $ 96,065
    Current portion of long-term debt                                              67,131               15,937
    Accounts payable                                                              104,314               98,310
    Accrued employee compensation and benefits                                     22,354               28,331
    Accrued interest                                                               13,063               12,376
    Accrued restructuring                                                           1,759                3,911
    Accrued customer rebates                                                       16,979               18,077
    Cash overdrafts                                                                10,434               12,688
    Other accrued liabilities                                                      13,623               13,673
                                                                                ---------             --------

      Total current liabilities                                                   364,564              299,368

LONG-TERM DEBT                                                                    568,461              633,621

ACCRUED EMPLOYEE BENEFITS                                                          55,388               43,348

ACCRUED RESTRUCTURING                                                               5,682                5,837

OTHER LIABILITIES                                                                   7,202                8,112
                                                                                ---------             --------

    Total liabilities                                                           1,001,297              990,286
                                                                                ---------             --------

COMMITMENTS AND CONTINGENCIES

PARTNERS' DEFICIENCY
    General partner                                                              (294,342)            (268,097)
    Limited partner                                                                     -                    -
    Accumulated other comprehensive loss                                          (52,028)             (47,813)
    Notes receivable from related party                                            (9,221)              (9,221)
                                                                                ---------             --------
      Total partners' deficiency                                                 (355,591)            (325,131)
                                                                                ---------             --------

TOTAL LIABILITIES AND PARTNERS' DEFICIENCY                                      $ 645,706             $665,155
                                                                                =========             ========

</TABLE>


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


                                      F-5
<PAGE>



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

<TABLE>
<CAPTION>
                                                                  January 2,        December 28,    December 29,
                                                                    2005               2003             2002
                                                                  ----------       -------------    -----------
                                                                                    (thousands)
<S>                                                               <C>               <C>             <C>
NET SALES                                                         $1,266,394        $1,304,560      $1,328,094

COST OF GOODS SOLD                                                 1,124,547         1,160,870       1,184,392
                                                                  ----------        ----------      ----------

GROSS PROFIT                                                         141,847           143,690         143,702

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                                          86,797            81,013          94,326

RESTRUCTURING, IMPAIRMENT AND OTHER
    CHARGES (CREDITS)                                                  3,250            (1,759)          4,799
                                                                  ----------        ----------      ----------

INCOME FROM OPERATIONS                                                51,800            64,436          44,577

INTEREST AND DEBT ISSUANCE EXPENSE                                    76,667            88,374          69,679

INCOME FROM EQUITY INTEREST IN JOINT VENTURES                            687             1,466           1,734

OTHER EXPENSE, NET                                                      (220)           (3,447)         (2,045)
                                                                  ----------        ----------      ----------

LOSS BEFORE PROVISION FOR INCOME TAXES
    AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE                       (24,400)          (25,919)        (25,413)

PROVISION FOR INCOME TAXES                                               631             1,494           1,791
                                                                  ----------        ----------      ----------

LOSS BEFORE CUMULATIVE EFFECT OF
    ACCOUNTING CHANGE                                                (25,031)          (27,413)        (27,204)

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

NET LOSS                                                          $  (25,031)       $  (27,413)     $  (99,170)
                                                                  ==========        ==========      ==========
</TABLE>



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


                                      F-6
<PAGE>


<PAGE>


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

<TABLE>
<CAPTION>
                                                                January 2,        December 28,     December 29,
                                                                   2005              2003              2002
                                                                ----------        ------------     ------------
OPERATING ACTIVITIES                                                              (thousands)
<S>                                                             <C>               <C>             <C>
   Net loss                                                     $(25,031)         $(27,413)       $(99,170)
   Adjustments to reconcile net loss to net cash provided by
     (used for) operating activities:
     Depreciation and amortization                                25,933            26,045          31,592
     Amortization of debt issuance costs, debt premium
        and debt discount                                          2,762             4,458           2,699
     Write off of debt issuance costs                                  -            12,928           4,892
     Asset impairment and other charges                            2,809                 -           2,503
     Cumulative effect of accounting change                            -                 -          71,966
     Loss (gain) on disposition of assets                         (1,185)               30               -
     Provision for uncollectible accounts                          3,291             2,115           2,336
     Retirement benefit funding greater than expense              (2,175)             (892)         (1,604)
     Deferred income taxes                                            35                21            (738)
     Other, net                                                     (889)                4              47
   Changes in operating assets and liabilities:
     Accounts receivable                                          (4,742)            8,143         (20,421)
     Inventories                                                  (4,147)            2,128          (8,580)
     Accounts payable                                              6,004            10,916         (41,362)
     Accrued restructuring                                        (2,111)          (13,023)         (2,225)
     Other assets and liabilities                                   (357)           (7,358)          8,447
                                                                --------          --------        --------

        Net cash provided by (used for) operating activities         197            18,102         (49,618)
                                                                --------          --------        --------

INVESTING ACTIVITIES
   Capital expenditures                                           (5,510)           (6,543)        (15,582)
   Proceeds from sale of assets                                    2,701             1,237              21
   Decrease (increase) in revolving loan with
        Foamex International                                           -                 -           2,490
   Other investing activities                                     (2,400)           (3,329)         (7,990)
                                                                --------          --------        --------

        Net cash used in investing activities                     (5,209)           (8,635)        (21,061)
                                                                --------          --------        --------

FINANCING ACTIVITIES
   Net proceeds from (repayments of) revolving loans              18,841            44,242         (73,176)
   Proceeds from long-term debt                                        -           130,000         356,590
   Repayments of long-term debt                                  (10,853)         (164,020)       (190,450)
   Repayments of long-term debt-related party                          -                 -         (31,590)
   Increase (decrease) in cash overdrafts                         (2,254)           (5,049)         13,664
   Debt issuance costs                                              (785)          (11,880)        (29,981)
   Interest rate swaps                                                 -                 -          14,821
   Distribution paid to partners                                  (1,200)             (513)              -
   Other financing activities                                          -                 -             105
                                                                --------          --------        --------

        Net cash provided by (used in) financing activities        3,749            (7,220)         59,983
                                                                --------          --------        --------

Net increase (decrease) in cash and cash equivalents              (1,263)            2,247         (10,696)

Cash and cash equivalents at beginning of period                   6,610             4,363          15,059
                                                                --------          --------        --------

