content: SECURITIES AND EXCHANGE COMMISSION
  
                                      FORM 10-Q
  
                  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
  
                    For the quarterly period ended June 28, 1998
  
                      Commission file numbers 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                                       (Zip Code)
  executive offices)
  
  Registrant's telephone number, including area code:  (610) 859-3000
  
  Indicate  by check mark  whether  the  registrants  (1) have  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  period  that the
  registrant  was required to file such reports) and (2) have been subject to such
  filing requirements for the past 90 days. YES X NO
  
  Foamex L.P. and Foamex  Capital  Corporation  meet the  conditions  set forth in
  General  Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this
  form with the reduced disclosure format.
  
  The number of shares of Foamex Capital Corporation's common stock outstanding as
  of August 12, 1998 was 1,000.
  
                                    Page 1 of 30
                            Exhibit List on Page 24 of 30
  <PAGE>
                                     FOAMEX L.P.
                             FOAMEX CAPITAL CORPORATION
  
                                        INDEX
                                                                           Page
  Part I.  Financial Information:
  
            Item 1. Financial Statements
  
             Foamex L.P.
  
              Condensed  Consolidated  Statements  of  Operations -
                  Thirteen Week and  Twenty-Six  Week Periods Ended
                  June 28, 1998 and June 29, 1997                           3
  
              Condensed Consolidated  Balance Sheets as of June 28,
                  1998 and December 28, 1997                                4
  
              Condensed  Consolidated  Statements  of Cash  Flows -
                  Twenty-Six  Week Periods  Ended June 28, 1998 and
                  June 29, 1997                                             5
  
              Notes to Condensed  Consolidated Financial Statements         6
  
              Foamex Capital Corporation
  
              Balance Sheets as of June 28, 1998 and December 28, 1997     15
  
              Notes to Balance Sheets                                      16
  
            Item 2. Management's Discussion and Analysis of Financial 
                    Condition and Results of Operations                    18
  
  Part II. Other Information                                               24
  
           Exhibit List                                                    24
  
           Signatures                                                      30
  
  <PAGE>
  PART I.  FINANCIAL INFORMATION
  ITEM 1.  FINANCIAL STATEMENTS
  
                            FOAMEX L.P. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
  <TABLE>
  <CAPTION>
                                             13 Week Periods Ended         26 Week Periods Ended
                                            June 28,        June 29,      June 28,      June 29,
                                              1998           1997           1998         1997
                                                                 (thousands)
  <S>                                       <C>            <C>            <C>            <C>     
  NET SALES                                 $263,347       $199,491       $547,892       $393,625
  
  COST OF GOODS SOLD                         214,794        164,876        455,776        322,169
                                           ---------      ---------      ---------      ---------
  
  GROSS PROFIT                                48,553         34,615         92,116         71,456
  
  SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES                  17,030         10,631         34,796         21,754
                                           ---------      ---------      ---------      ---------
  
  INCOME FROM OPERATIONS                      31,523         23,984         57,320         49,702
  
  INTEREST AND DEBT ISSUANCE EXPENSE          15,818         10,836         33,493         21,502
  
  OTHER INCOME (EXPENSE), NET                   (306)           750           (580)         1,571
                                           ---------      ---------      ---------      ---------
  
  INCOME FROM CONTINUING OPERATIONS
     BEFORE PROVISION FOR INCOME TAXES        15,399         13,898         23,247         29,771
  
  PROVISION FOR INCOME TAXES                     808            481          1,533            849
                                           ---------      ---------      ---------      ---------
  
  INCOME FROM CONTINUING OPERATIONS           14,591         13,417         21,714         28,922
  
  LOSS FROM DISCONTINUED OPERATIONS               --             --             --             --
  
  EXTRAORDINARY LOSS ON EARLY
     EXTINGUISHMENT OF DEBT                      (72)       (44,859)        (3,195)       (45,538)
                                           ---------      ---------      ---------      ---------
  
  NET INCOME (LOSS)                          $14,519       $(31,442)       $18,519       $(16,616)
                                           =========      =========      =========      =========
  </TABLE>
  The  accompanying  notes are an  integral  part of the  condensed
  consolidated financial statements.
  
                                  3
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
  
                                                        June 28,      December 28,
  ASSETS                                                  1998           1997
                                                       ---------      ---------
  CURRENT ASSETS:                                             (thousands)
       Cash and cash equivalents                          $4,697         $8,982
       Accounts receivable, net                          144,325        138,571
       Inventories                                       116,588        112,094
       Accounts receivable, related party                 21,021         12,823
       Other current assets                               52,063         32,519
                                                       ---------      ---------
          Total current assets                           338,694        304,989
  
  PROPERTY, PLANT AND EQUIPMENT, NET                     207,409        205,705
  
  COST IN EXCESS OF ASSETS ACQUIRED, NET                 182,490        184,523
  
  DEBT ISSUANCE COSTS, NET                                14,938         18,889
  
  OTHER ASSETS                                            20,578         21,831
                                                       ---------      ---------
  
  TOTAL ASSETS                                          $764,109       $735,937
                                                       =========      =========
  
  LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
  CURRENT LIABILITIES:
       Short-term borrowings                              $7,320         $6,598
       Current portion of long-term debt                   4,347         12,161
       Accounts payable                                   96,455        110,640
       Accounts payable - related parties                  5,026         11,662
       Accrued interest                                    9,931         10,655
       Other accrued liabilities                          41,669         47,119
                                                       ---------      ---------
          Total current liabilities                      164,748        198,835
  
  LONG-TERM DEBT                                         683,853        726,649
  
  LONG-TERM DEBT - RELATED PARTY                          34,000         38,800
  
  OTHER LIABILITIES                                       28,976         31,076
                                                       ---------      ---------
  
          Total liabilities                              911,577        995,360
                                                       ---------      ---------
  
  COMMITMENTS AND CONTINGENCIES                               --             --
                                                       ---------      ---------
  
  PARTNERS' EQUITY (DEFICIT):
       General partners                                 (113,699)      (122,304)
       Limited partners                                       --             --
       Notes receivable from partner                     (16,118)       (16,118)
       Investment in General Felt                             --       (103,121)
       Accumulated other comprehensive income             (7,857)        (8,086)
       Other                                              (9,794)        (9,794)
                                                       ---------      ---------
          Total partners' equity (deficit)              (147,468)      (259,423)
                                                       ---------      ---------
  
  TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT)      $764,109       $735,937
                                                       =========      =========
  
  The  accompanying  notes  are an  integral  part of the  condensed  consolidated
  financial statements.
  
                                         4
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
  <TABLE>
  <CAPTION>
                                                                                  26 Week Periods Ended
                                                                                June 28,        June 29,
                                                                                  1998           1997
                                                                               ---------      ---------
  OPERATING ACTIVITIES:                                                                (thousands)
  <S>                                                                            <C>           <C>      
     Net income (loss)                                                           $18,519       $(16,616)
     Adjustments to reconcile net income to net cash provided by operating
         activities:
         Depreciation and amortization                                            15,502          8,008
         Amortization of debt issuance costs and debt discount                       (33)         1,370
         Extraordinary loss on extinguishment of debt                              2,857         22,620
         Other operating activities                                                3,959         (1,143)
         Changes in operating assets and liabilities                             (75,250)       (37,514)
                                                                               ---------      ---------
  
            Net cash used for operating activities                               (34,446)       (23,275)
                                                                               ---------      ---------
  
  INVESTING ACTIVITIES:
     Capital expenditures                                                        (14,609)       (15,366)
     Acquisitions, net of cash acquired                                           (3,899)            --
     Purchase of FJPS senior secured discount debentures                              --       (105,829)
     Proceeds from (payments for) note receivable - related party                   (424)         9,465
     Other investing activities                                                     (451)            34
                                                                               ---------      ---------
  
            Net cash used for investing activities                               (19,383)      (111,696)
                                                                               ---------      ---------
  
  FINANCING ACTIVITIES:
     Net proceeds from short-term borrowings                                         722            256
     Proceeds from revolving loans                                                82,426         49,000
     Proceeds from long-term debt                                                129,000        453,500
     Repayment of long-term debt                                                (132,318)      (363,392)
     Repayments of long-term debt - related party                                 (4,800)            --
     Transfer of General Felt common stock                                        (3,898)            --
     Debt issuance costs                                                          (1,598)       (14,746)
     Distributions to partners                                                   (20,074)        (5,949)
     Other financing activities                                                       84             28
                                                                               ---------      ---------
  
            Net cash provided by financing activities                             49,544        118,697
                                                                               ---------      ---------
  
  NET DECREASE IN CASH AND CASH EQUIVALENTS                                       (4,285)       (16,274)
  
  CASH AND CASH EQUIVALENTS
     AT BEGINNING OF PERIOD                                                        8,982         20,968
                                                                               ---------      ---------
  
  CASH AND CASH EQUIVALENTS
     AT END OF PERIOD                                                             $4,697         $4,694
                                                                               =========      =========
  </TABLE>
  
            The  accompanying   notes  are  an  integral  part  of  the  condensed
  consolidated financial statements.
  
                                         5
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  1.     ORGANIZATION AND BASIS OF PRESENTATION
  
         Foamex  L.P.'s  condensed  consolidated  balance sheet as of December 28,
  1997 has been condensed from the audited consolidated balance sheet at that date
  after  being  restated  for the  transfer  of General  Felt  Industries,  Inc.'s
  ("General Felt") common stock (see Note 2). The condensed  consolidated  balance
  sheet  as of  June  28,  1998  and  the  condensed  consolidated  statements  of
  operations for the thirteen week and twenty-six week periods ended June 28, 1998
  and June 29, 1997 and the  condensed  consolidated  statements of cash flows for
  the  twenty-six  week  periods  ended June 28,  1998 and June 29, 1997 have been
  prepared by Foamex L.P.  and  subsidiaries  and have not been  audited by Foamex
  L.P.'s  independent   accountants.   In  addition,  the  condensed  consolidated
  statement of  operations  and  statement of cash flows for the thirteen week and
  twenty-six  week periods ended June 29, 1997 have been restated for the transfer
  of General  Felt common  stock (see Note 2). In the opinion of  management,  all
  adjustments,   consisting  only  of  normal  recurring  adjustments,  considered
  necessary  for a fair  presentation  of  the  consolidated  financial  position,
  results of operations and cash flows have been included.
  
         On December 23, 1997, Foamex International Inc. ("Foamex  International")
  acquired Crain Industries,  Inc.  ("Crain")  pursuant to a merger agreement with
  Crain  Holdings  Corp. for a purchase  price of  approximately  $213.7  million,
  including  the  assumption  of debt  with a face  value of  approximately  $98.6
  million (and an estimated fair value of approximately  $112.3  million),  Foamex
  International  then  contributed  the  assets  of  Crain  subject  to all of its
  liabilities  and  indebtedness  to Foamex  L.P.  (the "Crain  Acquisition").  In
  addition,   fees  and  expenses  associated  with  the  Crain  Acquisition  were
  approximately $13.2 million. (See Note 3).
  
         Certain  information  and  note  disclosures  normally  included  in  the
  financial  statements  prepared in accordance with generally accepted accounting
  principles  have been  condensed  or  omitted in  accordance  with the rules and
  regulations  of  the  Securities  and  Exchange   Commission.   These  condensed
  consolidated  financial  statements  should be read in  conjunction  with Foamex
  L.P.'s 1997 consolidated  financial statements and notes thereto as set forth in
  Foamex L.P.'s  Annual  Report on Form 10-K/A for the fiscal year ended  December
  28, 1997.
  
  2.     TRANSFER OF GENERAL FELT INDUSTRIES, INC.
  
         On February 27, 1998,  Foamex  International,  Foamex L.P. and certain of
  its affiliates  completed a series of  transactions  designed to simplify Foamex
  International's   corporate   structure  and  to  provide   future   operational
  flexibility.  Prior to the consummation of these  transactions,  (i) Foamex L.P.
  and Foamex L.P.'s wholly-owned  subsidiary,  General Felt, entered into a Supply
  Agreement and an  Administrative  Services  Agreement  (see Note 7), (ii) Foamex
  L.P.  repaid its  outstanding  indebtedness to General Felt with $4.8 million in
  cash and a $34.0  million  principal  amount  promissory  note (the  "Foamex/GFI
  Note")  supported by a $34.5 million letter of credit under the credit facility,
  (the  "Credit  Facility"),  (iii) Foamex L.P.  contributed  to General Felt $9.4
  million of outstanding net  intercompany  payables and  intercompany  loans with
  General  Felt,  and (iv)  Foamex  L.P.  defeased  the $4.5  million  outstanding
  principal  amount of its 9 1/2%  senior  secured  notes due  2000.  The  initial
  transaction resulted in the transfer from Foamex L.P. to Foam Funding LLC of all
  of the  outstanding  common  stock of  General  Felt,  in  exchange  for (i) the
  assumption Foam Funding LLC of $129.0 million of Foamex L.P.'s  indebtedness and
  (ii) the  transfer  by Foam  Funding  LLC to Foamex  L.P.  of a 1%  non-managing
  general  partnership  interest in Foamex L.P. As a result,  General  Felt ceased
  being a subsidiary  of Foamex L.P. and was relieved from all  obligations  under
  Foamex  L.P.'s 9 7/8%  senior  subordinated  notes  due 2007 and 13 1/2%  senior
  subordinated  notes due 2005.  Upon  consummation  of the  initial  transaction,
  Foamex Carpet  Cushion,  Inc.  ("Foamex  Carpet"),  a newly formed  wholly-owned
  subsidiary of Foamex International,  Foamex International, Foam Funding LLC, and
  General Felt entered into an Asset Purchase  Agreement  dated February 27, 1998,
  in which  General  Felt sold  substantially  all of its assets  (other  than the
  Foamex/GFI Note and its operating facility in Pico Rivera, California) to Foamex
  Carpet in  exchange  for (i) $20.0  million in cash and (ii) a  promissory  note
  issued by Foamex Carpet to Foam Funding LLC in the amount of $70.2 million.  The
  $20.0 million cash payment was funded with a distribution by Foamex L.P. As part
  of these  transactions,  Foamex Fibers,  Inc. ("Foamex Fibers"),  a wholly-owned
  subsidiary  of General  Felt,  was merged with and into  General Felt and Foamex
  LLC, a  wholly-owned  subsidiary of Foamex L.P., was merged with and into Foamex
  L.P. In addition, FMXI, Inc. and
  
                                         6
  <PAGE>
  2. TRANSFER OF GENERAL FELT INDUSTRIES, INC. (continued)
  
  Crain,  both  wholly-owned  subsidiaries  of Foamex  International  and  general
  partners of Foamex L.P.,  were merged and Crain,  as the surviving  corporation,
  subsequently  changed its name to FMXI,  Inc.  Foamex  Carpet  will  conduct the
  carpet cushion business previously conducted by General Felt. Also, Foam Funding
  LLC has retained  ownership of one of General Felt's operating  facilities which
  is being leased to Foamex Carpet and the $34.0 million Foamex/GFI Note.
  
         These  transactions  have been reflected as a reorganization of companies
  under common control.  Accordingly,  prior periods have been restated to exclude
  the  consolidated  operations of General Felt and partners' equity (deficit) was
  charged  to  reflect  the net  effect of these  transactions.  The  consolidated
  balance  sheet as of  December  28,  1997  has  been  restated  to  exclude  the
  consolidated  assets and  liabilities  of General Felt and reflect Foamex L.P.'s
  investment  in General Felt of  approximately  $103.1  million as a reduction of
  partners' equity (deficit). Upon consummation of these transactions, Foamex L.P.
  recorded an increase in  partners'  equity  (deficit)  of  approximately  $113.2
  million  associated  with the  assumption of  indebtedness  by Foam Funding LLC,
  related expenses and fees and other matters.  In addition,  Foamex L.P. recorded
  the $20.0 million distribution to Foamex International as discussed above.
  
         In connection with these transactions,  the consolidated balance sheet as
  of December  28,  1997 and the  consolidated  statement  of  operations  for the
  thirteen and  twenty-six  week periods ended June 29, 1997 have been restated as
  follows:
  <TABLE>
  <CAPTION>
                                                                         As previously     General           As
                                                                            Reported         Felt        Restated
         Balance Sheet:
  <S>                                                                       <C>           <C>            <C>     
           Current assets                                                   $352,217      $(47,228)      $304,989
           Total assets                                                      834,068       (98,131)       735,937
           Current liabilities                                               226,143       (27,308)       198,835
           Total liabilities                                                 990,370         4,990        995,360
           Partners' equity (deficit)                                       (156,302)     (103,121)      (259,423)
  
         Statement of Operations:
         Thirteen week period:
           Net sales                                                        $239,887      $(40,396)      $199,491
           Income before extraordinary loss                                   16,384        (2,967)        13,417
           Net income (loss)                                                 (28,475)       (2,967)       (31,442)
  
         Statement of Operations:
         Twenty-six week period:
           Net sales                                                        $469,007      $(75,382)      $393,625
           Income before extraordinary loss                                   32,600        (3,678)        28,922
           Net income (loss)                                                 (12,938)       (3,678)       (16,616)
  </TABLE>
  
  3.     CRAIN ACQUISITION
  
         On December 23, 1997, Foamex  International  acquired Crain pursuant to a
  merger with Crain Holdings Corp.  for a purchase price of  approximately  $213.7
  million,  including the  assumption  of debt with a face value of  approximately
  $98.6 million (with an estimated fair value of  approximately  $112.3  million),
  Foamex  International  then contributed the assets of Crain,  subject to all its
  liabilities and  indebtedness  to Foamex L.P. Fees and expenses  associated with
  the Crain  Acquisition  are  approximately  $13.2 million.  The  acquisition was
  funded by $118.0  million in bank  borrowings  by Foamex  L.P.  under the Credit
  Facility.  The excess of the purchase price over the estimated fair value of the
  net assets acquired was approximately $152.5 million.
  
                                         7
  <PAGE>
  
  3.     CRAIN ACQUISITION (continued)
  
         The Crain  Acquisition was accounted for as a purchase and the operations
  of Crain are included in the  consolidated  statements  of  operations  and cash
  flows from the date of acquisition.  The cost of the Crain  Acquisition has been
  allocated  on the  basis  of the  fair  value  of the  assets  acquired  and the
  liabilities  assumed.  The excess of the purchase  price over the estimated fair
  value of the net assets  acquired  is being  amortized  using the  straight-line
  method over forty years.  The  allocation  of the  purchase  price for the Crain
  Acquisition is based upon  preliminary  estimates and assumptions and is subject
  to revision once  appraisals,  valuations and other studies of the fair value of
  the acquired assets and liabilities  have been completed.  The pro forma results
  listed below are unaudited and assume that the Crain Acquisition occurred at the
  beginning of fiscal year 1997.
  
  <TABLE>
  <CAPTION>
                                                                    13 Week Period              26 Week Period
                                                                Ended June 29, 1997         Ended June 29, 1997
                                                                       (thousands, except per share data)
  <S>                                                                <C>                           <C>
         Net sales                                                      $215,519                  $419,677
                                                                        ========                  ========
  
         Income before extraordinary loss                               $ 15,153                  $ 30,857
                                                                        ========                  ========
  </TABLE>
  
         The pro forma results are not  necessarily  indicative of what would have
  occurred  if the Crain  Acquisition  had been in effect for the  entire  periods
  presented nor are they necessarily indicative of future consolidated results.
  
  4.     INVENTORIES
  
         Inventories consist of:
  <TABLE>
  <CAPTION>
                                                                          June 28,            December 28,
                                                                             1998                    1997
                                                                         ------------         -----------
                                                                                       (thousands)
  <S>                                                                      <C>                    <C>     
         Raw materials and supplies                                        $ 74,313               $ 72,071
         Work-in-process                                                     16,704                 15,406
         Finished goods                                                      25,571                 24,617
                                                                          ---------              ---------
             Total                                                         $116,588               $112,094
                                                                           ========               ========
  </TABLE>
  
                                         8
  <PAGE>
  5.     LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
  
         Long-term debt consists of:
  <TABLE>
  <CAPTION>
                                                                          June 28,            December 28,
                                                                             1998                 1997
                                                                         ------------         -----------
  <S>                                                                       <C>                     <C>   
         Credit Facility:                                                          (thousands)
           Term Loan A                                                $           -              $  76,700
           Term Loan B                                                       83,344                109,725
           Term Loan C                                                       75,766                 99,750
           Term Loan D                                                      109,725                110,000
           Revolving credit facility                                        137,354                 54,928
         9 7/8% Senior subordinated notes due 2007                          150,000                150,000
         13 1/2% Senior subordinated notes due 2005 (includes
           $12,824 and $13,720 of unamortized debt premium)                 110,824                111,720
         9 1/2% Senior secured notes due 2000                                     -                  4,523
         Industrial revenue bonds                                             7,000                  7,000
         Subordinated note payable (net of unamortized
           debt discount of $709 and $886)                                    6,306                  6,129
         Other                                                                7,881                  8,335
                                                                          ---------              ---------
                                                                            688,200                738,810
  
         Less current portion                                                 4,347                 12,161
                                                                          ---------              ---------
  
         Long-term debt-unrelated parties                                  $683,853               $726,649
                                                                          =========              =========
  
         Long-term debt-related party consists of:
  
         Foamex/GFI Note                                                  $  34,000              $  38,800
                                                                          =========              =========
  </TABLE>
  
         Refinancing  Associated  with Transfer of General Felt  Industries,  Inc.
         Common Stock
  
         In  connection  with  the  transfer  of  General  Felt  Industries,  Inc.
  ("General  Felt") common stock (see Note 2), Foamex L.P.  amended its agreements
  with lenders under the Credit Facility,  which included additional borrowings of
  $129.0 million under new term loan  agreements that were assumed by Foam Funding
  LLC (as discussed in Note 2) and  borrowings of $32.0 million under the existing
  revolving  credit  facility.  These  funds were used to (i) repay  approximately
  $125.1  million  of  existing  term  loans  and  accrued   interest  thereon  of
  approximately $0.9 million,  (ii) deposit $4.8 million into an escrow account in
  order to defease the senior  secured  notes  during June 1998,  (iii) repay $4.8
  million  of  indebtedness  owed to  General  Felt,  (iv) fund the $20.0  million
  distribution  to  Foamex   International  and  (v)  pay  fees  and  expenses  of
  approximately  $5.4 million.  Also,  this amendment  increased the  availability
  under the  revolving  credit  facility  from $150.0  million to $200.0  million;
  however,  $34.5  million  of this  increase  is used for a letter  of  credit to
  support the Foamex/GFI Note.
  
         Foamex/GFI Note
  
         In connection  with the transfer of General  Felt's common stock,  Foamex
  L.P.  entered  into the $34.0  million  Foamex/GFI  Note to  settle an  existing
  intercompany  note payable to General Felt. The Foamex/GFI Note matures in March
  2000 with  interest  payable at LIBOR plus an applicable  margin.  The principal
  amount is due upon maturity in March 2000.
  
  
                                         9
  <PAGE>
  5.     LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY (continued)
  
         Principal Payments
  
         Principal  payments on Foamex L.P.'s  long-term debt and long-term debt -
  related  party  for the  remainder  of 1998 and for the next  five  years are as
  follows:  1998 - $3.1 million; 1999 - $7.3 million; 2000 - $40.9 million; 2001 -
  $6.9 million; 2002 - $2.9 million; 2003 - $148.2 million and thereafter - $500.8
  million.
  
