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

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 29, 2002

                                       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  24,  2003,   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


                                       1
<PAGE>



                                   FOAMEX L.P.
                           FOAMEX CAPITAL CORPORATION

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                               Page
Part I
<S>            <C>                                                                                               <C>
         Item  1.     Business                                                                                   3
         Item  2.     Properties                                                                                 11
         Item  3.     Legal Proceedings                                                                          11
         Item  4.     Submission of Matters to a Vote of Security Holders                                        13

Part II
         Item  5.     Market for Registrant's Common Equity and
                           Related Stockholder Matters                                                           13
         Item  6.     Selected Consolidated Financial Data                                                       13
         Item  7.     Management's Discussion and Analysis of
                           Financial Condition and Results of Operations                                         15
         Item  7a.    Quantitative and Qualitative Disclosures about Market Risk                                 30
         Item  8.     Financial Statements and Supplementary Data                                                30
         Item  9.     Changes in and Disagreements with Accountants
                           on Accounting and Financial Disclosure                                                31

Part III
         Item 10.     Directors and Executive Officers of the Registrant                                         31
         Item 11.     Executive Compensation                                                                     31
         Item 12.     Security Ownership of Certain Beneficial Owners
                           and Management                                                                        31
         Item 13.     Certain Relationships and Related Transactions                                             31
         Item 14.     Controls and Procedures                                                                    31

Part IV
         Item 15      Exhibits, Financial Statement Schedules
                           and Reports on Form 8-K                                                               32

         Signatures                                                                                              38

         Certification of Chief Executive Officer                                                                39

         Certification of Chief Financial Officer                                                                40
</TABLE>


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



                                       2
<PAGE>


PART I
ITEM l.  BUSINESS

General

     Foamex L.P.  (referred to in this document as "Foamex  L.P.,  we, us and/or
our"),  a  wholly-owned   subsidiary  of  Foamex   International  Inc.  ("Foamex
International"),  is engaged  primarily in the manufacturing and distribution of
flexible  polyurethane  and advanced  polymer foam products.  As of December 29,
2002,  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.  The  contribution  of Foamex Carpet has been accounted for as a merger of
entities  under common  control and has been  recorded in a manner  similar to a
pooling of interests. Accordingly, all information in this annual report on Form
10-K includes  Foamex Carpet.  As of December 29, 2002,  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.

Segments

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

     Our five business segments are described below.

     Foam Products

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

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

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

     Carpet Cushion Products

     We manufacture carpet cushion products,  which include rebond,  prime, felt
and rubber carpet padding. Prime carpet padding is made from virgin polyurethane
foam buns.  Rebond carpet padding is primarily made from recycled foam, which is
shredded  into small  pieces,  processed  and then bonded  using a  polyurethane
chemical   adhesive.   Rebond   manufacturing   requires  the  management  of  a
comprehensive  recycling  business  that  includes  an  extensive  internal  and
external  collection  network  from  the  automotive  and foam  industries  on a
worldwide basis.


                                       3
<PAGE>


Our fiber operation incorporates both mechanical and chemical bonding techniques
to produce high-end padding from virgin and recycled fibers. We produce high-end
rubber carpet padding utilizing both natural and 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, which includes our new
SmoothBond(R)  product,  using  patented  VPF(SM)  technology to provide  unique
comfort   characteristics  in  seating  applications;   CustomFit(R)  semi-rigid
thermoformable  foams,  to provide  structure  and shape in headliner  substrate
applications;  Qylite(R)  acoustical  foams,  to reduce noise and improve  sound
quality  in the  vehicle.  We  provide  a range of foams  in this  category  for
applications  such  as  dash  insulators,  hood  insulators  and  interior  trim
insulators;  contoured  foam products for motor  vehicle  floor carpet  underlay
pads;  barrier foam products,  which provide soft-touch  cushioning,  while also
allowing  our  customers  to  more  efficiently   process  the  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 allow our customers to meet federal  regulatory  safety  standards for their
components;  molded  seating  cushions,  diversifying  us  further  into  molded
products to complement our core slab-based business.

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

     We maintain our position in the  automotive  industry  through a continuing
focus  on  new  product  development,   flexible  and  efficient   manufacturing
capabilities,  and  outstanding  quality  and  service in our QS9000  registered
manufacturing facilities.

     Technical Products

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

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

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


                                       4
<PAGE>


     Other

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

Marketing and Sales

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

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

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

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

International Operations

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

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

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

Major Customers

     Sales to Johnson  Controls,  which are  included  in  Automotive  Products,
accounted  for  approximately  17.3% of our net sales in 2002,  15.7% of our net
sales in 2001, and 12.3% of our net sales in 2000. 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  33.8% of our net
sales in  2002,  35.0% of our net  sales in 2001 and  29.7% of our net  sales in
2000.  The loss of any one of these  customers  could  have a  material  adverse
effect on our business.


                                       5
<PAGE>


Manufacturing and Raw Materials

     Our manufacturing and distribution  facilities are strategically located to
service our major  customers  because the high  freight  cost in relation to the
cost  of  the  foam  product  generally  results  in  distribution   being  most
cost-effective  within a 200 to 300 mile radius.  During 2002, we closed certain
rebond  carpet  padding  operations,   foam  pouring  operations,   and  a  foam
fabrication  operation.  We have identified  additional  operations to be closed
during  2003.  In many cases,  the volume from these closed  operations  will be
absorbed by our existing facilities in order to improve capacity utilization. In
some but not all  instances,  our  other  existing  facilities  will  have to be
upgraded  to absorb the  transferred  volume.  We may lose some  revenue  due to
closing these operations.

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

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

     The prices of TDI and polyol have  historically been cyclical and volatile.
The  prices of these raw  materials  are  influenced  by  demand,  manufacturing
capacity, oil prices and the current geopolitical  instability and its impact on
oil production and prices.  We experienced 32.0% to 37.0% increases in the price
of raw materials from major chemical  manufacturers during the fiscal year ended
December 29, 2002. Our major chemical  suppliers have announced  their intention
to increase prices by  approximately  10.0% to 12.0% effective April 1, 2003. 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  fiscal  year ended  December  29,  2002.  In the  future,  we may not be
successful in implementing selling price increases to fully recover raw material
cost increases.  Competitive  pricing pressure may also require us to adjust our
selling prices or lose volume.

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

Employees

     As  of  December  29,  2002,  we  employed   approximately  5,800  persons.
Approximately 1,700 of these employees are located outside the United States and
approximately  2,200 employees are covered by collective  bargaining  agreements
with labor  unions.  These  agreements  expire on various dates through 2004. 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,  Hickory Springs
Manufacturing  Company,  Vitafoam,  Inc.,  Flexible Foam Products,  Inc., Future
Foam,  Inc. and The Woodbridge  Group.  None of these  competitors  individually
competes in all of the business segments in which we do business.



                                       6
<PAGE>


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

Research and Development

     We believe we have a leading  research and  development  capability  in the
flexible  polyurethane  foam  industry.  Our primary  research  and  development
facility is located in Eddystone,  Pennsylvania.  Expenditures  for research and
development  amounted to $4.8  million for 2002,  $3.1 million for 2001 and $2.5
million for 2000.

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

Risk Factors

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

Our substantial debt could impair our financial condition.

     We  continue  to be highly  leveraged  and have  substantial  debt  service
obligations.  As of December 29, 2002, our total debt was  approximately  $738.6
million and our partners'  deficiency was  approximately  $305.8 million.  As of
December  29,  2002,  we had  approximately  $27.6  million  in  revolving  loan
availability and approximately  $20.6 million in outstanding  letters of credit.
We may also incur additional debt in the future,  subject to certain limitations
contained in our debt instruments.

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

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

     o    a  significant  portion  of our  cash  flow  from  operations  must be
          dedicated to the payment of interest and, beginning in 2004, principal
          on our debt, which reduces the funds available for operations;

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

     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;
          and



                                       7
<PAGE>


     o    On February 26,  2003,  Standard and Poor's  Rating  Services  ("S&P")
          announced  that it had lowered its  corporate  credit rating on Foamex
          L.P.  from "B+" to "B".  In their  announcement,  S&P cited their view
          that our weak operating performance,  higher raw material costs, and a
          sluggish domestic  economy,  which if not reversed will likely elevate
          near-term  liquidity  concerns.  The S&P action  could have a negative
          impact on the cost of our future borrowings, if any, and the extension
          of trade credit.

We and our bank lenders  executed an amendment to the Amended Credit Facility on
November 15, 2002 revising our financial  covenants.  If we are unable to comply
with our revised financial  covenants,  our bank lenders could cause all amounts
outstanding under the Amended Credit Facility to be due and payable immediately.

     On November 15, 2002, we and the bank lenders  executed an amendment to the
Amended  Credit  Facility,  which,  among other  things,  revised the  financial
covenants. In addition, borrowings under the Amended Credit Facility are subject
to a  borrowing  base  calculation,  which  could  limit  borrowings  under  the
revolving  credit  facility to less than the maximum  commitment.  Also,  we are
subject to other  financial  covenants  through  December  28,  2003.  A minimum
EBDAIT, as defined, covenant is tested monthly, on a cumulative basis, beginning
with December 2002. Our minimum EBDAIT  covenants have higher  thresholds in the
second  half  of  2003.  Our  ability  to  comply  with  this  covenant  will be
substantially   dependent  on  an  improved   gross  profit   margin  and  lower
administrative  costs  compared to the latter part of 2002.  If we are unable to
comply with the revised  financial  covenants,  the bank lenders could cause all
amounts  outstanding  under the  Amended  Credit  Facility 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 our 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.

If we breach any of the financial covenants under our various indentures, credit
facilities or guarantees, our debt service obligations could be accelerated.

     If we breach any of the financial  covenants under our various  indentures,
credit facilities or guarantees,  our substantial debt service obligations could
be accelerated.  Furthermore, any breach of any of the financial covenants under
our   subsidiaries'   indentures  or  credit  facilities  could  result  in  the
acceleration of all the  indebtedness of our  subsidiaries.  In the event of any
such  simultaneous  acceleration,  we  would  not be  able to  repay  all of the
indebtedness under our various guarantees or under our subsidiaries' indentures,
guarantees or credit facilities.

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

     Our  ability  to  generate  sufficient  cash flow from  operations  to make
scheduled  payments on our debt  service  obligations  will depend on our future
financial  performance,   which  will  be  affected  by  a  range  of  economic,
competitive and business factors,  many of which are outside of our control. Our
annual debt service  obligations will increase by $2.2 million per year for each
1%  increase  in interest  rates,  based on the  balance of  variable  rate debt
outstanding as of December 29, 2002.  Our estimated debt service  obligation for
2003 is $69.7  million,  based on levels of debt and interest rates in effect at
December 29, 2002. If we do not generate sufficient cash flow from operations to
satisfy  our debt  service  obligations,  we may have to  undertake  alternative
financing plans, such as refinancing or restructuring our debt,  selling assets,
reducing or delaying capital investments or seeking to raise additional capital.
We may not be able to  refinance  or  restructure  our debt or sell  assets on a
timely basis, on acceptable  terms or at all.  Furthermore,  the proceeds of any
refinancing,  restructuring or asset sale may not generate  sufficient cash flow
to meet our debt service obligations.  In addition, we may not be able to obtain
additional  financing on acceptable terms, if at all, or may not be permitted to
obtain additional financing under the terms of our various debt instruments then
in effect.  Our inability to generate  sufficient  cash flow to satisfy our debt
service obligations,  or to refinance our obligations on commercially reasonable
terms, would have a material adverse effect on our business, financial condition
and results of operations.



                                       8
<PAGE>


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 Amended  Credit  Facility  and the  indentures
relating  to  our  10  3/4%  senior  secured  notes  due  2009,  9  7/8%  senior
subordinated  notes  due 2007 and 13 1/2%  senior  subordinated  notes  due 2005
restrict us and our subsidiaries in incurring  additional  indebtedness,  but do
not fully prohibit us and our  subsidiaries  from doing so. If new debt is added
to our and our subsidiaries'  current debt levels, the related risks,  including
those described above,  that we and they now face could  intensify,  which could
have a material adverse effect on us.

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

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

     We experienced  32.0% to 37.0% increases in the price of raw materials from
major chemical manufacturers during the fiscal year ended December 29, 2002. Our
major chemical  suppliers have announced  their  intention to increase prices by
approximately  10.0% to 12.0%  effective April 1, 2003. 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 fiscal
year ended  December 29, 2002.  Our suppliers of TDI and polyol,  as well as our
other  suppliers,  may increase raw material prices in the future and we may not
be able to  implement  additional  selling  price  increases to fully offset raw
material  cost  increases.  This  could have a  material  adverse  effect on our
business, financial condition and results of operations.

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

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

We must effectively manage our other operating expenses.

     In  addition  to our  ability to  effectively  increase  selling  prices in
response to raw material  cost  increases,  we must manage and control our other
operating  expenses.  We experienced an increase in other operating expenses and
selling,  general  and  administrative  expenses  in 2002.  If we are  unable to
achieve reductions in other operating  expenses and in our selling,  general and
administrative  expenses,  this  could  have a  material  adverse  effect on our
business, financial condition and results of operations.

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

     A few of our customers are material to our business and  operations.  Sales
to our five largest customers together accounted for approximately  33.8% of our
net sales in 2002,  35.0% of our net sales in 2001 and 29.7% of our net sales in
2000. Sales to Johnson Controls,  our largest  customer,  accounted for 17.3% of
our net sales in 2002, 15.7% of our net sales in 2001 and 12.3% of our net sales
in 2000.  Johnson  Controls  has  informed  us that it  intends  to  reduce  its
purchases of certain  products  from us in 2003,  in an effort to diversify  its
supply  base,  which may result in up to a $70.0  million  reduction  in our net
sales to them. 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.


                                       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  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 eight 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.

Forward-Looking Information

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

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


                                       10
<PAGE>



ITEM 2.  PROPERTIES

     As of December 29, 2002, we maintained 62  manufacturing  and  distribution
facilities,   including  six   facilities   that  will  be  closed  as  part  of
restructuring  plans  during  2003.  Total  floor  space  in use at our 18 owned
manufacturing  and distribution  facilities is approximately  3.5 million square
feet  and  total  floor  space  in  use  at  our  44  leased  manufacturing  and
distribution  facilities is approximately 5.2 million square feet.  Fifty-two of
these  facilities are located  throughout 38 cities in the United  States,  four
facilities are located in Canada,  and six facilities are located in Mexico.  We
do not  anticipate  any  problem  in  renewing  or  replacing  any of the leases
expiring in 2003. In addition,  we have approximately 1.4 million square feet of
idle space of which approximately 0.9 million is leased.

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

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

ITEM 3.  LEGAL PROCEEDINGS

     Litigation--Breast Implants

     As of March 11, 2003, we and Trace International  Holdings,  Inc. ("Trace")
were two of multiple  defendants in 961 actions filed on behalf of approximately
1,087  recipients  of breast  implants in various  United  States courts and one
Canadian provincial court, some of which allege substantial damages, but most of
which allege  unspecified  damages for personal injuries of various types. Three
of these cases seek to allege claims on behalf of all breast implant  recipients
or other allegedly affected parties, but no class has been approved or certified
by the courts.  During 1995,  we,  Foamex  International  and Trace were granted
summary  judgments  and  dismissed as  defendants  from all cases in the federal
courts of the United  States and the state  courts of  California.  Appeals  for
these  decisions  were  withdrawn  and the  decisions  are final.  The number of
pending  cases has steadily  declined over the last several years from a peak of
3,486  cases on behalf of  approximately  5,766  individuals.  Despite  the 1995
Summary  Judgment,  some cases  have been filed  against us and Trace in federal
courts.  These have been dismissed and, in many cases, the actions were re-filed
in state courts.  No cases relating to breast implants are pending against us or
Trace in federal courts at this time. None of Foamex International, we, or Trace
nor any of our  carriers  has paid to  settle  any  claims  relating  to  breast
implants,  and no judgment has ever been entered  against Foamex  International,
Trace, or us or any of our carriers in respect of these matters.

     Although breast implants do not contain foam, certain silicone gel implants
were  produced  using a  polyurethane  foam covering  fabricated by  independent
distributors  or  fabricators  from bulk foam  purchased  from us or from Trace.
Neither we nor Trace  recommended,  authorized,  or approved the use of foam for
these  purposes.  We are  also  indemnified  by Trace  for any such  liabilities
relating to foam manufactured  prior to October 1990.  Trace's insurance carrier
has continued to pay our litigation  expenses after Trace's filing of a petition
for  relief  under  the  Bankruptcy  Code on July 21,  1999.  Trace's  insurance
policies  continue to cover certain  liabilities of Trace,  but if the limits of
those policies are exhausted, it is unlikely that Trace will be able to continue
to provide  additional  indemnification.  While it is not feasible to predict or
determine the outcome of these actions, based on management's present assessment
of the merits of pending claims, without taking into account the indemnification
provided by Trace, the coverage provided by Trace's and our liability  insurance
and potential  indemnity from the  manufacturers of polyurethane  covered breast
implants,  management  believes  that it is not  reasonably  possible  that  the
disposition  of  the  matters  that  are  pending  or  that  may  reasonably  be
anticipated  to be  asserted  will  result  in a loss  that is  material  to our
consolidated  financial  position,  results  of  operations  or cash  flows.  If
management's assessment of our liability relating to these actions is incorrect,
these actions could have a material  adverse  effect on our financial  position,
results of operations and cash flows.


                                       11
<PAGE>


     Litigation--Other

     During  the  second  quarter  of 2001,  we were  notified  by an  insurance
provider  concerning a dispute  involving the  reimbursement of liability claims
paid on behalf of Trace. The insurance provider is contending that we are liable
for claims of  approximately  $6.1  million.  We intend to strongly  defend this
claim and consider the claim to be without merit. If management's  assessment of
our  liability  relating to this action is  incorrect,  this action could have a
material  adverse  effect on our financial  position,  results of operations and
cash flows.

     We and our  subsidiaries  are  party to  various  other  lawsuits,  both as
defendant and  plaintiff,  arising in the normal  course of business.  It is the
opinion  of  management  that  the  disposition  of  these  lawsuits  will  not,
individually  or in  the  aggregate,  have  a  material  adverse  effect  on our
financial position or results of operations.  If management's  assessment of the
liability  relating to these  actions is  incorrect,  these actions could have a
material  adverse  effect on our  consolidated  financial  position,  results of
operations   and  cash  flows.   As  of  December  29,  2002,  we  have  accrued
approximately $0.7 million for litigation and other legal matters in addition to
the environmental matters discussed below.

Environmental and Health and Safety

     We are subject to extensive and changing federal,  state, local and foreign
environmental  laws  and  regulations,  including  those  relating  to the  use,
handling, storage, discharge and disposal of hazardous substances, the discharge
or  emission  of  materials  into  the  environment,   and  the  remediation  of
environmental contamination,  and as a result, are from time to time involved in
administrative and judicial  proceedings and inquiries relating to environmental
matters.  As of December 29, 2002, we had accruals of approximately $2.7 million
for  environmental  matters,  including  approximately  $2.3 million  related to
remediating and monitoring soil and groundwater  contamination and approximately
$0.4 million relating to PRP sites and other matters.

     On August 8,  2001,  the EPA  proposed  a National  Emission  Standard  for
Hazardous  Air  Pollutants,   or  "NESHAP",   for  Flexible   Polyurethane  Foam
Fabrication  Operations.  The proposed NESHAP  regulates  emissions of methylene
chloride and other  Hazardous Air  Pollutants  and restricts air emissions  from
flame lamination sources. We do not believe that this standard, if adopted, will
require us to make material expenditures.

     On  August  31,  2002,   Environment  Canada,  the  Canadian  environmental
regulatory  agency,  proposed a rule which would require  flexible  polyurethane
foam manufacturing operations to reduce methylene chloride (dichloromethane) air
emissions. The proposed rule establishes a 50.0% reduction in methylene chloride
emissions by December 1, 2003 and 100.0%  reductions  by January 1, 2007.  We do
not believe that this  standard,  if adopted,  will require us to make  material
expenditures for our Canadian plants.

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

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

     The Comprehensive  Environmental Response,  Compensation and Liability Act,
or "CERCLA," and comparable  state laws impose  liability  without fault for the
costs of  cleaning  up  contaminated  sites on certain  classes of persons  that
contributed to the release of hazardous substances into the environment at those
sites, for example, by generating wastes containing  hazardous  substances which
were disposed at such sites. We are currently  designated as a PRP by the EPA or
by state  environmental  agencies or other PRPs, pursuant to CERCLA or analogous
state  statutes,  with respect to eight 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.


                                       12
<PAGE>



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 or financial position.

     In 2003,  capital  expenditures  for  safety and  environmental  compliance
projects  are  anticipated  to be  approximately  $1.5  million.  Although it is
possible  that new  information  or  future  developments  could  require  us to
reassess the potential exposure relating to all pending  environmental  matters,
including  those  described  above,  management  believes  that,  based upon all
currently available  information,  the resolution of these environmental matters
will not have a material adverse effect on our operations,  financial  position,
capital expenditures or competitive position.  The possibility exists,  however,
that new  environmental  legislation  and/or  environmental  regulations  may be
adopted, or other environmental conditions, including the presence of previously
unknown environmental contamination,  may be found to exist or a reassessment of
the potential exposure to pending  environmental matters may be necessary due to
new  information  or future  developments,  that may  require  expenditures  not
currently anticipated and that may be material.

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

       None

PART II

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

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

     (b)  As of  December  29,  2002,  there were two  holders of Foamex  L.P.'s
          equity securities.

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

                                                Tax Sharing Distributions
                                                  2002              2001
                                                --------          --------
                                                       (thousands)
     FMXI                                        $   -              $  -
     Foamex International                         (105)              120
                                                 -----              ----
                                                 $(105)             $120
                                                 =====              ====

     2001 Distribution

     In 2001, we distributed $3.7 million in cash pro rata to our partners.