Cash and cash equivalents at end of period                      $  5,347          $  6,610        $  4,363
                                                                ========          ========        ========
</TABLE>



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


                                      F-7
<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)
2002
<S>                                                  <C>        <C>        <C>             <C>          <C>        <C>
Balances at January 1, 2002                          $(130,095) $     -    $(36,322)       $(2,490)     $(9,221)   $(178,128)
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)

2004
Net loss                                                 (426)  (24,605)                                             (25,031)
Minimum pension liability adjustment                                         (6,253)                                  (6,253)
Foreign currency translation adjustment                                       2,038                                    2,038
                                                                                                                   ---------
   Comprehensive loss                                                                                                (29,246)
Distributions and other                                     (3)  (1,211)                                              (1,214)
Offset balance against Limited Partner deficit
   assumed by General Partner                          (25,816)  25,816           -              -            -             -
                                                     ---------  -------    --------        -------      -------    ---------
Balances at January 2, 2005                          $(294,342) $     -    $(52,028)       $     -      $(9,221)   $(355,591)
                                                     =========  =======    ========        =======      =======    =========

</TABLE>

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


                                      F-8
<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
10.

     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
2004  included  the 53 weeks  ended  January 2, 2005 while the fiscal  year 2003
include the 52 weeks ended  December  28, 2003 and fiscal year 2002  included 52
weeks ended  December 28, 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  23.5% at January 2,
2005. 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".  During  early 2005,  the Bank of Nova
Scotia sold 0.3 million shares of Foamex  International's common stock and as of
February  15,  2005  holds   approximately   22.3%  of  Foamex   International's
outstanding common stock.

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 (Foamex Asia Co., Ltd.) in which it
has  ownership  of 70%.  Foamex  L.P.  does not  exercise  control of this joint
venture due to the minority shareholders'  substantive  participation rights and
therefore  Foamex L.P. 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 in the United States 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.


                                      F-9
<PAGE>

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

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     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.

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. Net
sales are reduced by allowances  for estimated  discounts,  returns and customer
rebates. Balances for allowances and rebates are reviewed at least quarterly and
are adjusted if warranted.  Shipping and handling  costs are included in cost of
goods sold.

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  January  2,  2005  were  $750.5  million  and  $714.7   million,
respectively,  and at December 28, 2003 were $745.6 million and $683.3  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 2004,  2003 and 2002 was $22.9  million,  $24.1  million  and $29.1
million, respectively.


                                      F-10
<PAGE>

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


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     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 not acquired in a business
combination and 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.

     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 identify 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 in accordance with the transitional implementation guidance
of SFAS No.142.  Foamex L.P. has completed its annual goodwill  impairment tests
as  of  September  27,  2004,   September  29,  2003  and  September  30,  2002,
respectively, with no recognition of any additional impairment.

     Goodwill at January 2, 2005  increased  $0.6 million from December 28, 2003
as a result of  foreign  currency  translation  adjustments  reflected  below as
Other.

       Goodwill balances include:


                                   Balance                          Balance
           Segments            December 28, 2003      Other     January 2, 2005
     -----------------------   -----------------   ----------   ---------------
                               (thousands)
     Foam Products                 $ 74,631           $222          $ 74,853
     Carpet Cushion Products          2,497              -             2,497
     Automotive Products             35,261            334            35,595
     Technical Products              13,869              -            13,869
                                   --------           ----          --------
         Total                     $126,258           $556          $126,814
                                   ========           ====          ========

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  management  authorizes the project,  the preliminary  project
stage is complete  and it is  probable  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 2006.  Capitalized  software costs aggregated $2.4 million,  $3.4 million and
$7.0 million


                                      F-11
<PAGE>

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


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

in 2004,  2003 and 2002,  respectively.  The  capitalized  costs  are  amortized
beginning in the period when placed in service on a straight-line basis over the
estimated useful life of the software, which is generally five years or less.

Long-Lived Assets

     Property and equipment  held for use is grouped for  impairment  testing at
the lowest level for which there are identifiable cash flows. Impairment testing
of the asset group occurs whenever events or changes in  circumstances  indicate
that the  carrying  amount of the assets  may not be  recoverable.  Foamex  L.P.
assesses  recoverability  by comparing the carrying amount of the asset group to
the  estimated  undiscounted  future cash flows  expected to be generated by the
assets.  If an asset group is considered  impaired,  the  impairment  loss to be
recognized  would be measured as the amount by which the asset group's  carrying
amount  exceeds  its fair  value.  Estimated  future  cash  flows  are  based on
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.

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 to
operations  were $0.6 million,  $0.5 million and $1.1 million in 2004,  2003 and
2002, 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 losses are reflected in other expense in the consolidated statements
of operations and included $0.6 million,  $2.7 million and $2.3 million in 2004,
2003 and 2002, respectively.

Research and Development

     Research and development costs are expensed as incurred. Amounts charged to
operations  were $2.8 million,  $3.6 million and $4.8 million in 2004,  2003 and
2002, respectively.

Self Insurance

     Foamex  L.P.  is  partially  self-insured  for a number of risks  including
workers'  compensation,  medical,  automobile and general liability.  Commercial
insurance  policies  are  carried  for  amounts  in excess  of the  self-insured
amounts.  Amounts  charged to operations  were $26.5 million,  $24.9 million and
$31.2 million in 2004, 2003 and 2002, 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.


                                      F-12
<PAGE>

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

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

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

     Foamex L.P.,  as a limited  partnership,  is not subject to Federal  income
taxes;  therefore no current or deferred  provision  has been  provided for such
taxes. However,  Foamex L.P. has provided for the income taxes of certain states
in which it is subject to taxes and for certain subsidiaries,  which are subject
to  Federal  and state  income  taxes and for  subsidiaries  located  in foreign
jurisdictions  that file  separate  tax returns.  The partners  will provide for
their  respective  shares of income or loss in their Federal or applicable state
income tax returns.  Foamex L.P. has a tax sharing  agreement  that provides for
the payment of  distributions to the partners for amounts that would be required
to be paid if Foamex L.P. were a corporation  filing  separate tax returns.  The
ability of Foamex L.P. to make such distributions is limited by the terms of its
credit agreements. See Note 6.

Accounting Changes

     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
have any "Variable Interest Entities" as defined by FIN No. 46R and accordingly,
the adoption of FIN No. 46R did not have an impact on its financial statements.

