content: SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549
  
  
  
  
  
                                      FORM 10-Q
  
  
                  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
  
                  For the quarterly period ended September 30, 1999
  
                      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 registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the  preceding 12 months (or for such  shorter  period that the  registrant  was
  required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
  requirements for the past 90 days. YES _X_   NO ___
  
  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 are therefore filing this
  form with the reduced disclosure format.
  
  The number of shares of Foamex Capital Corporation's common stock outstanding as
  of November 5, 1999 was 1,000.
  
  <PAGE>
                                     FOAMEX L.P.
                             FOAMEX CAPITAL CORPORATION
  
                                        INDEX
                                                                              Page
  
  Part I.  Financial Information
  
           Item 1.  Financial Statements
  
                Condensed Consolidated Statements of Operations (unaudited) -
                  Three and Nine Months Ended September 30, 1999 and 1998       3
  
                Condensed Consolidated Balance Sheets (unaudited) -
                  as of September 30, 1999 and December 31, 1998                4
  
                Condensed Consolidated Statements of Cash Flows (unaudited) -
                  Nine Months Ended September 30, 1999 and 1998                 5
  
                Notes to Condensed Consolidated Financial Statements
                  (unaudited)                                                   6
  
           Item 2.  Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                        16
  
           Item 3.  Quantitative and Qualitative Disclosure
                    about Market Risk                                          25
  
  Part II. Other Information                                                   26
  
           Item 1.  Legal Proceedings                                          26
  
           Item 6.  Exhibits and Reports on Form 8-K                           26
  
  Signatures                                                                   27
  
  Exhibits
  
  
                                         2
  <PAGE>
  PART I.  FINANCIAL INFORMATION
  ITEM 1.  FINANCIAL STATEMENTS
  
                            FOAMEX L.P. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
  
  <TABLE>
  <CAPTION>
                                                     Three Months Ended            Nine Months Ended
                                               September 30,  September 30,  September 30,   September 30,
                                                   1999          1998            1999           1998
                                                ---------      ---------      ---------      ---------
                                                                      (thousands)
  <S>                                           <C>            <C>            <C>            <C>
  NET SALES                                     $ 302,819      $ 299,783      $ 894,925      $ 871,564
  
  COST OF GOODS SOLD                              261,708        257,293        777,943        736,569
                                                ---------      ---------      ---------      ---------
  
  GROSS PROFIT                                     41,111         42,490        116,982        134,995
  
  SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES                       15,098         17,846         43,084         56,669
  
  RESTRUCTURING AND OTHER CHARGES (CREDITS)         2,988             --          9,962           (700)
                                                ---------      ---------      ---------      ---------
  
  INCOME FROM OPERATIONS                           23,025         24,644         63,936         79,026
  
  INTEREST AND DEBT ISSUANCE EXPENSE               17,190         16,706         49,461         49,186
  
  OTHER INCOME (EXPENSE), NET                         (87)        (1,146)          (282)        (1,765)
                                                ---------      ---------      ---------      ---------
  
  INCOME FROM CONTINUING OPERATIONS
     BEFORE PROVISION FOR INCOME TAXES              5,748          6,792         14,193         28,075
  
  PROVISION FOR INCOME TAXES                          353            165          1,383          2,049
                                                ---------      ---------      ---------      ---------
  
  INCOME FROM CONTINUING OPERATIONS                 5,395          6,627         12,810         26,026
  
  EXTRAORDINARY LOSS ON EARLY
     EXTINGUISHMENT OF DEBT                            --             --             --         (3,195)
                                                               ---------      ---------      ---------
  
  NET INCOME                                    $   5,395      $   6,627      $  12,810      $  22,831
                                                =========      =========      =========      =========
  </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)
  
  <TABLE>
  <CAPTION>
                                                                September 30,    December 31,
  ASSETS                                                            1999            1998
  CURRENT ASSETS:                                                       (thousands)
  <S>                                                            <C>            <C>
     Cash and cash equivalents                                   $   3,455      $   3,192
     Accounts receivable, net of allowance of $4,198 in 1999
       and $7,278 in 1998                                          154,996        143,301
     Accounts receivable from related parties                       15,280         17,533
     Inventories                                                    99,866        127,636
     Other current assets                                           25,948         33,849
                                                                 ---------      ---------
         Total current assets                                      299,545        325,511
  
  PROPERTY, PLANT AND EQUIPMENT                                    363,184        352,719
  LESS ACCUMULATED DEPRECIATION                                   (151,350)      (133,082)
                                                                 ---------      ---------
      NET PROPERTY, PLANT AND EQUIPMENT                            211,834        219,637
  
  COST IN EXCESS OF ASSETS ACQUIRED, net of accumulated
      amortization of $14,285 in 1999 and $10,635 in 1998          184,867        188,205
  
  DEBT ISSUANCE COSTS, net of accumulated
      amortization of $5,007 in 1999 and $2,894 in 1998             15,287         13,946
  
  OTHER ASSETS                                                      22,348         21,229
                                                                 ---------      ---------
  
  TOTAL ASSETS                                                   $ 733,881      $ 768,528
                                                                 =========      =========
  
  LIABILITIES AND PARTNERS' DEFICIT
  CURRENT LIABILITIES:
     Short-term borrowings                                       $   3,636      $   2,957
     Current portion of long-term debt                              12,543        689,478
     Current portion of long-term debt - related party                  --         34,000
     Accounts payable                                              114,753        139,726
     Accrued interest                                                7,477          7,396
     Other accrued liabilities                                      52,783         52,944
                                                                 ---------      ---------
         Total current liabilities                                 191,192        926,501
  
  LONG-TERM DEBT                                                   652,507             --
  
  LONG-TERM DEBT - RELATED PARTY                                    34,000             --
  
  OTHER LIABILITIES                                                 36,757         38,064
                                                                 ---------      ---------
  
         Total liabilities                                         914,456        964,565
                                                                 ---------      ---------
  
  COMMITMENTS AND CONTINGENCIES                                         --             --
                                                                 ---------      ---------
  
  PARTNERS' DEFICIT:
     General partner                                              (129,375)      (141,426)
     Limited partner                                                    --             --
     Accumulated other comprehensive income (loss)                 (25,861)       (26,208)
     Notes and advances receivable from partner                    (16,118)       (18,608)
     Notes receivable from related party                            (9,221)        (9,795)
                                                                 ---------      ---------
  
         Total partners' deficit                                  (180,575)      (196,037)
                                                                 ---------      ---------
  
  TOTAL LIABILITIES AND PARTNERS' DEFICIT                        $ 733,881      $ 768,528
                                                                 =========      =========
  </TABLE>
  
            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>
                                                                             Nine Months Ended
                                                                      -------------------------------
                                                                      September 30,     September 30,
                                                                          1999              1998
                                                                       ---------         ---------
                                                                                (thousands)
  OPERATING ACTIVITIES
  <S>                                                                  <C>               <C>
     Net income                                                        $  12,810         $  22,831
     Adjustments to reconcile net income to net cash provided
       by (used for) operating activities:
       Depreciation and amortization                                      23,359            23,146
       Amortization of debt issuance costs, debt discount,
         debt premium and deferred swap adjustments                          307              (114)
       Asset writedown and other charges                                   2,073                --
       Extraordinary loss on early extinguishment of debt                     --             2,857
       Other operating activities                                          2,592             2,448
       Changes in operating assets and liabilities, net                     (224)          (78,703)
                                                                       ---------         ---------
  
           Net cash provided by (used for) operating activities           40,917           (27,535)
                                                                       ---------         ---------
  
  INVESTING ACTIVITIES
     Capital expenditures                                                (14,388)          (22,603)
     Acquisitions, net of cash acquired                                       --            (3,899)
     Redemption of General Felt                                               --            (8,971)
     Repayments of note from partner                                       2,490                --
     Other investing activities                                              574              (168)
                                                                       ---------         ---------
  
           Net cash used for investing activities                        (11,324)          (35,641)
                                                                       ---------         ---------
  
  FINANCING ACTIVITIES
     Net proceeds from short-term borrowings                                 679               185
     Net proceeds from (repayments of) revolving loans                   (17,024)           81,489
     Proceeds from long-term debt                                             --           129,000
     Repayment of long-term debt                                          (6,852)         (134,203)
     Debt issuance cost                                                   (3,455)           (1,598)
     Cash overdraft                                                       (2,017)               --
     Distribution to partners                                               (258)          (20,074)
     Other financing activities                                             (403)            1,084
                                                                       ---------         ---------
  
           Net cash provided by (used for) financing activities          (29,330)           55,883
                                                                       ---------         ---------
  
  CASH AND CASH EQUIVALENTS
  Net increase (decrease)                                                    263            (7,293)
  Beginning of year                                                        3,192             9,405
                                                                       ---------         ---------
  End of period                                                        $   3,455         $   2,112
                                                                       =========         =========
  </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
  
  Basis of Presentation
  
       The condensed consolidated  financial statements are unaudited,  but in the
  opinion of management include all adjustments necessary to present fairly Foamex
  L.P.  and  subsidiaries'  financial  position and results of  operations.  These
  interim  financial  statements  should be read in conjunction with the financial
  statements and related notes included in the 1998 Form 10-K. Results for interim
  periods are not necessarily  indicative of trends or of results for a full year.
  Foamex L.P. is a wholly owned subsidiary of Foamex  International  Inc. ("Foamex
  International").
  
  Reporting Period
  
       Effective  September 1998, the annual  reporting  period was changed from a
  fifty-two or  fifty-three  week fiscal year ending on the Sunday  closest to the
  end of the calendar  year to a calendar  year ending on December 31. This change
  was effective for the third fiscal quarter of 1998, which ended on September 30,
  1998.
  
  Potential Business Combinations
  
       On  August  5,  1999,  Foamex  International  announced  that its  Board of
  Directors signed a letter of intent with Sorgenti Chemical  Industries,  LLC and
  Liberty  Partners  Holdings  20,  LLC  (collectively,  the  "Purchasers")  for a
  business  combination   providing  for  $11.50  per  share  for  all  of  Foamex
  International's  outstanding  common stock.  The  transaction  is subject to due
  diligence,  the execution of definitive  agreements and other conditions.  Under
  the  terms of the  letter  of  intent,  if Foamex  International  enters  into a
  business  combination  with another party,  the Purchasers will be entitled to a
  break-up fee of $6.0 million plus reimbursement of certain expenses,  subject to
  certain conditions.
  
       The  transaction  is  subject  to a number  of  conditions,  including  the
  negotiation  of  definitive  documents  that  will  contain  certain  conditions
  relating  to the bank  credit  facilities  and the  public  debt of Foamex  L.P.
  Additional issues that will need to be addressed  include,  minimum  shareholder
  acceptance,   change  of  Foamex  International  board  membership,   and  other
  provisions  providing  for a higher  break-up fee and expense  reimbursement  if
  Foamex  International  enters  into  a  business  combination  providing  a more
  favorable transaction.  The definitive buyout agreement will require appropriate
  filings  with the  Securities  and  Exchange  Commission  and  other  regulatory
  agencies.
  
       On  November 1, 1999,  Foamex  International  announced  that the letter of
  intent expired by its terms.  However,  the Purchasers requested an extension of
  the  letter of  intent  until  December  15,  1999.  The  parties  agreed to the
  extension and are continuing discussions towards a possible transaction.
  
       Also on  November  1,  1999,  Foamex  International  announced  that it has
  authorized a due diligence  review for a possible  business  combination  led by
  John  G.  Johnson,   Jr.,  President  and  Chief  Executive  Officer  of  Foamex
  International.  Mr.  Johnson  has  informed  the Board of  Directors  that he is
  working with various possible sources of equity funding, but that he has no firm
  commitments for the financing of a transaction. No formal proposal has been made
  to Foamex International by Mr. Johnson.
  
       The accompanying financial statements and notes have been prepared assuming
  a going-concern  basis and do not recognize the impact of the potential business
  combinations.
  
  Going Concern Issue - Financial Condition
  
       As of December 31, 1998,  Foamex L.P.  was not in  compliance  with various
  debt covenants included in agreements  totaling $415.4 million.  Had the lenders
  under these debt agreements  accelerated the maturity of their indebtedness as a
  result of  noncompliance,  the  acceleration  would have constituted an event of
  default  and  given  the  holders  the  right  to  require  the   repurchase  of
  substantially all of Foamex L.P.'s long-term debt. As a result of these factors,
  approximately  $715.8  million  of  long-term  debt at  December  31,  1998  was
  classified  as a current  liability in the  consolidated  balance  sheet,  which
  produced a working capital  deficit.  These issues raised  substantial  doubt at
  year-end 1998 about Foamex  L.P.'s  ability to continue as a going  concern.
  
                                         6
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  1.   ORGANIZATION AND BASIS OF PRESENTATION (continued)
  
       In response to these  financial  conditions,  amendments to debt agreements
  were  executed  during  the  first  half  of  1999,  as  discussed  in  Note  5.
  Additionally,  Foamex L.P. generated net income,  provided over $40.0 million of
  cash flow from operations and reduced total debt by 3% from the beginning of the
  year. The combination of debt amendments,  year to date results and management's
  expectations  regarding  compliance  with debt  covenants in future  measurement
  periods  represented an improved  financial  position relative to year-end 1998.
  Accordingly,  $695.4  million of debt at the end of the second  quarter 1999 and
  $686.5  million of debt at the end of the third quarter 1999 were  classified as
  long term.
  