  6.    EARLY EXTINGUISHMENT OF DEBT
  
         In connection with the General Felt transaction,  Foamex L.P. incurred an
  extraordinary  loss on the early  extinguishment  of debt of approximately  $3.1
  million.  The extraordinary  loss is comprised of approximately $2.9 million for
  the  write-off  of  debt  issuance  costs  and  approximately  $0.2  million  of
  professional fees and other costs.
  
         During 1997,  Foamex L.P.  used  approximately  $12.1 million of proceeds
  from notes receivable - related party to repurchase outstanding  indebtedness of
  approximately  $11.8  million,  which  resulted  in  an  extraordinary  loss  of
  approximately $1.0 million.
  
  7.     RELATED PARTY TRANSACTIONS
  
         Effective  February  27,  1998,  Foamex  L.P.  entered  into  the  Supply
  Agreement  (see Note 2) (i) whereby  Foamex Carpet may purchase from Foamex L.P.
  finished prime, rubber and rebond carpet cushion at the lessor of cost plus 4.7%
  or fair market value,  (ii) Foamex L.P. may purchase from Foamex Carpet nonwoven
  textile fiber products at the lessor of cost plus 15% or fair market value,  and
  (iii) either party may purchase from the other trim foam and other raw materials
  and  supplies  for the lessor of the price paid for such raw  materials  or fair
  market  value.  Prior to February 27, 1998,  Foamex L.P. had sales and purchases
  with General Felt based on an established  intercompany transfer price which was
  adjusted to comply with the transfer pricing regulations of the Internal Revenue
  Code, as amended, if necessary.  During the thirteen week periods ended June 28,
  1998 and June 29, 1997, Foamex L.P. sold  approximately  $34.9 million and $37.2
  million,  respectively,  to Foamex  Carpet  and  purchased  from  Foamex  Carpet
  approximately $0.9 million and $0.4 million, respectively. During the twenty-six
  week  periods  ended  June  28,  1998  and  June  29,  1997,  Foamex  L.P.  sold
  approximately  $66.4 million and $72.5 million,  respectively,  to Foamex Carpet
  and purchased  from Foamex Carpet  approximately  $2.6 million and $0.8 million,
  respectively.
  
         In connection with the General Felt transaction (see Note 2), Foamex L.P.
  and Foamex Carpet entered into a Management  Services  Agreement  whereby Foamex
  L.P. will provide certain administrative functions on behalf of Foamex Carpet at
  a cost basis.  During the thirteen week and  twenty-six  week periods ended June
  28, 1998, Foamex L.P. received $0.5 million and $0.6 million,  respectively, for
  services provided to Foamex Carpet.
  
         During the  thirteen  week  period  ended  March 29,  1998,  Foamex  L.P.
  incurred  approximately $0.5 million of interest expense on a $38.8 million note
  due to General Felt. On February 27, 1998, Foamex L.P. repaid approximately $4.8
  million of this note, and the balance was replaced by the  Foamex/GFI  Note. The
  Foamex/GFI Note was retained by Foam Funding LLC in connection with the transfer
  of General Felt. During the thirteen week and twenty-six week periods ended June
  28, 1998,  Foamex L.P.  incurred  approximately  $0.6 million and $0.8  million,
  respectively, of interest expense on the Foamex/GFI Note (see Note 2).
  
         Foamex L.P. has a supply  agreement (the "Supply  Agreement") with Foamex
  International   pursuant  to  which,  at  the  option  of  Foamex  L.P.,  Foamex
  International  will purchase certain raw materials,  which are necessary for the
  manufacture of Foamex L.P.'s products,  and resell such materials to Foamex L.P.
  at a price equal to net cost plus reasonable out of pocket expenses.  Management
  believes that the terms of the Supply
  
                                         10
  <PAGE>
  7.    RELATED PARTY TRANSACTIONS (continued)
  
  Agreement are no less favorable than those which Foamex L.P. could have obtained
  from an unaffiliated third party.  During the twenty-six week periods ended June
  28, 1998 and June 29, 1997, Foamex L.P.  purchased  approximately  $15.0 million
  and $63.0 million,  respectively,  of raw materials under the Supply  Agreement.
  Effective  March 30, 1998,  Foamex L.P. has  discontinued  utilizing  the Supply
  Agreement to purchase its raw materials.
  
         Foamex  L.P.  chartered  an  aircraft  (which is owned by a  wholly-owned
  subsidiary of Foamex International)  through a third party and incurred costs of
  approximately  $0.3  million and $0.2 million  during the thirteen  week periods
  ended June 28,  1998 and June 29,  1997,  respectively  and  approximately  $0.5
  million and $0.6 million during the twenty-six  week periods ended June 28, 1998
  and June 29, 1997, respectively.
  
         On December 11, 1996, Foamex L.P. entered into a Tax Distribution Advance
  Agreement,  pursuant to which its partners are entitled to obtain  advances,  in
  the aggregate not to exceed $17.0 million,  against future  distributions  under
  Foamex L.P.'s tax distribution  agreement. As of June 28, 1998, there were $13.6
  million of advances to Foamex International under this agreement.
  
  8.     ENVIRONMENTAL MATTERS
  
         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 and the
  remediation of  environmental  contamination,  and as a result,  is from time to
  time involved in administrative and judicial  proceedings and inquiries relating
  to environmental matters. During the twenty-six week period ended June 28, 1998,
  expenditures  in connection with Foamex L.P.'s  compliance with federal,  state,
  local and foreign  environmental  laws and  regulations  did not have a material
  adverse  effect  on  Foamex  L.P.'s  operations,   financial  position,  capital
  expenditures  or  competitive  position.  As of June 28,  1998,  Foamex L.P. has
  environmental  accruals of approximately $3.6 million for environmental matters.
  In  addition,   as  of  June  28,  1998  Foamex  L.P.  has  net  receivables  of
  approximately  $0.6  million  relating  to  indemnification   for  environmental
  liabilities.   Foamex  L.P.   believes  that   realization  of  the  receivables
  established for indemnification is probable.
  
         The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments")  provide
  for the establishment of federal emission standards for hazardous air pollutants
  including  methylene  chloride,  propylene oxide and TDI,  materials used in the
  manufacturing  of foam. On December 27, 1996,  the United  States  Environmental
  Protection Agency (the "EPA") proposed regulations under the 1990 CAA Amendments
  that  will  require  manufacturers  of slab  stock  polyurethane  foam  and foam
  fabrication  plants to reduce  emissions of methylene  chloride.  Because  these
  regulations  are subject to change  prior to  finalization,  Foamex L.P.  cannot
  accurately predict the actual cost of their implementation. Foamex L.P. does not
  believe  implementation  of the  regulations  will  require it to make  material
  expenditures  at  facilities  owned prior to December  23,  1997,  due to Foamex
  L.P.'s use of alternative  technologies  which do not utilize methylene chloride
  and its ability to shift current  production to the  facilities  which use these
  alternative technologies;  however, material expenditures may be required at the
  facilities  formerly  operated by Crain. The 1990 CAA Amendments also may result
  in  the  imposition  of  additional  standards  regulating  air  emissions  from
  polyurethane foam manufacturers,  but these standards have not yet been proposed
  or promulgated.
  
         Foamex L.P. has reported to  appropriate  state  authorities  that it has
  found soil and  groundwater  contamination  in excess of state standards at four
  facilities and soil  contamination  in excess of state  standards at three other
  facilities.  Foamex  L.P.  has  begun  remediation  and  is  conducting  further
  investigations  into the extent of the  contamination  at these  facilities and,
  accordingly,  the extent of the remediation that may ultimately be required. The
  actual cost and the timetable of any such  remediation  cannot be predicted with
  any degree of  certainty  at this time.  As of June 28,  1998,  Foamex L.P.  has
  environmental accruals of approximately $3.0 million for the remaining potential
  remediation costs for these facilities based on estimates.
  
  
                                         11
  <PAGE>
  8.     ENVIRONMENTAL MATTERS (continued)
  
         Federal  regulations  require  that by the end of  1998  all  underground
  storage tanks  ("USTs") be removed or upgraded in all states to meet  applicable
  standards.  Foamex  L.P.  has two USTs that will  require  removal or  permanent
  in-place closure by the end of 1998. Due to the age of these tanks,  leakage may
  have occurred resulting in soil and possibly groundwater  contamination.  Foamex
  L.P. has accrued $0.1 million for the estimated removal and remediation, if any,
  associated  with these  USTs.  However,  the full extent of  contamination  and,
  accordingly,  the actual cost of such  remediation  cannot be predicted with any
  degree of certainty at this time. Foamex L.P. believes that its USTs do not pose
  a  significant  risk  of  environmental   liability  because  of  Foamex  L.P.'s
  monitoring  practices  for  USTs  and  conditional  approval  for the  permanent
  in-place closure for certain USTs. However,  there can be no assurance that such
  USTs will not result in significant environmental liability in the future.
  
         Foamex  L.P.  has been  designated  as a  Potentially  Responsible  Party
  ("PRP") by the EPA with respect to nine sites, with an estimated total liability
  to Foamex  L.P.  for the nine  sites of less than  approximately  $0.5  million.
  Estimates of total clean-up  costs and  fractional  allocations of liability are
  generally  provided  by the EPA or the  committee  of PRP's with  respect to the
  specified site. In each case, the participation of Foamex L.P.
  is considered to be immaterial.
  
         Although it is possible that new information or future developments could
  require Foamex L.P. to reassess its potential  exposure  relating to all pending
  environmental  matters,  including those described herein,  management  believes
  that,  based upon all currently  available  information,  the resolution of such
  environmental  matters will not have a material  adverse effect on 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 may
  be found to exist, that may require  expenditures not currently  anticipated and
  that may be material.
  
  9.     LITIGATION
  
         As of August 12, 1998, Foamex L.P. and Trace International Holdings, Inc.
  ("Trace Holdings") were two of multiple defendants in actions filed on behalf of
  approximately  5,000  recipients  of breast  implants in various  United  States
  federal and state courts and one Canadian provincial court, some of which allege
  substantial  damages,  but most of which allege unspecified damages for personal
  injuries of various types.  Three of these cases seek to allege claims on behalf
  of all breast implant  recipients or other allegedly  affected  parties,  but no
  class has been approved or certified by the court. In addition, three cases have
  been  filed  alleging  claims  on  behalf  of  approximately  700  residents  of
  Australia, New Zealand, England, and Ireland. During 1995, Foamex L.P. and Trace
  Holdings were granted  summary  judgments  and dismissed as defendants  from all
  cases in the  federal  courts  of the  United  States  and the  state  courts of
  California.  Appeals for these  decisions  were  withdrawn and the decisions are
  final. In addition,  two of the cases filed on behalf of 903 foreign  plaintiffs
  were  dismissed on the grounds that the cases could not be brought in the United
  States courts. This decision is subject to appeal. Foamex L.P. believes that the
  number of suits and  claimants  may increase.  Although  breast  implants do not
  contain foam,  certain  silicone gel implants were produced using a polyurethane
  foam covering  fabricated by independent  distributors or fabricators  from bulk
  foam purchased from Foamex L.P. or Trace Holdings. Neither Foamex L.P. nor Trace
  Holdings  recommended,  authorized  or  approved  the use of its foam for  these
  purposes.  While it is not feasible to predict or determine the outcome of these
  actions,  based on  management's  present  assessment  of the  merits of pending
  claims,  after  consultation  with the general  counsel of Trace  Holdings,  and
  without  taking into  account  potential  indemnity  from the  manufacturers  of
  polyurethane  covered breast implants,  management believes that the disposition
  of matters that are pending or that may reasonably be anticipated to be asserted
  should  not have a  material  adverse  effect on either  Foamex  L.P.'s or Trace
  Holdings' consolidated financial position or results of operations. In addition,
  Foamex L.P.  is also  indemnified  by Trace  Holdings  for any such  liabilities
  relating to foam manufactured
  
                                         12
  <PAGE>
  9.    LITIGATION (continued)
  
  prior to October 1990. Although Trace Holdings has paid Foamex L.P.'s litigation
  expenses to date pursuant to such  indemnification and management believes Trace
  Holdings  likely will be in a position to continue to pay such  expenses,  there
  can be no absolute  assurance  that Trace  Holdings will be able to provide such
  indemnification. Based on information available at this time with respect to the
  potential  liability,  and  without  taking  into  account  the  indemnification
  provided by Trace  Holdings and the  coverage  provided by Trace  Holdings'  and
  Foamex L.P.'s  liability  insurance,  Foamex L.P.  believes that the proceedings
  should not ultimately result in any liability that would have a material adverse
  effect on the  financial  position  or results of  operations  of Foamex L.P. If
  management's assessment of Foamex L.P.'s liability with respect to these actions
  is incorrect, such actions could have a material adverse effect on Foamex L.P.
  
         In November  1997, a complaint  was filed in the United  States  District
  Court for the  Southern  District of Texas  alleging  that  various  defendants,
  including Crain through the use of the CARDIO(R)  process  licensed from a third
  party, infringed on a patent held by plaintiff.  Foamex L.P. is negotiating with
  the licensor of the process for the  assumption  of the defense of the action by
  the licensor; however, the action is in the preliminary stages, and there can be
  no assurance as to the ultimate outcome of the action.
  
         On or about March 17, 1998,  five  purported  class action  lawsuits were
  filed  in the  Delaware  Chancery  Court,  New  Castle  County,  against  Foamex
  International, directors of Foamex International, Trace Holdings, and individual
  officers and directors of Trace Holdings:
  
         Brickell Partners v. Marshall S. Cogan, et al.,  No. 16260NC;
         Mimona Capital v. Salvatore J. Bonanno, et al.,  No. 16259NC;
         Daniel Cohen v. Foamex International Inc.,  No. 16263;
         Eileen Karisinki v. Foamex International Inc., et al.,  No. 16261NC and
         John E. Funky Trust v. Salvatore J. Bonanno, et al., No. 16267.
  
         A  sixth  purported  class  action  lawsuit,  Barnett  Stepak  v.  Foamex
  International  Inc.,  et al.,  No.  16277,  was filed on or about March 23, 1998
  against the same  defendants.  The complaints in the six actions  allege,  among
  other things,  that the defendants have violated  fiduciary and other common law
  duties  purportedly  owed to Foamex  International's  stockholders in connection
  with Trace Holdings proposal to acquire all of the outstanding  shares of Foamex
  International's  common stock. The complaints  seek,  among other things,  class
  certification,  a declaration  that the defendants have breached their fiduciary
  duties  to  the   class,   preliminary   and   permanent   injunctions   barring
  implementation  of the proposed  transaction,  rescission of the  transaction if
  consummated, unspecified compensatory damages, and costs and attorneys' fees.
  
         The parties to the lawsuits  entered into a Memorandum of  Understanding,
  dated  June  25,  1998  (the  "Memorandum  of  Understanding"),  to  settle  the
  litigation,  subject to, inter alia,  execution of a definitive  Stipulation  of
  Settlement and approval by the Delaware  Chancery Court following  notice to the
  public stockholders and a hearing. The Memorandum of Understanding provides that
  as a result of, among other things, the stockholder  litigation and negotiations
  among  counsel for the parties to the  Memorandum  of  Understanding,  a special
  meeting of stockholders will be held to vote upon and adopt the Merger Agreement
  which  provides,  among other  things,  for the public  shares of the  Company's
  common stock to be converted into the right to receive  $18.75 in cash,  without
  interest.  The Memorandum of Understanding  also  acknowledged that the terms of
  the Merger have been significantly  improved over the terms originally  proposed
  by Trace Holdings on March 16, 1998, and Foamex International and the individual
  director and officer defendants  acknowledged that the filing and prosecution of
  the  stockholder  litigation  was a factor they took into account in giving fair
  consideration to and entering into the Merger,  and Trace Holdings  acknowledged
  that it took into account the  desirability  of  satisfactorily  addressing  the
  claims  asserted in the  stockholder  litigation  in  agreeing to the  increased
  consideration  to be paid to the  public  stockholders  pursuant  to the  Merger
  Agreement.
  
                                         13
  <PAGE>
  
  9.     LITIGATION (continued)
  
         The  Memorandum of  Understanding  also provided for  certification  of a
  class, for settlement purposes only, consisting of the public stockholders,  the
  dismissal  of the  stockholder  litigation  with  prejudice  and the  release by
  plaintiffs  and all members of the class of all claims and causes of action that
  were or could have been asserted  against Trace Holdings,  Foamex  International
  and the individual defendants in the stockholder litigation or that arise out of
  the matters alleged by plaintiffs.  In connection with the proposed  settlement,
  the  plaintiffs  intend to apply of an award of attorney's  fees and  litigation
  expenses in an amount not to exceed $925,000, and the defendants have agreed not
  to oppose this application. Additionally, Foamex International has agreed to pay
  the  cost  of  sending  notice  of  the  settlement,   if  any,  to  its  public
  shareholders.
  
         The  defendants  have  denied,  and  continued  to deny,  that  they have
  committed or have  threatened to commit any violation of law or breaches of duty
  to plaintiffs or the purported class. The defendants have agreed to the proposed
  settlement  because,  among other reasons,  such settlement  would eliminate the
  burden and expenses of further  litigation and would facilitate the consummation
  of a  transaction  that  they  believe  to be in the best  interests  of  Foamex
  International and the public stockholders.
  
         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 the  financial  position or
  results of operations of Foamex L.P. If management's assessment of Foamex L.P.'s
  liability with respect to these actions is incorrect,  such actions could have a
  material adverse effect on Foamex L.P.'s consolidated financial position.
  
  10.     COMPENSATION INCOME
  
         In June 1997, the Financial  Accounting  Standards Board issued Statement
  of  Financial  Accounting  Standards  No.  130  ("SFAS  No.  130"),   "Reporting
  Comprehensive  Income," which requires  disclosure of comprehensive  income,  as
  defined,  including  comprehensive  disclosure in interim financial  statements.
  Comprehensive  income for the thirteen  week and  twenty-six  week periods ended
  June 28, 1998 and June 29, 1997 is comprised of the following:
  <TABLE>
  <CAPTION>
                                                                    13 Week Period              26 Week Period
                                                                Ended June 28, 1998         Ended June 28, 1998
                                                                         (thousands, except per share data)
  <S>                                                                  <C>                          <C>    
  Net income                                                           $14,519                      $18,519
  Foreign currency translation adjustments                                   3                          230
                                                                      --------                     -------- 
  Total comprehensive income                                           $14,522                      $18,749
                                                                      ========                     ======== 
  
                                                                    13 Week Period              26 Week Period
                                                                Ended June 29, 1997         Ended June 29, 1997
                                                                         (thousands, except per share data)
  Net income                                                          $(31,442)                    $(16,616)
  Foreign currency translation adjustments                                  16                         (168)
                                                                      --------                     -------- 
  Total comprehensive income                                          $(31,426)                    $(16,784)
                                                                      ========                     ======== 
  </TABLE>
  
                                         14
  <PAGE>
                             FOAMEX CAPITAL CORPORATION
                     (A Wholly-Owned Subsidiary of Foamex L.P.)
                             BALANCE SHEETS (unaudited)
  
  <TABLE>
  <CAPTION>
                                                             June 28,  December 28,
                                                               1998        1997
  ASSETS                                                          (thousands)
  
  <S>                                                           <C>         <C>
  CASH                                                          $1          $1
                                                                ==          ==
  
  LIABILITIES AND STOCKHOLDER'S EQUITY
  
  COMMITMENTS AND CONTINGENCIES                                 $-          $-
                                                                --          --
  
  STOCKHOLDER'S EQUITY:
       Common stock, par value $.01 per share;
       1,000 shares authorized, issued and outstanding           -           -
       Additional paid-in capital                                1           1
                                                                --          --
  
          TOTAL STOCKHOLDER'S EQUITY                            $1          $1
                                                                ==          ==
  </TABLE>
  
         The accompanying notes are an integral part of the balance sheets.
  
                                         15
  <PAGE>
                             FOAMEX CAPITAL CORPORATION
                     (A Wholly-Owned Subsidiary of Foamex L.P.)
                         NOTES TO BALANCE SHEETS (unaudited)
  
  1.     ORGANIZATION
  
         Foamex Capital Corporation  ("FCC"), a wholly-owned  subsidiary of Foamex
  L.P.,  was formed for the sole  purpose of  obtaining  financing  from  external
  sources.
  
  2.     COMMITMENTS AND CONTINGENCIES
  
         FCC is a joint obligor and severally  liable on the following  borrowings
  of Foamex L.P.:
  
         9 7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")
  
         The Senior  Subordinated  Notes  were  issued by Foamex  L.P.  and FCC in
  connection with the June 1997 refinancing  plan. The Senior  Subordinated  Notes
  bear interest at the rate of 9 7/8% per annum payable  semiannually on each June
  15 and December 15, commencing  December 15, 1997. The Senior Subordinated Notes
  mature on June 15, 2007.  The Senior  Subordinated  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, initially at 104.938% of their principal amount, plus accrued interest and
  liquidated  damages,  as defined,  if any, thereon to the date of redemption and
  declining to 100.0% on or after June 15, 2005. In addition, at any time prior to
  June 15, 2000,  Foamex L.P. may on one or more  occasions  redeem up to 35.0% of
  the initially outstanding principal amount of the Senior Subordinated Notes at a
  redemption  price  equal to  109.875%  of the  principal  amount,  plus  accrued
  interest and liquidated  damages, if any, thereon to the date of redemption with
  the cash proceeds of one or more Public Equity Offerings,  as defined.  Upon the
  occurrence  of  a  change  of  control,  as  defined,   each  holder  of  Senior
  Subordinated  Notes will have the right to require Foamex L.P. to repurchase the
  Senior  Subordinated  Notes at a price equal to 101.0% of the principal  amount,
  plus accrued interest and liquidated damages, if any, to the date of repurchase.
  Trace Holdings' proposed acquisition of Foamex International may constitute such
  a change of control.  The Senior Subordinated Notes are subordinated in right of
  payment to all senior indebtedness and are pari passu in right of payment to the
  13 1/2% Senior  Subordinated Notes and approximately  $7.0 million  subordinated
  promissory note.
  
         13 1/2% Senior  Subordinated Notes due 2005 ("13 1/2% Senior Subordinated
  Notes")
  
         The 13 1/2% Senior  Subordinated Notes were issued by Foamex L.P. and FCC
  in a  private  placement  on  December  23,  1997 in  connection  with the Crain
  Acquisition.  The 13 1/2% Senior Subordinated Notes bear interest at the rate of
  13 1/2% per annum  payable  semiannually  on each  February  15 and  August  15,
  commencing  February 15, 1998. The 13 1/2% Senior  Subordinated  Notes mature on
  August 15, 2005.  The 13 1/2% Senior  Subordinated  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,  initially at 106.75% of their principal amount, plus accrued interest and
  liquidated  damages,  as defined,  if any, thereon to the date of redemption and
  declining to 100.0% on or after August 15, 2004. Upon the occurrence of a change
  of control,  as defined,  each holder of the 13 1/2% Senior  Subordinated  Notes
  will have the right to require  Foamex  L.P.  to  repurchase  the 13 1/2% Senior
  Subordinated  Notes at a price  equal to 101.0% of the  principal  amount,  plus
  accrued  interest and  liquidated  damages,  if any, to the date of  repurchase.
  Trace Holdings' proposed acquisition of Foamex International may constitute such
  a change of control.  The 13 1/2% Senior  Subordinated Notes are subordinated in
  right of  payment  to all  senior  indebtedness  and are pari  passu in right of
  payment to the Senior  Subordinated  Notes and an approximately  $7.0 million of
  subordinated promissory note.
  