     In  November  2004,  the FASB  issued  Statement  of  Financial  Accounting
Standards  No. 151,  "Inventory  Costs an  amendment  of ARB No. 43,  Chapter 4"
("SFAS No. 151").  The provisions of SFAS No. 151 require that abnormal  amounts
of idle  facility  expense,  freight,  handling  costs and  wasted  material  be
recognized as current  period  charges,  regardless of the  circumstances  under
which such charges arose.  SFAS No. 151 is effective for fiscal years  beginning
after June 15, 2005 and is not expected to have a  significant  impact on Foamex
L.P.'s financial statements.

Reclassifications

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

3.   CUMULATIVE EFFECT OF ACCOUNTING CHANGE

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

4.   RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES

2004

     During  2004,  Foamex L.P.  recorded  restructuring,  impairment  and other
charges of $3.2 million, primarily consisting of a $1.7 million charge primarily
related to lease  costs and asset write offs in  connection  with the closing of
its New York City office,  a $0.7 million charge  related to the  realignment of
its automotive  operations and an impairment  charge of $0.6 million for an idle
facility.


                                      F-13
<PAGE>

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


4.   RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES (continued)

2003

     During  2003,  Foamex L.P.  recorded  restructuring,  impairment  and other
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 and $2.1 million  related to the collection of
deferred rent receivable which had been fully reserved.

     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
                                             -----     -------------     ----------     ----------        --------
       2002                                                               (millions)
<S>                       <C>                <C>            <C>            <C>            <C>               <C>
       Balance at January 1, 2002            $25.0          $14.7          $ 7.8          $  -              $2.5
       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

       2004
       Restructuring and impairment charges    3.2            2.4            0.8             -                 -
       Cash spending                          (4.1)          (2.3)          (1.0)            -              (0.8)
       Asset impairment                       (1.4)          (1.4)             -             -                 -
                                             -----          -----          -----          ----              ----
       Balance at January 2, 2005            $ 7.4          $ 6.7          $ 0.7          $  -              $  -
                                             =====          =====          =====          ====              ====
</TABLE>

     Foamex L.P.  expects to spend  approximately  $1.8 million during 2005 with
the balance to be spent through  2012,  primarily  for lease  termination  costs
which are recorded net of estimated sublease rental income of approximately $3.8
million.



                                      F-14
<PAGE>

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

5.   INVENTORIES

     The components of inventory are listed below.

                                             January 2,        December 28,
                                               2005                2003
                                             ----------        ------------
                                                     (thousands)
     Raw materials and supplies              $ 63,336             $61,855
     Work-in-process                           18,667              16,484
     Finished goods                            18,026              17,543
                                             --------             -------
     Total                                   $100,029             $95,882
                                             ========             =======

6.   LONG-TERM DEBT AND REVOLVING CREDIT BORROWINGS

     The components of long-term debt and revolving credit borrowings are listed
below.

<TABLE>
<CAPTION>
                                                                       January 2,            December 28,
                                                                          2005                   2003
                                                                       ----------            ------------
     Foamex L.P. Senior Secured Credit Facility                                  (thousands)
<S>            <C>                                                      <C>                   <C>
     Term Loan (1)                                                      $ 37,371              $ 48,214
     Foamex L.P. Secured Term Loan (1)                                    80,000                80,000
     10 3/4% Senior Secured Notes due 2009 (2) (4)                       309,703               311,950
     9 7/8% Senior Subordinated Notes due 2007 (2)                       148,500               148,500
     13 1/2% Senior Subordinated Notes due 2005 (includes
       $581 and $1,543 of unamortized debt premium) (2)                   52,166                53,128
     Industrial revenue bonds (3)                                          7,000                 7,000
     Other (net of unamortized debt discount of $45 in 2004
       and $93 in 2003)                                                      852                   766
                                                                        --------              --------
                                                                         635,592               649,558

     Less current portion                                                 67,131                15,937
                                                                        --------              --------

     Long-term debt                                                     $568,461              $633,621
                                                                        ========              ========

     Revolving credit borrowings (1)                                    $114,907              $ 96,065
                                                                        ========              ========
</TABLE>


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

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

(3)  Debt of Foamex L.P.

(4)  Includes $9.7 million in 2004 and $12.0 million in 2003 of deferred credits
     on interest rate swap transactions.

Senior Secured Credit Facility

     On August 18,  2003,  Foamex  L.P.  entered  into a 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 Senior  Secured  Credit  Facility  initially  consisted  of a revolving
credit facility with a maximum availability of $190.0 million and a term loan of
$50.0 million.  On November 3, 2004, the lenders under the Senior Secured Credit
Facility  agreed to lend up to an  additional  $15.0  million under a new junior
term loan. The revolving



                                      F-15
<PAGE>


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


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

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 January 2, 2005 and  December  28,  2003,  Foamex  L.P.  had
available   borrowings  of  approximately   $25.0  million  and  $46.8  million,
respectively,  and  letters of credit  outstanding  of $22.1  million  and $20.9
million,  respectively.  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 January 2,
2005,  the weighted  average  interest  rates were 6.00% for both the  revolving
loans and the term loan.  At December 28, 2004,  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.  Borrowings
under  the  junior  term  loan  can be used  only to  repay  the 13 1/2%  Senior
Subordinated Notes at maturity and will bear interest at a floating rte based on
either LIBOR,  as defined,  reset monthly plus 6.00%.  All borrowings  under the
Senior Secured Credit Facility will mature on April 30, 2007. The 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
January 2, 2005 and 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 Secured Term Loan had an original  maturity  date of April 30, 2007. On
November 3, 2004, the lenders agreed to lend up to an additional  $39.0 million,
the proceeds of which could be used only to repurchase  prior to or repay the 13
1/2% Senior  Subordinated  Notes at maturity and certain fees related to the new
financing.  The lenders  also agreed to extend the  maturity of the Secured Term
Loan to April 1 2009.  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 was in effect as of December 28, 2003,  is 13.50%.  The
rate in effect at  January 2, 2005 was  14.50%.  In  addition,  Foamex  L.P.  is
subject to a 1.00%  facility fee on the initial $80.0 million term loan which is
payable  annually on the  anniversary  date, a 1.5% commitment fee on the unused
portion of the $39.0 million  additional  commitment  and a funding fee equal to
2.5%  of  the  additional   amount  borrowed  with  a  minimum  funding  fee  of
approximately  $0.6  million.   Borrowings  under  the  Secured  Term  Loan  are
collateralized by the same collateral as the Senior Secured Credit Facility.  An
intercreditor agreement governs the distribution of collateral among the lenders
under the 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 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 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.