  Going Concern Issue - Change In Control
  
       Trace  International  Holdings,  Inc. ("Trace") is a privately held company
  which owns  approximately  46.1% of Foamex  International's  outstanding  voting
  common stock and whose Chairman also serves as Foamex International's  Chairman.
  Foamex  International's  common  stock  owned by Trace is pledged as  collateral
  against certain of Trace's obligations.  The Foamex L.P. Amended Credit Facility
  and the Foamex/GFI Note, pursuant to which approximately  $421.2 million of debt
  was outstanding as of September 30, 1999,  contain  provisions that would result
  in the  acceleration of such  indebtedness if a person or group other than Trace
  were to  beneficially  own more than 25% of Foamex  International's  outstanding
  voting  stock and a greater  percentage  of such  voting  stock  than the amount
  beneficially owned by Trace. Additionally, certain indentures relating to senior
  subordinated notes of $248.0 million contain provisions that provide the holders
  of such notes with the right to require the issuers to repurchase  such notes at
  a price in cash equal to 101% of the aggregate  principal  amount thereof,  plus
  accrued and unpaid interest thereon,  if a person or group other than Trace were
  to beneficially own more than 25% of Foamex  International's  outstanding voting
  stock and a greater percentage of such voting stock than the amount beneficially
  owned by Trace.
  
       Foamex L.P. was informed by Trace that it filed a petition for relief under
  Chapter 11 of the Bankruptcy  Code in Federal Court in New York City on July 21,
  1999.  Trace's  bankruptcy  filing does not constitute a change of control under
  the provisions of the above  identified  debt  agreements  unless the bankruptcy
  court allows  Trace's  creditors  to  foreclose on and take  ownership of Foamex
  International's  common stock owned by Trace,  or otherwise  authorize a sale or
  transfer  of these  shares to a person or group  other  than Trace  which  would
  acquire more than 25% of Foamex  International's  outstanding voting stock and a
  greater  percentage of such voting stock than the amount  beneficially  owned by
  Trace. According to a filing made with the bankruptcy court on November 2, 1999,
  two of Trace's  creditors have  petitioned  the bankruptcy  court to permit such
  creditors  to  foreclose  on and take  ownership  of the shares of common  stock
  pledged  to  them,  representing  approximately  17% of  Foamex  International's
  outstanding voting stock.
  
       Foamex  L.P.  will seek to resolve the issues that may arise if the "change
  of control"  provisions are triggered in the future,  including  waivers of such
  provisions and/or refinancing  certain debt, if necessary.  Although  management
  believes that Foamex L.P.'s debt obligations  could be refinanced if accelerated
  as a result of the "change of  control"  provisions,  there can be no  assurance
  that  Foamex L.P.  will be able to do so, or that  Foamex  L.P.  will be able to
  obtain waivers of such provisions.  The accompanying  financial  statements were
  prepared on a going-concern  basis and do not include any adjustments that might
  result from the outcome of the Trace bankruptcy filing.
  
  2.   COMPREHENSIVE INCOME
  
       The components of comprehensive income are listed below.
  
  <TABLE>
  <CAPTION>
                                                     Three Months Ended                Nine Months Ended
                                                -----------------------------      -----------------------------
                                                September 30,    September 30,     September 30,   September 30,
                                                    1999              1998             1999           1998
                                                  --------         --------         --------        --------
                                                                          (thousands)
  <S>                                             <C>              <C>              <C>             <C>
  Net income                                      $  5,395         $  6,627         $ 12,810        $ 22,831
  Foreign currency translation adjustments            (464)          (1,130)             347            (900)
                                                  --------         --------         --------        --------
  Total comprehensive income                      $  4,931         $  5,497         $ 13,157        $ 21,931
                                                  ========         ========         ========        ========
  </TABLE>
  
                                         7
  
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  3.   RESTRUCTURING AND OTHER CHARGES (CREDITS)
  
       Foamex International and its subsidiaries approved and began implementing a
  restructuring  plan during the first quarter of 1999 to reduce selling,  general
  and administrative  expenses and other overhead costs.  During the first quarter
  of 1999,  restructuring  and other  charges of  approximately  $3.4 million were
  recognized  related  primarily to severance in  connection  with  replacing  its
  former Chief Executive  Officer and work force  reductions of  approximately  78
  employees.
  
       During  the  second  quarter of 1999,  restructuring  and other  charges of
  approximately $3.6 million were recognized.  The provision included $1.2 million
  of severance  costs in  connection  with  additional  work force  reductions  of
  approximately 60 employees, $2.3 million of costs associated with the closure of
  two additional manufacturing operations and facilities and $0.1 million of other
  charges.
  
       In  the  third  quarter  of  1999,   restructuring  and  other  charges  of
  approximately  $3.0  million were  recognized.  The third  quarter  provision is
  comprised of $1.6 million of severance  costs in connection with additional work
  force reductions of approximately 8 employees,  $0.9 million of costs associated
  with the  closure  of Foamex  L.P.'s New York  office and $0.5  million of other
  charges.
  
       Approximately  $4.2 million of severance  costs  incurred in 1999 have been
  paid as of  September  30,  1999.  Approximately  $1.5 million of the total 1999
  severance  costs  primarily  relate to  contractual  severance  costs payable to
  Foamex L.P.'s former Chief Executive  Officer,  which will be paid through March
  2001.  Foamex L.P. may record additional  restructuring  charges as it finalizes
  implementation of its restructuring plan.
  
  4.   INVENTORIES
  
       The components of inventory are listed below.
  
                                       September 30,    December 31,
                                           1999             1998
                                         --------        --------
                                                (thousands)
       Raw materials and supplies        $ 66,619        $ 93,241
       Work-in-process                     12,218          12,087
       Finished goods                      21,029          22,308
                                         --------        --------
       Total                             $ 99,866        $127,636
                                         ========        ========
  
  5.   LONG-TERM DEBT
  
       Long-term debt consists of:
  
  <TABLE>
  <CAPTION>
                                                                  September 30,    December 31,
                                                                      1999            1998
                                                                   --------        --------
       Foamex L.P. Amended Credit Facility:                               (thousands)
  <S>                                                              <C>             <C>
         Term Loan B                                               $ 82,084        $ 82,714
         Term Loan C                                                 74,622          75,194
         Term Loan D                                                108,075         108,900
         Revolving credit facility                                  122,414         139,438
       9 7/8% Senior subordinated notes due 2007                    150,000         150,000
       13 1/2% Senior subordinated notes due 2005 (includes
         $10,549 and $11,893 of unamortized debt premium)           108,549         109,893
       Industrial revenue bonds                                       7,000           7,000
       Subordinated note payable (net of unamortized
         debt discount of $280 and $523)                              4,396           6,491
       Other                                                          7,910           9,848
                                                                   --------        --------
                                                                    665,050         689,478
  </TABLE>
  
                                         8
  <PAGE>
  
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  5.   LONG-TERM DEBT (continued)
  
  <TABLE>
  <CAPTION>
                                                        September 30,    December 31,
                                                            1999             1998
                                                          --------        --------
                                                                 (thousands)
  
  <S>                                                    <C>            <C>
       Less current portion                                 12,543         689,478
                                                          --------        --------
  
       Long-term debt-unrelated parties                   $652,507        $     --
                                                          ========        ========
  
       Long-term debt - related party consists of:
  
       Foamex/GFI Note                                    $ 34,000        $ 34,000
  
       Less current portion                                     --          34,000
                                                          ========        ========
  
       Long-term debt - related party                     $ 34,000        $     --
                                                          ========        ========
  </TABLE>
  
       Foamex L.P.  amended its credit  facility (the "Foamex L.P.  Amended Credit
  Facility"),  as of June 30, 1999,  and modified the financial  covenants for net
  worth and interest,  fixed charge coverage and leverage ratios through  December
  2006.  An  earnings  requirement,  as defined in the debt  agreement,  was added
  through  September  30,  1999.  Foamex L.P. was in  compliance  with the interim
  requirement at the end of the third quarter 1999. Effective January 1, 2000, the
  interest rate on  outstanding  borrowings  under the Foamex L.P.  Amended Credit
  Facility  will  increase by 25 basis  points  each  quarter  that Foamex  L.P.'s
  leverage  ratio exceeds 5.00 to 1.00.  Once the leverage  ratio is reduced below
  this  level,  the  cumulative  amount of any 25 basis point  adjustments  to the
  interest rate on borrowings would be eliminated.  The agreement was also amended
  to no longer  permit  Foamex L.P. to make certain cash  payments,  including the
  payment of an annual  management  fee to a subsidiary  of Trace  (totaling  $3.0
  million in 1998) and distributions to Foamex International,  and to limit future
  investments in foreign subsidiaries and joint ventures.  The "change of control"
  definition under the agreement was also modified.  Revolver borrowings under the
  credit facility  totaled $122.4 million at the end of the third quarter of 1999.
  The  weighted  average  interest  rate on these  obligations  was 8.8% and $17.5
  million was available for additional borrowings.
  
       During 1999, the Foamex/GFI Note was amended to incorporate the same change
  in control  provisions  that are  included  in the Foamex  L.P.  Amended  Credit
  Facility.
  
       Foamex L.P. continues to be subject to covenants  contained in various debt
  agreements  that limit,  among other things to varying  degrees,  the ability of
  Foamex L.P. (a) to pay  distributions or redeem  partnership  interests,  (b) to
  make  certain  restrictive  payments  or  investments,  (c) to incur  additional
  indebtedness  or issue  Preferred  Equity  Interest,  as defined,  (d) to merge,
  consolidate or sell all or substantially  all of its assets or (e) to enter into
  certain  transactions with affiliates or related persons.  In addition,  certain
  agreements  contain provisions that, in the event of a defined change of control
  or the occurrence of an undefined  material adverse change in the ability of the
  obligor to perform its obligations,  the indebtedness must be repaid, in certain
  cases, at the option of the holder.
  
       Certain of Foamex L.P.'s Mexican  subsidiaries were in default of financial
  covenant provisions contained in loan agreements with a Mexican bank. Amendments
  to  the  loan  agreements  were  finalized  to  modify  the  financial  covenant
  provisions.  As of  September  30,  1999,  these  Mexican  subsidiaries  were in
  compliance with the financial covenant provisions under the loan agreements.
  
                                         9
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  6.     SEGMENT RESULTS
  
         Segment results are presented below.
  
  <TABLE>
  <CAPTION>
                                                          Carpet
                                             Foam         Cushion       Automotive     Technical
                                           Products       Products       Products       Products         Other            Total
                                           --------       --------       --------       --------         -----            -----
                                                                              (thousands)
       Third Quarter 1999
  <S>                                     <C>            <C>             <C>            <C>            <C>             <C>
       Net sales                          $ 139,111      $  46,030       $  83,355      $  24,322      $  10,001       $ 302,819
       Income (loss) from operations         16,064         (1,080)          7,024          6,573         (5,556)         23,025
       Depreciation and amortization          4,141          1,346           1,315            705            770           8,277
  
       Third Quarter 1998
       Net sales                          $ 152,854      $  51,263       $  69,843      $  19,891      $   5,932       $ 299,783
       Income (loss) from operations         21,711            (40)          4,425          4,156         (5,608)         24,644
       Depreciation and amortization          4,558            817           1,311            681            573           7,940
  
       Year to Date 1999
       Net sales                          $ 403,399      $ 136,020       $ 262,936      $  69,598      $  22,972       $ 894,925
       Income (loss) from operations         41,933         (1,516)         19,849         17,811        (14,141)         63,936
       Depreciation and amortization         12,383          3,782           3,784          1,978          1,432          23,359
  
       Year to Date 1998
       Net sales                          $ 434,569      $ 162,603       $ 197,447      $  61,163      $  15,782       $ 871,564
       Income (loss) from operations         56,737          1,711          17,661         12,744         (9,827)         79,026
       Depreciation and amortization         12,733          3,002           3,752          1,966          1,693          23,146
  </TABLE>
  
  7.   RELATED PARTY TRANSACTIONS
  
  Trace Management Fee
  
       Effective June 30, 1999, the Foamex L.P.  Amended Credit Facility no longer
  permits  Foamex  L.P.  to pay a  management  fee to a  subsidiary  of  Trace  in
  connection with a management agreement with the Trace subsidiary. The management
  fee was $3.0 million for the year ended  December  31,  1998.  On July 29, 1999,
  Foamex L.P.  submitted to the Trace subsidiary  formal notice of the termination
  of the management agreement.
  
  New York Sublease
  
       Prior to September 30, 1999, Foamex L.P. subleased certain space in its New
  York office to Trace (the "New York Sublease").  Foamex L.P. gave notice on June
  30,  1999 that if prior  unpaid rent under the New York  Sublease  was not paid,
  Foamex L.P.  intended to give notice  pursuant to Article 7 of the New York Real
  Property  Actions and Proceedings Law that the space be vacated by September 30,
  1999. Trace complied with such request,  and Foamex L.P. has closed its New York
  office and subleased the premises to a third party.
  
  Foamex/GFI Note
  
       In the third quarter of 1999, Foamex L.P. paid $0.5 million of interest and
  $1.6 million of interest for the first three  quarters of 1999 on the Foamex/GFI
  Note.  In the third  quarter of 1998,  Foamex L.P. paid $0.6 million of interest
  and $1.2  million  of  interest  for the  first  three  quarters  of 1998 on the
  Foamex/GFI Note.
  
                                         10
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  
  7.   RELATED PARTY TRANSACTIONS (continued)
  
  Other
  
       Foamex  L.P.   sold   approximately   $48.1   million  and  $43.6  million,
  respectively, of carpet cushion products to Foamex Carpet Cushion, Inc. ("Foamex
  Carpet")  during the  quarterly  period  ended  September  30, 1999 and 1998 and
  $138.1 million and $154.9  million,  respectively,  for the year to date periods
  ended  September  30,  1999 and 1998.  In  addition,  Foamex L.P.  provided  and
  invoiced approximately $0.4 million and $1.7 million of administrative  services
  to Foamex Carpet during the quarterly periods ended September 30, 1999 and 1998,
  respectively,  and $1.7  million and $1.8  million for the year to date  periods
  ended September 30, 1999 and 1998, respectively.
  
       Also,  Foamex L.P.  chartered an aircraft which was owned by a wholly owned
  subsidiary of Foamex  International  and incurred  costs of  approximately  $0.2
  million  during the quarterly  period ended  September 30, 1998 and $0.1 million
  and $0.7 million  during the year to date periods  ended  September 30, 1999 and
  1998,  respectively.  Foamex International sold this aircraft on March 31, 1999.
  The sale of the aircraft  triggered an obligation to Trace of approximately $0.6
  million.  The obligation was offset against Trace's two promissory notes payable
  to Foamex L.P.  The Trace  notes are  included in  partners'  deficit,  which is
  consistent with the recognition in prior years.
  