  
                                         16
  <PAGE>
                             FOAMEX CAPITAL CORPORATION
                     (A Wholly-Owned Subsidiary of Foamex L.P.)
                         NOTES TO BALANCE SHEETS (unaudited)
  
         Foamex  L.P.  has  completed  a  registration  statement  relating  to an
  exchange  offer in which Foamex L.P.  exchanged the 13 1/2% Senior  Subordinated
  Notes issued in the private  placement for new notes. The terms of the new notes
  are  substantially  identical  in  all  respects  (including  principal  amount,
  interest  rate,  maturity  and  ranking)  to the  terms  of the 13  1/2%  Senior
  Subordinated  Notes,  except  that the new notes  are  transferable  by  holders
  thereof  without  further  registration  under the  Securities  Act of 1933,  as
  amended  (except  in the  case  of 13 1/2%  Senior  Subordinated  Notes  held by
  affiliates of Foamex L.P. and for certain other holders), and are not subject to
  any  covenant  regarding  registration  under  the  Securities  Act of 1933,  as
  amended.
  
  
                                         17
  
  <PAGE>
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
         Foamex L.P.  operates in the flexible  polyurethane  and advanced polymer
  foam products industry.  The following  discussion should be read in conjunction
  with the condensed  consolidated  financial statements and related notes thereto
  of Foamex  L.P.  included in this  report.  Certain  information  in this report
  contains  forward-looking  statements and should be read in conjunction with the
  discussion regarding forward-looking statements set forth on page five of Foamex
  L.P.'s 1997 Annual Report on Form 10-K/A.
  
         During 1997,  Foamex  L.P.'s  products  were  utilized  primarily in four
  businesses:  (i)  Foam  Products,  consisting  of  cushioning  foams,  including
  bedding, furniture, packaging, health care and foam-based consumer products such
  as futons,  pillows,  mattress pads and juvenile furniture,  (ii) Carpet Cushion
  Products,  consisting of carpet padding and related  products,  (iii) Automotive
  Products,  consisting of automotive trim,  laminates and other accessories,  and
  (iv) Technical  Products,  consisting of reticulated  and other  specialty foams
  used for reservoiring filtration, gasketing and sealing.
  
         On June 25, 1998, Foamex International,  Trace Holdings, and Trace Merger
  Sub Corp. entered into an Agreement and Plan of Merger (the "Merger Agreement"),
  providing for the merger (the "Merger") of Trace Merger Sub Corp.  with and into
  Foamex  International.  Upon  consummation  of the  Merger,  the  holders of the
  outstanding  shares of Foamex  International's  common  sotck,  other than Trace
  Holdings and its  subsidiaries,  will  received,  in exchange for their  shares,
  $18.75 per share in cash.  Consummation  of the Merger is subject to a number of
  conditions,  many of which are  outside  the  control  of Foamex  International,
  including:  (i)  the  approval  and  adoption  of the  Merger  Agreement  by the
  affirmative  vote of the  holders of a  majority  of the  outstanding  shares of
  common  stock of  Foamex  International;  (ii)  the  absence  of any  injunction
  preventing  consummation of the Merger,  (iii) th absence of a material  adverse
  change  in the  business  of Foamex  International's,  and (iv) the  receipt  of
  requisite financing.
  
         On April 27, 1998, Foamex  International's  facility in Orlando,  Florida
  was damaged by a fire.  Foamex  International is in the process of repairing the
  damages to the facility and supplying  local  customers  from other  facilities.
  Foamex  International  believes  that it has  adequate  insurance  coverage  for
  business  interruption  and damages to the  facility  associated  with the fire.
  After   considering   Foamex   International's    insurance   coverage,   Foamex
  International  does not believe that the fire will have a significant  impact on
  Foamex International's  financial position or operations;  however, there can be
  no  assurance  that  the  fire  will not have a  significant  impact  on  Foamex
  International's financial position or operations.
  
         On February 27, 1998,  Foamex  International,  Foamex L.P. and certain of
  its affiliates  completed a series of  transactions  designed to simplify Foamex
  International's   corporate   structure  and  to  provide   future   operational
  flexibility.  Prior to the consummation of these  transactions,  (i) Foamex L.P.
  and Foamex L.P.'s wholly-owned subsidiary, General Felt, entered into the Supply
  Agreement and the Administrative Services Agreement, (ii) Foamex L.P. repaid its
  outstanding  indebtedness  to  General  Felt with $4.8  million  in cash and the
  Foamex/GFI  Note  supported by a $34.5 million letter of credit under the Credit
  Facility,  (iii)  Foamex  L.P.  contributed  to  General  Felt $9.4  million  of
  outstanding net intercompany  payables and intercompany  loans with General Felt
  and (iv) Foamex L.P. defeased the $4.5 million  outstanding  principal amount of
  its 9 1/2% Senior  Secured Notes due 2000. The initial  transaction  resulted in
  the  transfer  from Foamex L.P.  to Foam  Funding LLC of all of the  outstanding
  common stock of General Felt, in exchange for (i) the assumption by Foam Funding
  LLC of $129.0  million of Foamex  L.P.'s  indebtedness  and (ii) the transfer by
  Foam  Funding  LLC to  Foamex  L.P.  of a 1%  non-managing  general  partnership
  interest  in Foamex  L.P. As a result,  each of General  Felt and Foamex  Fibers
  ceased being a subsidiary of Foamex L.P. and was relieved  from all  obligations
  under  Foamex  L.P.'s  9 7/8%  Senior  Subordinated  Notes  and 13  1/2%  senior
  subordinated  notes due 2005.  Upon  consummation  of the  initial  transaction,
  Foamex Carpet, a newly formed wholly-owned  subsidiary of Foamex  International,
  Foamex  International,  Foam Funding LLC, and General Felt entered into an Asset
  Purchase Agreement, pursuant to which General Felt sold substantially all of its
  assets  (other  than the  Foamex/GFI  Note and its  operating  facility  in Pico
  Rivera,  California)  to Foamex Carpet in exchange for (i) $20.0 million in cash
  and (ii) a  promissory  note issued by Foamex  Carpet to Foam Funding LLC in the
  amount of $70.2  million.  The $20.0  million  cash  payment  was funded  with a
  distribution  by Foamex L.P. As part of these  transactions,  Foamex  Fibers,  a
  wholly-owned  subsidiary of General Felt,  was merged with and into General Felt
  and Foamex LLC, a  wholly-owned  subsidiary of Foamex L.P.,  was merged with and
  into  Foamex  L.P.  In  addition,   FMXI,  Inc.  and  Crain,  both  wholly-owned
  subsidiaries of Foamex  International  and general partners of Foamex L.P., were
  merged and Crain, as the surviving corporation, subsequently changed its name to
  FMXI,  Inc.  Foamex Carpet will conduct the carpet cushion  business  previously
  conducted by General Felt. Also, Foam Funding LLC has retained  ownership of one
  of General Felt's  operating  facilities  which is being leased to Foamex Carpet
  and  the  Foamex/GFI  Note.  These   transactions   have  been  reflected  as  a
  reorganization  of companies  under common control.
  
                                         18
  <PAGE>
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
  Accordingly,  Foamex L.P.'s consolidated financial statements have been restated
  to exclude the consolidated operations of General Felt.
  
         On December 23, 1997, Foamex  International  acquired Crain pursuant to a
  merger  agreement  with Crain  Holdings  for a purchase  price of  approximately
  $213.7  million,  including  the  assumption  of  debt  with  a  face  value  of
  approximately $98.6 million (and an estimated fair value of approximately $112.3
  million).  Foamex  International then contributed the assets of Crain subject to
  all of its  liabilities and  indebtedness  to Foamex L.P. In addition,  fees and
  expenses associated with the Crain Acquisition are approximately $13.2 million.
  
         On April 27, 1998, Foamex L.P.'s facility in Orlando, Florida was damaged
  by a fire.  Foamex  L.P.  is in the  process  of  repairing  the  damages to the
  facility  and  supplying  local  customers  from  other  facilities.  Management
  believes  that  Foamex  L.P.  has  adequate   insurance  coverage  for  business
  interruption  and  damages  to the  facility  associated  with the  fire.  After
  considering Foamex L.P.'s insurance coverage,  Foamex L.P. does not believe that
  the fire will have a significant  impact on Foamex L.P.'s financial  position or
  operations;  however,  there can be no  assurance  that the fire will not have a
  significant impact on Foamex L.P.'s financial position or operations.
  
         Operating  results  for 1998 are  expected  to be  influenced  by various
  internal and external factors.  These factors include,  among other things,  (i)
  consolidation of the Crain  Acquisition,  (ii) continued  implementation  of the
  continuous  improvement  program to improve Foamex L.P.'s  profitability,  (iii)
  additional  raw  material  cost  increases,  if any, by Foamex  L.P.'s  chemical
  suppliers,  (iv) Foamex L.P.'s  success in passing on to its  customers  selling
  price increases to recover such raw material cost increases and (v) fluctuations
  in interest rates.
  
  13 Week  Period  Ended June 28, 1998  Compared to 13 Week Period  Ended June 29,
  1997
  
  Results of Operations
  
         Net sales for the second  quarter of 1998 were $263.3 million as compared
  to $199.5 million in the second quarter of 1997, an increase of $63.8 million or
  32.0%.  Foam  Products  net sales for the second  quarter of 1998  increased  to
  $141.0 million from $82.6 million in the second quarter of 1997 primarily due to
  net sales from the Crain operations and increased volume to our national bedding
  customers  and  fabricators.  Carpet  Cushion  Products net sales for the second
  quarter of 1998 decreased 5.0% to $39.9 million from $38.0 million in the second
  quarter  of 1997  primarily  due to the sale of Dalton  in  October  1997  which
  contributed net sales of $13.6 million in 1997 and a reduction in rebond selling
  prices as compared to 1997. Automotive Products net sales for the second quarter
  of 1998 increased 4.9% to $62.2 million from $59.3 million in the second quarter
  of 1997 primarily due to increased volume.  Technical Products net sales for the
  second quarter of 1998 increased 2.6% to $20.2 million from $19.6 million in the
  second  quarter of 1997  primarily due to increased net sales volume for felted,
  gasketing, and sealing products.
  
         Gross  profit as a  percentage  of net sales  increased  to 18.4% for the
  second quarter of 1998 from 17.4% in the second quarter of 1997 primarily due to
  increased  purchasing  leverage  offset by a shift in product  mix for 1998 as a
  result of the Crain  Acquisition.  Crain's  principal  product  lines,  bedding,
  furniture and carpet cushion,  have  inherently  lower gross profit margins than
  Foamex  International's  historical  gross profit  margins.  Also,  gross profit
  percentage increased in the second quarter of 1998 due to Foamex International's
  implementation of restructuring/consolidation programs associated with the Crain
  Acquisition.
  
         Income from operations  increased to $31.5 million for the second quarter
  of 1998 from $24.0  million in the second  quarter of 1997  primarily due to the
  Crain Acquisition.
  
         Income  before  extraordinary  loss  increased  to $14.6  million for the
  second  quarter of 1998 as compared to $13.4  million for the second  quarter of
  1997.  The increase is primarily  due to the increase in income from  operations
  discussed above offset by an increase of approximately  $5.0 million in interest
  and debt issuance expense and $1.1 million of costs associated with the transfer
  of General Felt which is included in other income  
  
                                         19
  <PAGE>
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
  (expense),  net. The increase in interest and debt issuance expense is primarily
  due to the additional debt incurred in connection with the Crain Acquisition and
  the June 1997 refinancing plan.
  
         The extraordinary  loss on early  extinguishment of debt of approximately
  $44.9  million  during the  second  quarter  of 1997  primarily  relates to debt
  extinguished in connection with the June 1997 refinancing plan.
  
  26 Week  Period  Ended June 28, 1998  Compared to 26 Week Period  Ended June 29,
  1997
  
  Results of Operations
  
         Net sales for the twenty-six  week period ended June 28, 1998 were $547.9
  million as compared to $393.6 million for the twenty-six  week period ended June
  29, 1997,  an increase of $154.3  million or 39.2%.  Foam Products net sales for
  the twenty-six  week period ended June 28, 1998 increased to $295.1 million from
  $163.3 million for the twenty-six  week period ended June 29, 1997 primarily due
  to the net sales from the Crain  operations and increased volume to our national
  bedding  customers and  fabricators.  Carpet Cushion  Products net sales for the
  twenty-six week period ended June 28, 1998 increased 15.6% to $85.8 million from
  $74.2 million for the  twenty-six  week period ended June 28, 1997 primarily due
  to net sales from the Crain  operations  offset by the sale of Dalton in October
  1997  which  contributed  net sales of $24.3  million in 1997 and  reduction  of
  rebond selling prices as compared to 1997 and product mix.  Automotive  Products
  net sales for the  twenty-six  week period ended June 28, 1998 increased 5.6% to
  $125.7 million from $119.0 million for the twenty-six week period ended June 29,
  1997  primarily due to increased  volume.  Technical  Products net sales for the
  twenty-six week period ended June 28, 1998 increased 11.1% to $41.3 million from
  $37.1 million for the  twenty-six  week period ended June 29, 1997 primarily due
  to increased net sales volume for felted, gasketing, and sealing products.
  
         Gross  profit as a  percentage  of net sales  decreased  to 16.8% for the
  twenty-six  week period  ended June 28, 1998 from 18.2% in the  twenty-six  week
  period ended June 29, 1997 primarily due to the shift in product mix for 1998 as
  a result of the Crain  Acquisition.  Crain's principal  product lines,  bedding,
  furniture and carpet cushion,  have  inherently  lower gross profit margins than
  Foamex  International's  historical gross profit margins. Also, the gross profit
  was lower since Foamex International carried the full individual operating costs
  of both organizations throughout the majority of the first quarter of 1998.
  
         Income from operations increased to $57.3 million for the twenty-six week
  period  ended June 28,  1998 from $49.7  million in the  twenty-six  week period
  ended June 29, 1997 primarily due to the Crain Acquisition.
  
         Income  before  extraordinary  loss  decreased  to $23.2  million for the
  twenty-six  week period ended June 28, 1998 as compared to $30.0 million for the
  twenty-six  week period ended June 29, 1997.  The decrease is primarily  due the
  increase in income from operations, offset by an increase of approximately $12.0
  million  in  interest  and  debt  issuance  expense  and $2.0  million  of costs
  associated  with the  transfer of General Felt which is included in other income
  (expense),  net. The increase in interest and debt issuance expense is primarily
  due to the additional debt incurred in connection with the Crain Acquisition and
  the June 1997 refinancing plan.
  
         The extraordinary  loss on early  extinguishment of debt of approximately
  $3.2 million  during the  twenty-six  week period ended June 28, 1998  primarily
  relates to the  write-off of debt  issuance  costs with debt  extinguishment  in
  connection  with the GFI  Transaction  and the  redemption of the senior secured
  notes. The extraordinary  loss on early  extinguishment of debt of approximately
  $45.5 million  during the  twenty-six  week period ended June 29, 1997 primarily
  relates  to the  write-off  of debt  issuance  costs with debt  extinguished  in
  connection with the June 1997 refinancing plan.
  
  Foamex Capital Corporation ("FCC")
  
         FCC is solely a co-issuer of certain  indebtedness of Foamex L.P. and has
  no other material operations.
  
                                         20
  <PAGE>
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
  Liquidity and Capital Resources
  
         Foamex L.P.'s operating cash requirements  consist principally of working
  capital   requirements,   scheduled   payments  of  principal  and  interest  on
  outstanding  indebtedness and capital  expenditures.  Foamex L.P.  believes that
  cash flow from operating activities,  cash on hand and periodic borrowings under
  the Credit  Facility,  if  necessary,  will be adequate to meet  operating  cash
  requirements. The ability to meet the operating cash requirements of Foamex L.P.
  could be impaired if Foamex L.P. was to fail to comply with any of the covenants
  contained in the Credit Facility and such  noncompliance was not cured by Foamex
  L.P. or waived by the lenders.  Foamex L.P. was in compliance with the covenants
  in the Credit  Facility as of June 28, 1998 and expects to be in compliance with
  the covenants for the foreseeable future.
  
         Cash and cash  equivalents  decreased  $4.3  million  during 1998 to $4.7
  million at June 28, 1998 from $9.0 million at December 28, 1997 primarily due to
  an increase of cash used by the operating  assets and  liabilities and cash used
  for capital  expenditures,  offset by increased  revolving  credit  borrowings .
  Working  capital  increased  $67.7 million during 1998 to $173.9 million at June
  28, 1998 from $106.2  million at December 28, 1997  primarily  due to changes in
  net operating  assets (as  discussed  below),  a decrease in current  portion of
  long-term debt and a net increase in other current assets and  liabilities.  The
  decrease in current portion of long-term debt is primarily due to the assumption
  of Foamex  L.P.'s  long-term  debt by Foam  Funding LLC in  connection  with the
  General  Felt  transaction.  The  net  increase  in  other  current  assets  and
  liabilities  is  primarily  associated  with the timing of payments  for prepaid
  expenses and the receipt of cash for other receivables. Net operating assets and
  liabilities (comprised of accounts receivable, accounts receivables from related
  parties,  inventories,  accounts  payable and accounts  payable related parties)
  increased  $39.3  million  during  1998 to $180.5  million at June 28, 1998 from
  $141.2  million at December  28, 1997  primarily  due to  increases  in accounts
  receivable, accounts receivable related party, decreases in accounts payable and
  accounts  receivable  related  party.  The  increase in accounts  receivable  is
  primarily  due to an increase in net sales for June 1998 as compared to December
  1997. The decrease in accounts  payable and in account  payable related party is
  primarily due to the timing of payments.
  
         As of June 28,  1998,  there  were  $137.4  million of  revolving  credit
  borrowings under the Credit Facility and approximately  $49.7 million associated
  with letters of credit  outstanding  which are supported by the Credit  Facility
  with unused  availability of approximately  $13.0 million.  Borrowings by Foamex
  Canada as of June 28, 1998 were $4.3  million  under Foamex  Canada's  revolving
  credit agreement with unused availability of approximately $1.1 million.
  
         Cash  flow  used for  operating  activities  was  $34.4  million  for the
  twenty-six  week  period  ended June 28,  1998 as compared to cash used of $23.3
  million for the  twenty-six  week period ended June 29, 1997.  This  decrease is
  primarily due to (i) a reduction in operating  cash results,  (ii) cash used for
  an increase in accounts  receivable and other  receivables  associated  with the
  timing of receipts  and (iii) a  reduction  in  accounts  payable  and  accounts
  payable related party associated with the timing of payments.
  
         Cash flow used for  investing  activities  decreased to $19.4 million for
  the  twenty-six  week period  ended June 29,  1998 from  $111.7  million for the
  twenty-six  week period ended June 29, 1997  primarily  due to the use of $105.8
  million of cash during 1997 to purchase the outstanding FJPS discount debentures
  in connection with the refinancing plan.
  
         Cash flow provided by financing activities decreased to $49.5 million for
  the  twenty-six  week period ended June 28, 1998 as compared to cash provided of
  $118.7 million for the twenty-six  week period ended June 29, 1997. The decrease
  is due to greater net borrowings  during the  twenty-six  week period ended June
  29, 1997 primarily relating to the June 1997 refinancing plan as compared to net
  cash borrowings  during the twenty-six week period ended June 28, 1998 primarily
  for working capital needs and to fund distributions relating to the General Felt
  transaction.
  
                                         21
  <PAGE>
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
         Interest Rate Swaps
  
         Foamex L.P. enters into interest rate swaps to lower funding costs and/or
  to manage interest costs and exposure to changing  interest  rates.  Foamex L.P.
  does not hold or issue financial instruments for trading purposes.
  
         On January 8, 1998,  Foamex L.P.  entered into an amended  interest  rate
  swap  agreement  which  provides  for an  interest  rate swap  agreement  with a
  notional  amount of $150.0  million  through  June 2002.  Under this  agreement,
  Foamex  L.P. is  obligated  to make fixed  payments  of 5.78% per annum  through
  December 1998 and variable  payments based on LIBOR at the beginning of each six
  month period for the remainder of the agreement,  in exchange for fixed payments
  by the swap  partner at 6.44% per annum for the life of the  agreement,  payable
  semiannually in arrears.  The newly amended  interest rate swap agreement can be
  terminated  by the swap partner at the end of each six month  period  commencing
  December 1999.
  
         Foamex L.P. is exposed to credit loss in the event of a nonperformance by
  the swap partner; however, the occurrence of this event is not anticipated.  The
  effect of the  interest  rate  swap  agreement  was a  favorable  adjustment  to
  interest  and debt  issuance  expense of $0.2  million and $0.8  million for the
  thirteen  week periods ended June 28, 1998 and June 29, 1997,  respectively  and
  $0.4 million and $1.7  million for the  twenty-six  week periods  ended June 28,
  1998 and June 29, 1997, respectively.
  
  Environmental Matters
  
         Foamex L.P. is subject to extensive and changing  environmental  laws and
  regulations.  Expenditures to date in connection  with Foamex L.P.'s  compliance
  with  such  laws and  regulations  did not have a  material  adverse  effect  on
  operations,  financial position,  capital expenditures or competitive  position.
  The  amount  of  liabilities   recorded  by  Foamex  L.P.  in  connection   with
  environmental  matters as of June 28, 1998 was $3.6 million. In addition,  as of
  June  28,  1998  Foamex  L.P.   has  net   receivables   of  $0.6   million  for
  indemnification of environmental  liabilities from former owners. Although it is
  possible that new information or future  developments  could require Foamex L.P.
  to  reassess  its  potential  exposure  to all  pending  environmental  matters,
  including  those  described  in the  footnotes  to  Foamex  L.P.'s  consolidated
  financial  statements,  management  believes  that,  based  upon  all  currently
  available information,  the resolution of all such pending environmental matters
  will not have a material adverse effect on Foamex L.P.'s  operations,  financial
  position, capital expenditures or competitive position.
  
  Inflation and Other Matters
  
         There was no significant  impact on Foamex L.P.'s  operations as a result
  of  inflation  during  the  periods  presented.  In some  circumstances,  market
  conditions or customer  expectations may prevent Foamex L.P. from increasing the
  price of its products to offset the inflationary pressures that may increase its
  costs in the future.
  
         Foamex L.P.'s automotive products customers are predominantly  automotive
  original  equipment  manufacturers or other automotive  suppliers.  As such, the
  sales of these  product  lines are  directly  related  to the  overall  level of
  passenger car and light truck production in North America.  Also,  Foamex L.P.'s
  sales are  sensitive  to sales of new and  existing  homes,  changes in personal
  disposable  income  and  seasonality.  Foamex  L.P.  typically  experiences  two
  seasonally  slow periods  during each year, in early July and in late  December,
  due to scheduled plant shutdowns and holidays.
  