Limitations on Distributions

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

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

     The following table presents  selected  historical  consolidated  financial
data of Foamex  L.P.  All of the data  gives  retroactive  effect to the  common
control merger of Foamex L.P. and subsidiaries and Foamex Carpet Cushion,  Inc.,
which has been  accounted  for in a manner  similar to a pooling of interests as
described  in Note 1 to the  consolidated  financial  statements.  The  selected
consolidated  financial data should be read in conjunction with the consolidated
financial  statements of Foamex L.P. and related notes thereto  included in this
Annual  Report  on Form  10-K.


                                       13
<PAGE>



<TABLE>
<CAPTION>
                                                                            Fiscal  Year (1)
                                                  ------------------------------------------------------------------
                                                     2002           2001 (2)      2000         1999          1998
                                                  ----------      ----------   ----------   ----------    ----------
                                                                            (thousands)
Statements of Operations Data
<S>                                               <C>             <C>          <C>          <C>           <C>
   Net  sales                                     $1,328,094      $1,252,904   $1,257,778   $1,294,639    $1,260,559
   Income (loss) from continuing
     operations (3)(4)                            $  (24,410)     $   (2,261)  $   19,603   $   20,061    $  (15,519)

Balance Sheet Data
   Total assets                                   $  695,283      $  767,650   $  753,584   $  783,218    $  863,851
   Long-term debt, classified as current (5)               -               -            -            -    $  771,092
   Long-term debt, excluding current portion      $  738,540      $  648,232   $  687,758   $  725,297             -
   Partners' deficiency                           $ (305,786)     $ (178,128)  $ (158,503)  $ (160,481)   $ (196,407)
</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 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 the business was acquired.

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

         2002 - $ 4.8 million
         2001 - $36.1 million
         2000 - $ 6.3 million
         1999 - $10.5 million
         1998 - $(9.9) million

(4)  The  provision  for income  taxes in 2000 and 1999  reflected  the  partial
     reversal of the deferred income tax valuation allowance recognized in 1998.
     The  1998  provision  for  income  taxes of $16.0  million  for  continuing
     operations  consisted  primarily of an increase in the valuation  allowance
     for deferred income tax assets.

(5)  At  December  31,  1998,  we  classified  approximately  $771.1  million of
     long-term debt as current, in response to financial  conditions at year-end
     1998.


                                       14
<PAGE>




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

Forward Looking Statements

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

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

Overview

     We operate in the flexible  polyurethane and advanced polymer foam products
industry.  Operations  were  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
12 to the consolidated financial statements.

     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. We do not allocate  restructuring,
impairment  and  other  charges  to  operating  segments  because  many  of  our
facilities produce products for multiple segments.

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

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

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



                                       15
<PAGE>


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

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

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

     A small  number of major  customers  produce a  significant  portion of our
sales.  In 2002,  our largest  customer  provided 17.3% of our net sales and our
five largest customers  provided 33.8% 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.

     There  are a limited  number  of  suppliers  of TDI and  polyol,  the major
chemicals  used in the  production  of foam.  Our  principal  supplier  of these
chemicals  has  historically  been The Dow Chemical  Company.  While we have not
experienced  shortages of raw  materials,  a disruption in our ability to obtain
these chemicals would have a material adverse effect on our business.

     TDI and polyol are oil-based  chemicals  and, as such,  the prices of these
chemicals are significantly influenced by crude oil production and prices and by
world  political  instability,  particularly in the Middle East. The conflict in
that  part of the  world  could  significantly  impact  the  price of these  raw
materials.

     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.

Overview of 2002

     Operations

     We had income from operations of $45.5 million in the six months ended June
30,  2002 and a loss from  operations  of $3.2  million in the six months  ended
December 29, 2002.  Contributing factors to this significant negative turnaround
in operating results included the following:

     o    Significant  increases  in raw  material  prices  from major  chemical
          manufacturers  reduced our gross profit margin from 12.7% in the first
          half of 2002 to 8.7% in the second half of 2002. We experienced  20.0%
          to 25.0% increases in raw material  prices  beginning in June 2002 and
          further  10%  increases  beginning  in  November  2002.  The two price
          increases  raised raw  material  costs by 32.0% to 37.0% by the end of
          2002. We achieved only limited  success in raising  selling  prices to
          offset these cost increases during 2002.

     o    Selling, general and administrative expenses were $39.7 million in the
          first half of 2002 and $54.6 million in the second half of 2002.  This
          increase was partially  attributable  to  organizational  and proposed
          public  offering  costs of $3.6  million  related to the  formation of
          Symphonex  Inc., a proposed new  subsidiary  which would have included
          our Technical Products segment and other related activities,  and $1.3
          million  of costs  associated  with the  proposed  sale of our  Carpet
          Cushion  Products  segment.  The public offering of Symphonex Inc. has
          been deferred indefinitely and the proposed sale of the Carpet Cushion
          Products segment has been terminated.  In addition, in the second half
          of 2002 we experienced an increase in professional fees, primarily due
          to  information  technology  consulting  and  accounting  fees, and an
          increase in bad debt expense,  primarily due to one large write off of
          the balance due from a customer that ceased operations.



                                       16
<PAGE>


     o    Restructuring,  impairment and other charges increased $6.3 million in
          the second half of the year compared to the first six months.

     Our  results  for 2003 will be  principally  dependent  on our  success  in
maintaining  and increasing  margins  through  selling price  increases and cost
efficiencies  to  offset  past  and  future  raw  material  cost  increases.  We
implemented  significant price increases in late 2002, but further selling price
increases are needed to increase gross profit margins to acceptable  levels.  We
are developing  alternative  sources of supply for raw materials in an effort to
stabilize and reduce raw material  costs. We also expect the  reorganization  of
our facilities,  operations and management to result in savings of approximately
$8.0 to $10.0 million on an  annualized  basis,  in addition to the  anticipated
annualized  savings of  approximately  $25.0 to $27.0  million from the business
reorganization that began in the fourth quarter of 2001.

     There were a number of unusual items that impacted 2002. Accounting changes
as a result of the adoption of Statement of Financial  Accounting  Standards No.
142,   "Goodwill  and  Other  Intangible  Assets"  and  Statement  of  Financial
Accounting Standards No. 141, "Business  Combinations"  produced a net charge to
income of $72.0  million.  We had net  extraordinary  charges as a result of the
early extinguishment of debt in the amount of $2.8 million.

     Financing

     On March 25, 2002,  we completed a  refinancing  of a major  portion of our
debt structure.  The  refinancing  included the issuance of $300.0 million of 10
3/4% Senior  Secured  Notes due April 1, 2009 and  amendment  of the Foamex L.P.
credit  facility  ("Amended  Credit  Facility")  to provide  for term loans with
maturity dates of June 30, 2005 through  December 29, 2006, and a $100.0 million
revolving  credit facility that matures on June 30, 2005. Net proceeds were used
to pay a portion of debt outstanding  under the credit facility and the proceeds
from a new term loan under the Amended  Credit  Facility  was used to repay debt
due to a related party. Additionally,  the financial debt covenants contained in
the Amended  Credit  Facility  were  adjusted to reflect  changes in the capital
structure and business environment. Subsequently, we purchased and retired $49.0
million of the 13 1/2% senior  subordinated  notes,  including  unamortized debt
premium of $2.5  million,  and $1.5  million of the 9 7/8%  senior  subordinated
notes.

     On November 15, 2002, we and our bank lenders  executed an amendment to the
Amended  Credit  Facility.  We would  have been  unable to comply  with  certain
financial  covenants as of September 29, 2002.  Under the amendment,  compliance
with certain existing  covenants was suspended  through  September 28, 2003 with
the covenants revised and reinstated thereafter. Instead, Foamex L.P. is subject
to other  financial  covenants  through  December 28, 2003 and was in compliance
with such covenants at December 29, 2002. A minimum EBDAIT, as defined, covenant
is tested  monthly,  on a cumulative  basis  beginning  with  December  2002, in
addition  to  revised  minimum  net  worth,  as  defined,  and  maximum  capital
expenditures,  as defined, covenants,  measured quarterly. Our ability to comply
with the EBDAIT covenant will be  substantially  dependent on the achievement of
an improved gross profit margin and reduction of  administrative  costs compared
to the last six months of 2002. Additionally, we are subject to a borrowing base
calculation that may limit our ability to borrow funds in the future.

     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:



                                       17
<PAGE>


     Revenue Recognition

     We  record  net sales  when  product  title and risk of loss  passes to the
customer,  which is primarily at the time of shipment.  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.

     Account Receivable and Allowance for Uncollectible Accounts

     We actively monitor  customer  payments in conjunction with customer credit
evaluations.  Accordingly,  an estimate of uncollectible  accounts is maintained
and  is  based  on  historical   collection  experience  and  specific  customer
collection  issues.  A significant  change in the financial  condition of one or
more of our larger  customers  could have a  material  adverse  impact on future
financial results.

     Long-Lived Assets

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

     Self Insurance

     We are partially  self-insured  for a number of risks up to certain  limits
including  workers  compensation,  medical,  automobile  and general  liability.
Commercial  insurance  policies  are  carried  for  amounts  in  excess  of  the
self-insured  amounts.  Management exercises  significant judgment in estimating
the ultimate liability for claims.

     Retiree Benefit Plans

     We provide  defined benefit pension plans that cover most of our employees.
Projected  benefit  obligations,  pension expense and amounts  included in other
comprehensive income are impacted by a number of assumptions.  These assumptions
include the discount  rate on projected  benefit  obligations,  and the expected
long-term rate of return on plan assets.  The discount rate on projected benefit
obligations enables us to state expected future cash flows at a present value on
the  measurement  date. We have little latitude in selecting this rate, as it is
required to represent the market rate for high-quality fixed income investments.
A lower  discount rate  increases the present value of benefit  obligations  and
increases  pension  expense.  The  decrease in the  discount  rate on  projected
benefit obligations from 7.0% to 6.5% is expected to increase pension expense by
$0.5 million. To determine the expected long-term rate of return on pension plan
assets,  we consider  the current and  expected  asset  allocations,  as well as
historical and expected returns on various categories of plan assets. We assumed
that long-term returns on our pension plans were 9.0% in 2002 and 2001 and 10.0%
in 2000.  Amortization  of losses  has been and  continues  to be a  significant
component of pension  expense and this  amortization  is expected to increase by
approximately $1.0 million in 2003. The losses have resulted from actual returns
that are significantly  less than the expected return  assumption,  particularly
over the last three years,  and funding levels that have not been  sufficient to
offset the growth in benefit obligations.  We expect pension expense to increase
by a total of approximately $2.0 million in 2003.

     Claims and Litigation

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


                                       18
<PAGE>



     Environmental Remediation

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

LIQUIDITY AND CAPITAL RESOURCES

     Our operating cash requirements consist principally of accounts receivable,
inventory and accounts payable  requirements,  scheduled payments of interest on
outstanding indebtedness,  capital expenditures,  and employee benefit plans. We
believe that cash flow from our operating activities,  cash on hand and periodic
borrowings  under  our  credit  facility  will be  adequate  to  meet  liquidity
requirements. Scheduled principal payments on our debt are not significant until
the second  half of 2004.  If our cash flow is not  adequate  to meet  liquidity
requirements, there would be a material adverse effect on our financial position
as well as our ability to continue as a going concern.

     Cash and cash  equivalents  were $4.4 million at December 29, 2002 compared
to $15.1 million at December 31, 2001.  Working capital at December 29, 2002 was
$118.0 million and the current ratio was 1.6 to 1 compared to working capital at
December 31, 2001 of $63.6 million and a current ratio of 1.3 to 1. The increase
in working  capital is primarily  due to increases  in accounts  receivable  and
inventories  and  decreases in current  portion of  long-term  debt and accounts
payable,  partially offset by decreases in other current assets and increases in
accrued interest and cash overdrafts.

     Total  debt at  December  29,  2002 was  $738.6  million,  a $72.3  million
increase  from December 31, 2001,  including a deferred  credit of $14.2 million
related to  interest  rate swap  transactions.  (See Note 8 to the  consolidated
financial  statements.)  As of December 29, 2002,  there were  revolving  credit
borrowings  of $51.8 million  under the Foamex L.P.  credit  facility with $27.6
million  available  for  borrowings  and  $20.6  million  of  letters  of credit
outstanding.  Foamex  Canada  did not  have  any  outstanding  borrowings  as of
December 29, 2002 under Foamex Canada's  short-term  revolving credit agreement,
with unused  availability  of  approximately  $5.1 million.  The increased  debt
balance  reflects the issuance of $300.0 million of 10 3/4% Senior Secured Notes
due 2009 on March 25, 2002,  offset by $280.0  million of debt  repayments  from
proceeds of the  offering.  Revolving  credit  borrowings  at December  29, 2002
reflect working capital requirements.

     In 2002,  we  purchased  and  retired  $49.0  million of the 13 1/2% senior
subordinated notes, including unamortized debt premium of $2.5 million, and $1.5
million of the 9 7/8% senior  subordinated  notes for a total  purchase price of
$48.5 million.

     On  October  16,  2002,  we  announced  that we had  obtained  a waiver  of
financial  covenants  under the Amended  Credit  Facility  for the period  ended
September  29,  2002  since  we  would  not  have  been in  compliance  with the
covenants.  The waiver was  effective  until  November  30, 2002 and reduced the
commitment  under the revolving  credit  facility  from $100.0  million to $70.0
million for the period the waiver was in effect.  On November 15,  2002,  we and
our bank lenders executed an amendment to the Amended Credit Facility. Under the
amendment,  we are subject to minimum net worth, minimum EBDAIT, as defined, and
maximum capital expenditure  covenants through periods ending December 28, 2003.
The minimum EBDAIT  covenant is tested monthly on a cumulative  basis  beginning
with December 2002. We were in compliance with the revised covenants at December
29, 2002. In addition, we were subject to a minimum EBDAIT, as defined, covenant
for the quarter ended September 29, 2002 and were in compliance. Compliance with
existing  covenants on leverage,  fixed  charge  coverage and interest  coverage
ratios is suspended through periods ending September 28, 2003, but the covenants
are revised and will be reinstated thereafter.  All the financial covenants were
established  based on a business  plan  provided to the  lenders.  In  addition,
borrowings under the Amended Credit Facility will be subject to a borrowing base
calculation, which could limit borrowings under the revolving credit facility to
less than the maximum  commitment.  As of February 23,


                                       19
<PAGE>



2003, the borrowing base calculation does not limit borrowings under the Amended
Credit Facility.  The cost of obtaining the amendment  aggregated  approximately
$4.0 million, including bank and legal fees.

     On February 26, 2003, Standard and Poor's Rating Services ("S&P") announced
that it had lowered its corporate credit rating on Foamex L.P. from "B+" to "B".
In their announcement, S&P cited their view that our weak operating performance,
higher  raw  material  costs,  and a  sluggish  domestic  economy,  which if not
reversed will likely elevate near-term liquidity concerns.  The S&P action could
have a negative  impact on the cost of our future  borrowings,  if any,  and the
extension of trade credit.

     Our minimum EBDAIT  covenants have higher  thresholds in the second half of
2003.  Management's  current plans to achieve EBDAIT covenants require continued
customer  selling  price  management  in response to raw material  cost changes,
successful implementation of on-going cost savings initiatives,  plant closures,
improved operating efficiencies, improved working capital management and reduced
capital  expenditures.  Management  is also  continuing  to  evaluate  strategic
alternatives in an effort to reduce our debt.  There can be no assurance that we
will be  successful  in  achieving  our  plans or  complying  with  the  amended
covenants,  as there are a number of factors  beyond our control,  including raw
material cost changes and customer  acceptances of selling price  increases that
are  necessary  for  us to be  successful.  Additionally,  compliance  with  the
financial covenants 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   financial   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,  or not possible,  if required. If amendments or
waivers  are not  obtained,  we would be in default  and  lenders  could  demand
immediate payment of our outstanding debt under the Amended Credit Facility.  In
addition, it is possible that the holders of our 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.

     During 2002, we purchased,  pursuant to the terms of an existing agreement,
the 5% stock  interest held by the director of Foamex de Mexico S.A. de C.V. for
a cash  payment of $1.0  million.  In  addition,  during 2002 we entered into an
employment  agreement with one director and a consulting  agreement with another
director.  Payments  under  these  agreements  were to  aggregate  at least $0.7
million and $0.2  million,  respectively,  on an annual  basis.  The  employment
agreement with the director was terminated effective January 31, 2003.

     We were required to cause a registration statement under the Securities Act
of 1933 for our 10 3/4% Senior Secured Notes to be effective  within 180 days of
March 25, 2002. We filed the  registration  statement,  but it was not effective
until January 30, 2003 and therefore we are liable for  liquidated  damages from
September 23, 2002 until January 30, 2003.  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 until a maximum of $150,000 per week is reached.  At
December 29, 2002, we had an accrual for liquidated damages of $0.2 million.

     Effective  May 1,  2002,  we  completed  a series  of  interest  rate  swap
transactions with notional amounts  aggregating  $300.0 million.  We designated,
documented  and accounted for these  interest rate swaps as fair value hedges of
our 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,  we 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
will be amortized over the term of the 10 3/4% Senior  Secured Notes,  using the
effective interest rate method.


                                       20
<PAGE>



     Cash Flow from Operating Activities

     Cash used in operating  activities  in 2002 was $49.6  million  compared to
cash  provided of $108.7  million in the 2001  reflecting  significantly  higher
working capital  requirements  principally  relating to inventories and accounts
payable.

     Cash Flow from Investing Activities

     Cash used in investing  activities  totaled  $21.1  million for 2002.  Cash
requirements  included  capital  expenditures of $15.6 million.  Other investing
activities include software  development costs of $5.9 million in 2002. In 2001,
cash used in  investing  activities  was $38.1  million,  which  included  $22.5
million of capital expenditures and $17.6 million for an acquisition.  Estimated
capital   expenditures  for  2003  are  approximately  $19.0  million  including
approximately $1.5 million for safety and environmental activities. In addition,
we expect to spend approximately $6.8 million for internally  developed software
in 2003, a portion of which may be capitalized.

     Cash Flow from Financing Activities

     Cash provided by financing activities was $60.0 million in 2002 compared to
cash used of $60.4 million in 2001. We completed the offering of $300.0  million
of 10 3/4% Senior Secured Notes on March 25, 2002. We used $280.0 million of net
proceeds from these notes and $56.6 million of new term loans to repay revolving
loans of $125.0  million,  term loans of $140.0  million and long-term debt to a
related party of $31.6  million.  We also purchased and retired $49.0 million of
the 13 1/2% senior  subordinated  notes,  including  unamortized debt premium of
$2.5 million and $1.5 million of the 9 7/8% senior subordinated notes. Cash used
during 2001 primarily reflected debt repayments.

     Contractual Obligations and Commercial Commitments

     At December 29, 2002, we had obligations to repay a total of $722.0 million
of principal of long-term  debt  borrowed  under a number of  arrangements.  The
amortization  schedule for our long-term  debt payments is included in Note 8 to
the consolidated financial statements.  At December 29, 2002, we had outstanding
letters of credit aggregating $20.6 million.

     We also have  commitments  for operating  leases as discussed in Note 15 to
the consolidated  financial  statements that require minimum  payments  totaling
$52.2 million,  with $44.5 million due through December 31, 2007 and the balance
in later years.  We have  entered  into  contracts  for  information  technology
services  and certain  raw  materials  that have  minimum  purchase  commitments
estimated at $84.8  million in 2003,  $98.0  million in 2004,  $39.9  million in
2005, $39.4 million in 2006, $36.1 million in 2007 and $32.2 million for each of
the years 2008 to 2010.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                Carpet
                                   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    $ 24,000       $(12,440)      $ 25,430        $ 20,402     $(15,092)   $   42,300
Depreciation and amortization    $ 15,466       $  6,469       $  3,856        $  2,982     $  2,819    $   31,592
Income (loss) from operations
   as a percentage of net sales       5.1%          (5.3)%          5.4%           16.4%        n.m.(a)        3.2%
</TABLE>


                                       21
<PAGE>


<TABLE>
<CAPTION>
                                                Carpet
                                   Foam         Cushion       Automotive      Technical
                                 Products       Products       Products       Products       Other         Total
                                 --------       --------      ----------      ---------     --------    -----------
2001                                                        (dollars in thousands)
<S>                              <C>            <C>            <C>             <C>          <C>         <C>
Net sales                        $499,668       $230,965       $377,753        $111,043     $ 33,475    $1,252,904
Income (loss) from operations    $ 66,634       $ (6,572)      $ 21,445        $ 23,080     $(39,860)   $   64,727
Depreciation and amortization    $ 15,732       $  8,181       $  4,991        $  3,312     $  1,812    $   34,028
Income (loss) from operations
   as a percentage of net sales      13.3%          (2.8)%          5.7%           20.8%        n.m.(a)        5.2%

2000
Net sales                        $519,197       $256,439       $342,386        $106,697     $ 33,059    $1,257,778
Income (loss) from operations    $ 55,227       $  2,218       $ 22,417        $ 29,027     $(11,506)   $   97,383
Depreciation and amortization    $ 17,813       $  7,742       $  5,785        $  2,663     $  2,625    $   36,628
Income (loss) from operations
   as a percentage of net sales      10.6%           0.9%           6.5%           27.2%       n.m.(a)         7.7%
</TABLE>

(a)  Not meaningful.

2002 Compared to 2001

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

     The gross profit margin was $141.4  million,  or 10.6%, in 2002 compared to
$180.1  million,  or 14.4%,  in 2001 primarily as a result of the 32.0% to 37.0%
increases in the cost of our major chemical raw materials during the second half
of 2002.  The gross profit  margin was further  reduced by higher  manufacturing
costs  principally  in the Foam Products  segment,  unfavorable  yields,  higher
manufacturing overhead expense and unfavorable production mix. We are seeking to
improve gross profit margins through customer selling price increases, selective
elimination of unprofitable  customer  accounts and products,  and reductions in
manufacturing overhead expenses.