  8.   COMMITMENTS AND CONTINGENCIES
  
  Litigation - Foamex International Shareholders
  
       During 1999, Foamex International received several communications addressed
  to its Board of Directors  from certain of Foamex  International's  stockholders
  regarding  aspects of the relationship  between Trace and Foamex  International.
  Such stockholders  questioned the propriety of certain relationships and related
  transactions between Trace and Foamex  International,  which previously had been
  disclosed in Foamex  International's and Foamex L.P.'s periodic filings. On June
  14,  1999,  Foamex  International  received a draft  complaint  from  counsel of
  certain  stockholders naming Foamex International and certain current and former
  Foamex International  directors,  which included allegations similar to those in
  the Second Amended Complaint, as defined below. Foamex International was advised
  by  such  counsel  that  such  stockholders  intended  to file  an  action  soon
  thereafter.  On August 13, 1999 two stockholders filed an action on behalf of an
  alleged class of Foamex  International's  shareholders,  entitled  Watchung Road
  Associates,  L.P. et al v. Foamex  International  Inc., et al., Civil Action No.
  17370  (the  "Watchung  Complaint"),  in the Court of  Chancery  of the State of
  Delaware,  New Castle County. The suit names Foamex International,  Mr. Marshall
  S. Cogan, Mr. Etienne Davignon,  Mr. John Gutfreund,  Mr. Robert Hay, Dr. Stuart
  Hershon,  Mr. Jack  Johnson,  and Mr. John Tunney as  defendants.  The  Watchung
  Complaint alleges that the individual defendants breached their fiduciary duties
  by agreeing to the potential buyout of Foamex International by Sorgenti Chemical
  Industries LLC and Liberty Partners L.P. (the "Sorgenti Transaction").
  
       The Watchung  Complaint  alleges that the  Sorgenti  Transaction's  buy-out
  price of  $11.50  per  outstanding  share is  inadequate  and fails to take into
  consideration claims Foamex International allegedly has a result of the supposed
  wrongful diversions of Foamex  International's  assets in Foamex International's
  dealings with Trace and its affiliates. The Watchung Complaint also alleges that
  the directors  breached their fiduciary duties agreeing to the proposed Sorgenti
  Transaction  without  conducting  an auction or active  market  check.  The suit
  alleges  that the board  placed Mr.  Cogan's  interest  ahead of those of Foamex
  International's  stockholders,  and  alleges  that a critical  condition  of the
  Sorgenti  Transaction is a consulting agreement for Mr. Cogan. The Watchung suit
  seeks to enjoin the Sorgenti  Transaction,  seeks  rescission  or damages if the
  Sorgenti Transaction is consummated,  and seeks an accounting from the directors
  for plaintiffs  alleged losses.  To date, no response to the Watchung  Complaint
  has been made.
  
       On April 26, 1999, a putative  securities  class action entitled Molitor v.
  Foamex  International Inc., et al., 99 Civ. 3004, was filed in the United States
  District court for the Southern District of New York naming as defendants Foamex
  International,  Trace and certain officers and directors of Foamex International
  on behalf of  stockholders  who bought shares of Foamex  International's  common
  stock during the period from May 7, 1998 through and  including  April 16, 1999.
  The lawsuit alleges that the defendants violated Section 10(b) of the Securities
  Exchange Act of 1934 and Rule 10b-5 by misrepresenting  and/or omitting material
  information  about Foamex  International's  financial  situation and operations,
  
                                         11
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.   COMMITMENTS AND CONTINGENCIES (continued)
  
  
  with the result of  artificially  inflating the price of Foamex  International's
  stock.  The lawsuit  also  alleges  that Trace and  Marshall  S. Cogan  violated
  Section 20(a) of the Securities  Exchange Act of 1934 as controlling  persons of
  Foamex  International.  The complaint seeks class  certification,  a declaration
  that defendants violated the federal securities laws, an award of money damages,
  and costs and  attorneys',  accountants'  and experts'  fees. On May 18, 1999, a
  similar action entitled Thomas W. Riley v. Foamex International Inc., et al., 99
  Civ. 3653 was filed in the same court.  The two actions have been  consolidated.
  To date,  no response to the  complaint  has been made and no discovery or other
  proceedings has taken place.  Plaintiffs have advised Foamex  International that
  they plan to file a  consolidated  complaint  within 45 days of October 7, 1999.
  After  service,  defendants  will have 45 days to  respond  to the  consolidated
  complaint.
  
       Beginning  on or about  March  17,  1998,  six  actions  (collectively  the
  "Shareholder  Litigation")  were filed in the Court of  Chancery of the State of
  Delaware,   New  Castle  County  (the  "Court"),   by   stockholders  of  Foamex
  International. The Shareholder Litigation,  purportedly brought as class actions
  on  behalf  of  all   stockholders   of  Foamex   International,   named  Foamex
  International,  certain of its  directors,  certain of its  officers,  Trace and
  Trace Merger Sub,  Inc.  ("Merger  Sub") as  defendants  alleging  that they had
  breached their  fiduciary  duties to the plaintiffs  and other  stockholders  of
  Foamex  International  unaffiliated  with Trace in connection  with the original
  proposal of Trace to acquire the  publicly  traded  outstanding  common stock of
  Foamex  International for $17.00 per share under an Agreement and Plan of Merger
  (the "First Merger Agreement"). The complaints sought, among other things, class
  certification, a declaration that the defendants 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. A stipulation
  and  order  consolidating  these six  actions  under  the  caption  In re Foamex
  International  Inc.  Shareholders  Litigation,  Consolidated  Civil  Action  No.
  16259NC, was entered by the Court on May 28, 1998.
  
       The parties to the  Shareholder  Litigation  entered into a  Memorandum  of
  Understanding,  dated June 25,  1998 (the  "Memorandum  of  Understanding"),  to
  settle the  Shareholder  Litigation,  subject  to,  inter alia,  execution  of a
  definitive  Stipulation  of  Settlement  between the parties and approval by the
  Court  following  notice  to  the  class  and  a  hearing.   The  Memorandum  of
  Understanding  provided that as a result of, among other things, the Shareholder
  Litigation and  negotiations  among counsel for the parties to the Memorandum of
  Understanding,  a special meeting of stockholders would be held to vote upon and
  approve the First Merger Agreement which provided,  among other things,  for all
  Foamex  International's  outstanding  common  stock  not  owned by Trace and its
  subsidiaries  (the "Public  Shares") to be  converted  into the right to receive
  $18.75 in cash, without interest.
  
       The Memorandum of Understanding also provided for certification of a class,
  for  settlement  purposes  only,  consisting  of  the  Public  Shares  owned  by
  stockholders   of  Foamex   International   unaffiliated   with  Trace  and  its
  subsidiaries  (the "Public  Shareholders"),  the  dismissal  of the  Shareholder
  Litigation  with  prejudice and the release by the plaintiffs and all members of
  the  class of all  claims  and  causes of  action  that were or could  have been
  asserted against Trace,  Foamex  International and the individual  defendants in
  the  Shareholders  Litigation  or  that  arise  out of the  matters  alleged  by
  plaintiffs.  Following the completion of the  confirmatory  discovery  which was
  provided for in the  Memorandum  of  Understanding,  on  September 9, 1998,  the
  parties entered into a definitive  Stipulation of Settlement and the Court set a
  hearing  for October 27,  1998 to  consider  whether  the  settlement  should be
  approved (the "Settlement Hearing"). In connection with the proposed settlement,
  the plaintiffs  intended to apply for an award of attorney's fees and litigation
  expenses in an amount not to exceed $925,000,  and the defendants  agreed not to
  oppose this application.  Additionally,  Foamex  International agreed to pay the
  cost, if any, of sending notice of the settlement to the Public Shareholders. On
  September 24, 1998, a Notice of Pendency of Class Action, Proposed Settlement of
  Class Action and Settlement  Hearing was mailed to the members of the settlement
  class. On October 20, 1998, the parties to the Shareholder  Litigation requested
  that the Court cancel the Settlement  Hearing in light of the announcement  made
  by Trace on October 16,  1998,  that it had been unable to obtain the  necessary
  financing for the  contemplated  acquisition by Trace of Foamex  International's
  common stock at a price of $18.75 per share which was the subject  matter of the
  proposed settlement. This request was approved by the Court on October 21, 1998,
  and Foamex International issued a press release on October 21, 1998,  announcing
  that the Court had cancelled the Settlement Hearing.
  
                                         12
  
  <PAGE>
  
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.   COMMITMENTS AND CONTINGENCIES (continued)
  
       On  November  10,  1998,  counsel  for  certain  of the  defendants  in the
  Shareholder  Litigation  gave notice  pursuant to the  Stipulation of Settlement
  that such  defendants  were  withdrawing  from the  Stipulation of Settlement in
  light of the  notice  given by Trace to  Foamex  International  and the  special
  committee of the Board of Directors on November 5, 1998 whereby Trace terminated
  the First Merger  Agreement on the grounds that the  financing  condition in the
  First Merger Agreement was incapable of being satisfied.
  
       On November 12, 1998, the plaintiffs in the Shareholder Litigation filed an
  Amended Class Action Complaint (the "Amended Complaint").  The Amended Complaint
  named Foamex International, Trace, Merger Sub, Mr. Marshall S. Cogan, Mr. Andrea
  Farace,  Dr.  Stuart  Hershon,  Mr. John  Tunney,  and Mr.  Etienne  Davignon as
  defendants, alleging that they breached their fiduciary duties to plaintiffs and
  the other Public  Shareholders in connection with a second Agreement and Plan of
  Merger (the "Second Merger Agreement"),  that the proposal to acquire the Public
  Shares  for  $12.00  per  share  lacked  entire  fairness,  that the  individual
  defendants  violated  8  Del.  Code  ss.  251 in  approving  the  Second  Merger
  Agreement, and that Trace and Merger Sub breached the Stipulation of Settlement.
  On December 2, 1998,  plaintiffs  served a motion for a preliminary  injunction,
  seeking an Order to  preliminarily  enjoin the defendants from proceeding  with,
  consummating or otherwise effecting the merger contemplated by the Second Merger
  Agreement.  In January  1999,  Trace advised that it could not finance the offer
  reflected  in  the  Second  Merger  Agreement.  As  a  result,  the  preliminary
  injunction motion did not go forward.
  
       On June 9, 1999, the  plaintiffs in the  Shareholder  Litigation  moved for
  leave to file a Second  Amended and  Supplemental  Class  Action and  Derivative
  Complaint (the "Second  Amended  Complaint").  The Second Amended  Complaint was
  filed on July 14, 1999, and named Foamex  International,  Trace, Merger Sub, Mr.
  Marshall S. Cogan, Mr. Andrea Farace,  Dr. Stuart Hershon,  Mr. John Tunney, and
  Mr. Etienne Davignon as defendants, alleging that the named individuals breached
  their fiduciary  duties by causing Foamex  International  to waste assets in its
  transactions with Trace and by failing to enforce Foamex  International's rights
  under the First Merger Agreement,  seeking  appointment of a receiver for Foamex
  International,  and alleging that Trace and Merger Sub breached the  Stipulation
  of Settlement.
  
       On August 26, 1999, the plaintiffs in the Shareholder  Litigation moved for
  leave to file a Third  Amended  and  Supplemental  Class  Action and  Derivative
  Complaint (the "Third Amended Complaint"). The Third Amended Complaint was filed
  on October 27, 1999. The Third Amended  Complaint  alleges both class claims and
  derivative  claims, and names Foamex  International,  Mr. Marshall S. Cogan, Mr.
  Andrea Farace, Dr. Stuart Hershon,  Mr. John Tunney,  Mr. Etienne Davignon,  Mr.
  John Gutfreund, Mr. Robert Hay and Mr. John Johnson as defendants.
  
       The Third Amended Complaint alleges that the individual defendants breached
  their duties to Foamex  International's  Public  Shareholders by agreeing to the
  Sorgenti   Transaction   at  an  inadequate   price  that  fails  to  take  into
  consideration  Foamex  International's  allegedly valuable claims arising out of
  purported diversions of money from Foamex International to Trace, and by failing
  to  maximize  shareholder  value in a sale of Foamex  International  and instead
  agreeing to a deal with a buyer who is willing to enter into a  consulting  deal
  with Mr. Cogan to get his and the Foamex  International  board's  approval.  The
  Third  Amended  Complaint  purports to assert a  derivative  claim for waste and
  breach of fiduciary duty against Mr. Cogan, Mr. Farace, Dr. Hershon, Mr. Tunney,
  Mr. Davignon, Mr. Gutfreund,  and Mr. Hay. The Third Amended Complaint seeks the
  appointment of a receiver for Foamex International,  alleging that the directors
  have mismanaged Foamex  International.  The Third Amended Complaint also alleges
  that Mr.  Cogan,  Mr.  Farace,  Dr.  Hershon,  Mr.  Davignon,  Mr.  Tunney,  Mr.
  Gutfreund,  and Mr. Hay breached  their  fiduciary  duties by failing to enforce
  Foamex International's rights under the First Merger Agreement.
  
       The Third  Amended  Complaint  seeks:  a  declaration  that the  individual
  defendants have breached their fiduciary  duties;  damages;  the imposition of a
  constructive  trust on profits and  benefits  Mr.  Cogan,  Trace,  and the other
  individual  defendants allegedly received as a result of the alleged wrongdoing;
  an  injunction  against  the  Sorgenti  Transaction  under  its  present  terms;
  rescission  and damages if the deal is  consummated;  and the  appointment  of a
  receiver for Foamex  International.  To date,  no response to the Third  Amended
  Complaint has been made.
  