  Year 2000 Compliance
  
         Foamex L.P.  has and will  continue to make  certain  investments  in its
  software systems and applications to ensure Foamex L. P. is Year 2000 compliant.
  Foamex L.P. plans to continue to make  modifications to the identified  software
  during 1998 and test the  modifications  during 1998.  The  financial  impact to
  Foamex L.P. has not been and is not  anticipated to be material to its financial
  position or results of operation in any given year.
  
                                         22
  <PAGE>
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
  New Accounting Standards
  
         Statement of Financial  Accounting  Standards  No. 130 ("SFAS No.  130"),
  "Reporting  Comprehensive  Income,"  was  issued  by  the  Financial  Accounting
  Standards  Board in June 1997.  This  statement  requires all items that must be
  recognized under accounting  standards as components of comprehensive  income to
  be reported in a financial  statement that is displayed with the same prominence
  as other financial statements. Foamex L.P. adopted SFAS No. 130 during the first
  quarter of 1998 (see Note 10).
  
         Statement of Financial  Accounting  Standards  No. 131 ("SFAS No.  131"),
  "Disclosures  about  Segments of an Enterprise  and Restated  Information,"  was
  issued by the Financial  Accounting Standards Board in June 1997. This statement
  establishes  standards for reporting  information  about  operating  segments in
  annual  financial  statements  and  requires  reporting  of  selected  financial
  information  about  operating  segments in interim  financial  reports issued to
  stockholders.  It also  establishes  standards  for  related  disclosures  about
  products and services,  geographic areas, and major customers.  Foamex L.P. will
  adopt SFAS No. 131 for year end 1998  reporting.  Management is  evaluating  the
  impact,  if any,  the  standard  will  have on  Foamex  L.P.'s  present  segment
  reporting.
  
         In February 1998 the Financial Accounting Standards Board issued SFAS No.
  132, "Employers'  Disclosures about Pension and Other  Postretirement  Benefits"
  ("SFAS No. 132"),  which is effective for fiscal years  beginning after December
  15, 1997. SFAS No. 132 revised the required  disclosures about pension and other
  postretirement  benefit  plans.  Foamex L.P.  plans to adopt SFAS No. 132 in the
  fourth quarter of 1998.
  
                                         23
  <PAGE>
  PART II - OTHER INFORMATION
  
  Item 1.  Legal Proceedings.
  
           Reference is made to the description of the legal proceedings contained
           in the Foamex  L.P.  Annual  Report on Form  10-K/A for the fiscal year
           ended December 28, 1997 and in Foamex L.P.'s  Quarterly  Report for the
           fiscal quarter ended June 28, 1998.
  
           The  information  from  Notes  8 and 9 of  the  condensed  consolidated
           financial  statements  of Foamex L.P. and  subsidiaries  as of June 28,
           1998 (unaudited) is incorporated herein by reference.
  
  Item 2.  Changes in Securities.
  
           None.
  
  Item 3.  Defaults Upon Senior Securities.
  
           None.
  
  Item 4.  Submission of Matters to a Vote of Securities Holders.
  
           None.
  
  Item 5.  Other Information.
  
           None.
  
  Item 6.  Exhibits and Financial Statement Schedules.
  
           (a)  Exhibits
  
  2.1(x)    -    Transfer Agreement, dated as of February 27, 1998, by and between
                 Foam Funding LLC ("Foam LLC") and Foamex L.P.
  3.1(a)    -    Certificate of Limited Partnership of Foamex L.P.
  3.2.1(a)  -    Fourth Amended and Restated  Agreement of Limited  Partnership of
                 Foamex L.P.,  dated as of December  14,  1993,  by and among FMXI
                 Inc.  ("FMXI") and Trace Foam Company,  Inc.  ("Trace Foam"),  as
                 general  partners,  and Foamex  L.P.,  as a limited  partner (the
                 "Partnership Agreement").
  3.2.2(b)  -    First  Amendment  to the  Partnership  Agreement,  dated June 28,
                 1994.
  3.2.3(c)  -    Second  Amendment to the  Partnership  Agreement,  dated June 12,
                 1997.
  3.2.4(v)  -    Third Amendment to the Partnership Agreement,  dated December 23,
                 1997.
  3.2.5(x)  -    Fourth Amendment to the Partnership Agreement, dated February 27,
                 1998.
  3.3(y)    -    Certificate of Incorporation of FMXI.
  3.4(y)    -    By-laws of FMXI.
  3.5(k)    -    Certificate  of  Incorporation  of  Foamex  Capital   Corporation
                 ("FCC").
  3.6(k)    -    By-laws of FCC.
  4.1.1(d)  -    Indenture,  dated as of June 12, 1997,  by and among Foamex L.P.,
                 FCC,  the  Subsidiary  Guarantors  and The Bank of New  York,  as
                 Trustee,  relating  to  $150,000,000  principal  amount of 9 7/8%
                 Senior Subordinated Notes due 2007,  including the form of Senior
                 Subordinated Note and Subsidiary Guarantee.
  4.1.2(v)  -    First  Supplemental  Indenture,  dated as of December  23,  1997,
                 between Foamex LLC ("FLLC") and The Bank of New York, as trustee,
                 relating to the 9 7/8% Notes.
  
                                         24
  <PAGE>
  4.1.3(x)  -    Second  Supplemental  Indenture,  dated as of February  27, 1998,
                 among Foamex L.P. and FCC, as joint and several obligors, General
                 Felt  Industries,  Inc.  ("General  Felt"),  Foamex Fibers,  Inc.
                 ("Foamex Fibers"), and FLLC, as withdrawing  guarantors,  and The
                 Bank of New York, as trustee, relating to the 9 7/8% Notes.
  4.2.1(v)  -    Indenture,  dated as of December  23,  1997,  by and among Foamex
                 L.P.,  FCC, the Subsidiary  Guarantors,  Crain Holdings Corp., as
                 Intermediate  obligator,  and The Bank of New York,  as  trustee,
                 relating  to  $98,000,000  principal  amount  of 13  1/2%  Senior
                 Subordinated Notes due 2005 (the "13 1/2% Notes"),  including the
                 form of Senior Subordinated Note and Subsidiary Guarantee.
  4.2.2(x)  -    First  Supplemental  Indenture,  dated as of February  27,  1998,
                 among Foamex L.P. and FCC, as joint and several obligors, General
                 Felt,  Foamex Fibers and FLLC, as withdrawing  guarantors,  Crain
                 Industries,  Inc., as withdrawing  intermediate  obligor, and The
                 Bank of New York, as trustee, relating to the 13 1/2% Notes.
  4.3(x)    -    Discharge of  Indenture,  dated as of February  27, 1998,  by and
                 among  Foamex  L.P.,  General  Felt,  Foamex  International  Inc.
                 ("Foamex International") and State Street Bank and Trust Company,
                 as trustee, relating to the 9 1/2% Senior Secured Notes due 2000.
  4.4.1(x)  -    Credit  Agreement,  dated as of June 12,  1997,  as  amended  and
                 restated as of February 27, 1998,  by and among Foamex L.P.,  and
                 FMXI,  the  institutions  from  time to  time  party  thereto  as
                 lenders,  the  institutions  from time to time  party  thereto as
                 issuing  banks,  and  Citicorp  USA,  Inc.  and The  Bank of Nova
                 Scotia, as Administrative Agents.
  4.4.2(x)  -    Second Amended and Restated Foamex International Guaranty,  dated
                 as of February 27, 1998, made by Foamex International in favor of
                 Citicorp USA, Inc., as Collateral Agent.
  4.4.3(x)  -    Amended and Restated Partnership  Guaranty,  dated as of February
                 27,  1998,  made by FMXI in  favor  of  Citicorp  USA,  Inc.,  as
                 Collateral Agent.
  4.4.4(p)  -    Foamex  Guaranty,  dated as of June 12, 1997, made by Foamex L.P.
                 in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.5(p)  -    Subsidiary  Guaranty,  dated as of June 12, 1997,  made by Foamex
                 Latin America, Inc. in favor of Citicorp USA, Inc., as Collateral
                 Agent.
  4.4.6(p)  -    Subsidiary  Guaranty,  dated as of June 12, 1997,  made by Foamex
                 Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.7(p)  -    Subsidiary  Guaranty,  dated as of June 12, 1997,  made by FCC in
                 favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.8(p)  -    Subsidiary  Guaranty,  dated as of June 12, 1997,  made by Foamex
                 Mexico II, Inc. in favor of Citicorp  USA,  Inc.,  as  Collateral
                 Agent.
  4.4.9(p)  -    Subsidiary  Guaranty,  dated as of June 12, 1997,  made by Foamex
                 Asia, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.10(p) -    Subsidiary Pledge  Agreement,  dated as of June 12, 1997, made by
                 FCC in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.11(p) -    Subsidiary Pledge  Agreement,  dated as of June 12, 1997, made by
                 Foamex Latin  America,  Inc. in favor of Citicorp  USA,  Inc., as
                 Collateral Agent.
  4.4.12(p) -    Subsidiary Pledge  Agreement,  dated as of June 12, 1997, made by
                 Foamex Asia,  Inc. in favor of Citicorp USA,  Inc., as Collateral
                 Agent.
  4.4.13(p) -    Subsidiary Pledge  Agreement,  dated as of June 12, 1997, made by
                 Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
                 Agent.
  4.4.14(p) -    Subsidiary Pledge  Agreement,  dated as of June 12, 1997, made by
                 Foamex  Mexico  II,  Inc.  in favor of  Citicorp  USA,  Inc.,  as
                 Collateral Agent.
  4.4.15(p) -    Foamex  Security  Agreement,  dated as of June 12, 1997,  made by
                 Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.16(p) -    Subsidiary Security Agreement, dated as of June 12, 1997, made by
                 Foamex Latin  America,  Inc. in favor of Citicorp  USA,  Inc., as
                 Collateral Agent.
  4.4.17(p) -    Subsidiary Security Agreement, dated as of June 12, 1997, made by
                 Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
                 Agent.
  
                                         25
  <PAGE>
  4.4.18(p) -    Subsidiary Security Agreement, dated as of June 12, 1997, made by
                 Foamex  Mexico  II,  Inc.  in favor of  Citicorp  USA,  Inc.,  as
                 Collateral Agent.
  4.4.19(p) -    Subsidiary Security Agreement, dated as of June 12, 1997, made by
                 Foamex Asia,  Inc. in favor of Citicorp USA,  Inc., as Collateral
                 Agent.
  4.4.20(p) -    Subsidiary Security Agreement, dated as of June 12, 1997, made by
                 FCC in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.21(r) -    Foamex  Pledge  Agreement,  dated  as of June 12,  1997,  made by
                 Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.22(w) -    First Amendment to Foamex Pledge Agreement,  dated as of December
                 23,  1997,  by Foamex  L.P. in favor of Citicorp  USA,  Inc.,  as
                 Collateral Agent.
  4.4.23(w) -    First  Amendment  to  Foamex  Security  Agreement,  dated  as  of
                 December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc.,
                 as Collateral Agent.
  4.4.24(w) -    First Amendment to Foamex Patent Agreement,  dated as of December
                 23,  1997,  by Foamex  L.P. in favor of Citicorp  USA,  Inc.,  as
                 Collateral Agent.
  4.4.25(w) -    First  Amendment to  Trademark  Security  Agreement,  dated as of
                 December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc.,
                 as Collateral Agent.
  4.4.26(w) -    Acknowledgment  of  Guaranty  by  each  of  the  guarantors  to a
                 Guaranty dated June 12, 1997 in favor of Citicorp USA, Inc.
  4.4.27(w) -    First  Amendment  to Pledge  Agreement,  dated as of December 23,
                 1997, by pledgors in favor of Citicorp USA, Inc.
  4.4.28(w) -    Crain Industries Guaranty, dated as of December 23, 1997, made by
                 Crain in favor of Citicorp USA, Inc.
  4.4.29(x) -    Partnership Pledge Agreement, dated as of February 27, 1998, made
                 by Foamex  International and FMXI in favor of Citicorp USA, Inc.,
                 as Collateral Agent.
  4.6(j)    -    Commitment  letter,  dated  July 9,  1996,  from The Bank of Nova
                 Scotia to Foamex Canada Inc.
  4.7(a)    -    Subordinated  Promissory  Note,  dated as of May 6, 1993,  in the
                 original  principal amount of $7,014,864  executed by Foamex L.P.
                 to John Rallis ("Rallis").
  4.8(a)    -    Marely Loan Commitment Agreement,  dated as of December 14, 1993,
                 by and between Foamex L.P. and Marely s.a. ("Marely").
  4.9(a)    -    DLJ Loan Commitment Agreement,  dated as of December 14, 1993, by
                 and between Foamex L.P. and DLJ Funding, Inc. ("DLJ Funding").
  4.10(p)   -    Promissory Note, dated June 12, 1997, in the aggregate  principal
                 amount of $5,000,000, executed by Trace Holdings to Foamex.
  4.10.1(p) -    Promissory Note, dated June 12, 1997, in the aggregate  principal
                 amount of $4,794,828, executed by Trace Holdings to Foamex.
  4.11.1(x) -    Promissory  Note of  Foamex  L.P.  in  favor  of Foam  LLC in the
                 principal amount of $34 million, dated February 27, 1998.
  10.1.1(p) -    Amendment to Master Agreement,  dated as of June 5, 1997, between
                 Citibank, N.A. and Foamex.
  10.1.2(p) -    Amended  confirmation,   dated  as  of  June  13,  1997,  between
                 Citibank, N.A. and Foamex L.P.
  10.1.3(w) -    Amended  confirmation,  dated as of  February  2,  1998,  between
                 Citibank, N.A. and Foamex L.P.
  10.2(h)   -    Reimbursement  Agreement,  dated as of March  23,  1993,  between
                 Trace Holdings and General Felt.
  10.3(h)   -    Shareholder  Agreement,  dated December 31, 1992, among Recticel,
                 s.a.  ("Recticel"),  Recticel  Holding  Noord B.V.,  Foamex L.P.,
                 Beamech Group Limited, LME-Beamech,  Inc., James Brian Blackwell,
                 and Prefoam AG relating to foam technology sharing arrangement.
  10.4.1(k) -    Asset Transfer  Agreement,  dated as of October 2, 1990,  between
                 Trace  Holdings and Foamex (the "Trace  Holdings  Asset  Transfer
                 Agreement").
  10.4.2(k) -    First  Amendment,  dated as of December  19,  1991,  to the Trace
                 Holdings Asset Transfer Agreement.
  
                                         26
  <PAGE>
  10.4.3(k) -    Amended and  Restated  Guaranty,  dated as of December  19, 1991,
                 made by Trace Foam in favor of Foamex L.P.
  10.5.1(k) -    Asset Transfer  Agreement,  dated as of October 2, 1990,  between
                 RFC and Foamex L.P. (the "RFC Asset Transfer Agreement").
  10.5.2(k) -    First Amendment,  dated as of December 19, 1991, to the RFC Asset
                 Transfer Agreement.
  10.5.3(k) -    Schedule  5.03 to the RFC Asset  Transfer  Agreement  (the  "5.03
                 Protocol").
  10.5.4(h) -    The 5.03 Protocol Assumption  Agreement,  dated as of October 13,
                 1992, between RFC and Foamex L.P.
  10.5.5(h) -    Letter  Agreement  between Trace Holdings and Recticel  regarding
                 the Recticel Guaranty, dated as of July 22, 1992.
  10.6(l)   -    Supply  Agreement,  dated June 28, 1994,  between Foamex L.P. and
                 Foamex International.
  10.7.1(l) -    First  Amended and  Restated Tax Sharing  Agreement,  dated as of
                 December 14, 1993, among Foamex, Trace Foam, FMXI and Foamex L.P.
  10.7.2(d) -    First Amendment to Amended and Restated Tax Sharing  Agreement of
                 Foamex,  dated as of June 12, 1997, by and among  Foamex,  Foamex
                 L.P., FMXI, Inc. and Trace Foam.
  10.7.3(w) -    Second Amendment to Amended and Restated Tax Sharing Agreement of
                 Foamex L.P.,  dated as of December 23, 1997,  by and among Foamex
                 L.P., Foamex International, FMXI, and Trace Foam.
  10.7.4(y) -    Third Amendment to Amended and Restated Tax Sharing  Agreement of
                 Foamex L.P., dated as of February 27, 1998, by and between Foamex
                 L.P., Foamex International and FMXI.
  10.8.1(m) -    Tax  Distribution  Advance  Agreement,  dated as of December  11,
                 1996, by and between Foamex and Foamex-JPS Automotive.
  10.8.2(d) -    Amendment No. 1 to Tax Distribution  Advance Agreement,  dated as
                 of June 12, 1997, by and between Foamex L.P. and Foamex.
  10.9.1(h) -    Trace Foam  Management  Agreement  between Foamex and Trace Foam,
                 dated as of October 13, 1992.
  10.9.2(l) -    Affirmation  Agreement  re:  Management  Agreement,  dated  as of
                 December 14, 1993, between Foamex and Trace Foam.
  10.9.3(d) -    First  Amendment to  Management  Agreement,  dated as of June 12,
                 1997, by and between Foamex and Trace Foam.
  10.10.1(k)-    Salaried Incentive Plan of Foamex and Subsidiaries.
  10.10.2(k)-    Trace Holdings 1987 Nonqualified Stock Option Plan.
  10.10.3(k)-    Equity Growth Participation Program.
  10.10.4(e)(o) -Foamex  L.P.  Salaried  Retirement  Plan  (formerly  known as the
                 Foamex L.P. Products, Inc. Salaried Employee Retirement Plan), as
                 amended, effective July 1, 1994.
  10.10.5(u)-    Foamex L.P. 401(k) Savings Plan effective October 1, 1997.
  10.10.6(a)-    Foamex L.P.'s 1993 Stock Option Plan.
  10.10.7(a)-    Foamex L.P.'s Non-Employee Director Compensation Plan.
  10.11.1(o)-    Employment  Agreement,  dated  as of  February  1,  1994,  by and
                 between Foamex L.P. and William H. Bundy.
  10.12(a)  -    Warrant Exchange Agreement, dated as of December 14, 1993, by and
                 between Foamex L.P. and Marely.
  10.13(a)  -    Warrant Exchange Agreement, dated as of December 14, 1993, by and
                 between Foamex L.P. and DLJ Funding.
  10.14(o)  -    Stock Purchase  Agreement,  dated as of December 23, 1993, by and
                 between   Transformacion   de  Espumas  y  Fieltros,   S.A.,  the
                 stockholders which are parties thereto, and Foamex L.P.
  10.15.1(r)-    Asset  Purchase  Agreement,  dated as of August 29, 1997,  by and
                 among  General  Felt,  Foamex L.P.,  Bretlin,  Inc. and The Dixie
                 Group.
  10.15.2(s)-    Addendum  to Asset  Purchase  Agreement,  dated as of  October 1,
                 1997, by and among General Felt, Foamex L.P.,  Bretlin,  Inc. and
                 The Dixie Group.
  
                                         27
  <PAGE>
  10.16.1(x)-    Supply  Agreement,  dated as of February 27, 1998, by and between
                 Foamex L.P. and General Felt (as assigned to Foamex Carpet).
  10.16.2(x)-    Administrative Services Agreement, dated as of February 27, 1998,
                 by and between  Foamex  L.P.  and  General  Felt (as  assigned to
                 Foamex Carpet).
  10.17.1(w)-    Joint  Venture  Agreement  between  Hua Kee  Company  Limited and
                 Foamex Asia, Inc., dated July 8, 1997.
  10.17.2(w)-    Loan Agreement  between Hua Kee Company  Limited and Foamex Asia,
                 Inc., dated July 8, 1997.
  27        -    Financial Data Schedule for the period ended March 29, 1998.
  
  ----------------------------
  (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 Form 10-K of Foamex
       for the fiscal year ended January 1, 1995.
  
  (c)  Incorporated  herein by reference  to the Exhibit to the Current  Report on
       Form 8-K of Foamex 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 reporting an event that occurred June 12, 1997.
  
  (e)  Incorporated  herein  by  reference  to the  Exhibit  to  the  Registration
       Statement of Foamex and FCC on Form S-4, Registration No. 33-65158.
  
  (f)  Intentionally omitted.
  
  (g)  Intentionally omitted.
  
  (h)  Incorporated  herein by reference to the Exhibit to the Form 10-K Statement
       of Foamex and FCC for fiscal 1992.
  
  (i)  Intentionally omitted.
  
  (j)  Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
       for the quarterly period ended September 30, 1996.
  
  (k)  Incorporated  herein  by  reference  to the  Exhibit  to  the  Registration
       Statement  of Foamex and FCC on Form S-1,  Registration  Nos.  33-49976 and
       33-49976-01.
  
  (l)  Incorporated  herein  by  reference  to the  Exhibit  to  the  Registration
       Statement  of FJPS,  FJCC and Foamex  L.P.  on Form S-4,  Registration  No.
       33-82028.
  
  (m)  Incorporated  herein by  reference  to the Exhibit to the Annual  Report on
       Form 10-K of Foamex for the fiscal year ended December 29, 1996.
  
  (n)  Intentionally omitted.
  
  (o)  Incorporated  herein by reference to the Exhibit to the Form 10-K of Foamex
       L.P. for fiscal 1993.
  
  (p)  Incorporated  herein  by  reference  to the  Exhibit  in  the  Registration
       Statement of Foamex on Form S-4, Registration No. 333-30291.
  
                                         28
  <PAGE>
  (q)  Intentionally omitted.
  
  (r)  Incorporated  herein  by  reference  to the  Current  Report on Form 8-K of
       Foamex L.P. reporting an event that occurred on August 29, 1997.
  
  (s)  Incorporated  herein  by  reference  to the  Current  Report on Form 8-K of
       Foamex L.P. reporting an event that occurred on October 6, 1997.
  
  (t)  Intentionally omitted.
  
  (u)  Incorporated  by  reference  to the Exhibit to the Form 10-Q of Foamex L.P.
       for the quarterly period ended September 28, 1997.
  
  (v)  Incorporated  herein by reference  to the Exhibit to the Current  Report on
       Form  8-K  of  Foamex  L.P.,   Foamex   Capital   Corporation   and  Foamex
       International reporting an event that occurred December 23, 1997.
  
  (w)  Incorporated  herein  by  reference  to the  Exhibit  in  the  Registration
       Statement of Foamex L.P. and FCC on Form S-4, Registration No. 333-45733.
  
  (x)  Incorporated  herein  by  reference  to the  Current  Report on Form 8-K of
       Foamex International reporting an event that occurred on February 27, 1998.
  
  (y)  Incorporated  herein by reference to the Exhibit to the Form 10-K of Foamex
       International for fiscal 1997.
  
           Certain  instruments  defining the rights of security holders have been
  excluded herefrom in accordance with Item  601(b)(4)(iii) of Regulation S-K. The
  registrant  hereby  agrees  to  furnish  a copy of any  such  instrument  to the
  Commission upon request.
  
           (b) Foamex L.P. filed the following Current Reports on Form 8-K:
  
                Form 8-K/A,  dated March 9, 1998,  providing  pro forma  financial
                information relating to the acquisition of Crain Industries, Inc.
  
                Form 8-K,  dated  February  28, 1998,  reporting  the General Felt
                Transaction.
  
                Form 8-K/A,  dated May 12, 1998,  reporting the restated financial
                statements   of  Foamex  L.P.   relating   to  the  General   Felt
                transaction.
  