                                      F-16
<PAGE>

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


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

     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  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 January 2, 2005,  the  redemption  price was  101.646%  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 January 2, 2005, the redemption price was
100.000% 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).


                                      F-17
<PAGE>



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

Industrial Revenue Bonds ("IRBs")

     IRB debt includes a $1.0 million bond that matures on October 1, 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
January 2, 2005,  the interest rate was 1.95% on the $1.0 million bond and 2.04%
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.  In addition,  at any time prior to conversion to a fixed  interest
rate structure,  bondholders upon notice to the bond trustee and the remarketing
agent may place the bonds for sale. If the  remarketing  agent is not successful
in reselling the bonds before  settlement  is due on bonds placed for sale,  the
bond  trustee  may draw on a letter of credit  issued  under the Senior  Secured
Credit  Facility to repay the bondholder for the bonds placed for sale until the
bonds can be resold by the remarketing agent. Pursuant to this arrangement,  the
IRBs have been classified as current in the  accompanying  consolidated  balance
sheets at January 2, 2005 and December 28, 2003.

     The  IRBs  are  collateralized  by  certain   properties,   which  have  an
approximate net carrying value of $10.5 million at January 2, 2005.

Other

     Other debt includes a non-interest bearing promissory note with a principal
amount of $0.9 million at January 2, 2005 issued in connection  with  increasing
Foamex  L.P.'s  interest  in an Asian  joint  venture  to  70.0%  in  2001.  The
promissory  note which matures on December 1, 2005 had  unamortized  discount of
$0.1 million at January 2, 2005.

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 January 2, 2005, 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 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. Amendments to the Senior Secured Credit Facility and
Secured Term Loan  executed on November 3, 2004  allowed  Foamex L.P. to exclude
certain charges  aggregating  approximately  $3.7 million and approximately $1.0
million  in the  first  and  second  quarters  of 2004,  respectively,  from the
computation  of the fixed charge  coverage  ratio.  For the four quarters  ended
January 2, 2005,  Foamex  L.P.'s  fixed charge  coverage  ratio was 0.98 and the
lenders have agreed to waive compliance with the fixed charge coverage ratio for
that period.  On March 31, 2005,  Foamex L.P.  entered into  amendments with the
existing  lenders under the Senior Secured Credit  Facility and the Secured Term
Loan that set lower minimum fixed charge  coverage  ratios through April 2, 2006
and permit  borrowing of up to $25.0  million of the  additional  $39.0  million
commitment  under the Secured Term Loan,  the proceeds of which would be used to
repay revolving  loans.  Foamex L.P.  incurred fees and expenses for the waivers
and  amendments  aggregating  approximately  $1.0 million.  For the two quarters
ended  December 28, 2003,  Foamex L.P.'s fixed charge  coverage  ratio was 1.09.
Foamex L.P.


                                      F-18
<PAGE>

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

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

is also subject to a maximum annual capital  expenditure  amount which was $36.0
million  for the year ended  January 2, 2005 and will be $46.8  million  for the
year ending January 1, 2006.

Maturities of Long-Term Debt

     Scheduled  maturities  of  long-term  debt as of  January 2, 2005 are shown
below (thousands):

     2005                                                       $ 60,595
     2006                                                          7,172
     2007                                                        171,586
     2008                                                              -
     2009                                                        380,000
     Thereafter                                                    6,000
                                                                --------
                                                                 625,353

     Unamortized debt premium/discount and fair
         value adjustment, net                                    10,239
                                                                --------

     Total                                                      $635,592
                                                                ========

7.   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.

     Foamex L.P. also has a supplemental executive retirement plan (the "SERP").
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.


                                      F-19
<PAGE>

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

7.   RETIREE BENEFIT PLANS (continued)

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

<TABLE>
<CAPTION>
                                                              Pension Benefits           Other Benefits
                                                             2004          2003         2004         2003
                                                          ----------    ----------    --------     --------
     Change in Benefit Obligations                                            (thousands)
<S>                                                        <C>           <C>           <C>          <C>
       Benefit obligations at beginning of year            $125,052      $107,390      $ 1,234      $ 1,248
       Service cost                                           4,804         4,300           30           29
       Interest cost                                          7,463         7,086           69           76
       Amendments                                                 -           257            -            -
       Benefits paid                                         (6,038)       (5,392)         (78)        (139)
       Plan participants' contributions                           -             -           16           15
       Actuarial loss (gain)                                 12,008        10,461          (45)           5
       Foreign currency exchange rate changes                   615           950            -            -
                                                           --------      --------      -------      -------

       Benefit obligation at end of year                   $143,904      $125,052      $ 1,226      $ 1,234
                                                           ========      ========      =======      =======

     Change in Plan Assets
       Fair value of plan assets at
          beginning of year                                $ 79,886      $ 60,085      $     -      $     -
       Actual return on plan assets                           7,746        15,240            -            -
       Employer contribution                                 10,186         9,564           62          124
       Plan participants' contributions                           -             -           16           15
       Benefits paid                                         (6,038)       (5,392)         (78)        (139)
       Plan administrative expenses                            (500)         (438)           -            -
       Foreign currency exchange rate changes                   588           827            -            -
                                                           --------      --------      -------      -------

       Fair value of plan assets at end of year            $ 91,868      $ 79,886      $     -      $     -
                                                           ========      ========      =======      =======

     Funded Status and Net Amounts Recognized
     in Consolidated Balance Sheets
       Funded status                                       $(52,036)     $(45,166)     $(1,226)     $(1,234)
       Unrecognized transition asset                           (290)         (365)           -            -
       Unrecognized prior service cost (benefit)                192            92          (41)         (47)
       Unrecognized net actuarial loss                       60,021        50,997          328          387
                                                           --------      --------      -------      -------
       Net amount recognized in consolidated
          balance sheets                                   $  7,887      $  5,558      $  (939)     $  (894)
                                                           ========      ========      =======      =======

     Amounts Recognized in the Consolidated
     Balance Sheets
       Prepaid benefit costs                               $  9,263      $  6,520      $     -      $     -
       Accrued benefit liability                            (53,109)      (46,192)        (939)        (894)
       Intangible assets                                        596           674            -            -
       Accumulated other comprehensive loss*                 51,137        44,556            -            -
                                                           --------      --------      -------      -------

       Net amount recognized                               $  7,887      $  5,558      $  (939)     $  (894)
                                                           ========      ========      =======      =======
</TABLE>

*    Before related income tax benefit.