     Income from  operations  for 2002 was $42.3  million,  which  represented a
34.6% decrease from the $64.7 million reported for 2001.  Income from operations
was  3.2% of net  sales in 2002  compared  to 5.2% of net  sales  in  2001.  The
decrease  attributable to the reduced gross profit margin is discussed above. In
addition,  selling,  general  and  administrative  expenses  increased  by $15.0
million,  or 19.0%,  which included $3.6 million of organizational  and proposed
public  offering  costs related to the formation of Symphonex  Inc. The proposed
public  offering of Symphonex  Inc.  has been  deferred  indefinitely.  Selling,
general and  administrative  expenses  also include $1.3 million of  transaction
costs  associated with the proposed sale of our Carpet Cushion  Products segment
which was subsequently  terminated.  The remainder of the increase was primarily
due  to  higher  professional  service  fees  for  information   technology  and
accounting  services and employee related expenses,  partially offset by reduced
goodwill amortization and lower bad debt expense.

     Foam Products

     Foam  Products  net sales for 2002  decreased  5.7% to $471.0  million from
$499.7 million in 2001. The decrease primarily  reflected  reduction in business
from a major bedding  manufacturer  and the slow recovery of sales after an odor
issue caused by defective  chemicals  from a major  supplier in late 2001.  Foam
Products gross profit margin was 10.8% in 2002, down from 17.9% in 2001.  Income
from operations  decreased 64.0%, to $24.0 million in 2002 from $66.6 million in
2001,  primarily due to increased raw material costs, lower net sales and higher
manufacturing  costs. Income from operations was 5.1% of net sales in 2002, down
from 13.3% in 2001.



                                       22
<PAGE>


     Carpet Cushion Products

     Carpet Cushion Products net sales for 2002 increased 1.3% to $234.0 million
from $231.0  million in 2001. We were able to increase our market share in spite
of market  weakness and overcome the loss of sales to one large retail  customer
that  exited  the  carpet  business.  Loss from  operations,  which  principally
reflected higher raw material and other operating costs during 2002 and included
expenses  of $1.3  million  in 2002  associated  with the  proposed  sale of the
business which was  subsequently  terminated,  represented  5.3% of net sales in
2002 and 2.8% of net sales in 2001.

     Automotive Products

     Automotive  Products net sales for 2002  increased  23.6% to $466.7 million
from $377.8 million in 2001.  The  improvement  primarily  reflected a continued
high build rate for new cars and new  product  programs.  We have been  informed
that our largest  customer  intends to reduce its purchases of certain  products
from us in 2003 to diversify  its supply base.  This may result in reduced sales
to this customer of up to $70.0  million in 2003,  some of which may be replaced
by sales to other customers. Automotive Products gross profit margin was 8.2% in
2002  compared to 8.4% in 2001 and  reflects  the impact of higher raw  material
costs  offsetting  the  contribution  from  increased  net  sales.  Income  from
operations represented 5.4% of net sales in 2002 and 5.7% of net sales in 2001.

     Technical Products

     Net sales for Technical  Products in 2002 increased 11.8% to $124.1 million
from $111.0 million in 2001.  Higher sales  partially  reflected  sales from the
acquisition  of  General  Foam  Corporation  in  July  2001  (see  Note 3 to the
consolidated  financial  statements).  Income from operations decreased 11.6% to
$20.4 million in 2002 compared to $23.1 million in 2001.  The decrease  reflects
the  contribution  from higher net sales offset by higher material costs and the
costs  related to Symphonex  Inc. as  described  above.  Income from  operations
represented 16.4% of net sales in 2002 compared to 20.8% in 2001.

     Other

     Other  primarily  consists of certain  manufacturing  operations  in Mexico
City,  corporate  expenses not allocated to business segments and restructuring,
impairment and other  charges.  The 3.7% decrease in net sales  associated  with
this segment  primarily  resulted from the Mexico City operation.  The loss from
operations was $15.1 million in 2002 and included restructuring,  impairment and
other  charges,  discussed  below.  The loss from  operations  in 2001 was $39.9
million, including restructuring, impairment and other charges.

     Restructuring, Impairment and Other Charges

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

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



                                       23
<PAGE>



facilities closures reduced the number of planned  terminations to approximately
500. Approximately 340 employees were terminated in 2002.

     We will have substantially  completed the remaining actions contemplated by
the 2001  Operational  Reorganization  Plan in early 2003 and expect to complete
the facility closures and personnel reductions related to the 2002 restructuring
plan  during  2003,   primarily  in  the  first  six  months.   Terminations  of
approximately 300 employees are planned to take place in 2003.

     Interest and Debt Issuance Expense

     Interest  and debt  issuance  expense  was  $66.6  million  in 2002,  which
represented a 5.3% increase from 2001 expense of $63.2 million. The increase was
attributable  to higher  amortization  of debt  issuance  cost.  We  capitalized
interest of $0.3  million in 2002  compared to $1.4  million in 2001.  We expect
2003 interest and debt issuance expense to be at or higher than the 2002 level.

     Income from Equity Interest in Joint Ventures

     The income  from an equity  interest  in an Asian  joint  venture  was $1.6
million in both 2002 and 2001. We have a 70.0%  ownership  interest in the joint
venture since December 2001. Previously our ownership interest was 49.0%.

     Provision (Benefit) for Income Taxes

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

     Extraordinary Items, Net of Income Taxes

     In connection with the refinancing transaction completed on March 25, 2002,
we wrote off debt issuance costs  associated with the early  extinguishments  of
long-term  debt  due to a  related  party  and the  revolving  credit  facility,
resulting in an extraordinary loss of $4.2 million, net of income tax benefit of
$0.1  million.  We  purchased  and retired  $49.0  million of the 13 1/2% senior
subordinated notes, including unamortized debt premium of $2.5 million, and $1.5
million of the 9 7/8% senior  subordinated  notes resulting in an  extraordinary
gain of $1.4 million.  These  extraordinary  items will be reclassified upon the
adoption of Statement of Financial Accounting Standards No. 145 in 2003.

     Cumulative Effect of Accounting Changes

     The  cumulative  effect of  accounting  change in 2002  includes a goodwill
impairment  charge of $72.0  million as a result of the adoption of Statement of
Financial  Accounting  Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS No. 142").

2001 Compared to 2000

     Net sales for 2001 decreased 0.4% to $1,252.9 million from $1,257.8 million
in 2000. The decline was primarily  attributable to lower sales in Foam Products
and Carpet Cushion  Products,  partially offset by a significant  improvement in
Automotive Products sales. Technical Products also recorded improved sales.



                                       24
<PAGE>



     The  gross  profit  margin  was  14.4% in 2001  compared  to 13.7% in 2000.
Certain raw  material  cost  reductions  had the effect of  improving  the gross
profit margin percentage in 2001 by approximately 1.4 percentage  points.  These
2001 cost reductions are not anticipated to continue in 2002.  Selling,  general
and administrative expenses were 16.0% higher in 2001. The increase included the
impact of higher professional fees,  including those associated with a change in
independent accountants,  higher bad debt expense related to economic conditions
and increased compensation and benefit costs.

     Income from operations in 2001 was $64.7 million, which represented a 33.5%
decrease  from  the  $97.4  million  recorded  during  2000.   Results  included
restructuring,  impairment  and other  charges of $36.1 million in 2001 and $6.3
million in 2000.  Restructuring,  impairment and other charges  recorded  during
2001 are discussed under "Other" below. Excluding the restructuring,  impairment
and other charges for comparison  purposes,  income from  operations  would have
been $100.8  million in 2001 compared to $103.7  million in 2000. On this basis,
income  from  operations  was 8.0% of net  sales  in 2001  and 8.2% in 2000.  In
addition to the raw material cost  reductions  discussed  above,  cost reduction
programs and increases in certain selling prices were also positive factors.

     Foam Products

     Foam  Products  net sales for 2001  decreased  3.8% to $499.7  million from
$519.2 million in 2000. The decrease  primarily  reflected the domestic economic
slowdown that impacted the markets for  furniture  manufacturers  and other foam
fabricators.  Despite the sales decline, income from operations increased 20.7%,
from $55.2 million in 2000 to $66.6 million in 2001.  The increase was primarily
the impact of raw material cost  reductions,  discussed  above,  which primarily
benefited the Foam Products  segment.  Income from  operations  was 13.3% of net
sales in 2001, up from 10.6% in 2000.

     Carpet Cushion Products

     Carpet Cushion Products net sales for 2001 decreased 9.9% to $231.0 million
from $256.4 million in 2000. The sales decline continued to reflect  competitive
pressures that resulted in lower sales volumes  across all product lines.  Lower
selling  prices in certain  product  lines and a lower value  shipment  mix also
contributed to the sales decline.  The factors contributing to the sales decline
translated to a loss from  operations of $6.6 million in 2001 compared to income
from  operations of $2.2 million in 2000. The loss from  operations  represented
2.8% of net sales in 2001 and income  from  operations  represented  0.9% of net
sales in 2000.

     Automotive Products

     Automotive  Products net sales for 2001  increased  10.3% to $377.8 million
from $342.4 million in 2000.  The  improvement  primarily  reflected new product
programs and renewed activity  following  inventory  corrections in the domestic
automotive  industry earlier in the year. Income from operations  declined 4.3%,
from $22.4  million in 2000 to $21.4  million in 2001.  Income  from  operations
represented  5.7% of net sales in 2001 and 6.5% in 2000.  The lower  results  in
2001 were primarily  attributed to intense  pricing  competition  and higher raw
material costs.

     Technical Products

     Net sales for  Technical  Products  in 2001 were up 4.1% to $111.0  million
from $106.7 million in 2000.  Higher sales  primarily  reflected  sales from the
acquisition of certain assets from General Foam Corporation, discussed in Note 3
to the consolidated financial statements. Income from operations decreased 20.5%
to $23.1  million  in 2001  compared  to $29.0  million  in  2000.  The  decline
reflected a lower value  shipment mix and the impact of an economic  downturn in
the technology  industry,  especially during the first half of 2001. Income from
operations represented 20.8% of net sales in 2001 compared to 27.2% in 2000.

     Other

     Other  primarily  consists of certain  manufacturing  operations  in Mexico
City,  corporate  expenses not allocated to business  segments and restructuring
and other charges.  Net sales were slightly higher in 2001 compared to 2000. The
loss from  operations  was $39.9  million  in 2001 and  included  restructuring,
impairment  and other  charges  of



                                       25
<PAGE>



$36.1 million,  discussed  below. The $11.5 million loss from operations in 2000
included restructuring,  impairment and other charges totaling $6.3 million. The
2000 loss also included  professional  fees  associated  with the  resolution of
certain  change  in  control  issues  following  the  Trace  bankruptcy  and the
settlement of certain shareholder litigation.

Restructuring, Impairment and Other Charges

     In December 2001, we announced our 2001 Operational  Reorganization Plan to
reduce operating costs and accelerate  revenue growth.  The major initiatives of
the 2001  Operational  Reorganization  Plan included  plant  facility  closures,
headcount  reductions,  purchasing and logistics  cost  reductions and sales and
marketing management consolidation.

     We identified a total of 17 plant operations to be closed. Costs associated
with this aspect of the 2001  Operational  Reorganization  Plan  included  lease
termination  costs and  severance and  termination  benefits  aggregating  $14.1
million. Additionally, we identified salaried positions to be eliminated, mainly
in support  function areas.  Severance,  termination and other costs  associated
with these positions were estimated to be $4.4 million.

     Further,  we  evaluated  the  recoverability  of certain  other  long-lived
assets,  both associated and not associated with the Operational  Reorganization
Plan,  in  accordance  with SFAS No.  121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for Long-Lived  Assets to be Disposed".  As a result,  we
recorded an impairment  provision of $13.8 million (net of anticipated  proceeds
of $4.6 million) to reduce these assets to their estimated fair values.

     Severance  and  termination  benefits  as a result of the 2001  Operational
Reorganization   Plan  were  expected  to  be  incurred  for  approximately  700
employees. We expected to spend approximately $12.4 million during 2002 with the
balance to be spent through  2012,  primarily  for lease costs.  Other  one-time
period  expenses  during the fourth  quarter  consisted  primarily  of executive
severance  of $1.9  million  and  consulting  fees  related  to the  Operational
Reorganization Plan in the amount of $1.2 million.

     In addition,  we recorded $0.4 million for restructuring plans prior to the
fourth quarter of 2001 that included severance for 41 employees and $1.4 million
related to executive severance recorded in other charges. We also recorded a net
restructuring  credit of $1.2  million  related to changes in estimates to prior
restructuring plans.

     During 2000, we recorded $6.2 million for restructuring plans that included
severance  for 102  employees.  We also recorded a net  restructuring  charge of
approximately  $0.1  million  related to changes in  estimates  to prior  years'
restructuring  plans. Also during 2000, we received $3.6 million of net proceeds
from the sale of assets related to restructuring plans.

     Interest and Debt Issuance Expense

     Interest and debt issuance  expense  totaled  $63.2 million in 2001,  which
represented a 15.9%  decrease from $75.2 million  recorded in 2000. The decrease
was  attributable  to lower  average  debt levels and lower  effective  interest
rates.  We  capitalized  interest of $1.4  million and $0.8  million in 2001 and
2000,  respectively,  as a  component  of the  construction  cost of  plant  and
equipment.

     Income from Equity Interest in Joint Ventures

     Income  from an equity  interest  in an Asian joint  venture  totaled  $1.6
million and $1.7 million in 2001 and 2000, respectively.

       Other Expense, Net

     Other  expense,  net for 2001 was $1.9 million.  Expense items totaled $2.8
million and included letter of credit fees. Interest income recorded in 2001 was
$0.9 million.


                                       26
<PAGE>



     Other expense, net in 2000 totaled $1.6 million and primarily included $1.2
million of costs  associated  with a buyout  proposal and $0.7 million letter of
credit fees offset by $0.6 million of interest income.

       Income Tax Expense

     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.  We have a tax  sharing  agreement  that  provides  for the
payment of  distributions  to our partners for amounts that would be required to
be paid if we were a  corporation  filing  separate tax returns.  Our ability to
make such  distributions  is limited by the terms of our  credit  agreement  and
indentures.

OTHER

Foamex International and Change in Control Developments

     Trace International  Holdings,  Inc. ("Trace") is a privately held company,
which  owned  approximately  29% of Foamex  International's  outstanding  voting
common stock at September 30, 2000, and whose former Chairman also serves as our
Chairman.  Foamex  International's  common  stock  owned by Trace was pledged as
collateral against certain of Trace's obligations. Certain credit agreements and
promissory  notes,  pursuant to which  approximately  $401.1 million of debt was
outstanding as of September 30, 2000,  provided that a "change of control" would
be  an  event  of  default  and  could  result  in  the   acceleration  of  such
indebtedness.  "Change of control" means, for this purpose, that (i) a person or
related  group,  other  than  Trace,  beneficially  owns more than 25% of Foamex
International's  outstanding voting stock and (ii) such voting stock constitutes
a greater percentage of such voting stock than the amount  beneficially owned by
Trace.  Additionally,  certain  of our  indentures  and those of Foamex  Capital
Corporation ("FCC"), a wholly-owned subsidiary,  relating to senior subordinated
notes contain similar "change of control"  provisions,  which require us and FCC
to  tender  for such  notes at a price  in cash  equal to 101% of the  aggregate
principal amount thereof,  plus accrued and unpaid interest thereon, if there is
such a "change of control".

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

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

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


                                       27
<PAGE>



preference of $100 per share.  Following this exchange,  The Bank of Nova Scotia
became the owner of 24.41% of the outstanding  shares of Foamex  International's
common stock when the remaining 5,697,426 shares of Foamex  International common
stock were  transferred  to The Bank of Nova  Scotia  from the Trace  bankruptcy
estate.  Certain equity  transactions,  primarily the exercise of stock options,
have reduced the Bank of Nova  Scotia's  common stock  ownership  percentage  to
23.6% at February 15, 2003.

Environmental Health and Safety

     We are subject to extensive and changing federal,  state, local and foreign
environmental  laws  and  regulations,  including  those  relating  to the  use,
handling, storage, discharge and disposal of hazardous substances, the discharge
or  emission  of  materials  into  the  environment,   and  the  remediation  of
environmental contamination,  and as a result, are from time to time involved in
administrative and judicial  proceedings and inquiries relating to environmental
matters.  As of December 29, 2002, we had accruals of approximately $2.7 million
for  environmental  matters  including  approximately  $2.3  million  related to
remediating and monitoring soil and groundwater  contamination and approximately
$0.4 million relating to PRP sites 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 8,  2001,  the EPA  proposed  a National  Emission  Standard  for
Hazardous Air Pollutants or "NESHAP" for Flexible  Polyurethane Foam Fabrication
Operations.  The proposed NESHAP regulates  emissions of methylene  chloride and
other Hazardous Air Pollutants and restricts air emissions from flame lamination
sources.  We do not believe that this standard,  if adopted,  will require us to
make material expenditures.

     On  August  31,  2002,   Environment  Canada,  the  Canadian  environmental
regulatory  agency,  proposed a rule which would require  flexible  polyurethane
foam manufacturing operations to reduce methylene chloride (dichloromethane) air
emissions. The proposed rule establishes a 50.0% reduction in methylene chloride
emissions by December 1, 2003 and 100.0%  reductions  by January 1, 2007.  We do
not believe that this  standard,  if adopted,  will require us to make  material
expenditures for our Canadian plants.

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

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

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

     In 2003,  capital  expenditures  for  safety and  environmental  compliance
projects  are  anticipated  to be  approximately  $1.5  million.  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


                                       28
<PAGE>


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 or
results of operations.  If  management's  assessment is incorrect,  such actions
could have a material  adverse effect on our  consolidated  financial  position,
results of  operations  and cash flows.  As of December 29, 2002, we had accrued
approximately $0.7 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, 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.
The conflict in that part of the world could  significantly  impact the price of
these raw materials.  Results for 2002 were negatively  impacted by higher costs
for raw materials.  In 2001, the beginning of the economic  slowdown resulted in
excess  manufacturing  capacity for the major chemical suppliers.  This, coupled
with declining oil prices, resulted in lower costs for raw materials in 2001. We
experienced  32.0% to 37.0%  increases in the prices of raw material  from major
chemical  manufacturers  during 2002. We sought to recover these cost  increases
through  manufacturing  process  efficiencies  and  management  of selling price
increases, but were only partially able to do so during 2002. Our major chemical
suppliers have announced  their  intention to increase  prices by  approximately
10.0% to 12.0%  effective  April 1,  2003.  In an  attempt  to offset  these raw
material cost  increases,  we have announced price increases to our customers to
be effective  during April 2003. We may not be successful in implementing  these
and 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  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.

Related Party Transactions

     We  have a  number  of  related  party  transactions.  Such  related  party
transactions  and current  balances are discussed in Note 14 to the consolidated
financial statements included in this annual report on Form 10-K.

Accounting Changes

     Statement of Financial  Accounting  Standards No. 142,  "Goodwill and Other
Intangible Assets" ("SFAS No. 142") addresses financial accounting and reporting
for acquired  goodwill and other intangible  assets. A key change as a result of
implementing  SFAS No. 142 is that goodwill and certain other intangibles are no
longer  amortized but will be  periodically  assessed for  impairment,  and as a
result  there may be more  volatility  in the  reported  results  than under the
previous standard because  impairment losses are likely to occur irregularly and
in varying amounts.  An impairment of goodwill due to the initial application of
SFAS No. 142 is discussed  below.  Any goodwill and intangible  assets  acquired
after  June 30,  2001,  including  the  acquisition  discussed  in note 3 to the
consolidated



                                       29
<PAGE>


financial  statements,  are  subject  to the  nonamortization  and  amortization
provisions of SFAS No. 142. The other provisions of SFAS No. 142 were adopted by
us on January 1, 2002.

     SFAS No. 142 provides a six-month  transitional  period from the  effective
date to perform an assessment of whether there is an indication that goodwill is
impaired.  We completed this  assessment in the second quarter of 2002. Step one
of the transitional impairment test uses a fair value methodology, which differs
from the  undiscounted  cash  flow  methodology  that  continues  to be used for
intangible  assets with an identifiable  life. We identified six reporting units
during the second quarter and performed step one of the transitional  impairment
test on each of the  reporting  units.  Based on the  results of step one of the
transitional  impairment  test,  we identified  one  reporting  unit in the Foam
Products  segment,  the Carpet  Cushion  Products  reporting  unit and the Other
reporting  unit,  for which the carrying  values  exceeded the fair values as at
January  1,  2002,  indicating  a  potential  impairment  of  goodwill  in those
reporting units. Step two of the transitional  impairment test, to determine the
magnitude of any goodwill impairment, was completed in the third quarter of 2002
and the  resulting  impairment  loss of $72.0  million  has been  recorded  as a
cumulative effect of a change in accounting principle,  retroactive to the first
quarter  2002  results  of  operations  in  accordance  with  the   transitional
implementation  guidance  of SFAS No.  142.  We  performed  our annual  goodwill
impairment test as of September 30, 2002 which did not result in the recognition
of any additional impairment.

     On April 30, 2002,  Statement of Financial  Accounting  Standards  No. 145,
"Rescission of FASB  Statements  No. 4, 44, and 64,  Amendment of FASB Statement
No. 13, and Technical  Corrections"  ("SFAS No. 145") was issued. The provisions
of this  Statement  related to the rescission of Statement 4 shall be applied in
fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of
debt that was  classified as an  extraordinary  item in prior periods  presented
that  does  not  meet  the  criteria  in  Opinion  30 for  classification  as an
extraordinary item shall be reclassified. Early application of the provisions of
this  Statement  related to the  rescission  of Statement 4 is  encouraged.  The
adoption  of this  Statement  in 2003 will result in a  reclassification  of the
extraordinary items recorded during 2002.

     Statement of Financial  Accounting Standards No. 146, "Accounting for Costs
Associated with Exit or Disposal  Activities ("SFAS No. 146") was issued in June
2002.  SFAS No. 146 requires that a liability for costs  associated with an exit
or disposal activity be recognized when the liability is incurred rather than at
the  date of an  entity's  commitment  to an exit  plan.  SFAS No.  146  further
establishes  that fair value is the  objective  for initial  measurement  of the
liability.  The statement is effective for exit or disposal activities initiated
after December 31, 2002.