                                         13
  
  <PAGE>
  
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.   COMMITMENTS AND CONTINGENCIES (continued)
  
       The  defendants  intend to vigorously  defend these  litigations,  which if
  adversely  determined,  could have a material  adverse  effect on the  financial
  position,  results of operations and cash flows of Foamex  International and its
  subsidiaries.
  
  Litigation - Breast Implants
  
       As of  November  8,  1999,  Foamex  L.P.  and  Trace  were two of  multiple
  defendants  in actions  filed on behalf of  approximately  4,157  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 39 residents of Australia,  New Zealand,  England, and Ireland.
  Foamex L.P. believes that the number of suits and claimants may increase. During
  1995,  Foamex L.P. and Trace were granted  summary  judgments  and  dismissed as
  defendants  from all cases in the  federal  courts of the United  States and the
  state courts of California.  Appeals for these  decisions were withdrawn and the
  decisions are final.
  
       Although breast implants do not contain foam, certain silicone gel implants
  were  produced  using a  polyurethane  foam covering  fabricated by  independent
  distributors or fabricators  from bulk foam purchased from Foamex L.P. or Trace.
  Neither Foamex L.P. nor Trace  recommended,  authorized,  or approved the use of
  its foam for these  purposes.  Foamex L.P. is also  indemnified by Trace for any
  such liabilities  relating to foam manufactured prior to October 1990.  Although
  Trace's insurance carrier has paid Foamex L.P.'s litigation expenses to date, in
  light of Trace's  recent filing under Chapter 11 of the Bankruptcy  Code,  there
  can be no  assurance  that  Trace  will be  able to  continue  to  provide  such
  indemnification. While it is not feasible to predict or determine the outcome of
  these actions, based on management's present assessment of the merits of pending
  claims, after consultation with the general counsel of Trace, and without taking
  into account  indemnification  provided by Trace, the coverage provided by Trace
  and  Foamex  L.P.'s  liability   insurance  and  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  consolidated  financial  position or results of  operations.  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 the financial
  position, results of operations and cash flows of Foamex L.P.
  
  Litigation - Other
  
       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.
  
  Environmental
  
       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. As of September 30, 1999, Foamex L.P. had accruals of
  approximately $3.5 million for environmental  matters.  During 1998, Foamex L.P.
  established an allowance of $0.6 million  relating to receivables from Trace for
  environmental indemnifications due to the financial difficulties of Trace.
  
                                         14
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.   COMMITMENTS AND CONTINGENCIES (continued)
  
       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. The final National
  Emission  Standard for  Hazardous  Air  Pollutants  ("NESHAP")  was  promulgated
  October 7,  1998.  NESHAP  requires  a  reduction  of  approximately  70% of the
  emission  of  methylene  chloride  for the slab  stock foam  industry  effective
  October 7, 2001.  Foamex L.P. does not believe  implementation of the regulation
  will  require  it to make  material  expenditures  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.  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 three
  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.  Foamex L.P. has accruals of $2.5 million
  for the estimated  cost of completing  remediation at these  facilities.  Foamex
  L.P. is in the process of addressing potential  contamination at its Morristown,
  Tennessee facility, and has submitted a sampling plan to the State of Tennessee.
  The extent of the  contamination  and responsible  parties,  if any, has not yet
  been determined.  A former owner may be liable for cleanup costs;  nevertheless,
  the cost of remediation, if any, is not expected to be material.
  
       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 upgraded all USTs at its  facilities  in  accordance
  with  these  regulations.  Foamex  L.P.  believes  that  its  USTs do not pose a
  significant risk of environmental liability. However, there can be no assurances
  that such USTs will not result in  significant  environmental  liability  in the
  future.
  
       On April 10,  1997,  the  Occupational  Health  and  Safety  Administration
  promulgated new standards  governing  employee  exposure to methylene  chloride,
  which  is used  as a  blowing  agent  in some  of  Foamex  L.P.'s  manufacturing
  processes.  The phase-in of the  standards was completed in 1999 and Foamex L.P.
  has  developed  and  implemented  a  compliance  program.  Capital  expenditures
  required  and  changes  in  operating   procedures   are  not   anticipated   to
  significantly impact Foamex L.P.'s competitive position.
  
       Foamex L.P. has been designated as a Potentially  Responsible Party ("PRP")
  by the EPA with  respect  to six sites.  Estimates  of total  cleanup  costs and
  fractional  allocations  of liability are  generally  provided by the EPA or the
  committee  of PRP's  with  respect to the  specified  site.  In each  case,  the
  liability of Foamex L.P. is not considered to be material.
  
       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,  Foamex L.P. 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.
  
                                         15
  <PAGE>
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  Going Concern Issues
  
       The accompanying financial statements and notes have been prepared assuming
  Foamex L.P. will continue as a going concern.  As discussed in Note 1, there are
  going  concern  issues  involving  the  financial  condition  of Foamex L.P. and
  related impact of debt covenants, and change in control provisions that have the
  potential to accelerate certain debt obligations.
  
       Foamex L.P. is subject to various internal and external factors which could
  significantly impact its liquidity and capital structure, including, among other
  things,  (a)  Foamex  L.P.'s  debt  and  capital   structures,   (b)  the  Crain
  Consolidation,  (c) additional raw material cost  increases,  (d) the ability to
  increase  customers  selling price to recover raw material cost  increases,  (e)
  fluctuations in interest rates, and (f) Trace's financial  condition,  including
  the potential of triggering the "change of control"  provisions in Foamex L.P.'s
  debt agreements  (discussed  below),  and other such factors which may be beyond
  Foamex  L.P.'s  control.  Refer to page 4 of Foamex L.P.'s Annual Report on Form
  10-K  for the  year  ended  December  31,  1998 for a  discussion  of these  and
  additional  factors  which  management  believes  may impact  Foamex L.P.  These
  factors could cause future results to differ  materially from historical  trends
  and management's  current expectations and could impact Foamex L.P.'s ability to
  continue as a going concern.
  
       As discussed in the capital structure section below,  during the first half
  of 1999,  amendments to debt  agreements  were  completed and Foamex L.P. was in
  compliance  with the  financial  covenants of these  agreements on both June 30,
  1999 and September 30, 1999.  Although Foamex L.P. believes it can meet the debt
  covenant requirements under its financing agreements,  there can be no assurance
  these  covenants will be met.  Although  management  believes that Foamex L.P.'s
  debt  obligations  could be refinanced if accelerated as a result of the "change
  of control" provisions under related debt agreements,  there can be no assurance
  that  Foamex  L.P.  will be able to do so or that  Foamex  L.P.  will be able to
  obtain waivers of such provisions.  Additionally,  although Foamex L.P. believes
  that consolidated cash flow from its operating activities and borrowing capacity
  under its credit facility, if necessary,  will be adequate to meet its liquidity
  requirements,  there can be no assurance that Foamex L.P.'s internally generated
  funds and funds  from any  borrowings  will prove to be  sufficient  to fund its
  operations and permit it to continue as a going concern.
  
       Trace is a privately held company which owns approximately  46.1% of Foamex
  International's  outstanding  voting common stock and whose Chairman also serves
  as Foamex International's Chairman. Foamex International's common stock owned by
  Trace is pledged as  collateral  against  certain  of Trace's  obligations.  The
  Foamex L.P. Amended Credit Facility and the Foamex/GFI  Note,  pursuant to which
  approximately  $421.2 million of debt was  outstanding as of September 30, 1999,
  contain provisions that would result in the acceleration of such indebtedness if
  a person or group  other than Trace  were to  beneficially  own more than 25% of
  Foamex International's outstanding voting stock and a greater percentage of such
  voting stock than the amount beneficially owned by Trace. Additionally,  certain
  indentures  relating  to senior  subordinated  notes of $248.0  million  contain
  provisions  that provide the holders of such notes with the right to require the
  issuers  to  repurchase  such  notes  at a price  in cash  equal  to 101% of the
  aggregate principal amount thereof, plus accrued and unpaid interest thereon, if
  a person or group  other than Trace  were to  beneficially  own more than 25% of
  Foamex International's outstanding voting stock and a greater percentage of such
  voting stock than the amount beneficially owned by Trace.
  
       Foamex L.P. was informed by Trace that it filed a petition for relief under
  Chapter 11 of the Bankruptcy  Code in Federal Court in New York City on July 21,
  1999.  Trace's  bankruptcy  filing does not constitute a change of control under
  the provisions of the above  identified  debt  agreements  unless the bankruptcy
  court allows  Trace's  creditors  to  foreclose on and take  ownership of Foamex
  International's  common stock owned by Trace,  or otherwise  authorize a sale or
  transfer  of these  shares to a person or group  other  than Trace  which  would
  acquire more than 25% of Foamex  International's  outstanding voting stock and a
  greater  percentage of such voting stock than the amount  beneficially  owned by
  Trace. According to a filing made with the bankruptcy court on November 2, 1999,
  two of Trace's  creditors have  petitioned  the bankruptcy  court to permit such
  creditors  to  foreclose  on and take  ownership  of the shares of common  stock
  pledged  to  them,  representing  approximately  17% of  Foamex  International's
  outstanding voting stock.
  
       Foamex  L.P.  will seek to resolve the issues that may arise if the "change
  of control"  provisions are triggered in the future,  including  waivers of such
  provisions and/or refinancing  certain debt, if necessary.  Although  management
  
                                         16
  <PAGE>
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  believes that Foamex L.P.'s debt obligations  could be refinanced if accelerated
  as a result of the "change of  control"  provisions,  there can be no  assurance
  that  Foamex  L.P.  will be able to do so or that  Foamex  L.P.  will be able to
  obtain waivers of such provisions.
  
  Potential Business Combinations
  
       On  August  5,  1999,  Foamex  International  announced  that its  Board of
  Directors  signed  a  letter  of  intent  with  the  Purchasers  for a  business
  combination  providing  for $11.50  per share for all of Foamex  International's
  outstanding  common stock.  The  transaction  is subject to due  diligence,  the
  execution of definitive agreements and other conditions.  Under the terms of the
  letter of intent,  if Foamex  International  enters into a business  combination
  with another party,  the  Purchasers  will be entitled to a break-up fee of $6.0
  million plus reimbursement of certain expenses, subject to certain conditions.
  
       The  transaction  is  subject  to a number  of  conditions,  including  the
  negotiation  of  definitive  documents  that  will  contain  certain  conditions
  relating  to the bank  credit  facilities  and the  public  debt of Foamex  L.P.
  Additional issues that will need to be addressed  include,  minimum  shareholder
  acceptance,   change  of  Foamex  International  board  membership,   and  other
  provisions  providing  for a higher  break-up fee and expense  reimbursement  if
  Foamex  International  enters  into  a  business  combination  providing  a more
  favorable transaction.  The definitive buyout agreement will require appropriate
  filings  with the  Securities  and  Exchange  Commission  and  other  regulatory
  agencies.
  
       On  November 1, 1999,  Foamex  International  announced  that the letter of
  intent expired by its terms.  However,  the Purchasers requested an extension of
  the  letter of  intent  until  December  15,  1999.  The  parties  agreed to the
  extension and are continuing discussions towards a possible transaction.
  
       Also on  November  1,  1999,  Foamex  International  announced  that it has
  authorized a due diligence  review for a possible  business  combination  led by
  John  G.  Johnson,   Jr.,  President  and  Chief  Executive  Officer  of  Foamex
  International.  Mr.  Johnson  has  informed  the Board of  Directors  that he is
  working with various possible sources of equity funding, but that he has no firm
  commitments for the financing of a transaction. No formal proposal has been made
  to Foamex International by Mr. Johnson.
  
  RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
  
  Income from Operations
  
       Net sales for the  third  quarter  of 1999  were  $302.8  million,  up 1.0%
  compared to $299.8  million in the third  quarter of 1998.  The  increase in the
  third quarter  versus the prior year reflects a decrease in Foam Products  sales
  due to  manufacturing  consolidations  and a decrease in Carpet Cushion Products
  volume  offset  by  increased  volume  of  automotive  lamination  products  and
  Technical Products sales.
  
       Income  from  operations  decreased  6.6% to $23.0  million  for the  third
  quarter of 1999 compared to $24.6 million in the 1998 third quarter.  Results in
  1999 included a $3.0 million  provision for  restructuring  and other costs. The
  decrease in margins versus the prior year resulted  principally  from lower Foam
  Products  and Carpet  Cushion  Products  sales and an increase  in lower  margin
  automotive   lamination   business.   The  decrease  in  selling,   general  and
  administrative  costs included the  elimination  of  duplicative  costs from the
  Crain Consolidation and cost reductions implemented during 1999.
  
  Interest and Debt Issuance Expense
  
       Interest and debt issuance expense totaled $17.2 million for the 1999 third
  quarter, 2.9% higher than the comparable 1998 expense.
  
                                         17
  
  <PAGE>
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  Other Income (Expense), Net
  
       Other  expense of $0.1 million was  significantly  lower in 1999.  The 1998
  third quarter net other expense of $1.1 million included foreign currency losses
  from Foamex L.P.'s Canadian and Mexican operations.
  
  Net Income
  
       Net  income for the third  quarter  of 1999 was down 18.6% to $5.4  million
  compared to $6.6 million in the 1998 third quarter.
  
  Segment Results
  
  <TABLE>
  <CAPTION>
                                                   Carpet
                                       Foam        Cushion       Automotive    Technical
                                     Products      Products       Products      Products        Other         Total
                                     --------      --------       --------      --------        -----         -----
                                                                       (thousands)
  <S>                                <C>           <C>            <C>           <C>           <C>            <C>
  Third Quarter 1999
  Net sales                          $139,111      $ 46,030       $ 83,355      $ 24,322      $ 10,001       $302,819
  Income (loss) from operations        16,064        (1,080)         7,024         6,573        (5,556)        23,025
  
  Third Quarter 1998
  Net sales                          $152,854      $ 51,263       $ 69,843      $ 19,891      $  5,932       $299,783
  Income (loss) from operations        21,711           (40)         4,425         4,156        (5,608)        24,644
  </TABLE>
  
  Foam Products
  
       Foam Products net sales for the third quarter of 1999 decreased 9.0%. Lower
  margins resulted in a 26.0% drop in income from operations.  Improved  operating
  efficiencies  and cost reductions as part of the Crain  Consolidation  helped to
  offset the income decline.
  