     The accumulated benefit obligation for all defined benefit plans was $135.9
million at year-end 2004 and $119.5  million at year-end 2003.  Information  for
defined benefit plans with an accumulated  benefit  obligation in excess of plan
assets is listed below.


                                      F-20
<PAGE>

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


7.   RETIREE BENEFIT PLANS (continued)

<TABLE>
<CAPTION>
                                                                December 31, 2004          December 31, 2003
                                                                -----------------          -----------------
                                 (thousands)
<S>                                                                 <C>                       <C>
     Projected benefit obligation                                   $139,242                  $121,381
     Accumulated benefit obligation                                 $132,444                  $116,767
     Fair value of plan assets                                      $ 88,128                  $ 76,871
</TABLE>
     Components of Net Periodic Benefit Plan Cost


<TABLE>
<CAPTION>
                                                           Pension Benefits                  Other Benefits
                                                     ----------------------------     -------------------------
                                                      2004       2003      2002        2004      2003     2002
                                                     ------     ------    ------      ------    ------   ------
                                                                             (thousands)
<S>                                                  <C>        <C>       <C>           <C>     <C>      <C>
     Service cost                                    $4,804     $4,300    $3,866        $30     $  29    $ 29
     Interest cost                                    7,463      7,086     6,556         69        76      82
     Expected return on plan assets                  (6,891)    (5,611)   (5,823)         -         -       -
     Amortization of transition assets                  (75)       (75)      (75)         -         -       -
     Amortization of prior service benefit             (111)      (109)     (140)        (6)       (6)     (6)
     Amortization of net loss (gain)                  2,776      3,090     1,643         14        16      15
     Curtailment                                          -          -      (162)         -         -       -
                                                     ------     ------    ------       ----      ----    ----

     Net periodic benefit plan cost                  $7,966     $8,681    $5,865       $107      $115    $120
                                                     ======     ======    ======       ====      ====    ====
</TABLE>

     Additional Information

<TABLE>
<CAPTION>
                                                       Pension Benefits                Other Benefits
                                                   ------------------------       -----------------------
                                                      2004         2003             2004           2003
                                                   ----------   ----------        --------       --------
                                                                      (thousands)
     Increase (decrease) in minimum liability
<S>                                                  <C>         <C>
       included in other comprehensive loss*         $6,581      $(2,033)             N/A            N/A
</TABLE>

*    Before related income tax benefit.

<TABLE>
<CAPTION>
     Weighted-Average Assumptions Used                 Pension Benefits                Other Benefits
                                                   ------------------------       -----------------------
     to Determine Benefit Obligations                 2004         2003             2004           2003
     ----------------------------------------      ----------   ----------        --------       --------
<S>                                                    <C>          <C>            <C>            <C>
     Discount rate -U.S. Plans                         5.5%         6.0%           5.5%           6.0%
     Discount rate - Canadian Plans                   5.75%         6.0%            N/A             N/A
     Expected long-term return on plan assets*         8.5%         9.0%            N/A             N/A
     Rate of compensation increase                3.5%-5.0%    3.5%-5.0%            N/A             N/A

     Weighted-Average Assumptions Used
     to Determine Annual Net Benefit Cost
     Discount rate                                     6.0%         6.5%           6.0%           6.5%
     Expected long-term return on plan assets*         8.5%         9.0%            N/A             N/A
     Rate of compensation increase                3.5%-5.0%    4.0%-5.0%            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, 2004       December 31, 2003
<S>                                                                     <C>                     <C>
       Health care cost trend rate assumed for next year                11.0%                   12.0%
       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>


                                      F-21
<PAGE>


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


7.   RETIREE BENEFIT PLANS (continued)

     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 for
2004.

     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               $10                      $  (8)
     Effect on postretirement benefit obligation                     $98                       $(84)
</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 2004,  common stock of
Foamex  International  totaled $1.6 million,  or 1.9% of the assets. At year-end
2003, common stock of Foamex International  totaled $2.1 million, or 2.8% of the
assets.

<TABLE>
<CAPTION>
                                            U. S. Plan Assets
                                --------------------------------------------
                                December 31, 2004          December 31, 2003
                                -----------------          -----------------
<S>                                      <C>                         <C>
     Equity securities                   63%                         64%
     Debt securities                     30                          30
     Other                                7                           6
                                        ---                         ---

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

     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.

     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.

Canadian Plan Assets

     Pension plan assets from pension plans in Canada  totaled $7.2 million,  or
7.9% of  assets,  at  year-end  2004 and $5.5  million,  or 6.9% of  assets,  at
year-end 2003.  Canadian pension plan assets are primarily  invested in Canadian
equity securities with the balance in foreign equities.

Cash Flows

Contributions

     Foamex L.P. expects to contribute $7.4 million to its pension plan and $0.1
million to its other postretirement benefit plans in 2005.


                                      F-22
<PAGE>


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


7.     RETIREE BENEFIT PLANS (continued)

Estimated Future Benefit Payments

     The following benefit payments,  which reflect expected future service,  as
appropriate, are expected to be paid:

                                      Pension Benefits         Other Benefits
                                      ----------------         --------------
     2005                                  $ 6,200                   $132
     2006                                  $ 6,548                   $120
     2007                                  $ 6,822                   $100
     2008                                  $ 7,314                   $ 98
     2009                                  $ 7,751                   $ 82
     Years 2010-2014                       $46,264                   $441

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,  $0.9 million and $1.0 million in 2004, 2003 and
2002, respectively.