     In  November  2002,  the FASB issued  FASB  Interpretation  ("FIN") No. 45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees  of  Indebtedness  of  Others."  FIN No. 45  clarifies  the
requirements  of SFAS No. 5,  "Accounting  for  Contingencies,"  relating to the
guarantor's  accounting for and disclosures of certain  guarantees.  The initial
recognition and measurements  provisions of the interpretation are applicable on
a prospective  basis to guarantees  issued or modified  after December 31, 2002,
irrespective of the guarantor's fiscal year-end. The disclosure  requirements of
the interpretation  are effective for financial  statements of interim or annual
periods ending after December 15, 2002. The adoption of this  interpretation  is
not  expected  to have any impact on our  results  of  operations  or  financial
position. We do not have any disclosure obligations under this interpretation at
December 29, 2002.

ITEM 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our debt securities with variable interest rates are subject to market risk
for changes in interest rates. On December 29, 2002,  indebtedness with variable
interest rates totaled $221.0 million.  On an annualized  basis, if the interest
rates on these  debt  instruments  increased  by 1.0%,  interest  expense  would
increase by approximately $2.2 million.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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


                                       30
<PAGE>



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

     Foamex L.P.  changed its  accountants  during  2001.  Detailed  information
required by this item was  included in the Current  Reports on Form 8-K and Form
8-K/A filed with the Securities and Exchange Commission on June 29, July 6, July
17 and July 19, 2001.

PART III

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

ITEM 14.  CONTROLS AND PROCEDURES.

     Foamex L.P.'s  management,  including its Chief Executive Officer and Chief
Financial  Officer,  have conducted an evaluation of the effectiveness of Foamex
L.P.'s  disclosure  controls  and  procedures  as defined in Exchange  Act Rules
13a-14(c) and 15d-14(c) as of a date within 90 days of the filing of this Annual
Report on Form 10-K (the "Evaluation Date"). Based on the evaluation,  the Chief
Executive  Officer  and  Chief  Financial  Officer  concluded  that  as  of  the
Evaluation  Date,  the  disclosure  controls  and  procedures  are  effective in
ensuring  that all  material  information  required  to be filed in this  annual
report  has been  made  known to them in a timely  fashion.  There  have been no
significant changes in internal controls, or in factors that could significantly
affect internal controls,  subsequent to the date of the Chief Executive Officer
and Chief Financial Officer completed their evaluation.


                                       31
<PAGE>



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

<TABLE>
<CAPTION>
(a)    Financial statements.
<S>                                                                                                               <C>
       Foamex L.P.  and Subsidiaries
         Independent Auditors' Report                                                                           F-2
         Reports of Independent Accountants                                                                     F-3
         Consolidated Balance Sheets as of December 29, 2002 and December 31, 2001                              F-5
         Consolidated Statements of Operations for the years ended December 29, 2002,
           December 31, 2001 and 2000                                                                           F-7
         Consolidated Statements of Cash Flows for the years ended December 29, 2002
           December 31, 2001 and 2000                                                                           F-8
         Consolidated Statements of Partners' Deficiency for the years ended December 29, 2002
           December 31, 2001 and 2000                                                                           F-9
         Notes to Consolidated Financial Statements                                                            F-10

       Foamex Capital Corporation
         Independent Auditors' Report                                                                          F-42
         Balance Sheets as of December 29 2002 and December 31, 2001                                           F-43
         Notes to Balance Sheets                                                                               F-44

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

(b)    Reports on Form 8-K.

          A report dated  November  11, 2002,  was filed for Item 8. - Change in
          Fiscal Year,  concerning a press release  announcing  that 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 and that because
          the transition  period was less than one month,  no transition  report
          was required.

(c)    Exhibits.

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(v)  - Third Amendment to the Partnership  Agreement,  dated December 23,
            1997.
3.2.5(x)  - Fourth Amendment to the Partnership Agreement,  dated February 27,
            1998.
3.2.6(aa) - Fifth  Amendment  to the  Partnership  Agreement,  dated March 26,
            2002.
3.3(y)    - Certificate of Incorporation of FMXI.
3.4(y)    - By-laws of FMXI.
3.5(k)    - Certificate of Incorporation of Foamex Capital Corporation.
3.6(k)    - By-laws of Foamex Capital Corporation.
3.7(bb)   - Certificate of Formation of Foamex Carpet Cushion LLC.
3.8(bb)   - Limited Liability Company Agreement of Foamex Carpet Cushion LLC.
3.9(dd)   - Certificate of Incorporation of Foamex Asia, Inc.
3.10(dd)  - By-laws of Foamex Asia, Inc.
3.11(dd)  - Certificate of Incorporation of Foamex Latin America, Inc.
3.12(dd)  - By-laws of Foamex Latin America, Inc.
3.13(dd)  - Certificate of Incorporation of Foamex Mexico, Inc.
3.14(dd)  - By-laws of Foamex Mexico, Inc.


                                       32
<PAGE>


3.15(dd)  - Certificate of Incorporation of Foamex Mexico II, Inc.
3.16(dd)  - By-laws of Foamex Mexico II, Inc.
4.1(bb)   - 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.
4.2(bb)   - 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.
4.3(d)    - Indenture,  dated  as of  June 12,  1997,  by and among Foamex L.P.,
            FCC, the subsidiary guarantors and The Bank of New York, as trustee,
            relating  to  $150,000,000   principal   amount  of  9  7/8%  Senior
            Subordinated   Notes  due  2007,   including   the  form  of  Senior
            Subordinated Note and Subsidiary Guarantee.
4.4(v)    - First  Supplemental  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.
4.5(x)    - 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.  ("General Felt"),
            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.
4.6(bb)   - 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.
4.7(v)    - 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.
4.8(x)    - 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.
4.9(bb)   - 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.
4.10.1(cc)- Commitment  Letter and  Attachment,  dated  July  5, 2002,  from the
            Bank of Nova Scotia to Foamex Canada Inc.
4.11(bb)  - Pledge  and Security  Agreement, dated as of March 25, 2002, made by
            Foamex L.P. and U.S. Bank National Association, as collateral agent.
4.12(bb)  - Patent Security  Agreement,  dated  as  of March 25, 2002, by Foamex
            L.P.  in favor of U.S.  Bank  National  Association,  as  collateral
            agent.
4.13(bb)  - Trademark  Security  Agreement,  dated   as  of March 25,  2002,  by
            Foamex  L.P.  in  favor  of  U.S.  Bank  National  Association,   as
            collateral agent.
4.14(bb)  - Copyright  Security  Agreement,  dated  as  of  March 25,  2002,  by
            Foamex  L.P.  in  favor  of  U.S.  Bank  National  Association,   as
            collateral agent.
4.15(bb)  - Third Amended  and Restated  Foamex International Guaranty, dated as
            of March 25, 2002, made by Foamex International in favor of Citicorp
            USA, Inc., as collateral agent.
4.16(bb)  - Amended  and Restated  Guaranty, dated as of March 25, 2002, made by
            FMXI,  Inc. and the subsidiary  guarantors in favor of Citicorp USA,
            Inc., as collateral agent,  each lender,  each issuing bank and each
            other holder of an obligation.
4.17(bb)  - Amended  and Restated  Pledge  and Security  Agreement,  dated as of
            March 25, 2002, made by Foamex  International,  FMXI,  Inc.,  Foamex
            L.P. in favor of Citicorp USA, Inc., as collateral agent.
4.18(bb)  - Patent  Security  Agreement,  dated  as  of March 25, 2002,  made by
            Foamex L.P. in favor of Citicorp USA, Inc., as collateral agent.


                                       33
<PAGE>



4.19(bb)  - Trademark  Security Agreement,  dated  as of March 25, 2002, made by
            Foamex L.P. and Foamex Carpet  Cushion LLC in favor of Citicorp USA,
            Inc., as collateral agent.
4.20(bb)  - Copyright  Security  Agreement,  dated as of March 25, 2002, made by
            Foamex L.P. in favor of Citicorp USA, Inc. as collateral agent.
4.21(bb)  - Credit  Agreement,  dated  June 12, 1997, as amended and restated as
            of February 27, 1998, as further amended and restated as of June 29,
            1999 and as further  amended and restated as of March 25, 2002 among
            Foamex L.P., FMXI,  Inc., the  institutions  from time to time party
            thereto as lenders, the institutions from time to time party thereto
            as issuing  banks and Citicorp USA, Inc. and The Bank of Nova Scotia
            as agents.
4.22(ee)  - Amendment  No. 1, dated  as  of  November  15,  2002,  to the Credit
            Agreement,  dated as of June 12, 1997, as amended and restated as of
            February  27, 1998,  as further  amended and restated as of June 29,
            1999 and as further  amended and restated as of March 25,  2002,  by
            and among Foamex L.P., FMXI, Inc., the financial  institutions party
            thereto from time to time as lenders (the "Lenders"),  the financial
            institutions  party  thereto from time to time as issuing banks (the
            "Issuing Banks"), Citicorp USA, Inc., as administrative agent and as
            collateral agent for the Lenders and the Issuing Banks, and The Bank
            of Nova Scotia,  as funding agent and as  syndication  agent for the
            Lenders and the Issuing Banks.
4.23(bb)  - Intercreditor  Agreement,  dated  as of March 25, 2002, by and among
            Citicorp USA, Inc., as Senior Agent, U.S. Bank National Association,
            as trustee and collateral  agent under the Indenture for the 10 3/4%
            Senior Secured Notes and Foamex L.P.
10.1(e)   - Reimbursement  Agreement, dated  as of March 23, 1993, between Trace
            Holdings and General Felt Industries, Inc.
10.2(e)   - 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(f)   - 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(f)   - First  Amendment,  dated  as  of  December  19,  1991,  to the Trace
            Holdings Asset Transfer Agreement.
10.5(f)   - 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(f)   - 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(f)   - First  Amendment,  dated  as  of December 19, 1991, to the RFC Asset
            Transfer Agreement.
10.8(f)   -  Schedule  5.03  to  the RFC Asset  Transfer  Agreement  (the  "5.03
            Protocol").
10.9(e)   - The  5.03 Protocol  Assumption  Agreement,  dated  as of October 13,
            1992, between RFC and Foamex L.P.
10.10(e)  - Letter  Agreement between  Trace Holdings and Recticel regarding the
            Recticel Guaranty, dated as of July 22, 1992.
10.11(g)  - First  Amended  and  Restated  Tax  Sharing  Agreement,  dated as of
            December 14, 1993,  among Foamex L.P.,  Trace Foam,  FMXI and Foamex
            International.
10.12(d)  - First   Amendment  to   First  Amended   and  Restated  Tax  Sharing
            Agreement,  dated as of June 12,  1997,  by and among  Foamex  L.P.,
            Foamex International, FMXI and Trace Foam.
10.13(o)  - Second   Amendment  to  First  Amended   and  Restated  Tax  Sharing
            Agreement,  dated as of December 23, 1997, by and among Foamex L.P.,
            Foamex International, FMXI, and Trace Foam.
10.14(q)  - Third  Amendment   to  First   Amended  and   Restated  Tax  Sharing
            Agreement,  dated as of February  27,  1998,  by and between  Foamex
            L.P., Foamex International and FMXI.
10.15(h)  - Tax  Distribution  Advance Agreement, dated as of December 11, 1996,
            by and between Foamex L.P. and Foamex-JPS Automotive L.P.
10.16(d)  - Amendment  No. 1 to  Tax Distribution Advance Agreement, dated as of
            June 12, 1997, by and between Foamex L.P. and Foamex International.
10.17(f)+ - Salaried Incentive Plan of Foamex L.P. and Subsidiaries.
10.18(f)+ - Equity Growth Participation Program.
10.19(i)+ - The Foamex  L.P. Salaried  Pension Plan (formerly, "The General Felt
            Industries, Inc. Retirement Plan for Salaried Employees"), effective
            as of January 1, 1995.


                                       34
<PAGE>


10.20(m)  - The  Foamex L.P. Hourly  Pension Plan (formerly "The Foamex Products
            Inc.  Hourly Employee  Retirement  Plan"),  as amended  December 31,
            1995.
10.21(m)+ - Foamex L.P. 401(k) Savings Plan effective October 1, 1997.
10.22(t)+ - Foamex International Amended and Restated 1993 Stock Option Plan.
10.23(a)+ - Foamex International Non-Employee Director Compensation Plan.
10.24(x)+ - Foamex   International  Equity  Incentive   Plan  for   Non-Employee
            Directors.
10.25(x)+ - Foamex International Key Employee Incentive Bonus Plan.
10.26(y)+ - Agreement  with   Consultant,  dated  April 24, 2001  by and between
            Robert J. Hay and Foamex L.P.
10.27(z)+ - Foamex Supplemental  Executive  Retirement Plan, effective as of May
            15, 2001.
10.28(z)+ - Split  Dollar Life Insurance  Agreement Between Foamex International
            Inc. and Marshall S. Cogan, dated as of December 31, 2001.
10.29(ff)+- Foamex International 2002 Stock Award Plan.
10.30(v)+ - Employment  Agreement,  dated  as of January 1, 1999, by and between
            Foamex International and Marshall S. Cogan.
10.31(r)+ - Employment  Agreement,  dated  as  of March 16, 1999, by and between
            Foamex International and John G. Johnson, Jr.
10.32(v)+ - Employment Agreement, amended  effective as of  January 29, 2001, by
            and between Foamex International and John Televantos.
10.33(y)+ - Termination and Release  Agreement  dated as  of January 30, 2001 by
            and between Foamex International and John G. Johnson, Jr.
10.34(z)+ - Termination and Release  Agreement dated as of  December 6, 2001, by
            and between the Foamex International and John Televantos.
10.36(dd)+- Employment Agreement,  dated  as of August 20, 2002, by  and between
            Foamex International and Thomas E. Chorman.
10.38(dd)+- Employment Agreement,  dated as  of  August 20, 2002, by and between
            Foamex International and Peter W. Johnson.
10.39(dd)+- Employment  Agreement,  entered  into  on  September  10,  2002  and
            effective  as of July 22, 2002,  between  Foamex  International  and
            Virginia Kamsky.
10.40(z)+ - First Amendment to Employment Agreement,  dated  as  of December 31,
            2001,  by and between  Foamex  International  Inc.  and  Marshall S.
            Cogan.
10.41(p)  - Supply  Agreement,  dated as  of February 27,  1998,  by and between
            Foamex L.P. and General Felt (as assigned to Foamex Carpet).
10.42(p)  - Administrative Services  Agreement,  dated as  of February 27, 1998,
            by and between  Foamex L.P.  and General Felt (as assigned to Foamex
            Carpet).
10.43(o)  - Loan  Agreement  between  Hua  Kee Company  Limited and Foamex Asia,
            Inc., dated as of July 8, 1997.
10.44(dd)+- Agreement  with  Consultant,  dated  August  8, 2002, by and between
            Raymond E. Mabus, Jr. and Foamex International.
10.45(gg)+- Severance  Agreement and Release, dated  as of November 23, 2002, by
            and between Foamex International and Theodore J. Kall.
10.46(gg)+- Severance Agreement  and Release,  dates as of  January 31, 2003, by
            and between Foamex International and Pratt W. Wallace, Jr.
10.47(gg)+- Employment  Agreement,  dated  as  of March 24, 2003, by and between
            Foamex International and K. Douglas Ralph.
21*       - Subsidiaries of Foamex L.P.

--------------------------------------------------------
*    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.



                                       35
<PAGE>


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

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

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

(f)  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.

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

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

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

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

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

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

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

(n)  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.

(o)  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.

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

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

(r)  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.

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

(t)  Incorporated  herein by reference to the Exhibit to Foamex  International's
     definitive proxy statement dated May 31, 2000.


                                       36
<PAGE>




(u)  Incorporated  herein by reference  to the Exhibit to the Current  Report on
     Form 8-K of  Foamex  International  reporting  an event  that  occurred  on
     November 2, 2000.

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

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

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

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

(z)  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.

(aa) Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
     International for the quarterly period ended March 31, 2002.

(bb) 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.

(cc) Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
     International for the quarterly period ended June 30, 2002.

(dd) 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.

(ee) Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
     L.P. and FCC for the quarterly period ended September 29, 2002.

(ff) Incorporated  herein by reference  to Appendix C to Foamex  International's
     definitive proxy statement dated April 30, 2002.

(gg) 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.

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.



                                       37
<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 27th day of March 2003.



                                      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/ Marshall S. Cogan            Director of FMXI and FCC       March 27, 2003
----------------------------
    Marshall S. Cogan



/s/ George L. Karpinski          Director of FMXI and FCC       March 27, 2003
----------------------------
    George L. Karpinski


                                       38
<PAGE>




                                  CERTIFICATION


I, Thomas E. Chorman, certify that:


1.   I have  reviewed  this annual report on Form 10-K of Foamex L.P. and Foamex
     Capital Corporation;


2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;


3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;


4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:


     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;


     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and


     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;


5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):


     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and


     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and


6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.



Date:  March 27, 2003

Foamex L.P.                                      Foamex Capital Corporation


/s/ Thomas E. Chorman                            /s/ Thomas E. Chorman
-------------------------------------            -------------------------------
Thomas E. Chorman                                Thomas E. Chorman
President and Chief Executive Officer            President



                                       39
<PAGE>




                                  CERTIFICATION


I, K. Douglas Ralph, certify that:


1.   I have  reviewed  this annual report on Form 10-K of Foamex L.P. and Foamex
     Capital Corporation.;


2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;


3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;


4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:


     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;


     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and


     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;


5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):


     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and


     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and


6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.



Date:  March 27, 2003

Foamex L.P.                                  Foamex Capital Corporation


/s/ K. Douglas Ralph                         /s/ K. Douglas Ralph
-----------------------------                ------------------------------
K. Douglas Ralph                             K. Douglas Ralph
Executive Vice President and                 Executive Vice President and
Chief Financial Officer                      Chief Financial Officer


                                       40
<PAGE>




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


<TABLE>
<CAPTION>
       Financial Statements of Registrants

         Foamex L.P.
<S>                                                                                                               <C>
           Independent Auditors' Report                                                                         F-2
           Reports of Independent Accountants                                                                   F-3
           Consolidated Balance Sheets as of December 29, 2002 and December 31, 2001                            F-5
           Consolidated Statements of Operations for the years ended December 29, 2002 and
              December 31, 2001 and 2000                                                                        F-7
           Consolidated Statements of Cash Flows for the years ended December 29, 2002 and
              December 31, 2001 and 2000                                                                        F-8
           Consolidated Statements of Partners' Deficiency for the years ended December 29, 2002 and
              December 31, 2001 and 2000                                                                        F-9
           Notes to Consolidated Financial Statements                                                          F-10

         Foamex Capital Corporation
           Independent Auditors' Report                                                                        F-42
           Balance Sheets as of December 29, 2002 and December 31, 2001                                        F-43
           Notes to Balance Sheets                                                                             F-44
</TABLE>


                                      F-1
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying  consolidated balance sheets of Foamex L.P. and
subsidiaries  (the  "Company"),  an indirect  wholly-owned  subsidiary of Foamex
International  Inc.  as of December  29, 2002 and  December  31,  2001,  and the
related  consolidated  statements  of  operations,   cash  flows  and  partners'
deficiency  for  the  two  years  then  ended.  Our  audits  also  included  the
consolidated financial statement schedule as of and for the years ended December
29, 2002 and December 31, 2001 listed in the Index at Item 15a. The consolidated
financial statements and financial statement schedule give retroactive effect to
the common  control  merger of Foamex L.P. and  subsidiaries  and Foamex  Carpet
Cushion,  Inc., which has been accounted for in a manner similar to a pooling of
interests as described in Note 1 to the consolidated financial statements. 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 audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial  position of the Company at December 29, 2002
and December 31, 2001,  and the results of its operations and its cash flows for
the years then ended in conformity with accounting principles generally accepted
in the  United  States of  America.  Also,  in our  opinion,  such 2002 and 2001
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.

The 2000 financial  statements  were audited by other  auditors.  We audited the
adjustments  described  in Note 1 that were  applied to restate  such  financial
statements to give  retroactive  effect to the common  control  merger of Foamex
L.P. and  subsidiaries  and Foamex  Carpet  Cushion,  Inc. In our opinion,  such
adjustments are appropriate and have been properly applied.  We also audited the
allocations of the condensed consolidating financial information and the related
eliminations  included in Note 16 for the year ended  December 31, 2000.  In our
opinion,  such  allocations  and  eliminations  are  appropriate  and have  been
properly applied.

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 18, 2003
Parsippany, New Jersey


                                      F-2
<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Partners of Foamex L.P.:

In our opinion, the consolidated statements of operations,  partners' deficiency
and cash flows for the year  ended  December  31,  2000 of Foamex  L.P.  and its
subsidiaries (not presented  separately  herein) present fairly, in all material
respects,  the  results  of  operations  and cash flows of Foamex  L.P.  and its
subsidiaries for the year ended December 31, 2000,  (before giving effect to the
adjustments  to give  retroactive  effect to the  contribution  of Foamex Carpet
Cushion,  Inc.,  described in Note 1 and excluding the  information  included in
Note 16,  "Guarantor  Information")  in conformity  with  accounting  principles
generally accepted in the United States of America. In addition, in our opinion,
the  financial  statement  schedule of Foamex  L.P.  and its  subsidiaries  (not
presented  separately  herein) as of and for the year ended  December  31, 2000,
(before  giving  effect to the  adjustments  to give  retroactive  effect to the
contribution  of  Foamex  Carpet  Cushion,  Inc.,  described  in  Note  1)  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. These financial statements and the financial statement schedule are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these financial  statements and financial statement schedule based on
our  audit.  We  conducted  our audit of these  statements  in  accordance  with
auditing  standards  generally  accepted in the United States of America,  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

As discussed in Note 7, during the year ending December 31, 2001,  Foamex L.P.'s
financial  debt  covenants,  with which  Foamex L.P.  must comply on a quarterly
basis, become more restrictive.  Management's plans in regard to this matter are
also described in Note 7.