                                         29
  <PAGE>
                                     SIGNATURES
  
  
     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,  the
  registrants  have duly caused  this  report to be signed on their  behalf by the
  undersigned thereunto duly authorized.
  
  
  
                                        FOAMEX L.P.
  
                                        By: FMXI, INC.
  
                                        General Partner
  
  
  Date:  August 17, 1998                By: /s/ John A. Feenan
                                        ----------------------------
                                        John A. Feenan
                                        Executive Vice President and
                                        Chief Financial Officer
  
  
  
  
                                        FOAMEX CAPITAL CORPORATION
  
  
  
  Date:  August 17, 1998                By: /s/ John A. Feenan
                                        ----------------------------
                                        John A. Feenan
                                        Executive Vice President and
                                        Chief Financial Officer
  
                                         30
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 110082}]
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text: SECURITIES AND EXCHANGE COMMISSION
  
                                      FORM 10-Q
  
                  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
  
                    For the quarterly period ended June 28, 1998
  
                      Commission file numbers 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                                       (Zip Code)
  executive offices)
  
  Registrant's telephone number, including area code:  (610) 859-3000
  
  Indicate  by check mark  whether  the  registrants  (1) have  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  period  that the
  registrant  was required to file such reports) and (2) have been subject to such
  filing requirements for the past 90 days. YES X NO
  
  Foamex L.P. and Foamex  Capital  Corporation  meet the  conditions  set forth in
  General  Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this
  form with the reduced disclosure format.
  
  The number of shares of Foamex Capital Corporation's common stock outstanding as
  of August 12, 1998 was 1,000.
  
                                    Page 1 of 30
                            Exhibit List on Page 24 of 30
  FOAMEX L.P.
                             FOAMEX CAPITAL CORPORATION
  
                                        INDEX
                                                                           Page
  Part I.  Financial Information:
  
            Item 1. Financial Statements
  
             Foamex L.P.
  
              Condensed  Consolidated  Statements  of  Operations -
                  Thirteen Week and  Twenty-Six  Week Periods Ended
                  June 28, 1998 and June 29, 1997                           3
  
              Condensed Consolidated  Balance Sheets as of June 28,
                  1998 and December 28, 1997                                4
  
              Condensed  Consolidated  Statements  of Cash  Flows -
                  Twenty-Six  Week Periods  Ended June 28, 1998 and
                  June 29, 1997                                             5
  
              Notes to Condensed  Consolidated Financial Statements         6
  
              Foamex Capital Corporation
  
              Balance Sheets as of June 28, 1998 and December 28, 1997     15
  
              Notes to Balance Sheets                                      16
  
            Item 2. Management's Discussion and Analysis of Financial 
                    Condition and Results of Operations                    18
  
  Part II. Other Information                                               24
  
           Exhibit List                                                    24
  
           Signatures                                                      30
  PART I.  FINANCIAL INFORMATION
  ITEM 1.  FINANCIAL STATEMENTS
  
                            FOAMEX L.P. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
  13 Week Periods Ended         26 Week Periods Ended
                                            June 28,        June 29,      June 28,      June 29,
                                              1998           1997           1998         1997
                                                                 (thousands)
  NET SALES                                 $263,347       $199,491       $547,892       $393,625
  
  COST OF GOODS SOLD                         214,794        164,876        455,776        322,169
                                           ---------      ---------      ---------      ---------
  
  GROSS PROFIT                                48,553         34,615         92,116         71,456
  
  SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES                  17,030         10,631         34,796         21,754
                                           ---------      ---------      ---------      ---------
  
  INCOME FROM OPERATIONS                      31,523         23,984         57,320         49,702
  
  INTEREST AND DEBT ISSUANCE EXPENSE          15,818         10,836         33,493         21,502
  
  OTHER INCOME (EXPENSE), NET                   (306)           750           (580)         1,571
                                           ---------      ---------      ---------      ---------
  
  INCOME FROM CONTINUING OPERATIONS
     BEFORE PROVISION FOR INCOME TAXES        15,399         13,898         23,247         29,771
  
  PROVISION FOR INCOME TAXES                     808            481          1,533            849
                                           ---------      ---------      ---------      ---------
  
  INCOME FROM CONTINUING OPERATIONS           14,591         13,417         21,714         28,922
  
  LOSS FROM DISCONTINUED OPERATIONS               --             --             --             --
  
  EXTRAORDINARY LOSS ON EARLY
     EXTINGUISHMENT OF DEBT                      (72)       (44,859)        (3,195)       (45,538)
                                           ---------      ---------      ---------      ---------
  
  NET INCOME (LOSS)                          $14,519       $(31,442)       $18,519       $(16,616)
                                           =========      =========      =========      =========
  The  accompanying  notes are an  integral  part of the  condensed
  consolidated financial statements.
  
                                  3
  FOAMEX L.P. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
  
                                                        June 28,      December 28,
  ASSETS                                                  1998           1997
                                                       ---------      ---------
  CURRENT ASSETS:                                             (thousands)
       Cash and cash equivalents                          $4,697         $8,982
       Accounts receivable, net                          144,325        138,571
       Inventories                                       116,588        112,094
       Accounts receivable, related party                 21,021         12,823
       Other current assets                               52,063         32,519
                                                       ---------      ---------
          Total current assets                           338,694        304,989
  
  PROPERTY, PLANT AND EQUIPMENT, NET                     207,409        205,705
  
  COST IN EXCESS OF ASSETS ACQUIRED, NET                 182,490        184,523
  
  DEBT ISSUANCE COSTS, NET                                14,938         18,889
  
  OTHER ASSETS                                            20,578         21,831
                                                       ---------      ---------
  
  TOTAL ASSETS                                          $764,109       $735,937
                                                       =========      =========
  
  LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
  CURRENT LIABILITIES:
       Short-term borrowings                              $7,320         $6,598
       Current portion of long-term debt                   4,347         12,161
       Accounts payable                                   96,455        110,640
       Accounts payable - related parties                  5,026         11,662
       Accrued interest                                    9,931         10,655
       Other accrued liabilities                          41,669         47,119
                                                       ---------      ---------
          Total current liabilities                      164,748        198,835
  
  LONG-TERM DEBT                                         683,853        726,649
  
  LONG-TERM DEBT - RELATED PARTY                          34,000         38,800
  
  OTHER LIABILITIES                                       28,976         31,076
                                                       ---------      ---------
  
          Total liabilities                              911,577        995,360
                                                       ---------      ---------
  
  COMMITMENTS AND CONTINGENCIES                               --             --
                                                       ---------      ---------
  
  PARTNERS' EQUITY (DEFICIT):
       General partners                                 (113,699)      (122,304)
       Limited partners                                       --             --
       Notes receivable from partner                     (16,118)       (16,118)
       Investment in General Felt                             --       (103,121)
       Accumulated other comprehensive income             (7,857)        (8,086)
       Other                                              (9,794)        (9,794)
                                                       ---------      ---------
          Total partners' equity (deficit)              (147,468)      (259,423)
                                                       ---------      ---------
  
  TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT)      $764,109       $735,937
                                                       =========      =========
  
  The  accompanying  notes  are an  integral  part of the  condensed  consolidated
  financial statements.
  
                                         4
  FOAMEX L.P. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
  26 Week Periods Ended
                                                                                June 28,        June 29,
                                                                                  1998           1997
                                                                               ---------      ---------
  OPERATING ACTIVITIES:                                                                (thousands)
  Net income (loss)                                                           $18,519       $(16,616)
     Adjustments to reconcile net income to net cash provided by operating
         activities:
         Depreciation and amortization                                            15,502          8,008
         Amortization of debt issuance costs and debt discount                       (33)         1,370
         Extraordinary loss on extinguishment of debt                              2,857         22,620
         Other operating activities                                                3,959         (1,143)
         Changes in operating assets and liabilities                             (75,250)       (37,514)
                                                                               ---------      ---------
  
            Net cash used for operating activities                               (34,446)       (23,275)
                                                                               ---------      ---------
  
  INVESTING ACTIVITIES:
     Capital expenditures                                                        (14,609)       (15,366)
     Acquisitions, net of cash acquired                                           (3,899)            --
     Purchase of FJPS senior secured discount debentures                              --       (105,829)
     Proceeds from (payments for) note receivable - related party                   (424)         9,465
     Other investing activities                                                     (451)            34
                                                                               ---------      ---------
  
            Net cash used for investing activities                               (19,383)      (111,696)
                                                                               ---------      ---------
  
  FINANCING ACTIVITIES:
     Net proceeds from short-term borrowings                                         722            256
     Proceeds from revolving loans                                                82,426         49,000
     Proceeds from long-term debt                                                129,000        453,500
     Repayment of long-term debt                                                (132,318)      (363,392)
     Repayments of long-term debt - related party                                 (4,800)            --
     Transfer of General Felt common stock                                        (3,898)            --
     Debt issuance costs                                                          (1,598)       (14,746)
     Distributions to partners                                                   (20,074)        (5,949)
     Other financing activities                                                       84             28
                                                                               ---------      ---------
  
            Net cash provided by financing activities                             49,544        118,697
                                                                               ---------      ---------
  
  NET DECREASE IN CASH AND CASH EQUIVALENTS                                       (4,285)       (16,274)
  
  CASH AND CASH EQUIVALENTS
     AT BEGINNING OF PERIOD                                                        8,982         20,968
                                                                               ---------      ---------
  
  CASH AND CASH EQUIVALENTS
     AT END OF PERIOD                                                             $4,697         $4,694
                                                                               =========      =========
  The  accompanying   notes  are  an  integral  part  of  the  condensed
  consolidated financial statements.
  
                                         5
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  1.     ORGANIZATION AND BASIS OF PRESENTATION
  
         Foamex  L.P.'s  condensed  consolidated  balance sheet as of December 28,
  1997 has been condensed from the audited consolidated balance sheet at that date
  after  being  restated  for the  transfer  of General  Felt  Industries,  Inc.'s
  ("General Felt") common stock (see Note 2). The condensed  consolidated  balance
  sheet  as of  June  28,  1998  and  the  condensed  consolidated  statements  of
  operations for the thirteen week and twenty-six week periods ended June 28, 1998
  and June 29, 1997 and the  condensed  consolidated  statements of cash flows for
  the  twenty-six  week  periods  ended June 28,  1998 and June 29, 1997 have been
  prepared by Foamex L.P.  and  subsidiaries  and have not been  audited by Foamex
  L.P.'s  independent   accountants.   In  addition,  the  condensed  consolidated
  statement of  operations  and  statement of cash flows for the thirteen week and
  twenty-six  week periods ended June 29, 1997 have been restated for the transfer
  of General  Felt common  stock (see Note 2). In the opinion of  management,  all
  adjustments,   consisting  only  of  normal  recurring  adjustments,  considered
  necessary  for a fair  presentation  of  the  consolidated  financial  position,
  results of operations and cash flows have been included.
  
         On December 23, 1997, Foamex International Inc. ("Foamex  International")
  acquired Crain Industries,  Inc.  ("Crain")  pursuant to a merger agreement with
  Crain  Holdings  Corp. for a purchase  price of  approximately  $213.7  million,
  including  the  assumption  of debt  with a face  value of  approximately  $98.6
  million (and an estimated fair value of approximately  $112.3  million),  Foamex
  International  then  contributed  the  assets  of  Crain  subject  to all of its
  liabilities  and  indebtedness  to Foamex  L.P.  (the "Crain  Acquisition").  In
  addition,   fees  and  expenses  associated  with  the  Crain  Acquisition  were
  approximately $13.2 million. (See Note 3).
  
         Certain  information  and  note  disclosures  normally  included  in  the
  financial  statements  prepared in accordance with generally accepted accounting
  principles  have been  condensed  or  omitted in  accordance  with the rules and
  regulations  of  the  Securities  and  Exchange   Commission.   These  condensed
  consolidated  financial  statements  should be read in  conjunction  with Foamex
  L.P.'s 1997 consolidated  financial statements and notes thereto as set forth in
  Foamex L.P.'s  Annual  Report on Form 10-K/A for the fiscal year ended  December
  28, 1997.
  
  2.     TRANSFER OF GENERAL FELT INDUSTRIES, INC.
  
         On February 27, 1998,  Foamex  International,  Foamex L.P. and certain of
  its affiliates  completed a series of  transactions  designed to simplify Foamex
  International's   corporate   structure  and  to  provide   future   operational
  flexibility.  Prior to the consummation of these  transactions,  (i) Foamex L.P.
  and Foamex L.P.'s wholly-owned  subsidiary,  General Felt, entered into a Supply
  Agreement and an  Administrative  Services  Agreement  (see Note 7), (ii) Foamex
  L.P.  repaid its  outstanding  indebtedness to General Felt with $4.8 million in
  cash and a $34.0  million  principal  amount  promissory  note (the  "Foamex/GFI
  Note")  supported by a $34.5 million letter of credit under the credit facility,
  (the  "Credit  Facility"),  (iii) Foamex L.P.  contributed  to General Felt $9.4
  million of outstanding net  intercompany  payables and  intercompany  loans with
  General  Felt,  and (iv)  Foamex  L.P.  defeased  the $4.5  million  outstanding
  principal  amount of its 9 1/2%  senior  secured  notes due  2000.  The  initial
  transaction resulted in the transfer from Foamex L.P. to Foam Funding LLC of all
  of the  outstanding  common  stock of  General  Felt,  in  exchange  for (i) the
  assumption Foam Funding LLC of $129.0 million of Foamex L.P.'s  indebtedness and
  (ii) the  transfer  by Foam  Funding  LLC to Foamex  L.P.  of a 1%  non-managing
  general  partnership  interest in Foamex L.P. As a result,  General  Felt ceased
  being a subsidiary  of Foamex L.P. and was relieved from all  obligations  under
  Foamex  L.P.'s 9 7/8%  senior  subordinated  notes  due 2007 and 13 1/2%  senior
  subordinated  notes due 2005.  Upon  consummation  of the  initial  transaction,
  Foamex Carpet  Cushion,  Inc.  ("Foamex  Carpet"),  a newly formed  wholly-owned
  subsidiary of Foamex International,  Foamex International, Foam Funding LLC, and
  General Felt entered into an Asset Purchase  Agreement  dated February 27, 1998,
  in which  General  Felt sold  substantially  all of its assets  (other  than the
  Foamex/GFI Note and its operating facility in Pico Rivera, California) to Foamex
  Carpet in  exchange  for (i) $20.0  million in cash and (ii) a  promissory  note
  issued by Foamex Carpet to Foam Funding LLC in the amount of $70.2 million.  The
  $20.0 million cash payment was funded with a distribution by Foamex L.P. As part
  of these  transactions,  Foamex Fibers,  Inc. ("Foamex Fibers"),  a wholly-owned
  subsidiary  of General  Felt,  was merged with and into  General Felt and Foamex
  LLC, a  wholly-owned  subsidiary of Foamex L.P., was merged with and into Foamex
  L.P. In addition, FMXI, Inc. and
  
                                         6
  2. TRANSFER OF GENERAL FELT INDUSTRIES, INC. (continued)
  
  Crain,  both  wholly-owned  subsidiaries  of Foamex  International  and  general
  partners of Foamex L.P.,  were merged and Crain,  as the surviving  corporation,
  subsequently  changed its name to FMXI,  Inc.  Foamex  Carpet  will  conduct the
  carpet cushion business previously conducted by General Felt. Also, Foam Funding
  LLC has retained  ownership of one of General Felt's operating  facilities which
  is being leased to Foamex Carpet and the $34.0 million Foamex/GFI Note.
  
         These  transactions  have been reflected as a reorganization of companies
  under common control.  Accordingly,  prior periods have been restated to exclude
  the  consolidated  operations of General Felt and partners' equity (deficit) was
  charged  to  reflect  the net  effect of these  transactions.  The  consolidated
  balance  sheet as of  December  28,  1997  has  been  restated  to  exclude  the
  consolidated  assets and  liabilities  of General Felt and reflect Foamex L.P.'s
  investment  in General Felt of  approximately  $103.1  million as a reduction of
  partners' equity (deficit). Upon consummation of these transactions, Foamex L.P.
  recorded an increase in  partners'  equity  (deficit)  of  approximately  $113.2
  million  associated  with the  assumption of  indebtedness  by Foam Funding LLC,
  related expenses and fees and other matters.  In addition,  Foamex L.P. recorded
  the $20.0 million distribution to Foamex International as discussed above.
  
         In connection with these transactions,  the consolidated balance sheet as
  of December  28,  1997 and the  consolidated  statement  of  operations  for the
  thirteen and  twenty-six  week periods ended June 29, 1997 have been restated as
  follows:
  As previously     General           As
                                                                            Reported         Felt        Restated
         Balance Sheet:
  Current assets                                                   $352,217      $(47,228)      $304,989
           Total assets                                                      834,068       (98,131)       735,937
           Current liabilities                                               226,143       (27,308)       198,835
           Total liabilities                                                 990,370         4,990        995,360
           Partners' equity (deficit)                                       (156,302)     (103,121)      (259,423)
  
         Statement of Operations:
         Thirteen week period:
           Net sales                                                        $239,887      $(40,396)      $199,491
           Income before extraordinary loss                                   16,384        (2,967)        13,417
           Net income (loss)                                                 (28,475)       (2,967)       (31,442)
  
         Statement of Operations:
         Twenty-six week period:
           Net sales                                                        $469,007      $(75,382)      $393,625
           Income before extraordinary loss                                   32,600        (3,678)        28,922
           Net income (loss)                                                 (12,938)       (3,678)       (16,616)
  3.     CRAIN ACQUISITION
  
         On December 23, 1997, Foamex  International  acquired Crain pursuant to a
  merger with Crain Holdings Corp.  for a purchase price of  approximately  $213.7
  million,  including the  assumption  of debt with a face value of  approximately
  $98.6 million (with an estimated fair value of  approximately  $112.3  million),
  Foamex  International  then contributed the assets of Crain,  subject to all its
  liabilities and  indebtedness  to Foamex L.P. Fees and expenses  associated with
  the Crain  Acquisition  are  approximately  $13.2 million.  The  acquisition was
  funded by $118.0  million in bank  borrowings  by Foamex  L.P.  under the Credit
  Facility.  The excess of the purchase price over the estimated fair value of the
  net assets acquired was approximately $152.5 million.
  
                                         7
  3.     CRAIN ACQUISITION (continued)
  
         The Crain  Acquisition was accounted for as a purchase and the operations
  of Crain are included in the  consolidated  statements  of  operations  and cash
  flows from the date of acquisition.  The cost of the Crain  Acquisition has been
  allocated  on the  basis  of the  fair  value  of the  assets  acquired  and the
  liabilities  assumed.  The excess of the purchase  price over the estimated fair
  value of the net assets  acquired  is being  amortized  using the  straight-line
  method over forty years.  The  allocation  of the  purchase  price for the Crain
  Acquisition is based upon  preliminary  estimates and assumptions and is subject
  to revision once  appraisals,  valuations and other studies of the fair value of
  the acquired assets and liabilities  have been completed.  The pro forma results
  listed below are unaudited and assume that the Crain Acquisition occurred at the
  beginning of fiscal year 1997.
  13 Week Period              26 Week Period
                                                                Ended June 29, 1997         Ended June 29, 1997
                                                                       (thousands, except per share data)
  Net sales                                                      $215,519                  $419,677
                                                                        ========                  ========
  
         Income before extraordinary loss                               $ 15,153                  $ 30,857
                                                                        ========                  ========
  The pro forma results are not  necessarily  indicative of what would have
  occurred  if the Crain  Acquisition  had been in effect for the  entire  periods
  presented nor are they necessarily indicative of future consolidated results.
  
  4.     INVENTORIES
  
         Inventories consist of:
  June 28,            December 28,
                                                                             1998                    1997
                                                                         ------------         -----------
                                                                                       (thousands)
  Raw materials and supplies                                        $ 74,313               $ 72,071
         Work-in-process                                                     16,704                 15,406
         Finished goods                                                      25,571                 24,617
                                                                          ---------              ---------
             Total                                                         $116,588               $112,094
                                                                           ========               ========
  8
  5.     LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
  
         Long-term debt consists of:
  June 28,            December 28,
                                                                             1998                 1997
                                                                         ------------         -----------
  Credit Facility:                                                          (thousands)
           Term Loan A                                                $           -              $  76,700
           Term Loan B                                                       83,344                109,725
           Term Loan C                                                       75,766                 99,750
           Term Loan D                                                      109,725                110,000
           Revolving credit facility                                        137,354                 54,928
         9 7/8% Senior subordinated notes due 2007                          150,000                150,000
         13 1/2% Senior subordinated notes due 2005 (includes
           $12,824 and $13,720 of unamortized debt premium)                 110,824                111,720
         9 1/2% Senior secured notes due 2000                                     -                  4,523
         Industrial revenue bonds                                             7,000                  7,000
         Subordinated note payable (net of unamortized
           debt discount of $709 and $886)                                    6,306                  6,129
         Other                                                                7,881                  8,335
                                                                          ---------              ---------
                                                                            688,200                738,810
  
         Less current portion                                                 4,347                 12,161
                                                                          ---------              ---------
  
         Long-term debt-unrelated parties                                  $683,853               $726,649
                                                                          =========              =========
  
         Long-term debt-related party consists of:
  
         Foamex/GFI Note                                                  $  34,000              $  38,800
                                                                          =========              =========
  Refinancing  Associated  with Transfer of General Felt  Industries,  Inc.
         Common Stock
  
         In  connection  with  the  transfer  of  General  Felt  Industries,  Inc.
  ("General  Felt") common stock (see Note 2), Foamex L.P.  amended its agreements
  with lenders under the Credit Facility,  which included additional borrowings of
  $129.0 million under new term loan  agreements that were assumed by Foam Funding
  LLC (as discussed in Note 2) and  borrowings of $32.0 million under the existing
  revolving  credit  facility.  These  funds were used to (i) repay  approximately
  $125.1  million  of  existing  term  loans  and  accrued   interest  thereon  of
  approximately $0.9 million,  (ii) deposit $4.8 million into an escrow account in
  order to defease the senior  secured  notes  during June 1998,  (iii) repay $4.8
  million  of  indebtedness  owed to  General  Felt,  (iv) fund the $20.0  million
  distribution  to  Foamex   International  and  (v)  pay  fees  and  expenses  of
  approximately  $5.4 million.  Also,  this amendment  increased the  availability
  under the  revolving  credit  facility  from $150.0  million to $200.0  million;
  however,  $34.5  million  of this  increase  is used for a letter  of  credit to
  support the Foamex/GFI Note.
  
         Foamex/GFI Note
  
         In connection  with the transfer of General  Felt's common stock,  Foamex
  L.P.  entered  into the $34.0  million  Foamex/GFI  Note to  settle an  existing
  intercompany  note payable to General Felt. The Foamex/GFI Note matures in March
  2000 with  interest  payable at LIBOR plus an applicable  margin.  The principal
  amount is due upon maturity in March 2000.
  
                                         9
  5.     LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY (continued)
  
         Principal Payments
  
         Principal  payments on Foamex L.P.'s  long-term debt and long-term debt -
  related  party  for the  remainder  of 1998 and for the next  five  years are as
  follows:  1998 - $3.1 million; 1999 - $7.3 million; 2000 - $40.9 million; 2001 -
  $6.9 million; 2002 - $2.9 million; 2003 - $148.2 million and thereafter - $500.8
  million.
  