8.     INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                  2004          2003              2002
                                                               --------       --------          -------
                                                                            (thousands)
<S>                                                            <C>            <C>               <C>
     United States                                             $(24,144)      $(26,893)         $(30,158)
     Foreign                                                       (256)           974             4,745
                                                               --------       --------          --------

     Income (loss) before provision for income taxes           $(24,400)      $(25,919)         $(25,413)
                                                               ========       ========          ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 2004           2003               2002
                                                               --------       ---------          -------
                                                                            (thousands)
<S>                                                            <C>             <C>               <C>
     Statutory income taxes                                    $(8,540)        $(9,072)          $(8,895)
     State income taxes, net of federal benefit                 (1,062)           (831)             (810)
     Permanent difference on partnership income                  9,552           9,668            11,816
     Increase (decrease) in valuation allowance                      8             649               332
     Impact of tax rate change                                       -              85                 -
     Other, net                                                    673             995              (652)
                                                               -------         -------           -------
     Total                                                     $   631         $ 1,494           $ 1,791
                                                               =======         =======           =======
</TABLE>

     The provision for income taxes is summarized as follows:

<TABLE>
<CAPTION>
                                                                 2004           2003               2002
                                                               --------       ---------          -------
     Current                                                                (thousands)
<S>                                                            <C>             <C>               <C>
       Federal                                                 $     -         $     -           $     -
       State                                                        19              60               226
       Foreign                                                     577           1,286             2,423
                                                               -------         -------           -------
         Total current                                             596           1,346             2,649
                                                               -------         -------           -------
</TABLE>



                                      F-23
<PAGE>


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

8.   INCOME TAXES (continued)

<TABLE>
<CAPTION>
                                                                 2004           2003               2002
                                                               --------       ---------          -------
     Deferred                                                               (thousands)
<S>                                                            <C>             <C>               <C>
       Federal                                                       -               -                 -
       State                                                         -               -              (518)
       Foreign                                                      27            (501)             (672)
                                                               -------         -------           -------
         Total deferred                                             27            (501)           (1,190)
                                                               -------         -------           -------

     Change in valuation allowance                                   8             649               332
                                                               -------         -------           -------

     Total provision for income taxes                          $   631         $ 1,494           $ 1,791
                                                               =======         =======           =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                               January 2,          December 28,
                                                                                  2005                2003
                                                                               ---------           -----------
                                                                                        (thousands)
<S>                                                                            <C>                   <C>
     Loss carryforwards and other                                              $  4,431              $ 3,602
     Valuation allowance for deferred income tax assets                          (2,025)              (1,810)
                                                                               --------              -------
       Deferred income tax assets                                                 2,406                1,792
                                                                               --------              -------

     Deferred income tax liabilities
       Basis difference in property, plant and equipment                           (612)                (512)
       Investment in joint venture                                                 (771)                (771)
       Other                                                                     (2,779)              (2,175)
                                                                               --------              -------
       Deferred income tax liabilities                                           (4,162)              (3,458)
                                                                               --------              -------

     Net deferred income tax liabilities                                       $ (1,756)             $(1,666)
                                                                               ========              =======
</TABLE>

     The  American  Jobs  Creation  Act of 2004  introduced  a special  one-time
dividends  received  deduction on the repatriation of certain foreign  earnings.
Following a review by Foamex L.P.,  no earnings  from foreign  subsidiaries  are
anticipated to be repatriated to utilize the special deduction.

     At January 2, 2005,  Foamex L.P.  had $3.2  million of net  operating  loss
carryforwards  in a Mexican  subsidiary that expire in 2006 through 2014. A full
valuation  allowance  has been recorded at January 2, 2005 and December 28, 2003
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  January  2, 2005 and  December  28,  2003.  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.

9.   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 January 2, 2005, 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-24
<PAGE>

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


9.   PARTNERS' DEFICIENCY (continued)

Accumulated Other Comprehensive Loss

     The components of accumulated other comprehensive loss are listed below.

<TABLE>
<CAPTION>
                                                             2004               2003                  2002
                                                           ---------         -----------            --------
                                                                             (thousands)
<S>                                                        <C>                <C>                   <C>
     Foreign currency translation adjustment               $ (1,219)          $ (3,257)             $ (9,869)
     Minimum pension liability                              (50,809)           (44,556)              (46,589)
                                                           --------           --------              --------
                                                           $(52,028)          $(47,813)             $(56,458)
                                                           ========           ========              ========
</TABLE>

10.  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  prime,  rebond,  felt and rubber carpet
padding.  Automotive Products supplies foam products and laminates to major tier
one suppliers and OEMs. 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 and
fabrication operations in Mexico City, corporate expenses not allocated to other
business segments and restructuring, impairment and other charges (credits) (see
Note 4). 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.

     Sales to one customer, which are included in Automotive Products, accounted
for  approximately  12.5%,  16.3% and 17.3% of net sales in 2004, 2003 and 2002,
respectively.  No other  customer  accounted  for more  than  10.0% of net sales
during the periods presented.

     Business segment results are presented below.

<TABLE>
<CAPTION>
                                     Foam         Cushion       Automotive     Technical
                                   Products       Products       Products       Products        Other         Total
                                   --------       --------      ----------     ---------      ---------    ----------
2004                                                        (dollars in thousands)
<S>                                <C>            <C>            <C>            <C>           <C>         <C>
Net sales                          $551,414       $209,182       $350,985       $124,146      $ 30,667    $1,266,394
Income (loss) from operations      $ 52,418       $  8,539       $ 19,245       $ 32,916      $(61,318)   $   51,800
Depreciation and amortization      $ 10,213       $  2,978       $  3,116       $  2,801      $  6,825    $   25,933

2003
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
</TABLE>


                                      F-25
<PAGE>


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


10.  BUSINESS SEGMENTS (continued)

<TABLE>
<CAPTION>
                                     Foam         Cushion       Automotive     Technical
                                   Products       Products       Products       Products        Other         Total
                                   --------       --------      ----------     ---------      ---------    ----------
2002                                                        (dollars in thousands)
<S>                                <C>            <C>            <C>            <C>           <C>         <C>
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
</TABLE>

     Results by geographical area are presented below.