/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania
March 30, 2001



                                      F-3
<PAGE>




                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Stockholders of Foamex Carpet Cushion, Inc.:


In our opinion,  the  statements of  operations,  stockholder's  equity and cash
flows for the year ended December 31, 2000 of Foamex Carpet  Cushion,  Inc. (not
presented  separately  herein) present  fairly,  in all material  respects,  the
results of operations and cash flows of Foamex Carpet Cushion, Inc. for the year
ended  December 31, 2000, in conformity  with  accounting  principles  generally
accepted in the United States of America.  These  financial  statements  are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards  generally accepted in
the United  States of America,  which require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion.

As discussed in Note 5 to the financial statements Foamex Carpet Cushion, Inc.'s
financial debt covenants,  with which Foamex Carpet Cushion, Inc. must comply on
a quarterly basis, become more restrictive. Management's plans in regard to this
matter are also described in Note 5.




/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania
March 30, 2001


                                      F-4
<PAGE>




                          FOAMEX L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                             December 29,           December 31,
                                                                                2002                   2001
                                                                             ------------           ------------
ASSETS                                                                                  (thousands)
CURRENT ASSETS
<S>                                                                            <C>                    <C>
    Cash and cash equivalents                                                  $  4,363               $ 15,059
    Accounts receivable, net of allowance for doubtful
      accounts and discounts of $10,311 in 2002 and $10,940 in 2001             191,546                173,461
    Inventories                                                                  98,010                 89,430
    Other current assets                                                         22,558                 32,685
                                                                               --------               --------

            Total current assets                                                316,477                310,635
                                                                               --------               --------

PROPERTY, PLANT AND EQUIPMENT
    Land and land improvements                                                    7,272                  7,512
    Buildings and leasehold improvements                                        119,582                116,232
    Machinery, equipment and furnishings                                        287,847                275,261
    Construction in progress                                                      3,868                  8,199
                                                                               --------               --------
            Total                                                               418,569                407,204

    Less accumulated depreciation and amortization                             (236,531)              (206,407)
                                                                               --------               --------
       Property, plant and equipment, net                                       182,038                200,797

GOODWILL                                                                        125,321                209,503

DEBT ISSUANCE COSTS, net of
accumulated amortization of $14,079 in 2002 and
$14,643 in 2001                                                                  36,827                 13,690

OTHER ASSETS                                                                     34,620                 33,025
                                                                               --------               --------

TOTAL ASSETS                                                                   $695,283               $767,650
                                                                               ========               ========
</TABLE>



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



                                      F-5
<PAGE>


                          FOAMEX L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              December 29,         December 31,
                                                                                 2002                  2001
                                                                              -----------          ------------
LIABILITIES AND PARTNERS' DEFICIENCY                                                     (thousands)
CURRENT LIABILITIES
<S>                                                                            <C>                    <C>
    Current portion of long-term debt                                          $       46             $  4,023
    Current portion of long-term debt - related party                                   -               14,040
    Accounts payable                                                               87,394              128,756
    Accrued employee compensation and benefits                                     26,330               25,858
    Accrued interest                                                               14,173                8,946
    Accrued restructuring                                                          14,424               12,392
    Accrued customer rebates                                                       18,813               21,869
    Cash overdrafts                                                                17,737                4,073
    Other accrued liabilities                                                      17,665               25,405
    Deferred income taxes                                                           1,864                1,632
                                                                               ----------             --------
      Total current liabilities                                                   198,446              246,994


LONG-TERM DEBT                                                                    738,540              630,682

LONG-TERM DEBT - RELATED PARTY                                                          -               17,550

ACCRUED EMPLOYEE BENEFITS                                                          48,022               25,944

DEFERRED INCOME TAXES                                                                   -                1,542

ACCRUED RESTRUCTURING                                                               8,347               12,604

OTHER LIABILITIES                                                                   7,714               10,462
                                                                               ----------             --------
    Total liabilities                                                           1,001,069              945,778
                                                                               ----------             --------

COMMITMENTS AND CONTINGENCIES

PARTNERS' DEFICIENCY
    General partner                                                             (240,107)             (130,095)
    Limited partner                                                                    -                     -
    Accumulated other comprehensive loss                                         (56,458)              (36,322)
    Notes and advances receivable from partner                                         -                (2,490)
    Notes receivable from related party                                           (9,221)               (9,221)
                                                                               ----------             --------
      Total partners' deficiency                                                (305,786)             (178,128)
                                                                               ----------             --------
TOTAL LIABILITIES AND PARTNERS' DEFICIENCY                                     $  695,283             $767,650
                                                                               ==========             ========
</TABLE>


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


                                      F-6
<PAGE>


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

<TABLE>
<CAPTION>
                                                                  December 29,      December 31,    December 31,
                                                                     2002              2001            2000
                                                                  ------------      ------------    ------------
                                                                                    (thousands)
<S>                                                               <C>               <C>             <C>
NET SALES                                                         $1,328,094        $1,252,904      $1,257,778

COST OF GOODS SOLD                                                 1,186,669         1,072,823       1,085,753
                                                                  ----------        ----------      ----------

GROSS PROFIT                                                         141,425           180,081         172,025

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                                          94,326            79,286          68,374

RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES                            4,799            36,068           6,268
                                                                  ----------        ----------      ----------

INCOME FROM OPERATIONS                                                42,300            64,727          97,383

INTEREST AND DEBT ISSUANCE EXPENSE                                    66,607            63,237          75,229

INCOME FROM EQUITY INTEREST IN JOINT VENTURE                           1,734             1,645           1,652

OTHER INCOME (EXPENSE), NET                                               74            (1,853)         (1,550)
                                                                  ----------        ----------      ----------

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES                      (22,499)            1,282          22,256

PROVISION FOR INCOME TAXES                                             1,911             3,543           2,653
                                                                  ----------        ----------      ----------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS AND
    CUMULATIVE EFFECT OF ACCOUNTING CHANGE                           (24,410)           (2,261)         19,603

EXTRAORDINARY ITEMS, NET OF INCOME TAXES                              (2,794)                -               -

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

NET INCOME (LOSS)                                                 $  (99,170)       $   (2,261)     $   19,603
                                                                  ==========        ==========      ==========
</TABLE>


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


                                      F-7
<PAGE>


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

<TABLE>
<CAPTION>
                                                               December 29,      December 31,     December 31,
                                                                  2002              2001             2000
                                                               ------------      ------------     ------------
OPERATING ACTIVITIES                                                              (thousands)
<S>                                                             <C>               <C>             <C>
   Net income (loss)                                            $(99,170)         $ (2,261)       $ 19,603
   Adjustments to reconcile net income (loss) to net
     cash provided by (used in) operating activities:
     Depreciation and amortization                                31,592            34,028          36,628
     Amortization of debt issuance costs, debt premium
        and debt discount                                          4,797             1,288           1,335
     Extraordinary loss on extinguishment of debt                  2,794                 -               -
     Asset impairment and other charges                            2,503            13,811           2,621
     Cumulative effect of accounting change                       71,966                 -               -
     Loss on disposition of assets                                     -               963           1,654
     Provision for uncollectible accounts                          2,336             5,479           2,838
     Retirement benefit funding greater than expense              (1,604)           (1,752)         (7,198)
     Deferred income taxes                                          (738)            1,068            (425)
     Other, net                                                       47                 2             344
   Changes in operating assets and liabilities:
     Accounts receivable                                         (20,421)           (9,578)         (6,857)
     Inventories                                                  (8,580)           15,177          (2,452)
     Accounts payable                                            (41,362)           45,867             252
     Accrued restructuring                                        (2,225)           15,549          (3,352)
     Other assets and liabilities                                  8,447           (10,937)          7,873
                                                                --------          --------         -------
        Net cash provided by (used in) operating activities      (49,618)          108,704          52,864
                                                                --------          --------         -------

INVESTING ACTIVITIES
   Capital expenditures                                          (15,582)          (22,482)        (23,593)
   Proceeds from sale of assets                                       21               600           3,570
   Repayment of note from Foamex International                         -             2,500               -
   Acquisitions                                                        -           (17,559)              -
   Decrease (increase) in revolving loan with Foamex
     International                                                 2,490                 -          (1,814)
   Other investing activities                                     (7,990)           (1,130)         (1,850)
                                                                --------          --------         -------
        Net cash used in investing activities                    (21,061)          (38,071)        (23,687)
                                                                --------          --------         -------

FINANCING ACTIVITIES
   Repayments of short-term borrowings                                 -                 -          (1,627)
   Net proceeds from (repayments of) revolving loans             (73,176)          (20,905)         32,220
   Proceeds from long-term debt                                  356,590                 -               -
   Repayments of long-term debt                                 (190,450)           (8,538)        (20,550)
   Repayments of long-term debt-related party                    (31,590)          (15,795)        (41,898)
   Increase (decrease) in cash overdrafts                         13,664            (2,812)          1,029
   Debt issuance costs                                           (29,981)           (2,578)              -
   Interest rate swaps                                            14,821                 -               -
   Distribution paid to partners                                       -            (3,861)            (41)
   Other financing activities                                        105            (5,958)              -
                                                                --------          --------         -------

        Net cash provided by (used in) financing activities       59,983           (60,447)        (30,867)
                                                                --------          --------         -------

Net increase (decrease) in cash and cash equivalents             (10,696)           10,186          (1,690)

Cash and cash equivalents at beginning of period                  15,059             4,873           6,563
                                                                --------          --------         -------

Cash and cash equivalents at end of period                      $  4,363          $ 15,059         $ 4,873
                                                                ========          ========         =======
</TABLE>

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


                                      F-8
<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)
2000
<S>                                       <C>        <C>           <C>             <C>         <C>         <C>
Balances at January 1, 2000                $(139,161) $      -      $ (8,923)       $(3,176)    $(9,221)    $(160,481)
Net income                                       392    19,211                                                 19,603
Minimum pension liability adjustment                                 (14,628)                                 (14,628)
Foreign currency translation adjustment                                 (910)                                    (910)
   Comprehensive income                                                                                         4,065
Distributions                                    (10)     (471)                                                  (481)
Revolving loan with Foamex International                                             (1,814)                   (1,814)
Other                                                      208                                                    208
Offset balance against Limited Partner
  deficit assumed by General Partner          18,948   (18,948)                                                     -
                                           ---------  --------      --------         ------     -------     ---------
Balances at December 31, 2000               (119,831)        -       (24,461)        (4,990)     (9,221)     (158,503)


2001
Net loss                                        (45)    (2,216)                                                (2,261)
Minimum pension liability adjustment                                 (10,782)                                 (10,782)
Foreign currency translation adjustment                               (1,079)                                  (1,079)
   Comprehensive loss                                                                                         (14,122)
Distributions and other                        (160)    (7,843)                                                (8,003)
Repayment of note receivable from Foamex
   International                                                                      2,500                     2,500
Offset balance against Limited Partner
  deficit assumed by General Partner        (10,059)    10,059                                                      -
                                          ---------   --------      --------         ------     -------     ---------
Balances at December 31, 2001              (130,095)         -       (36,322)        (2,490)     (9,221)     (178,128)

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




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


                                      F-9
<PAGE>


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

1.   ORGANIZATION AND BASIS OF PRESENTATION

     Organization

     Foamex L.P. operates in the flexible polyurethane and advanced polymer foam
products  industry.  As of December  29, 2002,  Foamex  L.P.'s  operations  were
conducted directly and through its wholly-owned subsidiaries, Foamex Canada Inc.
("Foamex Canada"),  Foamex Latin America,  Inc. ("Foamex Mexico"),  Foamex Asia,
Inc. ("Foamex Asia") and through Foamex Carpet Cushion,  Inc. ("Foamex Carpet").
Foamex Carpet was converted to a limited  liability  company and was contributed
by Foamex  International  Inc. ("Foamex  International") to Foamex L.P. on March
25, 2002. The  contribution  of Foamex Carpet has been accounted for as a merger
of entities  under common control and has been recorded in a manner similar to a
pooling of interests. Accordingly, the consolidated financial statements include
the accounts of Foamex Carpet for all periods presented. Adjustments recorded to
restate previously reported financial statements for the year ended December 31,
2000 consisted of those  necessary to include the balances and results of Foamex
Carpet and to eliminate  intercompany  balances and transactions  between Foamex
L.P. and Foamex Carpet.  Financial information  concerning the business segments
of Foamex L.P. is included in Note 12.

     The following  table  represents  selected  historical  financial  data for
Foamex L.P. and subsidiaries and Foamex Carpet Cushion, Inc. and the adjustments
required  to affect the merger of entities  under  common  control  similar to a
pooling of interests.

<TABLE>
<CAPTION>
                                                                                               Consolidated
                                          Foamex L.P.     Foamex Carpet        Adjustments      Foamex L.P.
                                          -----------     -------------        -----------     ------------
       2000 Income Statement
<S>                                       <C>               <C>                 <C>              <C>
         Net Sales                        $1,161,017        $270,898            $(174,137)       $1,257,778
         Income from Operations           $   84,115        $ 13,268                    -        $   97,383
         Net Income                       $   13,268        $  6,335                    -        $   19,603
</TABLE>

     Foamex  L.P.  has 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
2002  includes  the 52 weeks ended  December  29,  2002,  after  adjustment  for
December 31, 2001 which was included in the prior year.

     Foamex International Shareholder and Change in Control Developments

     Trace International  Holdings,  Inc. ("Trace") is a privately held company,
which  owned  approximately  29% of Foamex  International's  outstanding  voting
common stock at September  30, 2000,  and whose former  Chairman  also serves as
Foamex  International's  Chairman.  Foamex International's common stock owned by
Trace was pledged as collateral against certain of Trace's obligations.  Certain
credit agreements and promissory notes of Foamex  International's  subsidiaries,
pursuant to which  approximately  $401.1  million of debt was  outstanding as of
September  30, 2000,  provided  that a "change of control"  would be an event of
default and could result in the  acceleration of such  indebtedness.  "Change of
control" means, for this purpose, that (i) a person or related group, other than
Trace,  beneficially  owns more than 25% of Foamex  International's  outstanding
voting stock and (ii) such voting stock constitutes a greater percentage of such
voting stock than the amount beneficially owned by Trace. Additionally,  certain
indentures of Foamex L.P. and Foamex Capital Corporation ("FCC"), a wholly-owned
subsidiary of Foamex L.P., contain similar "change of control" provisions, which
require Foamex L.P. and FCC to tender for such notes at a price in cash equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid interest
thereon, if there is such a "change of control".

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


                                      F-10
<PAGE>



1.   ORGANIZATION AND BASIS OF PRESENTATION (continued)

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

     Under the Exchange  Agreement,  The Bank of Nova Scotia initially  received
1,500,000  shares  of  Foamex   International's  common  stock  from  the  Trace
bankruptcy estate and exchanged these common stock shares for 15,000 shares of a
new  class  of  Foamex  International's  non-voting  non-redeemable  convertible
preferred  stock (the  "Series B Preferred  Stock").  Each share of the Series B
Preferred  Stock can be  converted  into 100  shares  of Foamex  International's
common stock but only if such conversion would not trigger a "change of control"
event,  as  discussed  above.  The Series B  Preferred  Stock (a) is entitled to
dividends only if a dividend is declared on Foamex International's common stock,
(b) ranks senior to any future  preferred  stock issued by Foamex  International
and (c) is entitled to a  liquidation  preference  of $100 per share.  Following
this  exchange,  The Bank of Nova  Scotia  became  the  owner of  24.41%  of the
outstanding  shares of Foamex  International's  common stock when the  remaining
5,697,426 shares of Foamex  International's common stock were transferred to The
Bank  of  Nova  Scotia  from  the  Trace  bankruptcy   estate.   Certain  equity
transactions,  primarily the exercise of stock options, have reduced the Bank of
Nova Scotia's common stock ownership percentage to 23.6% at December 29, 2002.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

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

Accounting Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosures  of contingent  assets and  liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Concentration of Credit Risk

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

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


                                      F-11
<PAGE>


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition, Discounts and Rebates

     Revenue from sales, net of discounts and estimated returns,  allowances and
rebates,  is  recognized  when  product  title  and risk of loss  passes  to the
customer, which is primarily at the time of shipment.

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 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 at December 29, 2002
were $738.6 million and $490.3 million,  respectively,  and at December 31, 2001
were  $666.3  million  and  $603.4  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 2002,  2001 and 2000 was $29.1  million,  $26.4  million  and $28.7
million, respectively.

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

Capitalized Software Costs

     Foamex L.P.  expenses  costs incurred in the  preliminary  project stage of
developing or obtaining internal use software,  such as research and feasibility
studies, as well as costs incurred in the post-implementation/operational stage,
such as maintenance and training.  Capitalization of software  development costs
occurs  only  after  the  preliminary  project  stage  is  complete,  management
authorizes the project, and it is probable that the project will be


                                      F-12
<PAGE>


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

completed  and the  software  will  be  used  for  the  function  intended.  The
capitalized  costs are  amortized on a  straight-line  basis over the  estimated
useful life of the software, which is generally five years or less.

Impairment of Long-Lived Assets

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

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.

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.

Comprehensive Income (Loss)

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

Foreign Currency Translation

     The financial  statements of foreign subsidiaries have been translated into
U.S. dollars by using  period-end  exchange rates for the assets and liabilities
and the  average  exchange  rates for the  statements  of  operations.  Currency
translation  adjustments are included in accumulated other  comprehensive  loss.
Transaction gains (losses) are reflected in operations.

Research and Development

     Research and  development  costs are expensed as incurred.  Amounts charged
against  income were $4.8 million,  $3.1 million and $2.5 million in 2002,  2001
and 2000, respectively.

Start-Up Costs

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

Self Insurance

     Foamex L.P. is partially  self-insured  for a number of risks up to certain
limits  including  workers'  compensation,   medical,   automobile  and  general
liability.  Commercial  insurance  policies are carried for amounts in excess of
the self-insured amounts.


                                      F-13
<PAGE>


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Claims and Litigation

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

Income Taxes

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

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

Accounting Changes - Business Combinations

     During 2001, Statement of Financial Accounting Standards No. 141, "Business
Combinations"  ("SFAS No.  141") was issued.  SFAS No. 141  addresses  financial
accounting and reporting for business combinations and limits the accounting for
business  combinations to the purchase  method.  The statement was effective for
all business  combinations,  including the acquisition discussed in Note 3, with
an acquisition date of July 1, 2001, or later.

Accounting Changes - Goodwill and Other Intangible Assets

     Statement of Financial  Accounting  Standards No. 142,  "Goodwill and Other
Intangible Assets" ("SFAS No. 142") addresses financial accounting and reporting
for acquired  goodwill and other intangible  assets. A key change as a result of
implementing  SFAS No. 142 is that goodwill and certain other intangibles are no
longer amortized but are periodically  assessed for impairment,  and as a result
there may be more  volatility  in the  reported  results than under the previous
standard  because  impairment  losses  are  likely to occur  irregularly  and in
varying  amounts.  Any impairment of goodwill due to the initial  application of
SFAS No. 142 is discussed  below.  Any goodwill and intangible  assets  acquired
after June 30, 2001, including the acquisition  discussed in Note 3, are subject
to the  nonamortization  and amortization  provisions of SFAS No. 142. The other
provisions  of SFAS No. 142 were adopted by Foamex L.P. on January 1, 2002.  The
impact on Foamex L.P.'s financial  statement for prior years was limited to $6.0
million of annual goodwill amortization. Foamex L.P.'s adjusted net income would
have been $3.7  million in 2001 and $25.6  million in 2000,  if SFAS No. 142 had
been adopted retroactively to January 1, 2000.

     SFAS No. 142 provides a six-month  transitional  period from the  effective
date to perform an assessment of whether there is an indication that goodwill is
impaired.  Foamex L.P.  completed this assessment in the second quarter of 2002.
Step one of the  transitional  impairment  test uses a fair  value  methodology,
which differs from the  undiscounted  cash flow methodology that continues to be
used  for  intangible  assets  with an  identifiable  life.  We  identified  six
reporting  units  and  during  the  second  quarter  performed  step  one of the
transitional  impairment  test on  each of the  reporting  units.  Based  on the
results of step one of the transitional  impairment test, Foamex L.P. identified
one reporting unit in the Foam Products  segment,  the Carpet  Cushion  Products
reporting  unit and the Other  reporting  unit,  for which the  carrying  values
exceeded  the fair  values as of  January 1, 2002,  indicating  a



                                      F-14
<PAGE>



2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

potential  impairment  of goodwill  in those  reporting  units.  Step two of the
transitional  impairment  test,  to  determine  the  magnitude  of any  goodwill
impairment, was completed in the third quarter of 2002. The resulting impairment
loss of $72.0  million has been  recorded as a cumulative  effect of a change in
accounting  principle,  retroactive  to Foamex L.P.'s first  quarter  results of
operations in accordance with the transitional  implementation  guidance of SFAS
No.  142.  Foamex  L.P.  performed  its annual  goodwill  impairment  test as of
September  30, 2002 which did not result in the  recognition  of any  additional
impairment.

     Goodwill balances include:

<TABLE>
<CAPTION>
                                           Balance            Accounting                         Balance
           Segments                   December 31, 2001         Changes      Other  (1)     December 29, 2002
     ------------------------         -----------------       ----------     ----------     -----------------
                                                                   (thousands)
<S>                                        <C>                 <C>            <C>               <C>
     Foam Products                         $ 90,909            $ (7,771)      $ (8,869)         $ 74,269
     Carpet Cushion Products                 62,898             (60,401)             -             2,497
     Automotive Products                     37,244                   -         (2,558)           34,686
     Technical Products                      14,658                   -           (789)           13,869
     Other                                    3,794              (3,794)             -                 -
                                           --------            --------       --------          --------
         Total                             $209,503            $(71,966)      $(12,216)         $125,321
                                           ========            ========       ========          ========
</TABLE>

(1)  Principally the reversal of a deferred income tax valuation allowance.