  6.    EARLY EXTINGUISHMENT OF DEBT
  
         In connection with the General Felt transaction,  Foamex L.P. incurred an
  extraordinary  loss on the early  extinguishment  of debt of approximately  $3.1
  million.  The extraordinary  loss is comprised of approximately $2.9 million for
  the  write-off  of  debt  issuance  costs  and  approximately  $0.2  million  of
  professional fees and other costs.
  
         During 1997,  Foamex L.P.  used  approximately  $12.1 million of proceeds
  from notes receivable - related party to repurchase outstanding  indebtedness of
  approximately  $11.8  million,  which  resulted  in  an  extraordinary  loss  of
  approximately $1.0 million.
  
  7.     RELATED PARTY TRANSACTIONS
  
         Effective  February  27,  1998,  Foamex  L.P.  entered  into  the  Supply
  Agreement  (see Note 2) (i) whereby  Foamex Carpet may purchase from Foamex L.P.
  finished prime, rubber and rebond carpet cushion at the lessor of cost plus 4.7%
  or fair market value,  (ii) Foamex L.P. may purchase from Foamex Carpet nonwoven
  textile fiber products at the lessor of cost plus 15% or fair market value,  and
  (iii) either party may purchase from the other trim foam and other raw materials
  and  supplies  for the lessor of the price paid for such raw  materials  or fair
  market  value.  Prior to February 27, 1998,  Foamex L.P. had sales and purchases
  with General Felt based on an established  intercompany transfer price which was
  adjusted to comply with the transfer pricing regulations of the Internal Revenue
  Code, as amended, if necessary.  During the thirteen week periods ended June 28,
  1998 and June 29, 1997, Foamex L.P. sold  approximately  $34.9 million and $37.2
  million,  respectively,  to Foamex  Carpet  and  purchased  from  Foamex  Carpet
  approximately $0.9 million and $0.4 million, respectively. During the twenty-six
  week  periods  ended  June  28,  1998  and  June  29,  1997,  Foamex  L.P.  sold
  approximately  $66.4 million and $72.5 million,  respectively,  to Foamex Carpet
  and purchased  from Foamex Carpet  approximately  $2.6 million and $0.8 million,
  respectively.
  
         In connection with the General Felt transaction (see Note 2), Foamex L.P.
  and Foamex Carpet entered into a Management  Services  Agreement  whereby Foamex
  L.P. will provide certain administrative functions on behalf of Foamex Carpet at
  a cost basis.  During the thirteen week and  twenty-six  week periods ended June
  28, 1998, Foamex L.P. received $0.5 million and $0.6 million,  respectively, for
  services provided to Foamex Carpet.
  
         During the  thirteen  week  period  ended  March 29,  1998,  Foamex  L.P.
  incurred  approximately $0.5 million of interest expense on a $38.8 million note
  due to General Felt. On February 27, 1998, Foamex L.P. repaid approximately $4.8
  million of this note, and the balance was replaced by the  Foamex/GFI  Note. The
  Foamex/GFI Note was retained by Foam Funding LLC in connection with the transfer
  of General Felt. During the thirteen week and twenty-six week periods ended June
  28, 1998,  Foamex L.P.  incurred  approximately  $0.6 million and $0.8  million,
  respectively, of interest expense on the Foamex/GFI Note (see Note 2).
  
         Foamex L.P. has a supply  agreement (the "Supply  Agreement") with Foamex
  International   pursuant  to  which,  at  the  option  of  Foamex  L.P.,  Foamex
  International  will purchase certain raw materials,  which are necessary for the
  manufacture of Foamex L.P.'s products,  and resell such materials to Foamex L.P.
  at a price equal to net cost plus reasonable out of pocket expenses.  Management
  believes that the terms of the Supply
  
                                         10
  7.    RELATED PARTY TRANSACTIONS (continued)
  
  Agreement are no less favorable than those which Foamex L.P. could have obtained
  from an unaffiliated third party.  During the twenty-six week periods ended June
  28, 1998 and June 29, 1997, Foamex L.P.  purchased  approximately  $15.0 million
  and $63.0 million,  respectively,  of raw materials under the Supply  Agreement.
  Effective  March 30, 1998,  Foamex L.P. has  discontinued  utilizing  the Supply
  Agreement to purchase its raw materials.
  
         Foamex  L.P.  chartered  an  aircraft  (which is owned by a  wholly-owned
  subsidiary of Foamex International)  through a third party and incurred costs of
  approximately  $0.3  million and $0.2 million  during the thirteen  week periods
  ended June 28,  1998 and June 29,  1997,  respectively  and  approximately  $0.5
  million and $0.6 million during the twenty-six  week periods ended June 28, 1998
  and June 29, 1997, respectively.
  
         On December 11, 1996, Foamex L.P. entered into a Tax Distribution Advance
  Agreement,  pursuant to which its partners are entitled to obtain  advances,  in
  the aggregate not to exceed $17.0 million,  against future  distributions  under
  Foamex L.P.'s tax distribution  agreement. As of June 28, 1998, there were $13.6
  million of advances to Foamex International under this agreement.
  
  8.     ENVIRONMENTAL MATTERS
  
         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 and the
  remediation of  environmental  contamination,  and as a result,  is from time to
  time involved in administrative and judicial  proceedings and inquiries relating
  to environmental matters. During the twenty-six week period ended June 28, 1998,
  expenditures  in connection with Foamex L.P.'s  compliance with federal,  state,
  local and foreign  environmental  laws and  regulations  did not have a material
  adverse  effect  on  Foamex  L.P.'s  operations,   financial  position,  capital
  expenditures  or  competitive  position.  As of June 28,  1998,  Foamex L.P. has
  environmental  accruals of approximately $3.6 million for environmental matters.
  In  addition,   as  of  June  28,  1998  Foamex  L.P.  has  net  receivables  of
  approximately  $0.6  million  relating  to  indemnification   for  environmental
  liabilities.   Foamex  L.P.   believes  that   realization  of  the  receivables
  established for indemnification is probable.
  
         The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments")  provide
  for the establishment of federal emission standards for hazardous air pollutants
  including  methylene  chloride,  propylene oxide and TDI,  materials used in the
  manufacturing  of foam. On December 27, 1996,  the United  States  Environmental
  Protection Agency (the "EPA") proposed regulations under the 1990 CAA Amendments
  that  will  require  manufacturers  of slab  stock  polyurethane  foam  and foam
  fabrication  plants to reduce  emissions of methylene  chloride.  Because  these
  regulations  are subject to change  prior to  finalization,  Foamex L.P.  cannot
  accurately predict the actual cost of their implementation. Foamex L.P. does not
  believe  implementation  of the  regulations  will  require it to make  material
  expenditures  at  facilities  owned prior to December  23,  1997,  due to Foamex
  L.P.'s use of alternative  technologies  which do not utilize methylene chloride
  and its ability to shift current  production to the  facilities  which use these
  alternative technologies;  however, material expenditures may be required at the
  facilities  formerly  operated by Crain. The 1990 CAA Amendments also may result
  in  the  imposition  of  additional  standards  regulating  air  emissions  from
  polyurethane foam manufacturers,  but these standards have not yet been proposed
  or promulgated.
  
         Foamex L.P. has reported to  appropriate  state  authorities  that it has
  found soil and  groundwater  contamination  in excess of state standards at four
  facilities and soil  contamination  in excess of state  standards at three other
  facilities.  Foamex  L.P.  has  begun  remediation  and  is  conducting  further
  investigations  into the extent of the  contamination  at these  facilities and,
  accordingly,  the extent of the remediation that may ultimately be required. The
  actual cost and the timetable of any such  remediation  cannot be predicted with
  any degree of  certainty  at this time.  As of June 28,  1998,  Foamex L.P.  has
  environmental accruals of approximately $3.0 million for the remaining potential
  remediation costs for these facilities based on estimates.
  
                                         11
  8.     ENVIRONMENTAL MATTERS (continued)
  
         Federal  regulations  require  that by the end of  1998  all  underground
  storage tanks  ("USTs") be removed or upgraded in all states to meet  applicable
  standards.  Foamex  L.P.  has two USTs that will  require  removal or  permanent
  in-place closure by the end of 1998. Due to the age of these tanks,  leakage may
  have occurred resulting in soil and possibly groundwater  contamination.  Foamex
  L.P. has accrued $0.1 million for the estimated removal and remediation, if any,
  associated  with these  USTs.  However,  the full extent of  contamination  and,
  accordingly,  the actual cost of such  remediation  cannot be predicted with any
  degree of certainty at this time. Foamex L.P. believes that its USTs do not pose
  a  significant  risk  of  environmental   liability  because  of  Foamex  L.P.'s
  monitoring  practices  for  USTs  and  conditional  approval  for the  permanent
  in-place closure for certain USTs. However,  there can be no assurance that such
  USTs will not result in significant environmental liability in the future.
  
         Foamex  L.P.  has been  designated  as a  Potentially  Responsible  Party
  ("PRP") by the EPA with respect to nine sites, with an estimated total liability
  to Foamex  L.P.  for the nine  sites of less than  approximately  $0.5  million.
  Estimates of total clean-up  costs and  fractional  allocations of liability are
  generally  provided  by the EPA or the  committee  of PRP's with  respect to the
  specified site. In each case, the participation of Foamex L.P.
  is considered to be immaterial.
  
         Although it is possible that new information or future developments could
  require Foamex L.P. to reassess its potential  exposure  relating to all pending
  environmental  matters,  including those described herein,  management  believes
  that,  based upon all currently  available  information,  the resolution of such
  environmental  matters will not have a material  adverse effect on 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 may
  be found to exist, that may require  expenditures not currently  anticipated and
  that may be material.
  
  9.     LITIGATION
  
         As of August 12, 1998, Foamex L.P. and Trace International Holdings, Inc.
  ("Trace Holdings") were two of multiple defendants in actions filed on behalf of
  approximately  5,000  recipients  of breast  implants in various  United  States
  federal and state courts and one Canadian provincial court, some of which allege
  substantial  damages,  but most of which allege unspecified damages for personal
  injuries of various types.  Three of these cases seek to allege claims on behalf
  of all breast implant  recipients or other allegedly  affected  parties,  but no
  class has been approved or certified by the court. In addition, three cases have
  been  filed  alleging  claims  on  behalf  of  approximately  700  residents  of
  Australia, New Zealand, England, and Ireland. During 1995, Foamex L.P. and Trace
  Holdings were granted  summary  judgments  and dismissed as defendants  from all
  cases in the  federal  courts  of the  United  States  and the  state  courts of
  California.  Appeals for these  decisions  were  withdrawn and the decisions are
  final. In addition,  two of the cases filed on behalf of 903 foreign  plaintiffs
  were  dismissed on the grounds that the cases could not be brought in the United
  States courts. This decision is subject to appeal. Foamex L.P. believes that the
  number of suits and  claimants  may increase.  Although  breast  implants do not
  contain foam,  certain  silicone gel implants were produced using a polyurethane
  foam covering  fabricated by independent  distributors or fabricators  from bulk
  foam purchased from Foamex L.P. or Trace Holdings. Neither Foamex L.P. nor Trace
  Holdings  recommended,  authorized  or  approved  the use of its foam for  these
  purposes.  While it is not feasible to predict or determine the outcome of these
  actions,  based on  management's  present  assessment  of the  merits of pending
  claims,  after  consultation  with the general  counsel of Trace  Holdings,  and
  without  taking into  account  potential  indemnity  from the  manufacturers  of
  polyurethane  covered breast implants,  management believes that the disposition
  of matters that are pending or that may reasonably be anticipated to be asserted
  should  not have a  material  adverse  effect on either  Foamex  L.P.'s or Trace
  Holdings' consolidated financial position or results of operations. In addition,
  Foamex L.P.  is also  indemnified  by Trace  Holdings  for any such  liabilities
  relating to foam manufactured
  
                                         12
  9.    LITIGATION (continued)
  
  prior to October 1990. Although Trace Holdings has paid Foamex L.P.'s litigation
  expenses to date pursuant to such  indemnification and management believes Trace
  Holdings  likely will be in a position to continue to pay such  expenses,  there
  can be no absolute  assurance  that Trace  Holdings will be able to provide such
  indemnification. Based on information available at this time with respect to the
  potential  liability,  and  without  taking  into  account  the  indemnification
  provided by Trace  Holdings and the  coverage  provided by Trace  Holdings'  and
  Foamex L.P.'s  liability  insurance,  Foamex L.P.  believes that the proceedings
  should not ultimately result in any liability that would have a material adverse
  effect on the  financial  position  or results of  operations  of Foamex L.P. If
  management's assessment of Foamex L.P.'s liability with respect to these actions
  is incorrect, such actions could have a material adverse effect on Foamex L.P.
  
         In November  1997, a complaint  was filed in the United  States  District
  Court for the  Southern  District of Texas  alleging  that  various  defendants,
  including Crain through the use of the CARDIO(R)  process  licensed from a third
  party, infringed on a patent held by plaintiff.  Foamex L.P. is negotiating with
  the licensor of the process for the  assumption  of the defense of the action by
  the licensor; however, the action is in the preliminary stages, and there can be
  no assurance as to the ultimate outcome of the action.
  
         On or about March 17, 1998,  five  purported  class action  lawsuits were
  filed  in the  Delaware  Chancery  Court,  New  Castle  County,  against  Foamex
  International, directors of Foamex International, Trace Holdings, and individual
  officers and directors of Trace Holdings:
  
         Brickell Partners v. Marshall S. Cogan, et al.,  No. 16260NC;
         Mimona Capital v. Salvatore J. Bonanno, et al.,  No. 16259NC;
         Daniel Cohen v. Foamex International Inc.,  No. 16263;
         Eileen Karisinki v. Foamex International Inc., et al.,  No. 16261NC and
         John E. Funky Trust v. Salvatore J. Bonanno, et al., No. 16267.
  
         A  sixth  purported  class  action  lawsuit,  Barnett  Stepak  v.  Foamex
  International  Inc.,  et al.,  No.  16277,  was filed on or about March 23, 1998
  against the same  defendants.  The complaints in the six actions  allege,  among
  other things,  that the defendants have violated  fiduciary and other common law
  duties  purportedly  owed to Foamex  International's  stockholders in connection
  with Trace Holdings proposal to acquire all of the outstanding  shares of Foamex
  International's  common stock. The complaints  seek,  among other things,  class
  certification,  a declaration  that the defendants have breached their fiduciary
  duties  to  the   class,   preliminary   and   permanent   injunctions   barring
  implementation  of the proposed  transaction,  rescission of the  transaction if
  consummated, unspecified compensatory damages, and costs and attorneys' fees.
  
         The parties to the lawsuits  entered into a Memorandum of  Understanding,
  dated  June  25,  1998  (the  "Memorandum  of  Understanding"),  to  settle  the
  litigation,  subject to, inter alia,  execution of a definitive  Stipulation  of
  Settlement and approval by the Delaware  Chancery Court following  notice to the
  public stockholders and a hearing. The Memorandum of Understanding provides that
  as a result of, among other things, the stockholder  litigation and negotiations
  among  counsel for the parties to the  Memorandum  of  Understanding,  a special
  meeting of stockholders will be held to vote upon and adopt the Merger Agreement
  which  provides,  among other  things,  for the public  shares of the  Company's
  common stock to be converted into the right to receive  $18.75 in cash,  without
  interest.  The Memorandum of Understanding  also  acknowledged that the terms of
  the Merger have been significantly  improved over the terms originally  proposed
  by Trace Holdings on March 16, 1998, and Foamex International and the individual
  director and officer defendants  acknowledged that the filing and prosecution of
  the  stockholder  litigation  was a factor they took into account in giving fair
  consideration to and entering into the Merger,  and Trace Holdings  acknowledged
  that it took into account the  desirability  of  satisfactorily  addressing  the
  claims  asserted in the  stockholder  litigation  in  agreeing to the  increased
  consideration  to be paid to the  public  stockholders  pursuant  to the  Merger
  Agreement.
  
                                         13
  9.     LITIGATION (continued)
  
         The  Memorandum of  Understanding  also provided for  certification  of a
  class, for settlement purposes only, consisting of the public stockholders,  the
  dismissal  of the  stockholder  litigation  with  prejudice  and the  release by
  plaintiffs  and all members of the class of all claims and causes of action that
  were or could have been asserted  against Trace Holdings,  Foamex  International
  and the individual defendants in the stockholder litigation or that arise out of
  the matters alleged by plaintiffs.  In connection with the proposed  settlement,
  the  plaintiffs  intend to apply of an award of attorney's  fees and  litigation
  expenses in an amount not to exceed $925,000, and the defendants have agreed not
  to oppose this application. Additionally, Foamex International has agreed to pay
  the  cost  of  sending  notice  of  the  settlement,   if  any,  to  its  public
  shareholders.
  
         The  defendants  have  denied,  and  continued  to deny,  that  they have
  committed or have  threatened to commit any violation of law or breaches of duty
  to plaintiffs or the purported class. The defendants have agreed to the proposed
  settlement  because,  among other reasons,  such settlement  would eliminate the
  burden and expenses of further  litigation and would facilitate the consummation
  of a  transaction  that  they  believe  to be in the best  interests  of  Foamex
  International and the public stockholders.
  
         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 the  financial  position or
  results of operations of Foamex L.P. If management's assessment of Foamex L.P.'s
  liability with respect to these actions is incorrect,  such actions could have a
  material adverse effect on Foamex L.P.'s consolidated financial position.
  
  10.     COMPENSATION INCOME
  
         In June 1997, the Financial  Accounting  Standards Board issued Statement
  of  Financial  Accounting  Standards  No.  130  ("SFAS  No.  130"),   "Reporting
  Comprehensive  Income," which requires  disclosure of comprehensive  income,  as
  defined,  including  comprehensive  disclosure in interim financial  statements.
  Comprehensive  income for the thirteen  week and  twenty-six  week periods ended
  June 28, 1998 and June 29, 1997 is comprised of the following:
  13 Week Period              26 Week Period
                                                                Ended June 28, 1998         Ended June 28, 1998
                                                                         (thousands, except per share data)
  Net income                                                           $14,519                      $18,519
  Foreign currency translation adjustments                                   3                          230
                                                                      --------                     -------- 
  Total comprehensive income                                           $14,522                      $18,749
                                                                      ========                     ======== 
  
                                                                    13 Week Period              26 Week Period
                                                                Ended June 29, 1997         Ended June 29, 1997
                                                                         (thousands, except per share data)
  Net income                                                          $(31,442)                    $(16,616)
  Foreign currency translation adjustments                                  16                         (168)
                                                                      --------                     -------- 
  Total comprehensive income                                          $(31,426)                    $(16,784)
                                                                      ========                     ========
  14
  FOAMEX CAPITAL CORPORATION
                     (A Wholly-Owned Subsidiary of Foamex L.P.)
                             BALANCE SHEETS (unaudited)
  June 28,  December 28,
                                                               1998        1997
  ASSETS                                                          (thousands)
  CASH                                                          $1          $1
                                                                ==          ==
  
  LIABILITIES AND STOCKHOLDER'S EQUITY
  
  COMMITMENTS AND CONTINGENCIES                                 $-          $-
                                                                --          --
  
  STOCKHOLDER'S EQUITY:
       Common stock, par value $.01 per share;
       1,000 shares authorized, issued and outstanding           -           -
       Additional paid-in capital                                1           1
                                                                --          --
  
          TOTAL STOCKHOLDER'S EQUITY                            $1          $1
                                                                ==          ==
  The accompanying notes are an integral part of the balance sheets.
  
                                         15
  FOAMEX CAPITAL CORPORATION
                     (A Wholly-Owned Subsidiary of Foamex L.P.)
                         NOTES TO BALANCE SHEETS (unaudited)
  
  1.     ORGANIZATION
  
         Foamex Capital Corporation  ("FCC"), a wholly-owned  subsidiary of Foamex
  L.P.,  was formed for the sole  purpose of  obtaining  financing  from  external
  sources.
  
  2.     COMMITMENTS AND CONTINGENCIES
  
         FCC is a joint obligor and severally  liable on the following  borrowings
  of Foamex L.P.:
  
         9 7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")
  
         The Senior  Subordinated  Notes  were  issued by Foamex  L.P.  and FCC in
  connection with the June 1997 refinancing  plan. The Senior  Subordinated  Notes
  bear interest at the rate of 9 7/8% per annum payable  semiannually on each June
  15 and December 15, commencing  December 15, 1997. The Senior Subordinated Notes
  mature on June 15, 2007.  The Senior  Subordinated  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, initially at 104.938% of their principal amount, plus accrued interest and
  liquidated  damages,  as defined,  if any, thereon to the date of redemption and
  declining to 100.0% on or after June 15, 2005. In addition, at any time prior to
  June 15, 2000,  Foamex L.P. may on one or more  occasions  redeem up to 35.0% of
  the initially outstanding principal amount of the Senior Subordinated Notes at a
  redemption  price  equal to  109.875%  of the  principal  amount,  plus  accrued
  interest and liquidated  damages, if any, thereon to the date of redemption with
  the cash proceeds of one or more Public Equity Offerings,  as defined.  Upon the
  occurrence  of  a  change  of  control,  as  defined,   each  holder  of  Senior
  Subordinated  Notes will have the right to require Foamex L.P. to repurchase the
  Senior  Subordinated  Notes at a price equal to 101.0% of the principal  amount,
  plus accrued interest and liquidated damages, if any, to the date of repurchase.
  Trace Holdings' proposed acquisition of Foamex International may constitute such
  a change of control.  The Senior Subordinated Notes are subordinated in right of
  payment to all senior indebtedness and are pari passu in right of payment to the
  13 1/2% Senior  Subordinated Notes and approximately  $7.0 million  subordinated
  promissory note.
  
         13 1/2% Senior  Subordinated Notes due 2005 ("13 1/2% Senior Subordinated
  Notes")
  
         The 13 1/2% Senior  Subordinated Notes were issued by Foamex L.P. and FCC
  in a  private  placement  on  December  23,  1997 in  connection  with the Crain
  Acquisition.  The 13 1/2% Senior Subordinated Notes bear interest at the rate of
  13 1/2% per annum  payable  semiannually  on each  February  15 and  August  15,
  commencing  February 15, 1998. The 13 1/2% Senior  Subordinated  Notes mature on
  August 15, 2005.  The 13 1/2% Senior  Subordinated  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,  initially at 106.75% of their principal amount, plus accrued interest and
  liquidated  damages,  as defined,  if any, thereon to the date of redemption and
  declining to 100.0% on or after August 15, 2004. Upon the occurrence of a change
  of control,  as defined,  each holder of the 13 1/2% Senior  Subordinated  Notes
  will have the right to require  Foamex  L.P.  to  repurchase  the 13 1/2% Senior
  Subordinated  Notes at a price  equal to 101.0% of the  principal  amount,  plus
  accrued  interest and  liquidated  damages,  if any, to the date of  repurchase.
  Trace Holdings' proposed acquisition of Foamex International may constitute such
  a change of control.  The 13 1/2% Senior  Subordinated Notes are subordinated in
  right of  payment  to all  senior  indebtedness  and are pari  passu in right of
  payment to the Senior  Subordinated  Notes and an approximately  $7.0 million of
  subordinated promissory note.
  