  Carpet Cushion Products
  
       Carpet  Cushion  Products net sales for the third quarter of 1999 decreased
  10.2% primarily due to lower shipments. Lower margins resulted in a loss for the
  third quarter of 1999.
  
  Automotive Products
  
       Automotive  Products  net  sales for the third  quarter  of 1999  increased
  19.3%. The increase  reflected higher shipments of lamination  products.  Income
  from operations  increased 58.7% from the combination of operating  efficiencies
  and sales gains.
  
  Technical Products
  
       Technical Products net sales for the third quarter of 1999 increased 22.3%.
  Income from operations increased 58.2% and reflected higher margin sales.
  
  Other
  
       Other  primarily  consists  of certain  foreign  manufacturing  operations,
  corporate  expenses not allocated to operating  segments and  restructuring  and
  other charges.  The increase in net sales associated with this segment primarily
  resulted  from an increase in net sales from Foamex L.P.'s  Mexican  operations.
  The loss from operations in 1999 was primarily  associated with the $3.0 million
  of restructuring and other charges.
  
                                         18
  <PAGE>
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  
  RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
  
  Income from Operations
  
       Net sales for the first three quarters of 1999 were $894.9 million compared
  to $871.6  million for the  comparable  period in 1998.  The 2.7%  increase  was
  primarily  the result of sales gains in the  Automotive  Products and  Technical
  Products  segments  partially offset by declines in the Foam Products and Carpet
  Cushion Products segments.
  
       Despite the sales improvement,  income from operations of $63.9 million was
  down 19.1% from $79.0 million for the  comparable  1998 period.  Results in 1999
  included $10.0 million of restructuring and other charges. The remaining decline
  primarily  reflected  lower  results in the Foam  Products  and  Carpet  Cushion
  Products segments.  The Foam Products segment was impacted by lower sales due to
  plant  closures  in  connection  with the Crain  Consolidation.  Carpet  Cushion
  Products 1999 results were impacted by lower margins. The increase in Automotive
  Products and Technical Products segment results translated to improved earnings.
  Partially  offsetting  these negative  factors were lower  selling,  general and
  administrative  expenses that primarily reflected the elimination of duplicative
  costs from the Crain Consolidation and cost reductions implemented during 1999.
  
  Interest and Debt Issuance Expense
  
       Interest and debt issuance expense totaled $49.5 million in 1999,  slightly
  higher than the 1998 expense of $49.2 million.
  
  Other Income (Expense), Net
  
       Other expense was  significantly  lower in 1999. The 1998 net other expense
  included  foreign  currency  losses  from  Foamex  L.P.'s  Canadian  and Mexican
  operations.
  
  Extraordinary Loss
  
         The  extraordinary  loss on the early  extinguishment of debt in 1998 was
  $3.2  million.  The charge  primarily  reflected  the write off of debt issuance
  costs in connection  with a series of  transaction  designed to simplify  Foamex
  L.P.'s capital structure and to provide future operational flexibility.
  
  Net Income
  
       Net income for the first  three  quarters of 1999 was $12.8  million,  down
  43.9% from the comparable period in 1998.
  
  Segment Results
  
  <TABLE>
  <CAPTION>
                                                     Carpet
                                        Foam        Cushion       Automotive       Technical
                                      Products      Products        Products        Products        Other          Total
                                      --------      --------        --------        --------        -----          -----
                                                                        (thousands)
  <S>                                <C>            <C>             <C>            <C>            <C>             <C>
  Year to Date 1999
  Net sales                          $ 403,399      $ 136,020       $ 262,936      $  69,598      $  22,972       $ 894,925
  Income (loss) from operations         41,933         (1,516)         19,849         17,811        (14,141)         63,936
  
  Year to Date 1998
  Net sales                          $ 434,569      $ 162,603       $ 197,447      $  61,163      $  15,782       $ 871,564
  Income (loss) from operations         56,737          1,711          17,661         12,744         (9,827)         79,026
  </TABLE>
  
                                         19
  <PAGE>
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  Foam Products
  
       Foam Products net sales for the first three  quarters  decreased  7.2%. The
  decrease primarily  reflected the closure of several plants as part of the Crain
  Consolidation.  Income from  operations  decreased  26.1% primarily due to lower
  margins.
  
  Carpet Cushion Products
  
       Carpet Cushion  Products net sales for the first three  quarters  decreased
  16.3% primarily due to lower  shipments.  Lower margins  resulted in a loss from
  operations for the first three quarters of 1999.
  
  Automotive Products
  
       Automotive Products net sales for the first three quarters increased 33.2%.
  The increase  reflected  higher  shipments of lamination  products.  Income from
  operations  increased 12.4% from the combination of operating  efficiencies  and
  sales gains that were especially evident during the third quarter of 1999.
  
  Technical Products
  
       Technical  Products net sales for the first three quarter  increased 13.8%.
  Income from operations increased 39.8% and reflected higher margin sales.
  
  Other
  
       Other  primarily  consists  of certain  foreign  manufacturing  operations,
  corporate  expenses not allocated to operating  segments and  restructuring  and
  other charges.  The increase in net sales associated with this segment primarily
  resulted  from an increase in net sales from Foamex L.P.'s  Mexican  operations.
  The loss from operations in 1999 was primarily associated with the $10.0 million
  of restructuring and other charges.
  
  Capital Structure
  
       As of December 31, 1998,  Foamex L.P.  was not in  compliance  with various
  debt covenants included in agreements  totaling $415.4 million.  Had the lenders
  under these debt agreements  accelerated the maturity of their indebtedness as a
  result of  noncompliance,  the  acceleration  would have constituted an event of
  default  and  given  the  holders  the  right  to  require  the   repurchase  of
  substantially all of Foamex L.P.'s long-term debt. As a result of these factors,
  approximately  $715.8  million  of  long-term  debt at  December  31,  1998  was
  classified  as a current  liability in the  consolidated  balance  sheet,  which
  produced a working capital  deficit.  These issues raised  substantial  doubt at
  year-end 1998 about Foamex L.P.'s ability to continue as a going concern.
  
       In response to these  financial  conditions,  amendments to debt agreements
  were executed during the first half of 1999, as discussed  below.  Additionally,
  Foamex L.P. generated net income,  provided over $40.0 million of cash flow from
  operations  and reduced  total debt by 3% from the  beginning  of the year.  The
  combination  of  debt   amendments,   year  to  date  results  and  management's
  expectations  regarding  compliance  with debt  covenants in future  measurement
  periods  represented an improved  financial  position relative to year-end 1998.
  Accordingly,  $695.4  million of debt at the end of the second  quarter 1999 and
  $686.5 million at the end of the third quarter 1999 were classified as long term
  in the balance sheet.
  
       Amendments to the Foamex L.P. Amended Credit Facility, as of June 30, 1999,
  modified  the  financial  covenants  for net worth and  interest,  fixed  charge
  coverage and leverage ratios through December 2006. An earnings requirement,  as
  defined in the debt agreement, was added through September 30, 1999. Foamex L.P.
  was in compliance  with the interim  requirement at the end of the third quarter
  of 1999. Effective January 1, 2000, the interest rate on outstanding  borrowings
  under the Foamex L.P.  Amended Credit  Facility will increase by 25 basis points
  each quarter that Foamex L.P.'s  leverage  ratio exceeds 5.00 to 1.00.  Once the
  leverage  ratio is reduced  below this level,  the  cumulative  amount of any 25
  basis point  adjustments to the interest rate on borrowings would be eliminated.
  The  agreement was also modified to no longer permit Foamex L.P. to make certain
  cash payments, including the payment of an annual management fee to a subsidiary
  
                                         20
  
  <PAGE>
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  of  Trace  (totaling  $3.0  million  in  1998)  and   distributions   to  Foamex
  International, and to limit future investments in foreign subsidiaries and joint
  ventures.  The  "change of  control"  definition  under the  agreement  was also
  modified.
  
       During 1999, the Foamex/GFI Note was amended to incorporate the same change
  in control  provisions  that are  included  in the Foamex  L.P.  Amended  Credit
  Facility.
  
       Foamex L.P. continues to be subject to covenants  contained in various debt
  agreements  that limit,  among other things to varying  degrees,  the ability of
  Foamex L.P. (a) to pay  distributions or redeem  partnership  interests,  (b) to
  make  certain  restrictive  payments  or  investments,  (c) to incur  additional
  indebtedness  or issue  Preferred  Equity  Interest,  as defined,  (d) to merge,
  consolidate or sell all or substantially  all of its assets or (e) to enter into
  certain  transactions with affiliates or related persons.  In addition,  certain
  agreements  contain provisions that, in the event of a defined change of control
  or the occurrence of an undefined  material adverse change in the ability of the
  obligor to perform its obligations,  the indebtedness must be repaid, in certain
  cases, at the option of the holder.
  
       Certain of Foamex L.P.'s Mexican  subsidiaries were in default of financial
  covenant provisions contained in loan agreements with a Mexican bank. Amendments
  to  the  loan  agreements  were  finalized  to  modify  the  financial  covenant
  provisions.  As of  September  30,  1999,  these  Mexican  subsidiaries  were in
  compliance with the financial covenant provisions under the loan agreements.
  
  Liquidity
  
       Cash provided by operating activities was $40.9 million for the first three
  quarters of 1999 as  compared to cash used of $27.5  million for the same period
  in 1998.  The  improvement  is  primarily  due to a  decrease  in cash  used for
  operating assets and liabilities.
  
       Cash used for investing  activities  was $11.3 million for the year to date
  period ended  September  30, 1999 as compared to cash used of $35.6  million for
  the comparable 1998 period.  Cash requirements in 1998 included $3.9 million for
  the  acquisition-related  payments and $9.0  million of payments  related to the
  redemption of General Felt Industries,  Inc. Capital  expenditures  were down in
  1999.
  
       Cash  required for  financing  activities  was $29.3  million for the first
  three quarters and primarily  reflected net debt  repayments and $3.5 million of
  debt issuance costs.
  
       The ability of Foamex L.P. to make distributions to Foamex International is
  restricted  by the  terms  of its  financing  agreements.  Consequently,  Foamex
  International  is not  expected  to have  access to the cash flow  generated  by
  Foamex L.P. for the foreseeable future.
  
       As of September  30, 1999,  there were $122.4  million of revolving  credit
  borrowings,  at a weighted  average interest rate of 8.8%, under the Foamex L.P.
  Amended Credit Facility with $17.5 million  available for additional  borrowings
  and  approximately  $47.6  million of letters  of credit  outstanding  which are
  supported  by the Foamex L.P.  Amended  Credit  Facility.  Borrowings  by Foamex
  Canada Inc. as of September  30, 1999 were  approximately  $3.6  million,  at an
  interest rate of 7.0%,  under Foamex Canada Inc.'s  revolving  credit  agreement
  with unused availability of approximately $1.8 million.
  
       Foamex  L.P.  expects  to  continue  to reduce  capital  expenditures  from
  historical levels for the foreseeable  future.  Lower capital expenditure levels
  are not anticipated to materially impact Foamex L.P.'s competitive position.
  
  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 Foamex
  L.P.'s  operations,  financial  position,  capital  expenditures  or competitive
  position.  The amount of liabilities  recorded by Foamex L.P. in connection with
  environmental matters as of September 30, 1999 was $3.5 million.  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 notes to Foamex L.P.'s  consolidated  financial
  statements  for the year ended  December 31, 1998,  Foamex L.P.  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
  
                                         21
  <PAGE>
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  L.P.'s  operations,  financial  position,  capital  expenditures  or competitive
  position.  See  Note  17 to  Foamex  L.P.'s  consolidated  financial  statements
  included in Foamex L.P.'s Annual Report on Form 10-K for the year ended December
  31, 1998.
  
  Market Risk
  
       Foamex L.P.'s debt securities  with variable  interest rates are subject to
  market risk for changes in interest rates.  On September 30, 1999,  indebtedness
  with variable interest rates totaled $439.1 million.  On an annualized basis, if
  the interest rates on these debt  instruments  increased by 1%, interest expense
  would increase by approximately $4.4 million.
  
  Year 2000 Compliance
  
       Status Update
  
       By the end of the  third  quarter  of 1999,  Foamex  L.P.  has  essentially
  completed  its  program to  address  potential  disruptions  to  operations  and
  relationships  with our  business  partners  related  to the Year 2000  software
  problem.
  
       Foamex L.P. utilized a cross-functional  team approach that was directed by
  a  Year  2000  Executive  Sponsor  Team.  A  comprehensive  assessment  of  both
  information  technology  (IT)  and  non-IT  systems  has been  completed.  These
  assessments included:
  
       o    administrative, manufacturing and laboratory computer systems
       o    desktop and telecommunications systems
       o    safety and environmental systems
       o    systems  provided  by  vendors  and  suppliers,   including   employee
            compensation and benefit plan maintenance systems
       o    process control systems and manufacturing equipment
       o    significant customers and suppliers.
  
       Assessment & Remediation Process
  
       The assessment process for each facility consisted of:
  
       o    an inventory of potential Year 2000 sensitive equipment and systems
       o    an  impact  evaluation  of  possible  failures  and  determination  of
            required remediation actions
       o    testing and implementation of remediation actions.
  
       The assessment process, including fail safe testing, was completed in 1999.
  The following discussion focuses on the process.
  
       The  inventory  and  assessment  phases were  completed by the end of 1998.
  These phases  consisted of a visit to each critical  location by team members to
  promote  awareness of the project and verify the initial  inventory  provided by
  the  contact at each  facility.  Testing  plans were  developed  which  included
  correspondence  with suppliers  regarding  date-sensitive  devices. In addition,
  local management was advised of their roles and  responsibilities  in connection
  with the Year 2000 Problem.
  