Future Accounting Changes - Extinguishment of Debt

     On April 30, 2002,  Statement of Financial  Accounting  Standards  No. 145,
"Rescission of FASB  Statements  No. 4, 44, and 64,  Amendment of FASB Statement
No. 13, and Technical  Corrections"  ("SFAS No. 145") was issued. The provisions
of this  Statement  related to the rescission of Statement 4 shall be applied in
fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of
debt that was  classified as an  extraordinary  item in prior periods  presented
that  does  not  meet  the  criteria  in  Opinion  30 for  classification  as an
extraordinary item shall be reclassified. Early application of the provisions of
this  Statement  related to the  rescission  of Statement 4 is  encouraged.  The
adoption  of this  Statement  in 2003 will result in a  reclassification  of the
extraordinary items recorded during 2002.

Future Accounting Change - Guarantees

     In  November  2002,  the FASB issued  FASB  Interpretation  ("FIN") No. 45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees  of  Indebtedness  of  Others."  FIN No. 45  clarifies  the
requirements  of SFAS No. 5,  "Accounting  for  Contingencies,"  relating to the
guarantor's  accounting for and disclosures of certain  guarantees.  The initial
recognition and measurements  provisions of the interpretation are applicable on
a prospective  basis to guarantees  issued or modified  after December 31, 2002,
irrespective of the guarantor's fiscal year-end. The disclosure  requirements of
the interpretation  are effective for financial  statements of interim or annual
periods ending after December 15, 2002. The adoption of this  interpretation  is
not  expected  to have any impact on the  results  of  operations  or  financial
position of Foamex L.P.  Foamex L.P.  does not have any  disclosure  obligations
under this interpretation at December 29, 2002.

Reclassifications

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



                                      F-15
<PAGE>


3.   ACQUISITION

     On July 25, 2001, Foamex L.P.  purchased certain assets and assumed certain
liabilities of General Foam  Corporation,  a manufacturer of  polyurethane  foam
products for the automotive,  industrial,  and home  furnishings  markets,  at a
total cost of $18.5 million,  which resulted in goodwill of  approximately  $9.0
million.  The  business  was  acquired  due to its synergy  with  Foamex  L.P.'s
existing  business.  The  assets  purchased  primarily  included  inventory  and
machinery and equipment. The results of the acquired business have been included
in the  consolidated  financial  statements  since the date of acquisition.  The
effects of the acquisition on Foamex L.P.'s  consolidated  financial  statements
are not material.

4.   EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE

     In connection with the refinancing  transaction completed on March 25, 2002
(see Note 8), Foamex L.P.  wrote off debt  issuance  costs  associated  with the
early  extinguishment  of its  long-term  debt due to a  related  party  and its
revolving credit facility,  resulting in an extraordinary  loss of $4.2 million,
net of income tax benefit of $0.1 million.  In addition,  Foamex L.P.  purchased
and retired $49.0 million of its 13 1/2% senior  subordinated  notes,  including
unamortized debt premium of $2.5 million,  and $1.5 million of its 9 7/8% senior
subordinated notes resulting in an extraordinary gain of $1.4 million.

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

5.   RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES

     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.

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

     The 2001  Operational  Reorganization  Plan is expected to be substantially
completed in early 2003 and Foamex L.P. expects to complete all of the remaining
facility  closures and personnel  reductions  related to its 2002  restructuring
plan  during  2003,   primarily  in  the  first  six  months.   Terminations  of
approximately 300 employees for both plans are planned to take place in 2003.

2001

     During  2001,  Foamex L.P.  recorded  restructuring,  impairment  and other
charges of $36.1  million,  primarily  related to its December 2001  Operational
Reorganization Plan. Included in the Operational  Reorganization Plan were plant
facility closures,  reductions in support function personnel and cost reductions
in purchasing and logistics.  The  Operational  Reorganization  Plan  originally
included  severance and termination  benefits for approximately 700 employees at
plants, in support functions and in executive management.  A reevaluation of the
plan in 2002 reduced the number of  facilities  to be closed and as a result the
number of employees  planned to be terminated was reduced to approximately  500.
Approximately  340 of these  employees were  terminated in 2002.  Restructuring,
impairment and other charges  included an impairment  provision of $13.8 million
(net of  anticipated  proceeds  of $4.6  million)  to reduce  certain  leasehold
improvements  and  machinery  and  equipment  included in the Foam  Products and
Carpet Cushion Products segments to their estimated fair values.


                                      F-16
<PAGE>



5.   RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES (continued)

2000

     During 2000,  Foamex L.P.  recorded  $6.3 million for  restructuring  plans
which included  severance for  approximately 100 employees all of whom have been
terminated.

     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
                                          ---------    -------------    ----------        -----------    ---------
       2000                                                             (millions)
<S>                                         <C>            <C>            <C>                <C>            <C>
       Balance at January 1, 2000           $ 9.0          $10.1          $2.7               $(3.8)         $  -
       Provision                              6.3            1.4           2.3                 2.6             -
       Net cash receipts (spending)          (3.5)          (3.9)         (3.2)                3.6             -
       Asset impairment                      (2.6)             -             -                (2.6)            -
                                            -----          -----          ----               -----          ----
       Balance at December 31, 2000           9.2            7.6           1.8                (0.2)            -

       2001
       2001 Operational Reorganization
         Plan                                35.4           10.6           8.3                13.4           3.1
       Adjustments and other                  0.7           (0.4)         (0.3)                  -           1.4
       Net cash receipts (spending)          (6.5)          (3.1)         (2.0)                0.6          (2.0)
       Asset impairment                     (13.8)             -             -               (13.8)            -
                                            -----          -----          ----               -----          ----
       Balance at December 31, 2001          25.0           14.7           7.8                   -           2.5

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


     Foamex L.P. expects to spend  approximately  $14.4 million during 2003 with
the balance to be spent through 2012, primarily for lease costs.

6.   INVENTORIES

     The components of inventory are listed below.

                                          December 29,          December 31,
                                             2002                  2001
                                          ------------          ------------
                                                  (thousands)
     Raw materials and supplies             $60,588                 $53,398
     Work-in-process                         16,737                  12,476
     Finished goods                          20,685                  23,556
                                            -------                 -------
     Total                                  $98,010                 $89,430
                                            =======                 =======


                                      F-17
<PAGE>



7.   SHORT-TERM BORROWINGS

     Foamex  Canada  is a  wholly-owned  subsidiary  of  Foamex  L.P.  and has a
short-term  credit  facility that  provides for $8.0 million of Canadian  dollar
loans (U.S. dollar  equivalent of approximately  $5.1 million as of December 29,
2002) of which up to $2.0 million is available in U.S. dollar loans.  The amount
of borrowings  available is based on a combination  of accounts  receivable  and
inventory,  as defined in the  credit  facility.  Interest  on  Canadian  dollar
borrowings is based on the bank's prime lending rate plus 1 1/2%. On U.S. dollar
loans,  interest is based on the bank's  U.S.  dollar base rate in Canada plus 1
1/2%.  At December  29, 2002 and December  31,  2001,  there were no  short-term
borrowings  outstanding and approximately $5.1 million was available at December
29, 2002.

8.   LONG-TERM DEBT

     The components of long-term debt are listed below.

<TABLE>
<CAPTION>
                                                                       December 29,          December 31,
                                                                           2002                  2001
                                                                       ------------          -------------
       Foamex L.P. Credit Facility                                                (thousands)
<S>                                                                      <C>                    <C>
         Term Loan B (1)                                                  $ 39,262               $ 76,139
         Term Loan C (1)                                                    35,693                 69,218
         Term Loan D (1)                                                    51,700                100,259
         Term Loan E (1)                                                    16,290                      -
         Term Loan F (1)                                                    19,243                      -
         Revolving credit facility (1)                                      51,823                125,000
       10 3/4% Senior secured notes due 2009 (2) (4)                       314,237                      -
       9 7/8% Senior subordinated notes due 2007 (2)                       148,500                150,000
       13 1/2% Senior subordinated notes due 2005 (includes
         $2,486 and $6,515 of unamortized debt premium) (2)                 54,071                104,515
       Industrial revenue bonds                                              7,000                  7,000
       Other (net of unamortized debt discount of $137 in 2002
         and $281 in 2001)                                                     767                  2,574
                                                                          --------               --------
                                                                           738,586                634,705

       Less current portion                                                     46                  4,023
                                                                          --------               --------

       Long-term debt-unrelated parties                                   $738,540               $630,682
                                                                          ========               ========
</TABLE>


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

<TABLE>
<CAPTION>
                                                                       December 29,          December 31,
                                                                           2002                  2001
                                                                       ------------          -------------
                                                                                  (thousands)
<S>                                                                      <C>                    <C>
       Note payable to Foam Funding LLC (3)                               $      -               $ 31,590

       Less current portion                                                      -                 14,040
                                                                          --------               --------
       Long-term debt - related party                                     $      -               $ 17,550
                                                                          ========               ========
</TABLE>

(1)  Debt of Foamex L.P., guaranteed by Foamex International and FMXI, Inc.
(2)  Debt of Foamex L.P. and Foamex Capital Corporation.
(3)  Debt of Foamex Carpet.
(4)  Includes   $14.2   million  of  deferred   credit  on  interest  rate  swap
     transactions at December 29, 2002.


                                      F-18
<PAGE>



8.   LONG-TERM DEBT (continued)

     On March 25, 2002, Foamex L.P. and Foamex Capital Corporation issued $300.0
million of 10 3/4% Senior  Secured Notes due 2009 (the "Senior  Secured  Notes")
and amended the Foamex L.P.  Credit  Facility (the "Amended  Credit  Facility").
Under the Amended Credit Facility,  Foamex L.P. may borrow up to $262.2 million,
consisting of $162.2 million of term loans and a $100.0 million revolving credit
facility. Net proceeds from the Senior Secured Notes of $280.0 million were used
to  repay a  portion  of the debt  outstanding  under  the  Foamex  L.P.  Credit
Facility.  The $31.6 million note payable to a related party,  Foam Funding LLC,
was repaid with the initial proceeds of a new term loan under the Amended Credit
Facility.  Additionally,  financial  covenants  contained in the Amended  Credit
Facility  were  adjusted  to reflect  changes in the capital  structure  and the
current business environment of Foamex L.P. Under the covenants contained in the
Senior  Secured Notes and the Amended Credit  Facility,  Foamex L.P. was able to
spend up to $48.5  million  of the  proceeds  from the Senior  Secured  Notes to
repurchase or redeem some of its senior  subordinated  notes. In July and August
2002, Foamex L.P. utilized $48.5 million to purchase and retire $49.0 million of
its 13 1/2% senior  subordinated  notes,  including  unamortized debt premium of
$2.5 million, and $1.5 million of its 9 7/8% senior subordinated notes.

     Amended Credit Facility
     -----------------------

     The  Amended  Credit  Facility  consists  of (1) the new  revolving  credit
facility,  which is a non-amortizing revolving credit facility provided by a new
syndicate of lenders  (the "New  Revolving  Credit  Facility"),  which  provides
working  capital for Foamex L.P. and its  subsidiary  guarantors and funding for
other general corporate  purposes,  (2) Term B, C, and D loans, (3) a new Term E
Loan in the initial amount of $31.6 million, the proceeds of which were borrowed
at closing and used to repay in full the obligations  outstanding under the note
payable to Foam Funding LLC, and (4) a new Term F Loan in the initial  amount of
$25.0 million,  the proceeds of which were borrowed at closing and used to repay
indebtedness  outstanding  under the revolving  credit  facility.  The remaining
obligations  outstanding  under the revolving credit facility were repaid with a
portion of the proceeds from the issuance of the 10 3/4% Senior Secured Notes as
described below.

     The  commitments  under the New Revolving  Credit Facility are available to
Foamex L.P. in the form of (1) revolving  credit loans, (2) swing loans (subject
to a $20.0  million  sublimit)  and (3)  letters of credit  (subject  to a $40.0
million sublimit). At December 29, 2002, Foamex L.P. had available borrowings of
$27.6 million and letters of credit outstanding of $20.6 million.

     A portion of the net  proceeds  from the 10 3/4% Senior  Secured  Notes was
used to repay a portion of the existing term loans, the Term E Loan and the Term
F Loan.  Loans made under the New Revolving  Credit Facility will mature and the
commitments  under them will  terminate on June 30, 2005.  The Term B Loan,  the
Term E Loan and the Term F Loan will  mature on June 30,  2005,  the Term C Loan
will mature on June 30,  2006 and the Term D Loan will  mature on  December  29,
2006.  Each of the Term Loans will be subject  to  amortization  on a  quarterly
basis;  however,  after  giving  effect to the  prepayments  of the Term  Loans,
quarterly  amortization  payments will commence for the Term B Loan,  the Term E
Loan and the Term F Loan in 2004, for the Term C Loan in 2005 and for the Term D
Loan in 2006.

     Foamex L.P. is required to make  mandatory  prepayments  of loans under the
Amended Credit  Facility with: (1) the net cash proceeds  received from sales of
assets by Foamex L.P. or certain of its subsidiaries,  (2) the net cash proceeds
received from certain  issuances by Foamex L.P., or any of its  subsidiaries  of
indebtedness  for borrowed money or equity  interests and (3) 75% of excess cash
flow in any fiscal year,  such  percentage  to be reduced to 50% if the ratio of
outstanding obligations under the Amended Credit Facility to EBDAIT (as defined)
for such fiscal year is reduced to specified levels,  subject,  in each case, to
certain limited exceptions.

     Foamex L.P. is permitted to make voluntary  prepayments  and/or permanently
reduce the  commitments  under the New Revolving  Credit Facility in whole or in
part,  without  premium or penalty,  subject to  reimbursement  of the  lenders'
redeployment  costs  in the  case  of  prepayment  of  LIBO,  as  defined,  rate
borrowings,  other  than  at the  end  of any  interest  period.  All  voluntary
prepayments  of Term Loans will be  applied  to such  tranches  of Term Loans as
Foamex L.P. may select.



                                      F-19
<PAGE>


8.   LONG-TERM DEBT (continued)

     Foamex  International,  FMXI,  Inc.  and  each of  Foamex  L.P.'s  domestic
subsidiaries  continue to guarantee the repayment of the  obligations  under the
Amended  Credit   Facility.   The  Amended  Credit  Facility  is  secured  by  a
first-priority  lien  (subject to  permitted  liens) on  substantially  the same
collateral  that  secured the  obligations  under the prior  Foamex L.P.  credit
facility,  which includes  substantially  all of Foamex L.P.'s material tangible
and intangible assets. In addition, all of the partnership interests, all of the
capital stock or other equity  interests of Foamex L.P.'s domestic  subsidiaries
(including Foamex Carpet) and 65% of the capital stock or other equity interests
of Foamex  L.P.'s  first-tier  foreign  subsidiaries  are pledged as part of the
security for the obligations under the Amended Credit Facility.

     Borrowings  under the Amended  Credit  Facility bear interest at a floating
rate based upon (and including a margin over), at our option,  (1) the higher of
(a) the  funding  agent's  prime  rate and (b) 0.50% in  excess  of the  Federal
Reserve reported  weighted  average  overnight rate for federal funds or (2) the
higher of (x) 2.50% per annum and (y) the LIBO rate,  as defined,  as determined
by the funding agent. The effective interest rates at December 29, 2002 for Term
Loans B, C, D, E and F ranged  between 7.00% and 7.38%.  The effective  interest
rate for revolving  loans at December 29, 2002 was 7.75%.  The rates increase 25
basis points each quarter that Foamex L.P.'s leverage ratio, as defined, exceeds
5.00 to  1.00.  Once the  leverage  ratio  is  reduced  below  this  level,  the
cumulative  amount of any 25 basis point  adjustment  to the  interest  rates on
borrowings  are reset to zero.  At December 29, 2002,  the  calculated  leverage
ratio was 8.66 to 1.00. Accordingly,  an additional 25 basis point rate increase
will become effective early in the second quarter of 2003.

     The Amended Credit Facility  contains  affirmative  and negative  covenants
that,  subject  to  certain  exceptions,  are  substantially  similar  to  those
contained  in the prior  credit  facility.  The  Amended  Credit  Facility  also
includes the following financial  covenants,  as defined therein:  (1) a minimum
net worth test;  (2) a minimum ratio of EBDAIT to cash interest  expense;  (3) a
minimum ratio of EBDAIT to fixed charges; and (4) a maximum ratio of funded debt
to EBDAIT.  These covenants are substantially the same as those contained in the
prior credit facility with appropriate changes to take into account the issuance
of the Senior Secured Notes and the contribution of Foamex Carpet to Foamex L.P.
The Amended Credit  Facility also requires the refinancing of the 13 1/2% senior
subordinated notes on or prior to March 1, 2005.

     The Amended Credit Facility contains events of default  including,  but not
limited to, nonpayment of principal,  interest,  fees or other amounts when due,
violation of covenants,  inaccuracy  of  representations  and  warranties in any
material  respect,  cross  default  and  cross  acceleration  to  certain  other
indebtedness,  bankruptcy,  ERISA,  material  judgments  and change of  control.
Certain of these events of default are subject to grace periods and  materiality
qualifications. See the Debt Covenants section of this Note.

     Foamex Carpet Credit Facility
     -----------------------------

     At December 31, 2001,  Foamex Carpet had a revolving  credit  facility (the
"Foamex Carpet Credit  Facility"),  which provided a commitment of $15.0 million
through  February 2004.  There were no borrowings  outstanding  under the credit
facility at December 31, 2001 and  available  borrowings  totaled  $14.8 million
with $0.2 million of letters of credit  outstanding.  The Foamex  Carpet  Credit
Facility was terminated on March 25, 2002 in connection with the refinancing.

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  Amended  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 Amended Credit Facility.  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 and liquidated damages, as defined, if
any,


                                      F-20
<PAGE>


8.   LONG-TERM DEBT (continued)

thereon to the date of redemption  and declining  annually to 100.0% on or after
April 1, 2008.  Additionally,  on or before  April 1,  2005,  up to 35.0% of the
principal  amount of the notes may be  redeemed at a  redemption  price equal to
110.750%  of  the  principal  amount,  plus  accrued  and  unpaid  interest  and
liquidated  damages,  as defined, if any, thereon to the date of redemption with
the net proceeds of one or more equity offerings.

     Upon the  occurrence of a change of control,  as defined,  each holder will
have the right to  require  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 and liquidated  damages,  as defined, if any, if there is such a
"change of control".

     Foamex  L.P.  was  required  to cause a  registration  statement  under the
Securities Act of 1933 to be effective within 180 days of March 25, 2002. Foamex
L.P. filed the  registration  statement,  but it was not effective until January
30, 2003 and therefore is liable for liquidated  damages from September 23, 2002
until the date the  registration  statement  became  effective.  The  liquidated
damages are 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 amount accrued for liquidated
damages at December 29, 2002 was $0.2 million.

     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 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 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
will be 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,  as
defined,  if any,  thereon to the date of redemption  and declining  annually to
100.0% on or after June 15, 2005.

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

13 1/2% Senior Subordinated Notes

     The 13 1/2% Senior Subordinated Notes were issued by Foamex L.P. and Foamex
Capital  Corporation  and  are due on  August  15,  2005.  The  notes  represent
uncollateralized  general obligations of Foamex L.P. and are subordinated to all
Senior Debt, as defined in the Indenture.  Interest is payable  semiannually  on
February  15 and August 15.  The notes may be  redeemed  at the option of Foamex
L.P., in whole or in part, at any time on or after August 15, 2000.  The initial
redemption  was  106.75% of their  principal  amount,  plus  accrued  and unpaid
interest,  if any,  thereon to the date of redemption and declining  annually to
100.0% on or after August 15, 2004. At December 29, 2002 the redemption price is
103.375% plus accrued and unpaid interest.


                                      F-21
<PAGE>


8.   LONG-TERM DEBT (continued)

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

Industrial Revenue Bonds ("IRBs")

     IRB debt  includes  a $1.0  million  bond that  matures  in 2005 and a $6.0
million  bond that  matures in 2013.  Interest is based on a variable  rate,  as
defined,  with options  available to Foamex L.P. to convert to a fixed rate.  At
December 31, 2001,  the interest rate was 2.0% on the $1.0 million bond and 1.7%
on the $6.0 million  bond.  The maximum  interest rate for either of the IRBs is
15.0% per annum.

     If  Foamex  L.P.  exercises  its  option  to  convert  the bonds to a fixed
interest  rate  structure,  the  IRBs  are  redeemable  at  the  option  of  the
bondholders.  The obligations are  collateralized by certain  properties,  which
have an approximate net carrying value of $10.8 million at December 29, 2002.

Other

     Other  debt  at  December  31,  2001   included  a  term  loan  owed  by  a
majority-owned  Mexican subsidiary,  Foamex de Cuautitlan S.A. de C.V. Quarterly
principal  payments  were due on the term loan through its maturity in May 2002.
Also included in other debt is a  non-interest  bearing  promissory  note with a
principal  amount of $0.9 million at December 29, 2002 issued in connection with
increasing  Foamex L.P.'s interest in an Asian joint venture to 70% in 2001. The
promissory note had unamortized discount of $0.1 million at December 29, 2002.

Related Party - Note Payable to Foam Funding LLC

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

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

Debt Covenants

     The  indentures,   the  Foamex  L.P.  Amended  Credit  Facility  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.  Also,  Foamex L.P. is
required  under  certain of these  agreements  to maintain  specified  financial
ratios of which the most restrictive are the maintenance of net worth,  interest
coverage,  fixed charge coverage and leverage ratios, as defined. Under the most
restrictive of the  distribution  restrictions  as of December 29, 2002,  Foamex
L.P. was able to distribute  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 $1.0  million  annually,  so long as no  event  of
default has occurred.


                                      F-22
<PAGE>


8.   LONG-TERM DEBT (continued)

     Foamex L.P. and Foamex Carpet were in compliance with the various financial
covenants of their loan agreements as of December 31, 2000.  Certain Foamex L.P.
and  Foamex  Carpet  debt  agreements   contained  certain  quarterly  financial
covenants, which became more restrictive during 2001. In the absence of a waiver
of  or  amendment  to  such  financial   covenants,   noncompliance  would  have
constituted an event of default under the applicable  debt  agreements,  and the
lenders would have been entitled to accelerate the maturity of the  indebtedness
outstanding  thereunder.  Prior to filing the Annual Report on Form 10-K for the
year ended  December 31, 2000,  Foamex L.P. and Foamex Carpet  anticipated  they
would  continue to comply with the financial  covenants in the  applicable  debt
agreements  during  2001.  In the event that  noncompliance  appeared  likely or
occurred, management was prepared to seek lenders' approval of amendments to, or
waivers of,  such  financial  covenants.  In December  2001,  certain  financial
covenants were modified to accommodate  the  restructuring  impairment and other
charges recorded in the fourth quarter of 2001 as a result of Foamex L.P.'s 2001
Operational  Reorganization  Plan. At that time certain financial covenants were
also eased for 2002.  Foamex L.P.  paid a fee of  approximately  $1.8 million to
obtain this  modification.  The Foamex Carpet debt agreements were terminated in
connection with the refinancing which took place on March 25, 2002.