                                         16
  FOAMEX CAPITAL CORPORATION
                     (A Wholly-Owned Subsidiary of Foamex L.P.)
                         NOTES TO BALANCE SHEETS (unaudited)
  
         Foamex  L.P.  has  completed  a  registration  statement  relating  to an
  exchange  offer in which Foamex L.P.  exchanged the 13 1/2% Senior  Subordinated
  Notes issued in the private  placement for new notes. The terms of the new notes
  are  substantially  identical  in  all  respects  (including  principal  amount,
  interest  rate,  maturity  and  ranking)  to the  terms  of the 13  1/2%  Senior
  Subordinated  Notes,  except  that the new notes  are  transferable  by  holders
  thereof  without  further  registration  under the  Securities  Act of 1933,  as
  amended  (except  in the  case  of 13 1/2%  Senior  Subordinated  Notes  held by
  affiliates of Foamex L.P. and for certain other holders), and are not subject to
  any  covenant  regarding  registration  under  the  Securities  Act of 1933,  as
  amended.
  
                                         17
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
         Foamex L.P.  operates in the flexible  polyurethane  and advanced polymer
  foam products industry.  The following  discussion should be read in conjunction
  with the condensed  consolidated  financial statements and related notes thereto
  of Foamex  L.P.  included in this  report.  Certain  information  in this report
  contains  forward-looking  statements and should be read in conjunction with the
  discussion regarding forward-looking statements set forth on page five of Foamex
  L.P.'s 1997 Annual Report on Form 10-K/A.
  
         During 1997,  Foamex  L.P.'s  products  were  utilized  primarily in four
  businesses:  (i)  Foam  Products,  consisting  of  cushioning  foams,  including
  bedding, furniture, packaging, health care and foam-based consumer products such
  as futons,  pillows,  mattress pads and juvenile furniture,  (ii) Carpet Cushion
  Products,  consisting of carpet padding and related  products,  (iii) Automotive
  Products,  consisting of automotive trim,  laminates and other accessories,  and
  (iv) Technical  Products,  consisting of reticulated  and other  specialty foams
  used for reservoiring filtration, gasketing and sealing.
  
         On June 25, 1998, Foamex International,  Trace Holdings, and Trace Merger
  Sub Corp. entered into an Agreement and Plan of Merger (the "Merger Agreement"),
  providing for the merger (the "Merger") of Trace Merger Sub Corp.  with and into
  Foamex  International.  Upon  consummation  of the  Merger,  the  holders of the
  outstanding  shares of Foamex  International's  common  sotck,  other than Trace
  Holdings and its  subsidiaries,  will  received,  in exchange for their  shares,
  $18.75 per share in cash.  Consummation  of the Merger is subject to a number of
  conditions,  many of which are  outside  the  control  of Foamex  International,
  including:  (i)  the  approval  and  adoption  of the  Merger  Agreement  by the
  affirmative  vote of the  holders of a  majority  of the  outstanding  shares of
  common  stock of  Foamex  International;  (ii)  the  absence  of any  injunction
  preventing  consummation of the Merger,  (iii) th absence of a material  adverse
  change  in the  business  of Foamex  International's,  and (iv) the  receipt  of
  requisite financing.
  
         On April 27, 1998, Foamex  International's  facility in Orlando,  Florida
  was damaged by a fire.  Foamex  International is in the process of repairing the
  damages to the facility and supplying  local  customers  from other  facilities.
  Foamex  International  believes  that it has  adequate  insurance  coverage  for
  business  interruption  and damages to the  facility  associated  with the fire.
  After   considering   Foamex   International's    insurance   coverage,   Foamex
  International  does not believe that the fire will have a significant  impact on
  Foamex International's  financial position or operations;  however, there can be
  no  assurance  that  the  fire  will not have a  significant  impact  on  Foamex
  International's financial position or operations.
  
         On February 27, 1998,  Foamex  International,  Foamex L.P. and certain of
  its affiliates  completed a series of  transactions  designed to simplify Foamex
  International's   corporate   structure  and  to  provide   future   operational
  flexibility.  Prior to the consummation of these  transactions,  (i) Foamex L.P.
  and Foamex L.P.'s wholly-owned subsidiary, General Felt, entered into the Supply
  Agreement and the Administrative Services Agreement, (ii) Foamex L.P. repaid its
  outstanding  indebtedness  to  General  Felt with $4.8  million  in cash and the
  Foamex/GFI  Note  supported by a $34.5 million letter of credit under the Credit
  Facility,  (iii)  Foamex  L.P.  contributed  to  General  Felt $9.4  million  of
  outstanding net intercompany  payables and intercompany  loans with General Felt
  and (iv) Foamex L.P. defeased the $4.5 million  outstanding  principal amount of
  its 9 1/2% Senior  Secured Notes due 2000. The initial  transaction  resulted in
  the  transfer  from Foamex L.P.  to Foam  Funding LLC of all of the  outstanding
  common stock of General Felt, in exchange for (i) the assumption by Foam Funding
  LLC of $129.0  million of Foamex  L.P.'s  indebtedness  and (ii) the transfer by
  Foam  Funding  LLC to  Foamex  L.P.  of a 1%  non-managing  general  partnership
  interest  in Foamex  L.P. As a result,  each of General  Felt and Foamex  Fibers
  ceased being a subsidiary of Foamex L.P. and was relieved  from all  obligations
  under  Foamex  L.P.'s  9 7/8%  Senior  Subordinated  Notes  and 13  1/2%  senior
  subordinated  notes due 2005.  Upon  consummation  of the  initial  transaction,
  Foamex Carpet, a newly formed wholly-owned  subsidiary of Foamex  International,
  Foamex  International,  Foam Funding LLC, and General Felt entered into an Asset
  Purchase Agreement, pursuant to which General Felt sold substantially all of its
  assets  (other  than the  Foamex/GFI  Note and its  operating  facility  in Pico
  Rivera,  California)  to Foamex Carpet in exchange for (i) $20.0 million in cash
  and (ii) a  promissory  note issued by Foamex  Carpet to Foam Funding LLC in the
  amount of $70.2  million.  The $20.0  million  cash  payment  was funded  with a
  distribution  by Foamex L.P. As part of these  transactions,  Foamex  Fibers,  a
  wholly-owned  subsidiary of General Felt,  was merged with and into General Felt
  and Foamex LLC, a  wholly-owned  subsidiary of Foamex L.P.,  was merged with and
  into  Foamex  L.P.  In  addition,   FMXI,  Inc.  and  Crain,  both  wholly-owned
  subsidiaries of Foamex  International  and general partners of Foamex L.P., were
  merged and Crain, as the surviving corporation, subsequently changed its name to
  FMXI,  Inc.  Foamex Carpet will conduct the carpet cushion  business  previously
  conducted by General Felt. Also, Foam Funding LLC has retained  ownership of one
  of General Felt's  operating  facilities  which is being leased to Foamex Carpet
  and  the  Foamex/GFI  Note.  These   transactions   have  been  reflected  as  a
  reorganization  of companies  under common control.
  
                                         18
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
  Accordingly,  Foamex L.P.'s consolidated financial statements have been restated
  to exclude the consolidated operations of General Felt.
  
         On December 23, 1997, Foamex  International  acquired Crain pursuant to a
  merger  agreement  with Crain  Holdings  for a purchase  price of  approximately
  $213.7  million,  including  the  assumption  of  debt  with  a  face  value  of
  approximately $98.6 million (and an estimated fair value of approximately $112.3
  million).  Foamex  International then contributed the assets of Crain subject to
  all of its  liabilities and  indebtedness  to Foamex L.P. In addition,  fees and
  expenses associated with the Crain Acquisition are approximately $13.2 million.
  
         On April 27, 1998, Foamex L.P.'s facility in Orlando, Florida was damaged
  by a fire.  Foamex  L.P.  is in the  process  of  repairing  the  damages to the
  facility  and  supplying  local  customers  from  other  facilities.  Management
  believes  that  Foamex  L.P.  has  adequate   insurance  coverage  for  business
  interruption  and  damages  to the  facility  associated  with the  fire.  After
  considering Foamex L.P.'s insurance coverage,  Foamex L.P. does not believe that
  the fire will have a significant  impact on Foamex L.P.'s financial  position or
  operations;  however,  there can be no  assurance  that the fire will not have a
  significant impact on Foamex L.P.'s financial position or operations.
  
         Operating  results  for 1998 are  expected  to be  influenced  by various
  internal and external factors.  These factors include,  among other things,  (i)
  consolidation of the Crain  Acquisition,  (ii) continued  implementation  of the
  continuous  improvement  program to improve Foamex L.P.'s  profitability,  (iii)
  additional  raw  material  cost  increases,  if any, by Foamex  L.P.'s  chemical
  suppliers,  (iv) Foamex L.P.'s  success in passing on to its  customers  selling
  price increases to recover such raw material cost increases and (v) fluctuations
  in interest rates.
  
  13 Week  Period  Ended June 28, 1998  Compared to 13 Week Period  Ended June 29,
  1997
  
  Results of Operations
  
         Net sales for the second  quarter of 1998 were $263.3 million as compared
  to $199.5 million in the second quarter of 1997, an increase of $63.8 million or
  32.0%.  Foam  Products  net sales for the second  quarter of 1998  increased  to
  $141.0 million from $82.6 million in the second quarter of 1997 primarily due to
  net sales from the Crain operations and increased volume to our national bedding
  customers  and  fabricators.  Carpet  Cushion  Products net sales for the second
  quarter of 1998 decreased 5.0% to $39.9 million from $38.0 million in the second
  quarter  of 1997  primarily  due to the sale of Dalton  in  October  1997  which
  contributed net sales of $13.6 million in 1997 and a reduction in rebond selling
  prices as compared to 1997. Automotive Products net sales for the second quarter
  of 1998 increased 4.9% to $62.2 million from $59.3 million in the second quarter
  of 1997 primarily due to increased volume.  Technical Products net sales for the
  second quarter of 1998 increased 2.6% to $20.2 million from $19.6 million in the
  second  quarter of 1997  primarily due to increased net sales volume for felted,
  gasketing, and sealing products.
  
         Gross  profit as a  percentage  of net sales  increased  to 18.4% for the
  second quarter of 1998 from 17.4% in the second quarter of 1997 primarily due to
  increased  purchasing  leverage  offset by a shift in product  mix for 1998 as a
  result of the Crain  Acquisition.  Crain's  principal  product  lines,  bedding,
  furniture and carpet cushion,  have  inherently  lower gross profit margins than
  Foamex  International's  historical  gross profit  margins.  Also,  gross profit
  percentage increased in the second quarter of 1998 due to Foamex International's
  implementation of restructuring/consolidation programs associated with the Crain
  Acquisition.
  
         Income from operations  increased to $31.5 million for the second quarter
  of 1998 from $24.0  million in the second  quarter of 1997  primarily due to the
  Crain Acquisition.
  
         Income  before  extraordinary  loss  increased  to $14.6  million for the
  second  quarter of 1998 as compared to $13.4  million for the second  quarter of
  1997.  The increase is primarily  due to the increase in income from  operations
  discussed above offset by an increase of approximately  $5.0 million in interest
  and debt issuance expense and $1.1 million of costs associated with the transfer
  of General Felt which is included in other income  
  
                                         19
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
  (expense),  net. The increase in interest and debt issuance expense is primarily
  due to the additional debt incurred in connection with the Crain Acquisition and
  the June 1997 refinancing plan.
  
         The extraordinary  loss on early  extinguishment of debt of approximately
  $44.9  million  during the  second  quarter  of 1997  primarily  relates to debt
  extinguished in connection with the June 1997 refinancing plan.
  
  26 Week  Period  Ended June 28, 1998  Compared to 26 Week Period  Ended June 29,
  1997
  
  Results of Operations
  
         Net sales for the twenty-six  week period ended June 28, 1998 were $547.9
  million as compared to $393.6 million for the twenty-six  week period ended June
  29, 1997,  an increase of $154.3  million or 39.2%.  Foam Products net sales for
  the twenty-six  week period ended June 28, 1998 increased to $295.1 million from
  $163.3 million for the twenty-six  week period ended June 29, 1997 primarily due
  to the net sales from the Crain  operations and increased volume to our national
  bedding  customers and  fabricators.  Carpet Cushion  Products net sales for the
  twenty-six week period ended June 28, 1998 increased 15.6% to $85.8 million from
  $74.2 million for the  twenty-six  week period ended June 28, 1997 primarily due
  to net sales from the Crain  operations  offset by the sale of Dalton in October
  1997  which  contributed  net sales of $24.3  million in 1997 and  reduction  of
  rebond selling prices as compared to 1997 and product mix.  Automotive  Products
  net sales for the  twenty-six  week period ended June 28, 1998 increased 5.6% to
  $125.7 million from $119.0 million for the twenty-six week period ended June 29,
  1997  primarily due to increased  volume.  Technical  Products net sales for the
  twenty-six week period ended June 28, 1998 increased 11.1% to $41.3 million from
  $37.1 million for the  twenty-six  week period ended June 29, 1997 primarily due
  to increased net sales volume for felted, gasketing, and sealing products.
  
         Gross  profit as a  percentage  of net sales  decreased  to 16.8% for the
  twenty-six  week period  ended June 28, 1998 from 18.2% in the  twenty-six  week
  period ended June 29, 1997 primarily due to the shift in product mix for 1998 as
  a result of the Crain  Acquisition.  Crain's principal  product lines,  bedding,
  furniture and carpet cushion,  have  inherently  lower gross profit margins than
  Foamex  International's  historical gross profit margins. Also, the gross profit
  was lower since Foamex International carried the full individual operating costs
  of both organizations throughout the majority of the first quarter of 1998.
  
         Income from operations increased to $57.3 million for the twenty-six week
  period  ended June 28,  1998 from $49.7  million in the  twenty-six  week period
  ended June 29, 1997 primarily due to the Crain Acquisition.
  
         Income  before  extraordinary  loss  decreased  to $23.2  million for the
  twenty-six  week period ended June 28, 1998 as compared to $30.0 million for the
  twenty-six  week period ended June 29, 1997.  The decrease is primarily  due the
  increase in income from operations, offset by an increase of approximately $12.0
  million  in  interest  and  debt  issuance  expense  and $2.0  million  of costs
  associated  with the  transfer of General Felt which is included in other income
  (expense),  net. The increase in interest and debt issuance expense is primarily
  due to the additional debt incurred in connection with the Crain Acquisition and
  the June 1997 refinancing plan.
  
         The extraordinary  loss on early  extinguishment of debt of approximately
  $3.2 million  during the  twenty-six  week period ended June 28, 1998  primarily
  relates to the  write-off of debt  issuance  costs with debt  extinguishment  in
  connection  with the GFI  Transaction  and the  redemption of the senior secured
  notes. The extraordinary  loss on early  extinguishment of debt of approximately
  $45.5 million  during the  twenty-six  week period ended June 29, 1997 primarily
  relates  to the  write-off  of debt  issuance  costs with debt  extinguished  in
  connection with the June 1997 refinancing plan.
  
  Foamex Capital Corporation ("FCC")
  
         FCC is solely a co-issuer of certain  indebtedness of Foamex L.P. and has
  no other material operations.
  
                                         20
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
  Liquidity and Capital Resources
  
         Foamex L.P.'s operating cash requirements  consist principally of working
  capital   requirements,   scheduled   payments  of  principal  and  interest  on
  outstanding  indebtedness and capital  expenditures.  Foamex L.P.  believes that
  cash flow from operating activities,  cash on hand and periodic borrowings under
  the Credit  Facility,  if  necessary,  will be adequate to meet  operating  cash
  requirements. The ability to meet the operating cash requirements of Foamex L.P.
  could be impaired if Foamex L.P. was to fail to comply with any of the covenants
  contained in the Credit Facility and such  noncompliance was not cured by Foamex
  L.P. or waived by the lenders.  Foamex L.P. was in compliance with the covenants
  in the Credit  Facility as of June 28, 1998 and expects to be in compliance with
  the covenants for the foreseeable future.
  
         Cash and cash  equivalents  decreased  $4.3  million  during 1998 to $4.7
  million at June 28, 1998 from $9.0 million at December 28, 1997 primarily due to
  an increase of cash used by the operating  assets and  liabilities and cash used
  for capital  expenditures,  offset by increased  revolving  credit  borrowings .
  Working  capital  increased  $67.7 million during 1998 to $173.9 million at June
  28, 1998 from $106.2  million at December 28, 1997  primarily  due to changes in
  net operating  assets (as  discussed  below),  a decrease in current  portion of
  long-term debt and a net increase in other current assets and  liabilities.  The
  decrease in current portion of long-term debt is primarily due to the assumption
  of Foamex  L.P.'s  long-term  debt by Foam  Funding LLC in  connection  with the
  General  Felt  transaction.  The  net  increase  in  other  current  assets  and
  liabilities  is  primarily  associated  with the timing of payments  for prepaid
  expenses and the receipt of cash for other receivables. Net operating assets and
  liabilities (comprised of accounts receivable, accounts receivables from related
  parties,  inventories,  accounts  payable and accounts  payable related parties)
  increased  $39.3  million  during  1998 to $180.5  million at June 28, 1998 from
  $141.2  million at December  28, 1997  primarily  due to  increases  in accounts
  receivable, accounts receivable related party, decreases in accounts payable and
  accounts  receivable  related  party.  The  increase in accounts  receivable  is
  primarily  due to an increase in net sales for June 1998 as compared to December
  1997. The decrease in accounts  payable and in account  payable related party is
  primarily due to the timing of payments.
  
         As of June 28,  1998,  there  were  $137.4  million of  revolving  credit
  borrowings under the Credit Facility and approximately  $49.7 million associated
  with letters of credit  outstanding  which are supported by the Credit  Facility
  with unused  availability of approximately  $13.0 million.  Borrowings by Foamex
  Canada as of June 28, 1998 were $4.3  million  under Foamex  Canada's  revolving
  credit agreement with unused availability of approximately $1.1 million.
  
         Cash  flow  used for  operating  activities  was  $34.4  million  for the
  twenty-six  week  period  ended June 28,  1998 as compared to cash used of $23.3
  million for the  twenty-six  week period ended June 29, 1997.  This  decrease is
  primarily due to (i) a reduction in operating  cash results,  (ii) cash used for
  an increase in accounts  receivable and other  receivables  associated  with the
  timing of receipts  and (iii) a  reduction  in  accounts  payable  and  accounts
  payable related party associated with the timing of payments.
  
         Cash flow used for  investing  activities  decreased to $19.4 million for
  the  twenty-six  week period  ended June 29,  1998 from  $111.7  million for the
  twenty-six  week period ended June 29, 1997  primarily  due to the use of $105.8
  million of cash during 1997 to purchase the outstanding FJPS discount debentures
  in connection with the refinancing plan.
  
         Cash flow provided by financing activities decreased to $49.5 million for
  the  twenty-six  week period ended June 28, 1998 as compared to cash provided of
  $118.7 million for the twenty-six  week period ended June 29, 1997. The decrease
  is due to greater net borrowings  during the  twenty-six  week period ended June
  29, 1997 primarily relating to the June 1997 refinancing plan as compared to net
  cash borrowings  during the twenty-six week period ended June 28, 1998 primarily
  for working capital needs and to fund distributions relating to the General Felt
  transaction.
  
                                         21
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
         Interest Rate Swaps
  
         Foamex L.P. enters into interest rate swaps to lower funding costs and/or
  to manage interest costs and exposure to changing  interest  rates.  Foamex L.P.
  does not hold or issue financial instruments for trading purposes.
  
         On January 8, 1998,  Foamex L.P.  entered into an amended  interest  rate
  swap  agreement  which  provides  for an  interest  rate swap  agreement  with a
  notional  amount of $150.0  million  through  June 2002.  Under this  agreement,
  Foamex  L.P. is  obligated  to make fixed  payments  of 5.78% per annum  through
  December 1998 and variable  payments based on LIBOR at the beginning of each six
  month period for the remainder of the agreement,  in exchange for fixed payments
  by the swap  partner at 6.44% per annum for the life of the  agreement,  payable
  semiannually in arrears.  The newly amended  interest rate swap agreement can be
  terminated  by the swap partner at the end of each six month  period  commencing
  December 1999.
  
         Foamex L.P. is exposed to credit loss in the event of a nonperformance by
  the swap partner; however, the occurrence of this event is not anticipated.  The
  effect of the  interest  rate  swap  agreement  was a  favorable  adjustment  to
  interest  and debt  issuance  expense of $0.2  million and $0.8  million for the
  thirteen  week periods ended June 28, 1998 and June 29, 1997,  respectively  and
  $0.4 million and $1.7  million for the  twenty-six  week periods  ended June 28,
  1998 and June 29, 1997, respectively.
  
  Environmental Matters
  
         Foamex L.P. is subject to extensive and changing  environmental  laws and
  regulations.  Expenditures to date in connection  with Foamex L.P.'s  compliance
  with  such  laws and  regulations  did not have a  material  adverse  effect  on
  operations,  financial position,  capital expenditures or competitive  position.
  The  amount  of  liabilities   recorded  by  Foamex  L.P.  in  connection   with
  environmental  matters as of June 28, 1998 was $3.6 million. In addition,  as of
  June  28,  1998  Foamex  L.P.   has  net   receivables   of  $0.6   million  for
  indemnification of environmental  liabilities from former owners. Although it is
  possible that new information or future  developments  could require Foamex L.P.
  to  reassess  its  potential  exposure  to all  pending  environmental  matters,
  including  those  described  in the  footnotes  to  Foamex  L.P.'s  consolidated
  financial  statements,  management  believes  that,  based  upon  all  currently
  available information,  the resolution of all such pending environmental matters
  will not have a material adverse effect on Foamex L.P.'s  operations,  financial
  position, capital expenditures or competitive position.
  
  Inflation and Other Matters
  
         There was no significant  impact on Foamex L.P.'s  operations as a result
  of  inflation  during  the  periods  presented.  In some  circumstances,  market
  conditions or customer  expectations may prevent Foamex L.P. from increasing the
  price of its products to offset the inflationary pressures that may increase its
  costs in the future.
  
         Foamex L.P.'s automotive products customers are predominantly  automotive
  original  equipment  manufacturers or other automotive  suppliers.  As such, the
  sales of these  product  lines are  directly  related  to the  overall  level of
  passenger car and light truck production in North America.  Also,  Foamex L.P.'s
  sales are  sensitive  to sales of new and  existing  homes,  changes in personal
  disposable  income  and  seasonality.  Foamex  L.P.  typically  experiences  two
  seasonally  slow periods  during each year, in early July and in late  December,
  due to scheduled plant shutdowns and holidays.
  
  Year 2000 Compliance
  
         Foamex L.P.  has and will  continue to make  certain  investments  in its
  software systems and applications to ensure Foamex L. P. is Year 2000 compliant.
  Foamex L.P. plans to continue to make  modifications to the identified  software
  during 1998 and test the  modifications  during 1998.  The  financial  impact to
  Foamex L.P. has not been and is not  anticipated to be material to its financial
  position or results of operation in any given year.
  
                                         22
  ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS
  
  New Accounting Standards
  
         Statement of Financial  Accounting  Standards  No. 130 ("SFAS No.  130"),
  "Reporting  Comprehensive  Income,"  was  issued  by  the  Financial  Accounting
  Standards  Board in June 1997.  This  statement  requires all items that must be
  recognized under accounting  standards as components of comprehensive  income to
  be reported in a financial  statement that is displayed with the same prominence
  as other financial statements. Foamex L.P. adopted SFAS No. 130 during the first
  quarter of 1998 (see Note 10).
  