<TABLE>
<CAPTION>
                                                      United
                                                      States           Canada            Mexico      Consolidated
                                                     ----------        -------          --------     ------------
2004                                                                           (thousands)
<S>                                                  <C>               <C>              <C>           <C>
Net sales                                            $1,009,102        $59,435          $197,857      $1,266,394
Property, plant and equipment, net                   $  120,578        $ 5,100          $ 15,865      $  141,543

2003
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
</TABLE>

11.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                         2004           2003             2002
                                                       -------        -------          -------
                                                                   (thousands)
<S>                                                    <C>            <C>              <C>
     Cash paid for interest                            $73,218        $72,785          $56,583
                                                       =======        =======          =======

     Cash paid for income taxes, net                   $   120        $ 2,349          $ 2,222
                                                       =======        =======          =======

     Non cash - capital leases                         $    49        $     -          $     -
                                                       =======        =======          =======
</TABLE>

12.  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 International  Holdings,  Inc. ("Trace"),  which was
formerly a major  stockholder  of Foamex  International,  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?%
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?% 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


                                      F-26
<PAGE>

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


12.  RELATED PARTY TRANSACTIONS AND BALANCES (continued)

Trace notes to the general  partners'  deficiency.  Foamex L.P. has not recorded
any interest income on these notes since the Trace bankruptcy.

Trace Accounts Receivable

     At January 2, 2005 and  December 28, 2003,  operating  accounts  receivable
from Trace were approximately $3.1 million and $3.4 million, respectively. These
accounts receivable were fully reserved for prior to 2002.

Foam Funding LLC Debt

     Foamex  L.P.  paid  interest on notes  payable to Foam  Funding LLC of $0.7
million in 2002. Foamex L.P. paid principal on notes payable to Foam Funding LLC
of $31.6 million in 2002. This debt was fully repaid in 2002.

Other

     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  recorded  a  one-time   charge  of
approximately  $1.4  million in the first  quarter of 2004 for  amounts  payable
under this  agreement,  none of which  related to past  service  rendered by the
former Chairman.  Additionally,  Foamex  International  recorded 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.

     In 2002,  pursuant  to the  terms of an  existing  agreement,  Foamex  L.P.
acquired the 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, one of Foamex  International's former 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 former  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  maintained an
apartment used by this former director.  Rent expense for this facility was $0.1
million in 2004 and $0.2 million in 2003 and 2002.  The apartment  lease expired
in 2004 and was not renewed.

     Foamex L.P.,  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  former 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.

     During 2001, Foamex International entered into an agreement that guarantees
two non-recourse  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 former director of Foamex  International  and an employee
of Foamex L.P. Foamex L.P. has  established an accrual of $0.3 million  included
in other  liabilities  at  January  2,  2005  since  the  promissory  notes  are
nonrecourse.

     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


                                      F-27
<PAGE>

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

12.  RELATED PARTY TRANSACTIONS AND BALANCES (continued)

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 $0.1  million  in 2004 and $0.5
million  in 2002  for  legal  services  to a law firm in  which  another  Foamex
International director is a partner.

13.    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 January 2, 2005 are (thousands):

     2005                                          $16,232
     2006                                           12,065
     2007                                           10,012
     2008                                            8,061
     2009                                            6,186
     Balance                                        18,878
                                                   -------
     Total                                         $71,434
                                                   =======

     Rental expense charged to operations  under operating  leases  approximated
$19.3  million,  $18.8  million  and  $23.4  million  in 2004,  2003  and  2002,
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
$117.7  million in 2005,  $98.3 million in 2006,  $92.5  million in 2007,  $88.5
million in 2008 and $88.5 million in 2009.

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  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 January 2, 2005, Foamex L.P. had accrued  approximately  $1.1 million
for litigation and other legal matters in addition to the environmental  matters
discussed below.


                                      F-28
<PAGE>


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

13.  COMMITMENTS AND CONTINGENCIES (continued)

Environmental and Health and Safety

     Foamex L.P. is subject to extensive and changing federal,  state, local and
foreign environmental laws and regulations, including those relating to the use,
handling, storage, discharge and disposal of hazardous substances, the discharge
or  emission  of  materials  into  the  environment,   and  the  remediation  of
environmental  contamination,  and as a result, is from time to time involved in
administrative and judicial  proceedings and inquiries relating to environmental
matters.  As of January 2, 2005, Foamex L.P. had accruals of approximately  $2.0
million for environmental matters,  including approximately $1.7 million related
to  remediating   and  monitoring  soil  and   groundwater   contamination   and
approximately  $0.3 million  related to sites where it has been  designated as a
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, which we have  implemented,  and 100.0% reduction
by January 1, 2007. This standard has not and will not require Foamex L.P. us to
make material expenditures for its Canadian plants.

     Foamex L.P. has reported to the appropriate  state  authorities that it had
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.

     Foamex L.P. has either upgraded or closed all underground  storage tanks at
its 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. 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 12 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.

14.    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  January  2,  2005  and  December  28,  2003  and  the  condensed
consolidating  statements  of  operations  and cash  flows for the  years  ended
January 2, 2005,  December 28, 2003 and December 29, 2002 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,


                                      F-29
<PAGE>

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


14.  GUARANTOR INFORMATION (continued)

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 January 2, 2005 and  December 28, 2003 and for the
years 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 January 2, 2005

<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                     $     -         $29,953       $    1      $284,159         $ (3,594)         $ 310,519
   Investment in subsidiaries           8,768               -            -        42,213          (50,981)                 -
   Property, plant and equipment, net       -          18,650            -       122,893                -            141,543
   Goodwill                                 -           6,328            -       120,486                -            126,814
   Debt issuance costs                      -               -            -        21,152                -             21,152
   Other assets                        15,686           2,486            -        36,556           (9,050)            45,678
                                      -------         -------       ------      --------         --------          ---------
     Total assets                     $24,454         $57,417       $    1      $627,459         $(63,625)         $ 645,706
                                      =======         =======       ======      ========         ========          =========

Liabilities and Partners' Deficiency
   Current liabilities                $ 1,589         $19,020       $    -      $347,549         $ (3,594)         $ 364,564
   Long-term debt                       4,200           4,850            -       568,461           (9,050)           568,461
   Other liabilities                        -           1,232            -        67,040                -             68,272
                                      -------         -------       ------      --------         --------          ---------
     Total liabilities                  5,789          25,102            -       983,050          (12,644)         1,001,297
   Partners' deficiency                18,665          32,315            1      (355,591)         (50,981)          (355,591)
                                      -------         -------       ------      --------         --------          ---------
     Total liabilities and partners'
        deficiency                    $24,454         $57,417       $   1       $627,459         $(63,625)         $ 645,706
                                      =======         =======       ======      ========         ========          =========
</TABLE>