     On October 16, 2002,  Foamex L.P.  announced  that it had obtained a waiver
from its bank lenders of its financial  covenants for the period ended September
29,  2002 since it would not have been in  compliance  with the  covenants.  The
waiver was effective  until November 30, 2002 and reduced the  commitment  under
the  revolving  credit  facility  from $100.0  million to $70.0  million for the
period the waiver was in effect.  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. will be subject to minimum net worth, minimum EBDAIT, as
defined,  and maximum  capital  expenditure  covenants  through  periods  ending
December  28,  2003.  The  minimum  EBDAIT  covenant  is  tested  monthly,  on a
cumulative  basis,  beginning with December 2002.  Foamex L.P. was in compliance
with the revised covenants as of December 29, 2002. In addition, Foamex L.P. was
subject  to a  minimum  EBDAIT,  as  defined,  covenant  for the  quarter  ended
September 29, 2002 and was in compliance.  Compliance with existing covenants on
leverage,  fixed  charge  coverage  and  interest  coverage  ratios is suspended
through  periods  ending  September 28, 2003,  but the covenants are revised and
will be reinstated  thereafter.  All of the financial covenants were established
based on a business plan provided to the lenders. In addition,  borrowings under
the Amended  Credit  Facility will be subject to a borrowing  base  calculation,
which could limit  borrowings  under the revolving  credit facility to less than
the maximum commitment. Under the borrowing base calculation, availability under
the Revolving Credit Facility shall equal the lesser of (1) the Revolving Credit
Facility  commitment or (2) the sum of 65% of Foamex L.P.'s accounts  receivable
plus 50% of Foamex  L.P.'s  inventory  plus $85.0  million,  less certain  other
adjustments  for Term Loan  repayments,  less the  outstanding  balance  of Term
Loans.  As of December 29, 2002,  the borrowing base  calculation  did not limit
borrowings  under  the  Amended  Credit  Facility.  The  cost of  obtaining  the
amendment aggregated $4.0 million, including bank and legal fees.

     Foamex L.P.'s minimum EBDAIT covenants have higher thresholds in the second
half of 2003.  Management's  current plans to achieve EBDAIT covenant compliance
require continued  customer selling price management in response to raw material
cost changes,  successful  implementation of on-going cost savings  initiatives,
improved operating efficiencies, improved working capital management and reduced
capital  expenditures.  Management  is also  continuing  to  evaluate  strategic
alternatives in an effort to reduce Foamex L.P.'s debt.



                                      F-23
<PAGE>


8.   LONG-TERM DEBT (continued)

Maturities of Long-Term Debt

     Scheduled  maturities  of long-term  debt as of December 29, 2002 are shown
below (thousands):

     2003                                                   $     46
     2004                                                     33,795
     2005                                                    160,216
     2006                                                     73,444
     2007                                                    148,500
     Thereafter                                              306,000
                                                            --------
                                                             722,001

     Unamortized debt premium/discount and
         deferred credit, net                                 16,585
                                                            --------
     Total                                                  $738,586
                                                            ========

9.   RETIREE BENEFIT PLANS

Defined Benefit Pension Plans

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

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

     The components of pension expense are listed below.

<TABLE>
<CAPTION>
                                                                2002             2001             2000
                                                               ------           ------           -------
                                                                              (thousands)
<S>                                                            <C>             <C>               <C>
     Service cost                                              $3,866          $3,666            $3,307
     Interest cost                                              6,556           6,158             5,667
     Expected return on plan assets                            (5,823)         (5,829)           (6,371)
     Amortization
       Transition asset                                           (75)            (75)              (75)
       Prior service cost                                        (140)           (177)             (240)
       Losses and other                                         1,643           1,163               179
       Curtailment gain                                          (162)              -                 -
                                                               ------          ------            ------
         Total                                                 $5,865          $4,906            $2,467
                                                               ======          ======            ======
</TABLE>



                                      F-24
<PAGE>


9.   RETIREE BENEFIT PLANS (continued)

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

<TABLE>
<CAPTION>
                                                                                December 29,       December 31,
                                                                                    2002              2001
                                                                                ------------       ------------
                                                                                         (thousands)
       Change in Benefit Obligation
<S>                                                                               <C>               <C>
         Benefit obligation at beginning of year                                  $ 95,962          $ 84,820
         Service cost                                                                3,866             3,666
         Interest cost                                                               6,556             6,158
         Amendments, including SERP in 2001                                            157             1,059
         Benefits paid                                                              (5,003)           (4,525)
         Actuarial loss                                                              6,512             4,784
         Curtailment                                                                  (660)                -
                                                                                  --------          --------
           Projected benefit obligation at end of year                            $107,390          $ 95,962
                                                                                  ========          ========

       Change in Plan Assets
         Fair value of plan assets at beginning of year                           $ 65,514          $ 66,199
         Actual return on plan assets                                               (7,350)           (2,269)
         Company contributions                                                       7,464             6,347
         Benefits paid                                                              (5,003)           (4,525)
         Other                                                                        (540)             (238)
                                                                                  --------          --------
           Fair value of plan assets at end of year                               $ 60,085          $ 65,514
                                                                                  ========          ========

       Funded Status
         Plan assets less than benefit obligation                                 $(47,305)         $(30,448)
         Unrecognized transition asset                                                (440)             (515)
         Unrecognized prior service cost                                              (265)             (733)
         Unrecognized net losses                                                    52,573            34,656
                                                                                  --------          --------
           Net prepaid assets                                                     $  4,563          $  2,960
                                                                                  ========          ========

       Amounts Recognized in the Consolidated Balance Sheets
         Prepaid benefit costs                                                    $    194          $    389
         Accrued benefit liability                                                 (42,983)          (26,363)
         Intangible assets                                                             763               612
         Accumulated other comprehensive loss                                       46,589            28,322
                                                                                  --------          --------
           Net amount recognized                                                  $  4,563          $  2,960
                                                                                  ========          ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 2002           2001             2000
                                                                --------      ---------        -------

<S>                                                             <C>            <C>              <C>
     Expected long-term rate of return on plan assets           9.0%           9.0%             10.0%
     Discount rate on projected benefit obligations             6.5%           7.0%              7.25%
     Rate of compensation increase                              4.0%-5.0%      4.0%-7.0%         4.0%
</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  Internal  Revenue  Code of 1986,  as amended  (the
"Code").

     At December 29, 2002 and  December  31, 2001,  included in plan assets were
420,000  shares  of  Foamex  International's  stock.  The  value  of the  Plan's
investment in Foamex  International's  stock was approximately  $1.3 million and
$3.4  million at December  29, 2002 and  December  31,  2001,  respectively.


                                      F-25
<PAGE>


9.    RETIREE BENEFIT PLANS (continued)

Defined Contribution Plan

     Foamex L.P. maintains a defined contribution plan, which is qualified under
Section  401(k)  of the Code  ("401(k)  Plan")  and is  available  for  eligible
employees 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 $1.0 million,  $1.0 million and $1.1 million in 2002, 2001 and
2000, respectively.

Retiree Medical and Life Insurance Benefits

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

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

<TABLE>
<CAPTION>
                                                                     2002            2001           2000
                                                                   --------        --------       ---------
                                                                                (thousands)
<S>                                                                 <C>              <C>             <C>
       Service cost                                                 $ 29             $19             $15
       Interest cost                                                  82              60              57
       Amortization
         Prior service cost                                           (6)             (6)             (6)
         Losses and other                                             15              (8)            (27)
                                                                    ----             ---             ---
       Total                                                        $120             $65             $39
                                                                    ====             ===             ===
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                December 29,     December 31,
                                                                                   2002             2001
                                                                                ------------     ------------
                                                                                        (thousands)
       Change in Benefit Obligation
<S>                                                                              <C>                   <C>
         Benefit obligations at beginning of year                                $   624               $ 763
         Service cost                                                                 29                  19
         Interest cost                                                                82                  60
         Employee contributions                                                       19                  23
         Benefits paid                                                              (144)               (399)
         Actuarial loss                                                              638                 158
                                                                                 -------               -----
           Accumulated postretirement benefit obligation at end of year          $ 1,248               $ 624
                                                                                 =======               =====

       Change in Plan Assets
         Fair value of plan assets at beginning of year                          $     -               $   -
         Company contributions                                                       125                 376
         Employee contributions                                                       19                  23
         Benefits paid                                                              (144)               (399)
                                                                                 -------               -----
           Fair value of plan assets at end of year                              $     -               $   -
                                                                                 =======               =====

       Funded Status of the Plan
         Plan assets less than benefit obligation                                $(1,248)              $(624)
         Unrecognized prior service cost                                             398                 (60)
         Unrecognized net gains                                                      (53)               (224)
                                                                                 -------               -----
           Net accrued liabilities                                               $  (903)              $(908)
                                                                                 =======               =====
</TABLE>



                                      F-26
<PAGE>


9.    RETIREE BENEFIT PLANS (continued)

     Significant  assumptions  used  in the  calculation  of  retiree  and  life
insurance benefit expense and obligations are listed below.
<TABLE>
<CAPTION>
                                                              2002             2001              2000
                                                             ------           ------            ------
<S>                                                            <C>             <C>               <C>
     Discount rates on projected benefit obligations           6.5%            7.0%              7.25%
     Health care cost increase                                13.0%            9.0%              7.0%
</TABLE>

     The health care cost increase  assumption will gradually be reduced to 5.0%
by 2009.  Increasing or decreasing the weighted average assumed health care cost
trend rates by one percentage  point would not have a significant  impact on the
accumulated postretirement benefit obligation or on service and interest costs.

10.  INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                  2002            2001             2000
                                                               ---------       --------          --------
                                                                              (thousands)
<S>                                                            <C>             <C>               <C>
     United States                                             $(26,953)       $(6,696)          $17,281
     Foreign                                                      4,454          7,978             4,975
                                                               --------        -------           -------
     Income (loss) before provision for income taxes           $(22,499)       $ 1,282           $22,256
                                                               ========        =======           =======
</TABLE>


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

<TABLE>
<CAPTION>
                                                                 2002             2001             2000
                                                               --------       ----------         ---------
                                                                              (thousands)
<S>                                                            <C>             <C>               <C>
     Statutory income taxes                                    $(7,875)        $   449           $ 7,790
     State income taxes, net of federal benefit                   (810)           (368)              916
     Permanent difference on partnership income                 10,916           2,712            (6,156)
     Increase (decrease) in valuation allowance                    332            (526)           (1,688)
     Non-deductible amortization                                     -           1,391             1,364
     Other, net                                                   (652)           (115)              427
                                                               -------         -------           -------
     Total                                                     $ 1,911         $ 3,543           $ 2,653
                                                               =======         =======           =======
</TABLE>

     The provision for income taxes is summarized as follows:

<TABLE>
<CAPTION>
                                                                 2002             2001             2000
                                                               --------        --------          --------
     Current                                                                (thousands)
<S>                                                             <C>            <C>               <C>
       Federal                                                  $    -         $     -           $   445
       State                                                       226             239               142
       Foreign                                                   2,423           2,594             1,566
                                                                ------         -------           -------
         Total current                                           2,649           2,833             2,153
                                                                ------         -------           -------
     Deferred
       Federal                                                       -             576             2,408
       State                                                      (398)            320               221
       Foreign                                                    (672)            340              (441)
                                                                ------         -------           -------
         Total deferred                                         (1,070)          1,236             2,188
                                                                ------         -------           -------

     Change in valuation allowance                                 332            (526)           (1,688)

     Total provision for income taxes                           $1,911         $ 3,543           $ 2,653
                                                                ======         =======           =======
</TABLE>


                                      F-27
<PAGE>



10.    INCOME TAXES (continued)

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

<TABLE>
<CAPTION>
                                                                               December 29,       December 31,
                                                                                  2002               2001
                                                                               -----------        ------------
                                                                                          (thousands)
<S>                                                                             <C>                  <C>
     Intangible asset basis difference                                          $     -              $ 6,931
     Other                                                                        2,406                4,238
     Valuation allowance for deferred income tax assets                          (1,020)              (9,601)
                                                                                -------              -------
       Deferred income tax assets                                                 1,386                1,568
                                                                                -------              -------

     Deferred income tax liabilities
       Basis difference in property, plant and equipment                           (586)              (2,245)
       Investment in joint venture                                                 (771)                (771)
       Other                                                                     (1,674)              (1,726)
                                                                                -------              -------
       Deferred income tax liabilities                                           (3,031)              (4,742)
                                                                                -------              -------

     Net deferred income tax liabilities                                        $(1,645)             $(3,174)
                                                                                =======              =======
</TABLE>


     At December 29, 2002,  Foamex L.P. had $2.9 million of net  operating  loss
carryforwards  in a Mexican  subsidiary  that expire in 2009.  A full  valuation
allowance  has been  recorded at December  29, 2002 and December 31, 2001 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 $13.4
million  at  December  29,  2002  and  $10.6   million  at  December  31,  2001,
respectively. Such earnings are deemed to be permanently invested by Foamex L.P.
As such,  no  deferred  tax  liability  has been  recognized  with regard to the
remittance  of  such  earnings.   Further,   determination   of  the  amount  of
unrecognized  deferred  tax  liability  with  regard  to  such  earnings  is not
practicable.

11.    PARTNERS' DEFICIENCY

     Foamex L.P. was formed as a Delaware  limited  partnership  on September 5,
1990, and initially capitalized on October 2, 1990, in accordance with a limited
partnership  agreement as amended  through  March 2002. As of December 29, 2002,
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.

Accumulated Other Comprehensive Loss

     The components of accumulated other comprehensive loss are listed below.

<TABLE>
<CAPTION>
                                                             2002               2001                  2000
                                                           ---------          ---------             ---------
                                                                             (thousands)
<S>                                                        <C>                <C>                   <C>
     Foreign currency translation adjustment               $ (9,869)          $ (8,000)             $ (6,921)
     Minimum pension liability                              (46,589)           (28,322)              (17,540)
                                                           --------           --------              --------
                                                           $(56,458)          $(36,322)             $(24,461)
                                                           ========           ========              ========
</TABLE>



                                      F-28
<PAGE>



12.    BUSINESS SEGMENTS

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

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

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

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

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

     Sales to one customer, which are included in Automotive Products, accounted
for  approximately  17.3%,  15.7% and 12.3% of net sales in 2002, 2001 and 2000,
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>
                                              Carpet
                                   Foam       Cushion        Automotive     Technical
                                 Products     Products       Products       Products        Other         Total
                                 --------     --------       ----------     ---------     ---------   -----------
2002                                                        (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    $ 24,000     $(12,440)       $ 25,430      $ 20,402      $(15,092)   $   42,300
Depreciation and amortization    $ 15,466     $  6,469        $  3,856      $  2,982      $  2,819    $   31,592

2001
Net sales                        $499,668     $230,965        $377,753      $111,043      $ 33,475    $1,252,904
Income (loss) from operations    $ 66,634     $ (6,572)       $ 21,445      $ 23,080      $(39,860)   $   64,727
Depreciation and amortization    $ 15,732     $  8,181        $  4,991      $  3,312      $  1,812    $   34,028

2000
Net sales                        $519,197     $256,439        $342,386      $106,697      $ 33,059    $1,257,778
Income (loss) from operations    $ 55,227     $  2,218        $ 22,417      $ 29,027      $(11,506)   $   97,383
Depreciation and amortization    $ 17,813     $  7,742        $  5,785      $  2,663      $  2,625    $   36,628
</TABLE>



                                      F-29
<PAGE>



12.  BUSINESS SEGMENTS (continued)

     Results by geographical area are presented below.

<TABLE>
<CAPTION>
                                                       United
                                                        States        Canada            Mexico      Consolidated
                                                     -----------      -------          --------     ------------
2002                                                                           (thousands)
<S>                                                  <C>              <C>              <C>           <C>
Net sales                                            $  981,927       $66,940          $279,227      $1,328,094
Property, plant and equipment, net                   $  157,007       $ 3,898          $ 21,133      $  182,038

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

2000
Net sales                                            $1,024,388       $69,180          $164,210      $1,257,778
Property, plant and equipment, net                   $  183,266       $ 4,623          $ 24,642      $  212,531
</TABLE>



13.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                         2002           2001             2000
                                                                       -------        -------          --------
                                                                                     (thousands)
<S>                                                                    <C>            <C>              <C>
     Cash paid for interest                                            $56,583        $63,593          $75,155
                                                                       =======        =======          =======

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

     Non cash - capital leases                                         $     -        $   299          $    53
                                                                       =======        =======          =======

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

14.  RELATED PARTY TRANSACTIONS AND BALANCES

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

Foamex International Notes

     On December 26, 1997,  Foamex L.P.  entered into a $2.5 million  promissory
note with  Foamex  International.  The note bears  interest at the rate of LIBOR
plus 2 3/8%. The note was repaid during 2001.

     On October 20, 1999,  Foamex L.P. and Foamex  International  entered into a
revolving note that allows Foamex  International  to borrow up to  approximately
$2.5 million  through  October 20, 2004.  The revolving note bears interest at a
rate  equal to  three-month  LIBOR plus 2.5%,  per  annum,  and is payable  upon
demand, or if no demand is made, then on October 20, 2004. At December 31, 2001,
Foamex L.P.  had a receivable  of  approximately  $2.5  million  relating to the
revolving  note which was repaid in 2002. The receivable for both of these notes
were classified as a component of partners' deficiency.

Trace Promissory Notes

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


                                      F-30
<PAGE>


14.  RELATED PARTY TRANSACTIONS AND BALANCES (continued)

The principal was reduced by approximately $0.6 million relating to a portion of
the proceeds from the sale of a corporate  aircraft in 1999. The promissory note
was due and  payable on demand or, if no demand was made,  on July 7, 2001,  and
bears interest at 2 3/8% plus three-month  LIBOR, as defined,  per annum payable
quarterly in arrears.

     The  Trace  notes  are  included  in  the  other   component  of  partners'
deficiency.  Based on Trace's financial  position discussed in Note 1, it is not
probable  that Trace will be able to pay the  aggregate  amount of $9.2 million.
Upon the conclusion of the Trace bankruptcy proceedings, Foamex L.P. will charge
the uncollected portion of the Trace notes to the general partners'  deficiency.
Accordingly,  Foamex L.P. has not  recorded  any interest  income on these notes
since the Trace bankruptcy.

Trace Accounts Receivable

     At December 29, 2002 and December 31, 2001,  operating accounts  receivable
from Trace were approximately $2.7 million. These accounts receivable were fully
reserved for prior to 2000.

Foam Funding LLC Debt

     Foamex  L.P.  paid  interest on notes  payable to Foam  Funding LLC of $0.7
million,  $2.8  million and $5.8 million in 2002,  2001 and 2000,  respectively.
Foamex  L.P.  paid  principal  on notes  payable  to Foam  Funding  LLC of $31.6
million, $15.8 million and $41.9 million in 2002, 2001 and 2000, respectively.

Foamex GFI Note

     During March of 2000,  Foamex L.P.  repaid a $34.0  million note payable to
Foam Funding  LLC, a  subsidiary  of Trace.  Foamex L.P.  paid  interest of $0.6
million on the note in 2000.

Other

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

     In 2001,  two  members of the board of  directors  of Foamex  International
provided  consulting  services  to Foamex  L.P.  for  which  fees paid were $0.2
million.  Also in 2001, one of these  directors  received a loan of $0.2 million
from Foamex  L.P.'s joint  venture in Asia.  The loan was evidenced by a 20-year
non-recourse  promissory note bearing  interest at 4.0% per annum secured by the
director's  5.0% interest in the value of Foamex  L.P.'s equity  interest in the
joint venture in Asia.  In 2000,  one member of the board of directors of Foamex
International  provided consulting services totaling $0.1 million. In 2000, this
director  also  received an option to purchase  25,000 shares of common stock of
Foamex  International at the fair market value on the date of grant. Foamex L.P.
also  maintained  an  apartment  used by this  director.  Rent  expense for this
facility was $0.2 million in 2002, 2001 and 2000.

     As  discussed in Note 8,  included in the group of banks that  provides the
Foamex  L.P.  Amended  Credit  Facility is The Bank of Nova  Scotia,  which is a
shareholder of Foamex International.

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

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


                                      F-31
<PAGE>


14.  RELATED PARTY TRANSACTIONS AND BALANCES (continued)

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

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

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

15.  COMMITMENTS AND CONTINGENCIES

Operating Leases

     Foamex L.P. is obligated under various  noncancelable  lease agreements for
rental of facilities,  vehicles and other equipment.  Many of the leases contain
renewal  options  with  varying  terms and  escalation  clauses that provide for
increased  rentals based upon increases in the Consumer Price Index, real estate
taxes  and  lessors'  operating  expenses.   Total  minimum  rental  commitments
(excluding    commitments   accrued   as   part   of   Foamex   L.P.'s   various
restructuring/consolidation  plans) required under operating  leases at December
29, 2002 are (thousands):

     2003                                         $15,438
     2004                                          10,889
     2005                                           7,970
     2006                                           7,575
     2007                                           2,622
     Balance                                        7,701
                                                  -------
     Total                                        $52,195
                                                  =======

     Rental expense charged to operations  under operating  leases  approximated
$23.4  million,  $20.2  million  and  $16.3  million  in 2002,  2001  and  2000,
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
$84.8  million in 2003,  $98.0  million in 2004,  $39.9  million in 2005,  $39.4
million in 2006,  $36.1  million in 2007 and $32.2 million for each of the years
2008 to 2010.