       Foamex L.P.  completed  the  remediation  and testing of critical  business
  information  computer  systems as of  December  31,  1998.  Remediation  actions
  included:
  
       o    the modification of several million lines of system code
       o    the  conversion of the systems  acquired in business  combinations  to
            standard business information computer systems
  
                                         22
  
  <PAGE>
  
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
       o    upgrading system hardware and operating system software
       o    testing of the applicable systems in a development testing area
       o    the  migration  of  the   remediated   systems  into  the   production
            environment.
  
       Cost and Project Impact
  
       The cost to address the Year 2000 Problem is  approximately  $2.0  million.
  The majority of this total  project cost has already been  incurred  during 1998
  and 1999. The project cost primarily represents the cost for various consultants
  and  system  upgrades.  Project  cost  includes  internal  Company  cost  for IT
  employees that worked directly on software programming modifications.
  
       Spending on the Year 2000  Problem has been funded by cash  generated  from
  operations.  The project did not significantly impact the other responsibilities
  and project schedule of the IT department during the past two years.
  
       Contingency Plans
  
       As part of the overall  response to the Year 2000 Problem,  Foamex L.P. has
  developed  contingency plans in the event of Year 2000 non-compliance of certain
  systems or third parties. These contingency plans include:
  
       o    additional security of manufacturing and administrative facilities
       o    response teams to address incidents
       o    status review and testing of critical applications prior to initiation
            of normal processing requirements on or about January 1, 2000
       o    alternative   production  and  shipping  locations  in  the  event  of
            localized power outages.
  
       Risks
  
       Management  believes that all significant systems controlled by Foamex L.P.
  are ready.  While  Foamex L.P.  is  communicating  readiness  to  customers,  as
  requested, and is assessing the readiness of critical suppliers, there can be no
  assurance  that third  parties with a  significant  business  relationship  will
  successfully test, reprogram,  and replace all of their IT and non-IT systems on
  a timely basis.
  
       There is inherent  uncertainty in connection with the Year 2000 Problem due
  to the  possibility  of  unanticipated  failures  by  customers,  suppliers  and
  infrastructure  services.  Accordingly,  Foamex L.P. is unable, at this time, to
  assess the extent and resulting  materiality of the impact of possible Year 2000
  failures on its  operations,  liquidity  or  financial  position.  The Year 2000
  assessment,  remediation,  and testing process has provided information in order
  to  reduce  the  level of  uncertainty  regarding  the  impact  of the Year 2000
  Problem.  Management  believes  that Foamex  L.P.'s  solutions  to the Year 2000
  Problem will help minimize the possibility of significant  disruptions to Foamex
  L.P.'s operations.
  
       Forward-Looking Statements Relating to the Year 2000 Problem
  
       The Year 2000  Problem  discussion  includes  a number  of  forward-looking
  statements that are based on Foamex L.P.'s best estimates.  The actual impact of
  the Year 2000 Problem could differ  materially from these estimates because of a
  number of factors,  including  the failure of third parties to achieve Year 2000
  compliance and the inability of Foamex to:
  
       o    accurately assess which systems and  relationships  with third parties
            are important
       o    identify and correct all computer code in key systems
       o    identify  and  correct  all  production  equipment  that could have an
            embedded date sensitive chip
       o    identify all significant issues.
  
         The factors  identified above are not necessarily all of the factors that
  could  result in  materially  different  impact from the  estimates  included in
  Foamex L.P.'s forward-looking statements.
  
                                         23
  <PAGE>
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  Forward-Looking Statements
  
       This  report  contains  forward-looking  statements  and  should be read in
  conjunction with the discussion regarding  forward-looking  statements set forth
  on page 4 of  Foamex  L.P.'s  Annual  Report  on Form  10-K for the  year  ended
  December 31, 1998.
  
  
  
  
                                         24
  
  <PAGE>
  
  ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
       See the "Market  Risk" section under Item 2,  Management's  Discussion  and
  Analysis of Financial Condition and Results of Operations.
  
  
  
                                         25
  <PAGE>
  
  Part II -  Other Information
  
  Item 1.    Legal Proceedings
  
             Reference  is  made  to  the  description  of the  legal  proceedings
             contained in Foamex  L.P.'s  Annual  Report on Form 10-K for the year
             ended December 31, 1998.
  
             The information from Note 8 of the condensed  consolidated  financial
             statements  of Foamex L.P. as of September  30, 1999  (unaudited)  is
             incorporated herein by reference.
  
  Item 5.    Other Information
  
             Information  concerning  the  extension of a Letter of Intent for the
             acquisition of Foamex  International  is incorporated by reference to
             Exhibit No. 99.
  
  Item 6.    Exhibits and Reports on Form 8-K
  
             (a)  Exhibits
  
                   4.5(a) Commitment Letter dated August 9, 1999, from The Bank of
                          Nova Scotia to Foamex Canada Inc.
  
                   27     Financial  Data  Schedule  for the  year to date  period
                          ended September 30, 1999.
  
                   99(a)  Press  release  concerning  the extension of a Letter of
                          Intent for the acquisition of Foamex International.
  
             (b)  Foamex L.P. filed the following  Current Reports on Form 8-K for
                  the quarter ended September 30, 1999:
  
                  A report,  dated  August 5,  1999,  was filed for Item 5.  Other
                  Events,  reporting  press  release of proposed  buyout of Foamex
                  International.
  
                  A report,  dated August 13, 1999,  was filed for Item.  5. Other
                  Events, concerning a purported class action complaint by certain
                  shareholders of Foamex International.
  
  
  (a)  Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
       International for the quarter ended September 30, 1999.
  
  
                                         26
  
  <PAGE>
                                     SIGNATURES
  
  
       Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
  registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned thereunto duly authorized.
  
  
                                              FOAMEX L.P.
                                              By:  FMXI, Inc.
                                                   General Partner
  
  
  Date: November 12, 1999                     By: /s/ George L. Karpinski
                                                  --------------------------------
                                                  George L. Karpinski
                                                  Vice President
  
  
                                              FOAMEX CAPITAL CORPORATION
  
  
  Date: November 12, 1999                     By: /s/ George L. Karpinski
                                                  --------------------------------
                                                  George L. Karpinski
                                                  Vice President
  
  
  
  
                                         27
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 100328}]
metadata_filer: [{"company-data": {"conformed-name": "FOAMEX L P", "cik": "0000890080", "assigned-sic": "3086", "irs-number": "050475617", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "001-11432", "film-number": "99747312"}, "business-address": {"street1": "1000 COLUMBIA AVENUE", "city": "LINEWOOD", "state": "PA", "zip": "19061", "phone": "6108593000"}, "mail-address": {"street1": "1000 COLUMBIA AVE", "city": "LINWOOD", "state": "PA", "zip": "19061"}}, {"company-data": {"conformed-name": "FOAMEX CAPITAL CORP", "cik": "0000890081", "assigned-sic": "3086", "irs-number": "223182164", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "001-11436", "film-number": "99747313"}, "business-address": {"street1": "1000 COLUMBIA AVE", "city": "LINWOOD", "state": "PA", "zip": "19061", "phone": "6108593000"}, "mail-address": {"street1": "1000 COLUMBIA AVE", "city": "LINWOOD", "state": "PA", "zip": "19061"}}]
text: SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549
  
                                      FORM 10-Q
  
                  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934
  
                  For the quarterly period ended September 30, 1999
  
                      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 registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the  preceding 12 months (or for such  shorter  period that the  registrant  was
  required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
  requirements for the past 90 days. YES _X_   NO ___
  
  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 are therefore filing this
  form with the reduced disclosure format.
  
  The number of shares of Foamex Capital Corporation's common stock outstanding as
  of November 5, 1999 was 1,000.
  FOAMEX L.P.
                             FOAMEX CAPITAL CORPORATION
  
                                        INDEX
                                                                              Page
  
  Part I.  Financial Information
  
           Item 1.  Financial Statements
  
                Condensed Consolidated Statements of Operations (unaudited) -
                  Three and Nine Months Ended September 30, 1999 and 1998       3
  
                Condensed Consolidated Balance Sheets (unaudited) -
                  as of September 30, 1999 and December 31, 1998                4
  
                Condensed Consolidated Statements of Cash Flows (unaudited) -
                  Nine Months Ended September 30, 1999 and 1998                 5
  
                Notes to Condensed Consolidated Financial Statements
                  (unaudited)                                                   6
  
           Item 2.  Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                        16
  
           Item 3.  Quantitative and Qualitative Disclosure
                    about Market Risk                                          25
  
  Part II. Other Information                                                   26
  
           Item 1.  Legal Proceedings                                          26
  
           Item 6.  Exhibits and Reports on Form 8-K                           26
  
  Signatures                                                                   27
  
  Exhibits
  
                                         2
  PART I.  FINANCIAL INFORMATION
  ITEM 1.  FINANCIAL STATEMENTS
  
                            FOAMEX L.P. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
  Three Months Ended            Nine Months Ended
                                               September 30,  September 30,  September 30,   September 30,
                                                   1999          1998            1999           1998
                                                ---------      ---------      ---------      ---------
                                                                      (thousands)
  NET SALES                                     $ 302,819      $ 299,783      $ 894,925      $ 871,564
  
  COST OF GOODS SOLD                              261,708        257,293        777,943        736,569
                                                ---------      ---------      ---------      ---------
  
  GROSS PROFIT                                     41,111         42,490        116,982        134,995
  
  SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES                       15,098         17,846         43,084         56,669
  
  RESTRUCTURING AND OTHER CHARGES (CREDITS)         2,988             --          9,962           (700)
                                                ---------      ---------      ---------      ---------
  
  INCOME FROM OPERATIONS                           23,025         24,644         63,936         79,026
  
  INTEREST AND DEBT ISSUANCE EXPENSE               17,190         16,706         49,461         49,186
  
  OTHER INCOME (EXPENSE), NET                         (87)        (1,146)          (282)        (1,765)
                                                ---------      ---------      ---------      ---------
  
  INCOME FROM CONTINUING OPERATIONS
     BEFORE PROVISION FOR INCOME TAXES              5,748          6,792         14,193         28,075
  
  PROVISION FOR INCOME TAXES                          353            165          1,383          2,049
                                                ---------      ---------      ---------      ---------
  
  INCOME FROM CONTINUING OPERATIONS                 5,395          6,627         12,810         26,026
  
  EXTRAORDINARY LOSS ON EARLY
     EXTINGUISHMENT OF DEBT                            --             --             --         (3,195)
                                                               ---------      ---------      ---------
  
  NET INCOME                                    $   5,395      $   6,627      $  12,810      $  22,831
                                                =========      =========      =========      =========
  The accompanying notes are an integral part of the condensed
                         consolidated financial statements.
  
                                         3
  FOAMEX L.P. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
  September 30,    December 31,
  ASSETS                                                            1999            1998
  CURRENT ASSETS:                                                       (thousands)
  Cash and cash equivalents                                   $   3,455      $   3,192
     Accounts receivable, net of allowance of $4,198 in 1999
       and $7,278 in 1998                                          154,996        143,301
     Accounts receivable from related parties                       15,280         17,533
     Inventories                                                    99,866        127,636
     Other current assets                                           25,948         33,849
                                                                 ---------      ---------
         Total current assets                                      299,545        325,511
  
  PROPERTY, PLANT AND EQUIPMENT                                    363,184        352,719
  LESS ACCUMULATED DEPRECIATION                                   (151,350)      (133,082)
                                                                 ---------      ---------
      NET PROPERTY, PLANT AND EQUIPMENT                            211,834        219,637
  
  COST IN EXCESS OF ASSETS ACQUIRED, net of accumulated
      amortization of $14,285 in 1999 and $10,635 in 1998          184,867        188,205
  
  DEBT ISSUANCE COSTS, net of accumulated
      amortization of $5,007 in 1999 and $2,894 in 1998             15,287         13,946
  
  OTHER ASSETS                                                      22,348         21,229
                                                                 ---------      ---------
  
  TOTAL ASSETS                                                   $ 733,881      $ 768,528
                                                                 =========      =========
  
  LIABILITIES AND PARTNERS' DEFICIT
  CURRENT LIABILITIES:
     Short-term borrowings                                       $   3,636      $   2,957
     Current portion of long-term debt                              12,543        689,478
     Current portion of long-term debt - related party                  --         34,000
     Accounts payable                                              114,753        139,726
     Accrued interest                                                7,477          7,396
     Other accrued liabilities                                      52,783         52,944
                                                                 ---------      ---------
         Total current liabilities                                 191,192        926,501
  
  LONG-TERM DEBT                                                   652,507             --
  
  LONG-TERM DEBT - RELATED PARTY                                    34,000             --
  
  OTHER LIABILITIES                                                 36,757         38,064
                                                                 ---------      ---------
  
         Total liabilities                                         914,456        964,565
                                                                 ---------      ---------
  
  COMMITMENTS AND CONTINGENCIES                                         --             --
                                                                 ---------      ---------
  
  PARTNERS' DEFICIT:
     General partner                                              (129,375)      (141,426)
     Limited partner                                                    --             --
     Accumulated other comprehensive income (loss)                 (25,861)       (26,208)
     Notes and advances receivable from partner                    (16,118)       (18,608)
     Notes receivable from related party                            (9,221)        (9,795)
                                                                 ---------      ---------
  
         Total partners' deficit                                  (180,575)      (196,037)
                                                                 ---------      ---------
  
  TOTAL LIABILITIES AND PARTNERS' DEFICIT                        $ 733,881      $ 768,528
                                                                 =========      =========
  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)
  Nine Months Ended
                                                                      -------------------------------
                                                                      September 30,     September 30,
                                                                          1999              1998
                                                                       ---------         ---------
                                                                                (thousands)
  OPERATING ACTIVITIES
  Net income                                                        $  12,810         $  22,831
     Adjustments to reconcile net income to net cash provided
       by (used for) operating activities:
       Depreciation and amortization                                      23,359            23,146
       Amortization of debt issuance costs, debt discount,
         debt premium and deferred swap adjustments                          307              (114)
       Asset writedown and other charges                                   2,073                --
       Extraordinary loss on early extinguishment of debt                     --             2,857
       Other operating activities                                          2,592             2,448
       Changes in operating assets and liabilities, net                     (224)          (78,703)
                                                                       ---------         ---------
  