<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>



                                      F-30
<PAGE>

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


14.  GUARANTOR INFORMATION (continued)

                 Condensed Consolidating Statement of Operations
                       For the year ended January 2, 2005

<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                            $      -        $100,515       $    -      $1,187,774       $(21,895)         $1,266,394

Cost of goods sold                          -          93,882            -       1,052,560        (21,895)          1,124,547
                                      -------        --------       ------      ----------       --------          ----------

   Gross profit                             -           6,633            -         135,214              -             141,847

Selling, general and administrative
   expenses                                 -           6,722            -          80,075              -              86,797

Restructuring, impairment and other
   charges                                  -               -            -           3,250              -               3,250
                                      -------        --------       ------      ----------       --------          ----------

Income from operations                      -             (89)           -          51,889              -              51,800

Interest and debt issuance expense        250             330            -          76,614           (527)             76,667

Equity in undistributed earnings
   of affiliates                         (658)              -            -            (760)         2,105                 687

Other expense, net                        202            (524)           -             629           (527)               (220)
                                      -------        --------       ------      ----------       --------          ----------

Loss before provision for income
   taxes                                 (706)           (943)           -         (24,856)         2,105             (24,400)

Provision for income taxes                  -             456            -             175              -                 631
                                      -------        --------       ------      ----------       --------          ----------

Net loss                              $  (706)       $ (1,399)      $    -      $  (25,031)      $  2,105          $  (25,031)
                                      =======        ========       ======      ==========       ========          ==========
</TABLE>


                                      F-31
<PAGE>

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


14.    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-32
<PAGE>

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


14.  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-33
<PAGE>


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



14.    GUARANTOR INFORMATION (continued)

                 Condensed Consolidating Statement of Cash Flows
                       For the year ended January 2, 2005

<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)                   $  (705)       $(1,399)     $     -      $(25,031)       $2,104     $(25,031)
   Total adjustments to reconcile net
     income (loss) to net cash provided
     by (used in) operating activities     705          2,665            -        23,962        (2,104)      25,228
                                       -------        -------      -------      --------        ------     --------

   Net cash provided by
     operating activities                    -          1,266            -        (1,069)            -          197

Cash Flows from Investing Activities
   Capital expenditures                      -         (1,235)           -        (4,275)            -       (5,510)
   Acquisition                               -              -            -             -             -            -
   Other                                     -              -            -         2,801        (2,500)         301
                                       -------        -------      -------      --------        ------     --------

   Net cash used in investing activities     -         (1,235)           -        (1,474)       (2,500)      (5,209)

Cash Flows from Financing Activities
   Net proceeds from revolving loans         -              -            -        18,841             -       18,841
   Repayments of long-term debt              -              -            -       (10,853)            -      (10,853)
   Other, net                                -         (2,500)           -        (4,239)        2,500       (4,239)
                                       -------        -------      -------      --------        ------     --------

   Net cash provided by financing
        activities                           -         (2,500)           -         3,749         2,500        3,749
                                       -------        -------      -------      --------        ------     --------

Net decrease in cash and cash equivalents    -         (2,469)           -         1,206             -       (1,263)

Cash and cash equivalents at
   beginning of period                       -          4,669            1         1,940             -        6,610
                                       -------        -------      -------      --------        ------     --------

Cash and cash equivalents at
   end of period                       $     -        $ 2,200      $     1      $  3,146        $    -     $  5,347
                                       =======        =======      =======      ========        ======     ========

</TABLE>


                                      F-34
<PAGE>

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


14   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-35
<PAGE>


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


14.  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-36
<PAGE>





                        REPORT OF INDEPENDENT REGISTERED
                             PUBLIC ACCOUNTING FIRM


The Board of Directors of
Foamex Capital Corporation:


We have audited the  accompanying  balance sheet of Foamex  Capital  Corporation
(the  "Company"),  a  wholly-owned  subsidiary  of Foamex L.P., as of January 2,
2005.  This  financial   statement  is  the   responsibility  of  the  Company's
management.  Our  responsibility  is to express  an  opinion  on this  financial
statement based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). 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 of a balance  sheet  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the balance  sheet.  An audit of a balance  sheet 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 audit
of the balance sheet provides a reasonable basis for our opinion.

In our opinion,  the balance sheet  referred to above  presents  fairly,  in all
material respects,  the financial  position of Foamex Capital  Corporation as of
January  2,  2005,  in  conformity  with  U.S.  generally  accepted   accounting
principles.

/s/ KPMG LLP

Philadelphia, Pennsylvania
April 4, 2005


                                      F-37
<PAGE>




                        REPORT OF INDEPENDENT REGISTERED
                             PUBLIC ACCOUNTING FIRM



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

We have audited the accompanying  balance sheet of Foamex Capital Corporation (a
wholly-owned subsidiary of Foamex L.P.) (the "Company") as of December 28, 2003.
This financial statement is the responsibility of the Company's management.  Our
responsibility is to express an opinion on this financial statement based on our
audit.

We  conducted  our audit in  accordance  with  standards  of the Public  Company
Accounting Oversight Board (United States). 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 audit  provides a  reasonable  basis for our
opinion.

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




/s/ DELOITTE & TOUCHE LLP

March 9, 2004
Parsippany, New Jersey


                                      F-38
<PAGE>


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


<TABLE>
<CAPTION>
                                                            January 2,             December 28,
                                                               2005                   2003
                                                            ----------             -----------

<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-39
<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  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 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,  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  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,  if any,  thereon  to the date of
redemption  and  declining  annually  to 100.0% on or after  June 15,  2005.  At
January 2, 2005,  the  redemption  price was  101.646%  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-40
<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 January 2, 2005,  the  redemption  price was 100.000% 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-41
<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 JANUARY 2, 2005
<S>                                           <C>             <C>           <C>            <C>            <C>
Allowance for Uncollectible Accounts          $8,254          $3,291        $     -        $ 4,491        $7,054
                                              ======          ======        =======        =======        ======

Reserve for Discounts                         $2,251          $    -        $14,751 (1)    $15,055        $1,957
                                              ======          ======        =======        =======        ======


YEAR ENDED DECEMBER 28, 2003
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
                                              ======          ======        =======        =======        ======
</TABLE>



(1)  Adjustments reflect a reduction in net sales.


                                      S-2
<PAGE>