Litigation - Breast Implants

     As of March 11, 2003, Foamex L.P. and Trace were two of multiple defendants
in actions filed on behalf of approximately  1,087 recipients of breast implants
in various  United States  federal and state courts and one Canadian  provincial
court,  some of which  allege  substantial  damages,  but  most of which  allege
unspecified damages for personal injuries of various types. Three of these cases
seek to allege claims on behalf of all breast implant



                                      F-32
<PAGE>



15.   COMMITMENTS AND CONTINGENCIES (continued)

recipients or other allegedly  affected parties,  but no class has been approved
or  certified  by the court.  During  1995,  Foamex L.P.  and Trace were granted
summary  judgments  and  dismissed as  defendants  from all cases in the federal
courts of the United  States and the state  courts of  California.  Appeals  for
these decisions were withdrawn and the decisions are final.

     Although breast implants do not contain foam, certain silicone gel implants
were  produced  using a  polyurethane  foam covering  fabricated by  independent
distributors or fabricators  from bulk foam purchased from Foamex L.P. or Trace.
Neither Foamex L.P. nor Trace  recommended,  authorized,  or approved the use of
its foam for these  purposes.  Foamex L.P. is also  indemnified by Trace for any
such liabilities  relating to foam manufactured  prior to October 1990.  Trace's
insurance carrier has continued to pay Foamex L.P.'s  litigation  expenses after
Trace's  filing for relief under the Bankruptcy  Code on July 21, 1999.  Trace's
insurance  policies  continue to cover certain  liabilities  of Trace but if the
limits of those policies are  exhausted,  it is unlikely that Trace will be able
to continue to provide additional  indemnification.  While it is not feasible to
predict or determine the outcome of these actions, based on management's present
assessment of the merits of pending claims,  after consultation with the general
counsel of Foamex  L.P.,  and without  taking into  account the  indemnification
provided by Trace, the coverage  provided by Trace's and Foamex L.P.'s liability
insurance and potential indemnity from the manufacturers of polyurethane covered
breast implants, management believes that it is not reasonably possible that the
disposition  of  the  matters  that  are  pending  or  that  may  reasonably  be
anticipated  to be  asserted  will  result in a loss that is  material to Foamex
L.P.'s consolidated financial position,  results of operations or cash flows. If
management's  assessment of Foamex L.P.'s liability relating to these actions is
incorrect,  these actions could have a material  adverse effect on Foamex L.P.'s
financial position, results of operations and cash flows.

Litigation - Other

     During 2001, Foamex L.P. was notified by an insurance provider concerning a
dispute  involving the reimbursement of liability claims paid on behalf of Trace
before 1990. The insurance provider is contending that Foamex L.P. is liable for
claims of  approximately  $6.1 million.  Foamex L.P.  intends to strongly defend
this  claim  and  considers  the  claim to be  without  merit.  If  management's
assessment  of Foamex L.P.'s  liability  relating to these actions is incorrect,
these actions could have a material  adverse  effect on the financial  position,
results of operations and cash flows.

     Foamex L.P.  is party to various  other  lawsuits,  both as  defendant  and
plaintiff,  arising  in the  normal  course of  business.  It is the  opinion of
management that the  disposition of these lawsuits will not,  individually or in
the  aggregate,  have a  material  adverse  effect  on 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 December 29, 2002, Foamex L.P. had accrued approximately $0.7 million
for litigation and other legal matters in addition to the environmental  matters
discussed below.

Environmental and Health and Safety

     Foamex L.P. is subject to extensive and changing federal,  state, local and
foreign environmental laws and regulations, including those relating to the use,
handling, storage, discharge and disposal of hazardous substances, the discharge
or  emission  of  materials  into  the  environment,   and  the  remediation  of
environmental contamination,  and as a result, are from time to time involved in
administrative and judicial  proceedings and inquiries relating to environmental
matters. As of December 29, 2002, Foamex L.P. had accruals of approximately $2.7
million for environmental matters,  including approximately $2.3 million related
to mediating and monitoring soil and groundwater contamination and approximately
$0.4 million related to PRP sites 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.



                                      F-33
<PAGE>



15.    COMMITMENTS AND CONTINGENCIES (continued)

     On August 8, 2001, the United States  Environmental  Protection  Agency, or
"EPA," proposed a National  Emission  Standard for Hazardous Air Pollutants,  or
"NESHAP" for Flexible  Polyurethane  Foam Fabrication  Operations.  The proposed
NESHAP  regulates  emissions  of  methylene  chloride  and other  Hazardous  Air
Pollutants and restricts air emissions  from flame  lamination  sources.  Foamex
L.P. does not believe that this  standard,  if adopted,  will require it to make
material expenditures.

     On  August  31,  2002,   Environment  Canada,  the  Canadian  environmental
regulatory  agency,  proposed a rule which would require  flexible  polyurethane
foam manufacturing operations to reduce methylene chloride (dichloromethane) air
emissions. The proposed rule establishes a 50.0% reduction in methylene chloride
emissions by December 1, 2003 and 100.0%  reductions by January 1, 2007.  Foamex
L.P. does not believe that this standard,  if adopted,  will require Foamex L.P.
to make material expenditures for its Canadian plants.

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

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

     The Comprehensive  Environmental Response,  Compensation and Liability Act,
or "CERCLA," and comparable  state laws impose  liability  without fault for the
costs of  cleaning  up  contaminated  sites on certain  classes of persons  that
contributed to the release of hazardous substances into the environment at those
sites, for example, by generating wastes containing  hazardous  substances which
were  disposed  at  such  sites.  Foamex  L.P.  is  currently  designated  as  a
Potentially  Responsible  Party, or "PRP," by the EPA or by state  environmental
agencies or other PRPs,  pursuant to CERCLA or analogous  state  statutes,  with
respect  to  eight  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.

     In 2003,  capital  expenditures  for  safety and  environmental  compliance
projects  are  anticipated  to be  approximately  $1.5  million.  Although it is
possible that new information or future  developments  could require Foamex L.P.
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 Foamex  L.P.'s  operations,
financial  position,   capital   expenditures  or  competitive   position.   The
possibility  exists,   however,   that  new  environmental   legislation  and/or
environmental  regulations may be adopted,  or other  environmental  conditions,
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 October 2001, Foamex L.P. experienced a fire at one of its manufacturing
facilities.  Costs  relating to the fire aggregate  approximately  $1.2 million.
Foamex L.P.  has filed a claim with its  insurance  carrier and believes it will
recover substantially all costs in excess of a deductible of $0.2 million.


                                      F-34
<PAGE>


16.    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  wholly-owned
domestic subsidiaries  ("Guarantors").  Such guarantees are full,  unconditional
and joint and several.  Separate financial  statements of the Guarantors are not
presented because Foamex L.P.'s management has determined that they would not be
material to investors.  The following presents condensed  consolidating  balance
sheets  as of  December  29,  2002  and  December  31,  2001  and the  condensed
consolidating  statements  of  operations  and cash  flows for the  years  ended
December  29,  2002  and  December  31,  2001  and  2000 of the  Guarantors  and
nonguarantors.  The Guarantors  include Foamex Carpet Cushion LLC,  Foamex Latin
America, Inc., Foamex Mexico, Inc., Foamex Mexico II, Inc. and Foamex Asia, Inc.
The  nonguarantors  are Foamex  Canada Inc. and Grupo Foamex de Mexico,  S.A. de
C.V. and its subsidiaries.  The following  financial  information is intended to
provide information for the Guarantors and nonguarantors of Foamex L.P. based on
amounts derived from the financial statements of Foamex L.P.

                      Condensed Consolidating Balance Sheet
                             As of December 29, 2002

<TABLE>
<CAPTION>
                                                                 Foamex
                                                                 Capital       Foamex L.P.               Consolidated
                                     Guarantors   Nonguarantors  Corporation   (Parent)    Eliminations  Foamex L.P.
                                     ----------   -------------  -----------   ----------- ------------  ------------
Assets                                                            (thousands of dollars)
<S>                                   <C>             <C>           <C>       <C>           <C>          <C>
   Current assets                     $40,111         $28,481       $    1    $274,700      $(26,816)    $  316,477
   Investment in subsidiaries           8,014               -            -      27,243       (35,257)             -
   Property, plant and equipment, net   5,851          21,549            -     154,638             -        182,038
   Goodwill                             1,249           4,835            -     119,237             -        125,321
   Debt issuance costs                      -               -            -      36,827             -         36,827
   Other assets                        13,706           2,384            -      40,933       (22,403)        34,620
                                      -------         -------      -------    --------      --------     ----------
     Total assets                     $68,931         $57,249      $     1    $653,578      $(84,476)    $  695,283
                                      =======         =======      =======    ========      ========     ==========

Liabilities and Partners' Deficiency
   Current liabilities                $41,401         $25,065      $     -    $158,674      $(26,694)    $  198,446
   Long-term debt                         713               -            -     737,827             -        738,540
   Other liabilities                   23,623               -            -      62,863       (22,403)        64,083
     Total liabilities                 65,737          25,065            -     959,364       (49,097)     1,001,069
   Partners' deficiency                 3,194          32,184            1    (305,786)      (35,379)      (305,786)
                                      -------         -------      -------    --------      --------     ----------
     Total liabilities and partners'
         deficiency                   $68,931         $57,249      $     1    $653,578      $(84,476)    $  695,283
                                      =======         =======      =======    ========      ========     ==========
</TABLE>



                      Condensed Consolidating Balance Sheet
                             As of December 31, 2001

<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                    $ 39,421         $31,389      $     1    $263,239      $(23,415)    $ 310,635
   Investment in subsidiaries          14,824               -            -      48,268       (63,092)            -
   Property, plant and equipment, net   6,743          24,780            -     169,274             -       200,797
   Cost in excess of net assets
     acquired                          32,774           6,989            -     169,740             -       209,503
   Debt issuance costs                  2,783               -            -      10,907             -        13,690
   Other assets                         6,271           1,351            -      25,403             -        33,025
                                     --------         -------      -------    --------      --------     ----------
     Total assets                    $102,816         $64,509      $     1    $686,831      $(86,507)    $ 767,650
                                     ========         =======      =======    ========      ========     ==========

Liabilities and Partners' Deficiency
   Current liabilities               $ 50,070         $25,908      $     -    $192,411      $(21,395)    $ 246,994
   Long-term debt                      18,619               -            -     629,613             -       648,232
   Other liabilities                    3,389             785            -      46,378             -        50,552
     Total liabilities                 72,078          26,693            -     868,402       (21,395)      945,778
   Partners' deficiency                30,738          37,816            1    (181,571)      (65,112)     (178,128)
                                     --------         -------      -------    --------      --------     ----------
     Total liabilities and partners'
         deficiency                  $102,816         $64,509      $     1    $686,831      $(86,507)    $ 767,650
                                     ========         =======      =======    ========      ========     ==========
</TABLE>



                                      F-35
<PAGE>



16.  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      102,953             -      1,030,338    (168,569)     1,186,669
                                       --------     --------        ------     ----------   ---------     ----------

   Gross profit                          18,669        9,944             -        112,812           -        141,425

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        3,063             -         33,164           -         42,300

Interest and debt issuance expense        1,528           44             -         65,714        (679)        66,607

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

Other income (expense), net                 496           (6)            -             263       (679)            74
                                       --------     --------        ------     ----------   ---------     ----------
Loss before provision for income
   taxes                                    938        3,013             -        (60,486)     34,036        (22,499)

Provision for income taxes                  100        1,751             -             60           -          1,911
                                       --------     --------        ------     ----------   ---------     ----------
Loss before extraordinary items and
   accounting change                        838        1,262             -        (60,546)     34,036        (24,410)

Extraordinary items                      (2,398)           -             -           (396)          -         (2,794)

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


                                      F-36
<PAGE>



16.  GUARANTOR INFORMATION (continued)

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

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

Cost of goods sold                      213,370        98,180            -       932,308     (171,035)    1,072,823
                                       --------      --------       ------    ----------    ---------    ----------

   Gross profit                          24,138        13,922            -       142,021            -       180,081

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

Restructuring, impairment and other
   charges (credits)                      2,264             -            -        33,804            -        36,068
                                       --------      --------       ------    ----------    ---------    ----------
Income from operations                    7,024         6,563            -        51,140            -        64,727

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

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

Other income (expense), net                (503)           48            -        (1,398)           -        (1,853)
                                       --------      --------       ------    ----------    ---------    ----------
Income before provision for income
   taxes                                  5,669         6,367            -        (1,450)      (9,304)        1,282

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



                                      F-37
<PAGE>


16.  GUARANTOR INFORMATION (continued)

                 Condensed Consolidating Statement of Operations
                      For the year ended December 31, 2000

<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                             $270,898        $114,482     $     -     $1,060,928   $(188,530)    $1,257,778

Cost of goods sold                     245,137         103,067           -        926,079    (188,530)     1,085,753
                                      --------        --------     -------     ----------   ---------     ----------

   Gross profit                         25,761          11,415           -        134,849           -        172,025

Selling, general and administrative
   expenses                             13,284           6,251           -         48,839           -         68,374

Restructuring, impairment and other
   charges (credits)                       249               -           -          6,019           -          6,268
                                      --------        --------     -------     ----------   ---------     ----------
Income from operations                  12,228           5,164           -         79,991           -         97,383

Interest and debt issuance expense       6,019             677           -         68,533           -         75,229

Equity in undistributed earnings
   of affiliates                         2,324               -           -          9,515     (10,187)         1,652

Other income (expense), net               (220)            (75)          -         (1,255)          -         (1,550)
                                      --------        --------     -------     ----------   ---------     ----------
Income before provision for income
   taxes                                 8,313           4,412           -         19,718     (10,187)        22,256

Provision for income taxes                 743           1,795           -            115           -          2,653
                                      --------        --------     -------     ----------   ---------     ----------
Net income                            $  7,570        $  2,617     $     -     $   19,603   $ (10,187)    $   19,603
                                      ========        ========     =======     ==========   =========     ==========
</TABLE>


                                      F-38
<PAGE>


16.  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-39
<PAGE>


16.  GUARANTOR INFORMATION (continued)

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

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

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

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

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

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

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



                                      F-40
<PAGE>



16.  GUARANTOR INFORMATION (continued)

                 Condensed Consolidating Statement of Cash Flows
                      For the year ended December 31, 2000


<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)                        $7,570          $2,617     $      -       $19,603      $(10,187)     $19,603
   Total adjustments to reconcile net
     income (loss) to net cash provided
     by operating activities                (1,403)          3,755            -        20,722        10,187       33,261
                                            ------          ------     --------       -------      --------      -------
   Net cash provided by operating
     activities                              6,167           6,372            -        40,325             -       52,864
                                            ------          ------     --------       -------      --------      -------

Cash Flows from Investing Activities
   Capital expenditures                     (1,232)         (1,006)           -       (21,780)          425      (23,593)
   Other                                         -               -            -           331          (425)         (94)
                                            ------          ------     --------       -------      --------      -------
   Net cash used in investing activities    (1,232)         (1,006)           -       (21,449)            -      (23,687)
                                            ------          ------     --------       -------      --------      -------

Cash Flows from Financing Activities
   Net proceeds from (repayments of)
     revolving loans                             -          (1,627)           -        32,220             -       30,593
   Repayments of long-term debt             (7,898)         (2,608)           -       (51,942)            -      (62,448)
   Other, net                                  (41)              -            -         1,029             -          988
                                            ------          ------     --------       -------      --------      -------
   Net cash used in financing activities    (7,939)         (4,235)           -       (18,693)            -      (30,867)
                                            ------          ------     --------       -------      --------      -------

Net increase (decrease) in cash and
   cash equivalents                         (3,004)          1,131            -           183             -       (1,690)

Cash and cash equivalents at
   beginning of period                       4,990             690            1           882             -        6,563
                                            ------          ------     --------       -------      --------      -------
Cash and cash equivalents at
   end of period                            $1,986          $1,821     $      1       $ 1,065      $      -      $ 4,873
                                            ======          ======     ========       =======      ========      =======
</TABLE>



                                      F-41
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying balance sheets of Foamex Capital Corporation (a
wholly-owned  subsidiary of Foamex L.P.) (the "Company") as of December 29, 2002
and December 31, 2001. These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

In our opinion,  such balance sheets present fairly,  in all material  respects,
the  financial  position of the Company at December  29, 2002 and  December  31,
2001, in conformity with accounting  principles generally accepted in the United
States of America.




/s/ DELOITTE & TOUCHE LLP

March 18, 2003
Parsippany, New Jersey



                                      F-42
<PAGE>




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


<TABLE>
<CAPTION>
                                                              December 29,           December 31,
                                                                 2002                    2001
                                                              ------------           ------------

<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-43
<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

     Trace International  Holdings,  Inc. ("Trace") is a privately held company,
which  owned   approximately  29%  of  Foamex   International   Inc.'s  ("Foamex
International") outstanding voting common stock at September 30, 2000, and whose
former  Chairman  also  serves  as  Foamex  International's   Chairman.   Foamex
International's  common stock owned by Trace was pledged as  collateral  against
certain of Trace's  obligations.  Certain credit agreements and promissory notes
of Foamex  L.P.  pursuant  to which  approximately  $401.1  million  of debt was
outstanding as of September 30, 2000,  provided that a "change of control" would
be  an  event  of  default  and  could  result  in  the   acceleration  of  such
indebtedness.  "Change of control" means, for this purpose, that (i) a person or
related  group,  other  than  Trace,  beneficially  owns more than 25% of Foamex
International's  outstanding voting stock and (ii) such voting stock constitutes
a greater percentage of such voting stock than the amount  beneficially owned by
Trace.  Additionally,  certain  indentures  of Foamex L.P.  and FCC  relating to
senior subordinated notes contain similar "change of control" provisions,  which
require Foamex L.P. and FCC to tender for such notes at a price in cash equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid interest
thereon, if there is such a "change of control".

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

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

     Under the Exchange  Agreement,  The Bank of Nova Scotia initially  received
1,500,000  shares  of  Foamex   International's  common  stock  from  the  Trace
bankruptcy estate and exchanged these common stock shares for 15,000 shares of a
new  class  of  Foamex  International's  non-voting  non-redeemable  convertible
preferred  stock (the  "Series B Preferred  Stock").  Each share of the Series B
Preferred  Stock can be  converted  into 100  shares  of Foamex  International's
common stock but only if such conversion would not trigger a "change of control"
event,  as  discussed  above.  The Series B  Preferred  Stock (a) is entitled to
dividends only if a dividend is declared on Foamex International's common stock,
(b) ranks senior to any future  preferred  stock issued by Foamex  International
and (c) is entitled to a  liquidation  preference  of $100 per share.  Following
this  exchange,  The Bank of Nova  Scotia  became  the  owner of  24.41%  of the
outstanding  shares of Foamex  International's  common stock when the  remaining
5,697,426 shares of Foamex  International's common stock were transferred to The
Bank  of  Nova  Scotia  from  the  Trace  bankruptcy   estate.   Certain  equity
transactions,  primarily the exercise of stock options, have reduced the Bank of
Nova Scotia's common stock ownership percentage to 23.6% at December 29, 2002.


                                      F-44
<PAGE>




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

2.   COMMITMENTS AND CONTINGENCIES (continued)

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

     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  Amended  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 Amended Credit Facility.  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 and liquidated damages, as defined, if
any,  thereon to the date of redemption  and declining  annually to 100.0% on or
after April 1, 2008.  Additionally,  on or before April 1, 2005,  up to 35.0% of
the principal amount of the notes may be redeemed at a redemption price equal to
110.750%  of  the  principal  amount,  plus  accrued  and  unpaid  interest  and
liquidated  damages,  as defined, if any, thereon to the date of redemption with
the net proceeds of one or more equity offerings.

     Upon the  occurrence of a change of control,  as defined,  each holder will
have the right to  require  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 and liquidated  damages,  as defined, 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 Foamex L.P.  and FCC
(the   "Issuers")   and  are  due  on  June  15,  2007.   The  notes   represent
uncollateralized  general obligations of the Issuers and are subordinated to all
Senior  Debt,  as  defined in the  Indenture.  Interest  is payable  June 15 and
December 15. The notes may be redeemed at the option of the Issuers, in whole or
in part,  at any time on or after June 15, 2002.  The initial  redemption  is at
104.938%  of their  principal  amount,  plus  accrued  and unpaid  interest,  as
defined,  if any,  thereon to the date of redemption  and declining  annually to
100.0% on or after June 15, 2005.

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

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

     The 13 1/2%  Senior  Subordinated  Notes were issued by the Issuers and are
due on August 15, 2005. The notes represent uncollateralized general obligations
of the  Issuers  and are  subordinated  to all  Senior  Debt,  as defined in the
Indenture.  Interest is payable  semiannually  on February 15 and August 15. The
notes may be redeemed at the option of the Issuers,  in whole or in part, at any
time on or after August 15, 2000. The initial  redemption is at 106.75% of their
principal amount, plus accrued and unpaid interest,  if any, thereon to the date
of redemption  and declining  annually to 100.0% on or after August 15, 2004. At
December 31, 2001,  the  redemption  price is 105.0625%  plus accrued and unpaid
interest.


                                      F-45
<PAGE>



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

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


                                      F-46
<PAGE>






                                   FOAMEX L.P.
                     INDEX TO FINANCIAL STATEMENT SCHEDULES


     Index to Financial Statement Schedules

     Schedule II - Valuation and Qualifying Accounts

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




                                      S-1
<PAGE>



                                                                  Schedule II

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

<TABLE>
<CAPTION>
                                             Balance at      Charged to    Charged to                     Balance at
                                            Beginning of     Costs and        Other                          End of
                                              Period         Expenses       Accounts     Deductions         Period
                                            ------------     ----------    ----------    ----------       -----------

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

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

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

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

YEAR ENDED DECEMBER 31, 2000
Allowance for Uncollectible Accounts          $7,474          $2,838       $     -         $ 2,619         $7,693
                                              ======          ======       =======         =======         ======

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



(1)  Adjustments reflect a reduction in net sales.


                                      S-2
<PAGE>