         Statement of Financial  Accounting  Standards  No. 131 ("SFAS No.  131"),
  "Disclosures  about  Segments of an Enterprise  and Restated  Information,"  was
  issued by the Financial  Accounting Standards Board in June 1997. This statement
  establishes  standards for reporting  information  about  operating  segments in
  annual  financial  statements  and  requires  reporting  of  selected  financial
  information  about  operating  segments in interim  financial  reports issued to
  stockholders.  It also  establishes  standards  for  related  disclosures  about
  products and services,  geographic areas, and major customers.  Foamex L.P. will
  adopt SFAS No. 131 for year end 1998  reporting.  Management is  evaluating  the
  impact,  if any,  the  standard  will  have on  Foamex  L.P.'s  present  segment
  reporting.
  
         In February 1998 the Financial Accounting Standards Board issued SFAS No.
  132, "Employers'  Disclosures about Pension and Other  Postretirement  Benefits"
  ("SFAS No. 132"),  which is effective for fiscal years  beginning after December
  15, 1997. SFAS No. 132 revised the required  disclosures about pension and other
  postretirement  benefit  plans.  Foamex L.P.  plans to adopt SFAS No. 132 in the
  fourth quarter of 1998.
  
                                         23
  PART II - OTHER INFORMATION
  
  Item 1.  Legal Proceedings.
  
           Reference is made to the description of the legal proceedings contained
           in the Foamex  L.P.  Annual  Report on Form  10-K/A for the fiscal year
           ended December 28, 1997 and in Foamex L.P.'s  Quarterly  Report for the
           fiscal quarter ended June 28, 1998.
  
           The  information  from  Notes  8 and 9 of  the  condensed  consolidated
           financial  statements  of Foamex L.P. and  subsidiaries  as of June 28,
           1998 (unaudited) is incorporated herein by reference.
  
  Item 2.  Changes in Securities.
  
           None.
  
  Item 3.  Defaults Upon Senior Securities.
  
           None.
  
  Item 4.  Submission of Matters to a Vote of Securities Holders.
  
           None.
  
  Item 5.  Other Information.
  
           None.
  
  Item 6.  Exhibits and Financial Statement Schedules.
  
           (a)  Exhibits
  
  2.1(x)    -    Transfer Agreement, dated as of February 27, 1998, by and between
                 Foam Funding LLC ("Foam LLC") and Foamex L.P.
  3.1(a)    -    Certificate of Limited Partnership of Foamex L.P.
  3.2.1(a)  -    Fourth Amended and Restated  Agreement of Limited  Partnership of
                 Foamex L.P.,  dated as of December  14,  1993,  by and among FMXI
                 Inc.  ("FMXI") and Trace Foam Company,  Inc.  ("Trace Foam"),  as
                 general  partners,  and Foamex  L.P.,  as a limited  partner (the
                 "Partnership Agreement").
  3.2.2(b)  -    First  Amendment  to the  Partnership  Agreement,  dated June 28,
                 1994.
  3.2.3(c)  -    Second  Amendment to the  Partnership  Agreement,  dated June 12,
                 1997.
  3.2.4(v)  -    Third Amendment to the Partnership Agreement,  dated December 23,
                 1997.
  3.2.5(x)  -    Fourth Amendment to the Partnership Agreement, dated February 27,
                 1998.
  3.3(y)    -    Certificate of Incorporation of FMXI.
  3.4(y)    -    By-laws of FMXI.
  3.5(k)    -    Certificate  of  Incorporation  of  Foamex  Capital   Corporation
                 ("FCC").
  3.6(k)    -    By-laws of FCC.
  4.1.1(d)  -    Indenture,  dated as of June 12, 1997,  by and among Foamex L.P.,
                 FCC,  the  Subsidiary  Guarantors  and The Bank of New  York,  as
                 Trustee,  relating  to  $150,000,000  principal  amount of 9 7/8%
                 Senior Subordinated Notes due 2007,  including the form of Senior
                 Subordinated Note and Subsidiary Guarantee.
  4.1.2(v)  -    First  Supplemental  Indenture,  dated as of December  23,  1997,
                 between Foamex LLC ("FLLC") and The Bank of New York, as trustee,
                 relating to the 9 7/8% Notes.
  
                                         24
  4.1.3(x)  -    Second  Supplemental  Indenture,  dated as of February  27, 1998,
                 among Foamex L.P. and FCC, as joint and several obligors, General
                 Felt  Industries,  Inc.  ("General  Felt"),  Foamex Fibers,  Inc.
                 ("Foamex Fibers"), and FLLC, as withdrawing  guarantors,  and The
                 Bank of New York, as trustee, relating to the 9 7/8% Notes.
  4.2.1(v)  -    Indenture,  dated as of December  23,  1997,  by and among Foamex
                 L.P.,  FCC, the Subsidiary  Guarantors,  Crain Holdings Corp., as
                 Intermediate  obligator,  and The Bank of New York,  as  trustee,
                 relating  to  $98,000,000  principal  amount  of 13  1/2%  Senior
                 Subordinated Notes due 2005 (the "13 1/2% Notes"),  including the
                 form of Senior Subordinated Note and Subsidiary Guarantee.
  4.2.2(x)  -    First  Supplemental  Indenture,  dated as of February  27,  1998,
                 among Foamex L.P. and FCC, as joint and several obligors, General
                 Felt,  Foamex Fibers and FLLC, as withdrawing  guarantors,  Crain
                 Industries,  Inc., as withdrawing  intermediate  obligor, and The
                 Bank of New York, as trustee, relating to the 13 1/2% Notes.
  4.3(x)    -    Discharge of  Indenture,  dated as of February  27, 1998,  by and
                 among  Foamex  L.P.,  General  Felt,  Foamex  International  Inc.
                 ("Foamex International") and State Street Bank and Trust Company,
                 as trustee, relating to the 9 1/2% Senior Secured Notes due 2000.
  4.4.1(x)  -    Credit  Agreement,  dated as of June 12,  1997,  as  amended  and
                 restated as of February 27, 1998,  by and among Foamex L.P.,  and
                 FMXI,  the  institutions  from  time to  time  party  thereto  as
                 lenders,  the  institutions  from time to time  party  thereto as
                 issuing  banks,  and  Citicorp  USA,  Inc.  and The  Bank of Nova
                 Scotia, as Administrative Agents.
  4.4.2(x)  -    Second Amended and Restated Foamex International Guaranty,  dated
                 as of February 27, 1998, made by Foamex International in favor of
                 Citicorp USA, Inc., as Collateral Agent.
  4.4.3(x)  -    Amended and Restated Partnership  Guaranty,  dated as of February
                 27,  1998,  made by FMXI in  favor  of  Citicorp  USA,  Inc.,  as
                 Collateral Agent.
  4.4.4(p)  -    Foamex  Guaranty,  dated as of June 12, 1997, made by Foamex L.P.
                 in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.5(p)  -    Subsidiary  Guaranty,  dated as of June 12, 1997,  made by Foamex
                 Latin America, Inc. in favor of Citicorp USA, Inc., as Collateral
                 Agent.
  4.4.6(p)  -    Subsidiary  Guaranty,  dated as of June 12, 1997,  made by Foamex
                 Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.7(p)  -    Subsidiary  Guaranty,  dated as of June 12, 1997,  made by FCC in
                 favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.8(p)  -    Subsidiary  Guaranty,  dated as of June 12, 1997,  made by Foamex
                 Mexico II, Inc. in favor of Citicorp  USA,  Inc.,  as  Collateral
                 Agent.
  4.4.9(p)  -    Subsidiary  Guaranty,  dated as of June 12, 1997,  made by Foamex
                 Asia, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.10(p) -    Subsidiary Pledge  Agreement,  dated as of June 12, 1997, made by
                 FCC in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.11(p) -    Subsidiary Pledge  Agreement,  dated as of June 12, 1997, made by
                 Foamex Latin  America,  Inc. in favor of Citicorp  USA,  Inc., as
                 Collateral Agent.
  4.4.12(p) -    Subsidiary Pledge  Agreement,  dated as of June 12, 1997, made by
                 Foamex Asia,  Inc. in favor of Citicorp USA,  Inc., as Collateral
                 Agent.
  4.4.13(p) -    Subsidiary Pledge  Agreement,  dated as of June 12, 1997, made by
                 Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
                 Agent.
  4.4.14(p) -    Subsidiary Pledge  Agreement,  dated as of June 12, 1997, made by
                 Foamex  Mexico  II,  Inc.  in favor of  Citicorp  USA,  Inc.,  as
                 Collateral Agent.
  4.4.15(p) -    Foamex  Security  Agreement,  dated as of June 12, 1997,  made by
                 Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.16(p) -    Subsidiary Security Agreement, dated as of June 12, 1997, made by
                 Foamex Latin  America,  Inc. in favor of Citicorp  USA,  Inc., as
                 Collateral Agent.
  4.4.17(p) -    Subsidiary Security Agreement, dated as of June 12, 1997, made by
                 Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
                 Agent.
  
                                         25
  4.4.18(p) -    Subsidiary Security Agreement, dated as of June 12, 1997, made by
                 Foamex  Mexico  II,  Inc.  in favor of  Citicorp  USA,  Inc.,  as
                 Collateral Agent.
  4.4.19(p) -    Subsidiary Security Agreement, dated as of June 12, 1997, made by
                 Foamex Asia,  Inc. in favor of Citicorp USA,  Inc., as Collateral
                 Agent.
  4.4.20(p) -    Subsidiary Security Agreement, dated as of June 12, 1997, made by
                 FCC in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.21(r) -    Foamex  Pledge  Agreement,  dated  as of June 12,  1997,  made by
                 Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
  4.4.22(w) -    First Amendment to Foamex Pledge Agreement,  dated as of December
                 23,  1997,  by Foamex  L.P. in favor of Citicorp  USA,  Inc.,  as
                 Collateral Agent.
  4.4.23(w) -    First  Amendment  to  Foamex  Security  Agreement,  dated  as  of
                 December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc.,
                 as Collateral Agent.
  4.4.24(w) -    First Amendment to Foamex Patent Agreement,  dated as of December
                 23,  1997,  by Foamex  L.P. in favor of Citicorp  USA,  Inc.,  as
                 Collateral Agent.
  4.4.25(w) -    First  Amendment to  Trademark  Security  Agreement,  dated as of
                 December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc.,
                 as Collateral Agent.
  4.4.26(w) -    Acknowledgment  of  Guaranty  by  each  of  the  guarantors  to a
                 Guaranty dated June 12, 1997 in favor of Citicorp USA, Inc.
  4.4.27(w) -    First  Amendment  to Pledge  Agreement,  dated as of December 23,
                 1997, by pledgors in favor of Citicorp USA, Inc.
  4.4.28(w) -    Crain Industries Guaranty, dated as of December 23, 1997, made by
                 Crain in favor of Citicorp USA, Inc.
  4.4.29(x) -    Partnership Pledge Agreement, dated as of February 27, 1998, made
                 by Foamex  International and FMXI in favor of Citicorp USA, Inc.,
                 as Collateral Agent.
  4.6(j)    -    Commitment  letter,  dated  July 9,  1996,  from The Bank of Nova
                 Scotia to Foamex Canada Inc.
  4.7(a)    -    Subordinated  Promissory  Note,  dated as of May 6, 1993,  in the
                 original  principal amount of $7,014,864  executed by Foamex L.P.
                 to John Rallis ("Rallis").
  4.8(a)    -    Marely Loan Commitment Agreement,  dated as of December 14, 1993,
                 by and between Foamex L.P. and Marely s.a. ("Marely").
  4.9(a)    -    DLJ Loan Commitment Agreement,  dated as of December 14, 1993, by
                 and between Foamex L.P. and DLJ Funding, Inc. ("DLJ Funding").
  4.10(p)   -    Promissory Note, dated June 12, 1997, in the aggregate  principal
                 amount of $5,000,000, executed by Trace Holdings to Foamex.
  4.10.1(p) -    Promissory Note, dated June 12, 1997, in the aggregate  principal
                 amount of $4,794,828, executed by Trace Holdings to Foamex.
  4.11.1(x) -    Promissory  Note of  Foamex  L.P.  in  favor  of Foam  LLC in the
                 principal amount of $34 million, dated February 27, 1998.
  10.1.1(p) -    Amendment to Master Agreement,  dated as of June 5, 1997, between
                 Citibank, N.A. and Foamex.
  10.1.2(p) -    Amended  confirmation,   dated  as  of  June  13,  1997,  between
                 Citibank, N.A. and Foamex L.P.
  10.1.3(w) -    Amended  confirmation,  dated as of  February  2,  1998,  between
                 Citibank, N.A. and Foamex L.P.
  10.2(h)   -    Reimbursement  Agreement,  dated as of March  23,  1993,  between
                 Trace Holdings and General Felt.
  10.3(h)   -    Shareholder  Agreement,  dated December 31, 1992, among Recticel,
                 s.a.  ("Recticel"),  Recticel  Holding  Noord B.V.,  Foamex L.P.,
                 Beamech Group Limited, LME-Beamech,  Inc., James Brian Blackwell,
                 and Prefoam AG relating to foam technology sharing arrangement.
  10.4.1(k) -    Asset Transfer  Agreement,  dated as of October 2, 1990,  between
                 Trace  Holdings and Foamex (the "Trace  Holdings  Asset  Transfer
                 Agreement").
  10.4.2(k) -    First  Amendment,  dated as of December  19,  1991,  to the Trace
                 Holdings Asset Transfer Agreement.
  
                                         26
  10.4.3(k) -    Amended and  Restated  Guaranty,  dated as of December  19, 1991,
                 made by Trace Foam in favor of Foamex L.P.
  10.5.1(k) -    Asset Transfer  Agreement,  dated as of October 2, 1990,  between
                 RFC and Foamex L.P. (the "RFC Asset Transfer Agreement").
  10.5.2(k) -    First Amendment,  dated as of December 19, 1991, to the RFC Asset
                 Transfer Agreement.
  10.5.3(k) -    Schedule  5.03 to the RFC Asset  Transfer  Agreement  (the  "5.03
                 Protocol").
  10.5.4(h) -    The 5.03 Protocol Assumption  Agreement,  dated as of October 13,
                 1992, between RFC and Foamex L.P.
  10.5.5(h) -    Letter  Agreement  between Trace Holdings and Recticel  regarding
                 the Recticel Guaranty, dated as of July 22, 1992.
  10.6(l)   -    Supply  Agreement,  dated June 28, 1994,  between Foamex L.P. and
                 Foamex International.
  10.7.1(l) -    First  Amended and  Restated Tax Sharing  Agreement,  dated as of
                 December 14, 1993, among Foamex, Trace Foam, FMXI and Foamex L.P.
  10.7.2(d) -    First Amendment to Amended and Restated Tax Sharing  Agreement of
                 Foamex,  dated as of June 12, 1997, by and among  Foamex,  Foamex
                 L.P., FMXI, Inc. and Trace Foam.
  10.7.3(w) -    Second Amendment to Amended and Restated Tax Sharing Agreement of
                 Foamex L.P.,  dated as of December 23, 1997,  by and among Foamex
                 L.P., Foamex International, FMXI, and Trace Foam.
  10.7.4(y) -    Third Amendment to Amended and Restated Tax Sharing  Agreement of
                 Foamex L.P., dated as of February 27, 1998, by and between Foamex
                 L.P., Foamex International and FMXI.
  10.8.1(m) -    Tax  Distribution  Advance  Agreement,  dated as of December  11,
                 1996, by and between Foamex and Foamex-JPS Automotive.
  10.8.2(d) -    Amendment No. 1 to Tax Distribution  Advance Agreement,  dated as
                 of June 12, 1997, by and between Foamex L.P. and Foamex.
  10.9.1(h) -    Trace Foam  Management  Agreement  between Foamex and Trace Foam,
                 dated as of October 13, 1992.
  10.9.2(l) -    Affirmation  Agreement  re:  Management  Agreement,  dated  as of
                 December 14, 1993, between Foamex and Trace Foam.
  10.9.3(d) -    First  Amendment to  Management  Agreement,  dated as of June 12,
                 1997, by and between Foamex and Trace Foam.
  10.10.1(k)-    Salaried Incentive Plan of Foamex and Subsidiaries.
  10.10.2(k)-    Trace Holdings 1987 Nonqualified Stock Option Plan.
  10.10.3(k)-    Equity Growth Participation Program.
  10.10.4(e)(o) -Foamex  L.P.  Salaried  Retirement  Plan  (formerly  known as the
                 Foamex L.P. Products, Inc. Salaried Employee Retirement Plan), as
                 amended, effective July 1, 1994.
  10.10.5(u)-    Foamex L.P. 401(k) Savings Plan effective October 1, 1997.
  10.10.6(a)-    Foamex L.P.'s 1993 Stock Option Plan.
  10.10.7(a)-    Foamex L.P.'s Non-Employee Director Compensation Plan.
  10.11.1(o)-    Employment  Agreement,  dated  as of  February  1,  1994,  by and
                 between Foamex L.P. and William H. Bundy.
  10.12(a)  -    Warrant Exchange Agreement, dated as of December 14, 1993, by and
                 between Foamex L.P. and Marely.
  10.13(a)  -    Warrant Exchange Agreement, dated as of December 14, 1993, by and
                 between Foamex L.P. and DLJ Funding.
  10.14(o)  -    Stock Purchase  Agreement,  dated as of December 23, 1993, by and
                 between   Transformacion   de  Espumas  y  Fieltros,   S.A.,  the
                 stockholders which are parties thereto, and Foamex L.P.
  10.15.1(r)-    Asset  Purchase  Agreement,  dated as of August 29, 1997,  by and
                 among  General  Felt,  Foamex L.P.,  Bretlin,  Inc. and The Dixie
                 Group.
  10.15.2(s)-    Addendum  to Asset  Purchase  Agreement,  dated as of  October 1,
                 1997, by and among General Felt, Foamex L.P.,  Bretlin,  Inc. and
                 The Dixie Group.
  
                                         27
  10.16.1(x)-    Supply  Agreement,  dated as of February 27, 1998, by and between
                 Foamex L.P. and General Felt (as assigned to Foamex Carpet).
  10.16.2(x)-    Administrative Services Agreement, dated as of February 27, 1998,
                 by and between  Foamex  L.P.  and  General  Felt (as  assigned to
                 Foamex Carpet).
  10.17.1(w)-    Joint  Venture  Agreement  between  Hua Kee  Company  Limited and
                 Foamex Asia, Inc., dated July 8, 1997.
  10.17.2(w)-    Loan Agreement  between Hua Kee Company  Limited and Foamex Asia,
                 Inc., dated July 8, 1997.
  27        -    Financial Data Schedule for the period ended March 29, 1998.
  
  ----------------------------
  (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 Form 10-K of Foamex
       for the fiscal year ended January 1, 1995.
  
  (c)  Incorporated  herein by reference  to the Exhibit to the Current  Report on
       Form 8-K of Foamex 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 reporting an event that occurred June 12, 1997.
  
  (e)  Incorporated  herein  by  reference  to the  Exhibit  to  the  Registration
       Statement of Foamex and FCC on Form S-4, Registration No. 33-65158.
  
  (f)  Intentionally omitted.
  
  (g)  Intentionally omitted.
  
  (h)  Incorporated  herein by reference to the Exhibit to the Form 10-K Statement
       of Foamex and FCC for fiscal 1992.
  
  (i)  Intentionally omitted.
  
  (j)  Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
       for the quarterly period ended September 30, 1996.
  
  (k)  Incorporated  herein  by  reference  to the  Exhibit  to  the  Registration
       Statement  of Foamex and FCC on Form S-1,  Registration  Nos.  33-49976 and
       33-49976-01.
  
  (l)  Incorporated  herein  by  reference  to the  Exhibit  to  the  Registration
       Statement  of FJPS,  FJCC and Foamex  L.P.  on Form S-4,  Registration  No.
       33-82028.
  
  (m)  Incorporated  herein by  reference  to the Exhibit to the Annual  Report on
       Form 10-K of Foamex for the fiscal year ended December 29, 1996.
  
  (n)  Intentionally omitted.
  
  (o)  Incorporated  herein by reference to the Exhibit to the Form 10-K of Foamex
       L.P. for fiscal 1993.
  
  (p)  Incorporated  herein  by  reference  to the  Exhibit  in  the  Registration
       Statement of Foamex on Form S-4, Registration No. 333-30291.
  
                                         28
  (q)  Intentionally omitted.
  
  (r)  Incorporated  herein  by  reference  to the  Current  Report on Form 8-K of
       Foamex L.P. reporting an event that occurred on August 29, 1997.
  
  (s)  Incorporated  herein  by  reference  to the  Current  Report on Form 8-K of
       Foamex L.P. reporting an event that occurred on October 6, 1997.
  
  (t)  Intentionally omitted.
  
  (u)  Incorporated  by  reference  to the Exhibit to the Form 10-Q of Foamex L.P.
       for the quarterly period ended September 28, 1997.
  
  (v)  Incorporated  herein by reference  to the Exhibit to the Current  Report on
       Form  8-K  of  Foamex  L.P.,   Foamex   Capital   Corporation   and  Foamex
       International reporting an event that occurred December 23, 1997.
  
  (w)  Incorporated  herein  by  reference  to the  Exhibit  in  the  Registration
       Statement of Foamex L.P. and FCC on Form S-4, Registration No. 333-45733.
  
  (x)  Incorporated  herein  by  reference  to the  Current  Report on Form 8-K of
       Foamex International reporting an event that occurred on February 27, 1998.
  
  (y)  Incorporated  herein by reference to the Exhibit to the Form 10-K of Foamex
       International for fiscal 1997.
  
           Certain  instruments  defining the rights of security holders have been
  excluded herefrom in accordance with Item  601(b)(4)(iii) of Regulation S-K. The
  registrant  hereby  agrees  to  furnish  a copy of any  such  instrument  to the
  Commission upon request.
  
           (b) Foamex L.P. filed the following Current Reports on Form 8-K:
  
                Form 8-K/A,  dated March 9, 1998,  providing  pro forma  financial
                information relating to the acquisition of Crain Industries, Inc.
  
                Form 8-K,  dated  February  28, 1998,  reporting  the General Felt
                Transaction.
  
                Form 8-K/A,  dated May 12, 1998,  reporting the restated financial
                statements   of  Foamex  L.P.   relating   to  the  General   Felt
                transaction.
  
                                         29
  SIGNATURES
  
     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,  the
  registrants  have duly caused  this  report to be signed on their  behalf by the
  undersigned thereunto duly authorized.
  
                                        FOAMEX L.P.
  
                                        By: FMXI, INC.
  
                                        General Partner
  
  Date:  August 17, 1998                By: /s/ John A. Feenan
                                        ----------------------------
                                        John A. Feenan
                                        Executive Vice President and
                                        Chief Financial Officer
  
                                        FOAMEX CAPITAL CORPORATION
  
  Date:  August 17, 1998                By: /s/ John A. Feenan
                                        ----------------------------
                                        John A. Feenan
                                        Executive Vice President and
                                        Chief Financial Officer
  
                                         30