           Net cash provided by (used for) operating activities           40,917           (27,535)
                                                                       ---------         ---------
  
  INVESTING ACTIVITIES
     Capital expenditures                                                (14,388)          (22,603)
     Acquisitions, net of cash acquired                                       --            (3,899)
     Redemption of General Felt                                               --            (8,971)
     Repayments of note from partner                                       2,490                --
     Other investing activities                                              574              (168)
                                                                       ---------         ---------
  
           Net cash used for investing activities                        (11,324)          (35,641)
                                                                       ---------         ---------
  
  FINANCING ACTIVITIES
     Net proceeds from short-term borrowings                                 679               185
     Net proceeds from (repayments of) revolving loans                   (17,024)           81,489
     Proceeds from long-term debt                                             --           129,000
     Repayment of long-term debt                                          (6,852)         (134,203)
     Debt issuance cost                                                   (3,455)           (1,598)
     Cash overdraft                                                       (2,017)               --
     Distribution to partners                                               (258)          (20,074)
     Other financing activities                                             (403)            1,084
                                                                       ---------         ---------
  
           Net cash provided by (used for) financing activities          (29,330)           55,883
                                                                       ---------         ---------
  
  CASH AND CASH EQUIVALENTS
  Net increase (decrease)                                                    263            (7,293)
  Beginning of year                                                        3,192             9,405
                                                                       ---------         ---------
  End of period                                                        $   3,455         $   2,112
                                                                       =========         =========
  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
  
  Basis of Presentation
  
       The condensed consolidated  financial statements are unaudited,  but in the
  opinion of management include all adjustments necessary to present fairly Foamex
  L.P.  and  subsidiaries'  financial  position and results of  operations.  These
  interim  financial  statements  should be read in conjunction with the financial
  statements and related notes included in the 1998 Form 10-K. Results for interim
  periods are not necessarily  indicative of trends or of results for a full year.
  Foamex L.P. is a wholly owned subsidiary of Foamex  International  Inc. ("Foamex
  International").
  
  Reporting Period
  
       Effective  September 1998, the annual  reporting  period was changed from a
  fifty-two or  fifty-three  week fiscal year ending on the Sunday  closest to the
  end of the calendar  year to a calendar  year ending on December 31. This change
  was effective for the third fiscal quarter of 1998, which ended on September 30,
  1998.
  
  Potential Business Combinations
  
       On  August  5,  1999,  Foamex  International  announced  that its  Board of
  Directors signed a letter of intent with Sorgenti Chemical  Industries,  LLC and
  Liberty  Partners  Holdings  20,  LLC  (collectively,  the  "Purchasers")  for a
  business  combination   providing  for  $11.50  per  share  for  all  of  Foamex
  International's  outstanding  common stock.  The  transaction  is subject to due
  diligence,  the execution of definitive  agreements and other conditions.  Under
  the  terms of the  letter  of  intent,  if Foamex  International  enters  into a
  business  combination  with another party,  the Purchasers will be entitled to a
  break-up fee of $6.0 million plus reimbursement of certain expenses,  subject to
  certain conditions.
  
       The  transaction  is  subject  to a number  of  conditions,  including  the
  negotiation  of  definitive  documents  that  will  contain  certain  conditions
  relating  to the bank  credit  facilities  and the  public  debt of Foamex  L.P.
  Additional issues that will need to be addressed  include,  minimum  shareholder
  acceptance,   change  of  Foamex  International  board  membership,   and  other
  provisions  providing  for a higher  break-up fee and expense  reimbursement  if
  Foamex  International  enters  into  a  business  combination  providing  a more
  favorable transaction.  The definitive buyout agreement will require appropriate
  filings  with the  Securities  and  Exchange  Commission  and  other  regulatory
  agencies.
  
       On  November 1, 1999,  Foamex  International  announced  that the letter of
  intent expired by its terms.  However,  the Purchasers requested an extension of
  the  letter of  intent  until  December  15,  1999.  The  parties  agreed to the
  extension and are continuing discussions towards a possible transaction.
  
       Also on  November  1,  1999,  Foamex  International  announced  that it has
  authorized a due diligence  review for a possible  business  combination  led by
  John  G.  Johnson,   Jr.,  President  and  Chief  Executive  Officer  of  Foamex
  International.  Mr.  Johnson  has  informed  the Board of  Directors  that he is
  working with various possible sources of equity funding, but that he has no firm
  commitments for the financing of a transaction. No formal proposal has been made
  to Foamex International by Mr. Johnson.
  
       The accompanying financial statements and notes have been prepared assuming
  a going-concern  basis and do not recognize the impact of the potential business
  combinations.
  
  Going Concern Issue - Financial Condition
  
       As of December 31, 1998,  Foamex L.P.  was not in  compliance  with various
  debt covenants included in agreements  totaling $415.4 million.  Had the lenders
  under these debt agreements  accelerated the maturity of their indebtedness as a
  result of  noncompliance,  the  acceleration  would have constituted an event of
  default  and  given  the  holders  the  right  to  require  the   repurchase  of
  substantially all of Foamex L.P.'s long-term debt. As a result of these factors,
  approximately  $715.8  million  of  long-term  debt at  December  31,  1998  was
  classified  as a current  liability in the  consolidated  balance  sheet,  which
  produced a working capital  deficit.  These issues raised  substantial  doubt at
  year-end 1998 about Foamex  L.P.'s  ability to continue as a going  concern.
  
                                         6
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  1.   ORGANIZATION AND BASIS OF PRESENTATION (continued)
  
       In response to these  financial  conditions,  amendments to debt agreements
  were  executed  during  the  first  half  of  1999,  as  discussed  in  Note  5.
  Additionally,  Foamex L.P. generated net income,  provided over $40.0 million of
  cash flow from operations and reduced total debt by 3% from the beginning of the
  year. The combination of debt amendments,  year to date results and management's
  expectations  regarding  compliance  with debt  covenants in future  measurement
  periods  represented an improved  financial  position relative to year-end 1998.
  Accordingly,  $695.4  million of debt at the end of the second  quarter 1999 and
  $686.5  million of debt at the end of the third quarter 1999 were  classified as
  long term.
  
  Going Concern Issue - Change In Control
  
       Trace  International  Holdings,  Inc. ("Trace") is a privately held company
  which owns  approximately  46.1% of Foamex  International's  outstanding  voting
  common stock and whose Chairman also serves as Foamex International's  Chairman.
  Foamex  International's  common  stock  owned by Trace is pledged as  collateral
  against certain of Trace's obligations.  The Foamex L.P. Amended Credit Facility
  and the Foamex/GFI Note, pursuant to which approximately  $421.2 million of debt
  was outstanding as of September 30, 1999,  contain  provisions that would result
  in the  acceleration of such  indebtedness if a person or group other than Trace
  were to  beneficially  own more than 25% of Foamex  International's  outstanding
  voting  stock and a greater  percentage  of such  voting  stock  than the amount
  beneficially owned by Trace. Additionally, certain indentures relating to senior
  subordinated notes of $248.0 million contain provisions that provide the holders
  of such notes with the right to require the issuers to repurchase  such notes at
  a price in cash equal to 101% of the aggregate  principal  amount thereof,  plus
  accrued and unpaid interest thereon,  if a person or group other than Trace were
  to beneficially own more than 25% of Foamex  International's  outstanding voting
  stock and a greater percentage of such voting stock than the amount beneficially
  owned by Trace.
  
       Foamex L.P. was informed by Trace that it filed a petition for relief under
  Chapter 11 of the Bankruptcy  Code in Federal Court in New York City on July 21,
  1999.  Trace's  bankruptcy  filing does not constitute a change of control under
  the provisions of the above  identified  debt  agreements  unless the bankruptcy
  court allows  Trace's  creditors  to  foreclose on and take  ownership of Foamex
  International's  common stock owned by Trace,  or otherwise  authorize a sale or
  transfer  of these  shares to a person or group  other  than Trace  which  would
  acquire more than 25% of Foamex  International's  outstanding voting stock and a
  greater  percentage of such voting stock than the amount  beneficially  owned by
  Trace. According to a filing made with the bankruptcy court on November 2, 1999,
  two of Trace's  creditors have  petitioned  the bankruptcy  court to permit such
  creditors  to  foreclose  on and take  ownership  of the shares of common  stock
  pledged  to  them,  representing  approximately  17% of  Foamex  International's
  outstanding voting stock.
  
       Foamex  L.P.  will seek to resolve the issues that may arise if the "change
  of control"  provisions are triggered in the future,  including  waivers of such
  provisions and/or refinancing  certain debt, if necessary.  Although  management
  believes that Foamex L.P.'s debt obligations  could be refinanced if accelerated
  as a result of the "change of  control"  provisions,  there can be no  assurance
  that  Foamex L.P.  will be able to do so, or that  Foamex  L.P.  will be able to
  obtain waivers of such provisions.  The accompanying  financial  statements were
  prepared on a going-concern  basis and do not include any adjustments that might
  result from the outcome of the Trace bankruptcy filing.
  
  2.   COMPREHENSIVE INCOME
  
       The components of comprehensive income are listed below.
  Three Months Ended                Nine Months Ended
                                                -----------------------------      -----------------------------
                                                September 30,    September 30,     September 30,   September 30,
                                                    1999              1998             1999           1998
                                                  --------         --------         --------        --------
                                                                          (thousands)
  Net income                                      $  5,395         $  6,627         $ 12,810        $ 22,831
  Foreign currency translation adjustments            (464)          (1,130)             347            (900)
                                                  --------         --------         --------        --------
  Total comprehensive income                      $  4,931         $  5,497         $ 13,157        $ 21,931
                                                  ========         ========         ========        ========
  7
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  3.   RESTRUCTURING AND OTHER CHARGES (CREDITS)
  
       Foamex International and its subsidiaries approved and began implementing a
  restructuring  plan during the first quarter of 1999 to reduce selling,  general
  and administrative  expenses and other overhead costs.  During the first quarter
  of 1999,  restructuring  and other  charges of  approximately  $3.4 million were
  recognized  related  primarily to severance in  connection  with  replacing  its
  former Chief Executive  Officer and work force  reductions of  approximately  78
  employees.
  
       During  the  second  quarter of 1999,  restructuring  and other  charges of
  approximately $3.6 million were recognized.  The provision included $1.2 million
  of severance  costs in  connection  with  additional  work force  reductions  of
  approximately 60 employees, $2.3 million of costs associated with the closure of
  two additional manufacturing operations and facilities and $0.1 million of other
  charges.
  
       In  the  third  quarter  of  1999,   restructuring  and  other  charges  of
  approximately  $3.0  million were  recognized.  The third  quarter  provision is
  comprised of $1.6 million of severance  costs in connection with additional work
  force reductions of approximately 8 employees,  $0.9 million of costs associated
  with the  closure  of Foamex  L.P.'s New York  office and $0.5  million of other
  charges.
  
       Approximately  $4.2 million of severance  costs  incurred in 1999 have been
  paid as of  September  30,  1999.  Approximately  $1.5 million of the total 1999
  severance  costs  primarily  relate to  contractual  severance  costs payable to
  Foamex L.P.'s former Chief Executive  Officer,  which will be paid through March
  2001.  Foamex L.P. may record additional  restructuring  charges as it finalizes
  implementation of its restructuring plan.
  
  4.   INVENTORIES
  
       The components of inventory are listed below.
  
                                       September 30,    December 31,
                                           1999             1998
                                         --------        --------
                                                (thousands)
       Raw materials and supplies        $ 66,619        $ 93,241
       Work-in-process                     12,218          12,087
       Finished goods                      21,029          22,308
                                         --------        --------
       Total                             $ 99,866        $127,636
                                         ========        ========
  
  5.   LONG-TERM DEBT
  
       Long-term debt consists of:
  September 30,    December 31,
                                                                      1999            1998
                                                                   --------        --------
       Foamex L.P. Amended Credit Facility:                               (thousands)
  Term Loan B                                               $ 82,084        $ 82,714
         Term Loan C                                                 74,622          75,194
         Term Loan D                                                108,075         108,900
         Revolving credit facility                                  122,414         139,438
       9 7/8% Senior subordinated notes due 2007                    150,000         150,000
       13 1/2% Senior subordinated notes due 2005 (includes
         $10,549 and $11,893 of unamortized debt premium)           108,549         109,893
       Industrial revenue bonds                                       7,000           7,000
       Subordinated note payable (net of unamortized
         debt discount of $280 and $523)                              4,396           6,491
       Other                                                          7,910           9,848
                                                                   --------        --------
                                                                    665,050         689,478
  8
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  5.   LONG-TERM DEBT (continued)
  September 30,    December 31,
                                                            1999             1998
                                                          --------        --------
                                                                 (thousands)
  Less current portion                                 12,543         689,478
                                                          --------        --------
  
       Long-term debt-unrelated parties                   $652,507        $     --
                                                          ========        ========
  
       Long-term debt - related party consists of:
  
       Foamex/GFI Note                                    $ 34,000        $ 34,000
  
       Less current portion                                     --          34,000
                                                          ========        ========
  
       Long-term debt - related party                     $ 34,000        $     --
                                                          ========        ========
  Foamex L.P.  amended its credit  facility (the "Foamex L.P.  Amended Credit
  Facility"),  as of June 30, 1999,  and modified the financial  covenants for net
  worth and interest,  fixed charge coverage and leverage ratios through  December
  2006.  An  earnings  requirement,  as defined in the debt  agreement,  was added
  through  September  30,  1999.  Foamex L.P. was in  compliance  with the interim
  requirement at the end of the third quarter 1999. Effective January 1, 2000, the
  interest rate on  outstanding  borrowings  under the Foamex L.P.  Amended Credit
  Facility  will  increase by 25 basis  points  each  quarter  that Foamex  L.P.'s
  leverage  ratio exceeds 5.00 to 1.00.  Once the leverage  ratio is reduced below
  this  level,  the  cumulative  amount of any 25 basis point  adjustments  to the
  interest rate on borrowings would be eliminated.  The agreement was also amended
  to no longer  permit  Foamex L.P. to make certain cash  payments,  including the
  payment of an annual  management  fee to a subsidiary  of Trace  (totaling  $3.0
  million in 1998) and distributions to Foamex International,  and to limit future
  investments in foreign subsidiaries and joint ventures.  The "change of control"
  definition under the agreement was also modified.  Revolver borrowings under the
  credit facility  totaled $122.4 million at the end of the third quarter of 1999.
  The  weighted  average  interest  rate on these  obligations  was 8.8% and $17.5
  million was available for additional borrowings.
  
       During 1999, the Foamex/GFI Note was amended to incorporate the same change
  in control  provisions  that are  included  in the Foamex  L.P.  Amended  Credit
  Facility.
  
       Foamex L.P. continues to be subject to covenants  contained in various debt
  agreements  that limit,  among other things to varying  degrees,  the ability of
  Foamex L.P. (a) to pay  distributions or redeem  partnership  interests,  (b) to
  make  certain  restrictive  payments  or  investments,  (c) to incur  additional
  indebtedness  or issue  Preferred  Equity  Interest,  as defined,  (d) to merge,
  consolidate or sell all or substantially  all of its assets or (e) to enter into
  certain  transactions with affiliates or related persons.  In addition,  certain
  agreements  contain provisions that, in the event of a defined change of control
  or the occurrence of an undefined  material adverse change in the ability of the
  obligor to perform its obligations,  the indebtedness must be repaid, in certain
  cases, at the option of the holder.
  
       Certain of Foamex L.P.'s Mexican  subsidiaries were in default of financial
  covenant provisions contained in loan agreements with a Mexican bank. Amendments
  to  the  loan  agreements  were  finalized  to  modify  the  financial  covenant
  provisions.  As of  September  30,  1999,  these  Mexican  subsidiaries  were in
  compliance with the financial covenant provisions under the loan agreements.
  
                                         9
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  6.     SEGMENT RESULTS
  
         Segment results are presented below.
  Carpet
                                             Foam         Cushion       Automotive     Technical
                                           Products       Products       Products       Products         Other            Total
                                           --------       --------       --------       --------         -----            -----
                                                                              (thousands)
       Third Quarter 1999
  Net sales                          $ 139,111      $  46,030       $  83,355      $  24,322      $  10,001       $ 302,819
       Income (loss) from operations         16,064         (1,080)          7,024          6,573         (5,556)         23,025
       Depreciation and amortization          4,141          1,346           1,315            705            770           8,277
  
       Third Quarter 1998
       Net sales                          $ 152,854      $  51,263       $  69,843      $  19,891      $   5,932       $ 299,783
       Income (loss) from operations         21,711            (40)          4,425          4,156         (5,608)         24,644
       Depreciation and amortization          4,558            817           1,311            681            573           7,940
  
       Year to Date 1999
       Net sales                          $ 403,399      $ 136,020       $ 262,936      $  69,598      $  22,972       $ 894,925
       Income (loss) from operations         41,933         (1,516)         19,849         17,811        (14,141)         63,936
       Depreciation and amortization         12,383          3,782           3,784          1,978          1,432          23,359
  
       Year to Date 1998
       Net sales                          $ 434,569      $ 162,603       $ 197,447      $  61,163      $  15,782       $ 871,564
       Income (loss) from operations         56,737          1,711          17,661         12,744         (9,827)         79,026
       Depreciation and amortization         12,733          3,002           3,752          1,966          1,693          23,146
  7.   RELATED PARTY TRANSACTIONS
  
  Trace Management Fee
  
       Effective June 30, 1999, the Foamex L.P.  Amended Credit Facility no longer
  permits  Foamex  L.P.  to pay a  management  fee to a  subsidiary  of  Trace  in
  connection with a management agreement with the Trace subsidiary. The management
  fee was $3.0 million for the year ended  December  31,  1998.  On July 29, 1999,
  Foamex L.P.  submitted to the Trace subsidiary  formal notice of the termination
  of the management agreement.
  
  New York Sublease
  
       Prior to September 30, 1999, Foamex L.P. subleased certain space in its New
  York office to Trace (the "New York Sublease").  Foamex L.P. gave notice on June
  30,  1999 that if prior  unpaid rent under the New York  Sublease  was not paid,
  Foamex L.P.  intended to give notice  pursuant to Article 7 of the New York Real
  Property  Actions and Proceedings Law that the space be vacated by September 30,
  1999. Trace complied with such request,  and Foamex L.P. has closed its New York
  office and subleased the premises to a third party.
  
  Foamex/GFI Note
  
       In the third quarter of 1999, Foamex L.P. paid $0.5 million of interest and
  $1.6 million of interest for the first three  quarters of 1999 on the Foamex/GFI
  Note.  In the third  quarter of 1998,  Foamex L.P. paid $0.6 million of interest
  and $1.2  million  of  interest  for the  first  three  quarters  of 1998 on the
  Foamex/GFI Note.
  
                                         10
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  7.   RELATED PARTY TRANSACTIONS (continued)
  
  Other
  
       Foamex  L.P.   sold   approximately   $48.1   million  and  $43.6  million,
  respectively, of carpet cushion products to Foamex Carpet Cushion, Inc. ("Foamex
  Carpet")  during the  quarterly  period  ended  September  30, 1999 and 1998 and
  $138.1 million and $154.9  million,  respectively,  for the year to date periods
  ended  September  30,  1999 and 1998.  In  addition,  Foamex L.P.  provided  and
  invoiced approximately $0.4 million and $1.7 million of administrative  services
  to Foamex Carpet during the quarterly periods ended September 30, 1999 and 1998,
  respectively,  and $1.7  million and $1.8  million for the year to date  periods
  ended September 30, 1999 and 1998, respectively.
  
       Also,  Foamex L.P.  chartered an aircraft which was owned by a wholly owned
  subsidiary of Foamex  International  and incurred  costs of  approximately  $0.2
  million  during the quarterly  period ended  September 30, 1998 and $0.1 million
  and $0.7 million  during the year to date periods  ended  September 30, 1999 and
  1998,  respectively.  Foamex International sold this aircraft on March 31, 1999.
  The sale of the aircraft  triggered an obligation to Trace of approximately $0.6
  million.  The obligation was offset against Trace's two promissory notes payable
  to Foamex L.P.  The Trace  notes are  included in  partners'  deficit,  which is
  consistent with the recognition in prior years.
  
  8.   COMMITMENTS AND CONTINGENCIES
  
  Litigation - Foamex International Shareholders
  
       During 1999, Foamex International received several communications addressed
  to its Board of Directors  from certain of Foamex  International's  stockholders
  regarding  aspects of the relationship  between Trace and Foamex  International.
  Such stockholders  questioned the propriety of certain relationships and related
  transactions between Trace and Foamex  International,  which previously had been
  disclosed in Foamex  International's and Foamex L.P.'s periodic filings. On June
  14,  1999,  Foamex  International  received a draft  complaint  from  counsel of
  certain  stockholders naming Foamex International and certain current and former
  Foamex International  directors,  which included allegations similar to those in
  the Second Amended Complaint, as defined below. Foamex International was advised
  by  such  counsel  that  such  stockholders  intended  to file  an  action  soon
  thereafter.  On August 13, 1999 two stockholders filed an action on behalf of an
  alleged class of Foamex  International's  shareholders,  entitled  Watchung Road
  Associates,  L.P. et al v. Foamex  International  Inc., et al., Civil Action No.
  17370  (the  "Watchung  Complaint"),  in the Court of  Chancery  of the State of
  Delaware,  New Castle County. The suit names Foamex International,  Mr. Marshall
  S. Cogan, Mr. Etienne Davignon,  Mr. John Gutfreund,  Mr. Robert Hay, Dr. Stuart
  Hershon,  Mr. Jack  Johnson,  and Mr. John Tunney as  defendants.  The  Watchung
  Complaint alleges that the individual defendants breached their fiduciary duties
  by agreeing to the potential buyout of Foamex International by Sorgenti Chemical
  Industries LLC and Liberty Partners L.P. (the "Sorgenti Transaction").
  
       The Watchung  Complaint  alleges that the  Sorgenti  Transaction's  buy-out
  price of  $11.50  per  outstanding  share is  inadequate  and fails to take into
  consideration claims Foamex International allegedly has a result of the supposed
  wrongful diversions of Foamex  International's  assets in Foamex International's
  dealings with Trace and its affiliates. The Watchung Complaint also alleges that
  the directors  breached their fiduciary duties agreeing to the proposed Sorgenti
  Transaction  without  conducting  an auction or active  market  check.  The suit
  alleges  that the board  placed Mr.  Cogan's  interest  ahead of those of Foamex
  International's  stockholders,  and  alleges  that a critical  condition  of the
  Sorgenti  Transaction is a consulting agreement for Mr. Cogan. The Watchung suit
  seeks to enjoin the Sorgenti  Transaction,  seeks  rescission  or damages if the
  Sorgenti Transaction is consummated,  and seeks an accounting from the directors
  for plaintiffs  alleged losses.  To date, no response to the Watchung  Complaint
  has been made.
  
       On April 26, 1999, a putative  securities  class action entitled Molitor v.
  Foamex  International Inc., et al., 99 Civ. 3004, was filed in the United States
  District court for the Southern District of New York naming as defendants Foamex
  International,  Trace and certain officers and directors of Foamex International
  on behalf of  stockholders  who bought shares of Foamex  International's  common
  stock during the period from May 7, 1998 through and  including  April 16, 1999.
  The lawsuit alleges that the defendants violated Section 10(b) of the Securities
  Exchange Act of 1934 and Rule 10b-5 by misrepresenting  and/or omitting material
  information  about Foamex  International's  financial  situation and operations,
  
                                         11
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.   COMMITMENTS AND CONTINGENCIES (continued)
  
  with the result of  artificially  inflating the price of Foamex  International's
  stock.  The lawsuit  also  alleges  that Trace and  Marshall  S. Cogan  violated
  Section 20(a) of the Securities  Exchange Act of 1934 as controlling  persons of
  Foamex  International.  The complaint seeks class  certification,  a declaration
  that defendants violated the federal securities laws, an award of money damages,
  and costs and  attorneys',  accountants'  and experts'  fees. On May 18, 1999, a
  similar action entitled Thomas W. Riley v. Foamex International Inc., et al., 99
  Civ. 3653 was filed in the same court.  The two actions have been  consolidated.
  To date,  no response to the  complaint  has been made and no discovery or other
  proceedings has taken place.  Plaintiffs have advised Foamex  International that
  they plan to file a  consolidated  complaint  within 45 days of October 7, 1999.
  After  service,  defendants  will have 45 days to  respond  to the  consolidated
  complaint.
  
       Beginning  on or about  March  17,  1998,  six  actions  (collectively  the
  "Shareholder  Litigation")  were filed in the Court of  Chancery of the State of
  Delaware,   New  Castle  County  (the  "Court"),   by   stockholders  of  Foamex
  International. The Shareholder Litigation,  purportedly brought as class actions
  on  behalf  of  all   stockholders   of  Foamex   International,   named  Foamex
  International,  certain of its  directors,  certain of its  officers,  Trace and
  Trace Merger Sub,  Inc.  ("Merger  Sub") as  defendants  alleging  that they had
  breached their  fiduciary  duties to the plaintiffs  and other  stockholders  of
  Foamex  International  unaffiliated  with Trace in connection  with the original
  proposal of Trace to acquire the  publicly  traded  outstanding  common stock of
  Foamex  International for $17.00 per share under an Agreement and Plan of Merger
  (the "First Merger Agreement"). The complaints sought, among other things, class
  certification, a declaration that the defendants 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. A stipulation
  and  order  consolidating  these six  actions  under  the  caption  In re Foamex
  International  Inc.  Shareholders  Litigation,  Consolidated  Civil  Action  No.
  16259NC, was entered by the Court on May 28, 1998.
  
       The parties to the  Shareholder  Litigation  entered into a  Memorandum  of
  Understanding,  dated June 25,  1998 (the  "Memorandum  of  Understanding"),  to
  settle the  Shareholder  Litigation,  subject  to,  inter alia,  execution  of a
  definitive  Stipulation  of  Settlement  between the parties and approval by the
  Court  following  notice  to  the  class  and  a  hearing.   The  Memorandum  of
  Understanding  provided that as a result of, among other things, the Shareholder
  Litigation and  negotiations  among counsel for the parties to the Memorandum of
  Understanding,  a special meeting of stockholders would be held to vote upon and
  approve the First Merger Agreement which provided,  among other things,  for all
  Foamex  International's  outstanding  common  stock  not  owned by Trace and its
  subsidiaries  (the "Public  Shares") to be  converted  into the right to receive
  $18.75 in cash, without interest.
  
       The Memorandum of Understanding also provided for certification of a class,
  for  settlement  purposes  only,  consisting  of  the  Public  Shares  owned  by
  stockholders   of  Foamex   International   unaffiliated   with  Trace  and  its
  subsidiaries  (the "Public  Shareholders"),  the  dismissal  of the  Shareholder
  Litigation  with  prejudice and the release by the plaintiffs and all members of
  the  class of all  claims  and  causes of  action  that were or could  have been
  asserted against Trace,  Foamex  International and the individual  defendants in
  the  Shareholders  Litigation  or  that  arise  out of the  matters  alleged  by
  plaintiffs.  Following the completion of the  confirmatory  discovery  which was
  provided for in the  Memorandum  of  Understanding,  on  September 9, 1998,  the
  parties entered into a definitive  Stipulation of Settlement and the Court set a
  hearing  for October 27,  1998 to  consider  whether  the  settlement  should be
  approved (the "Settlement Hearing"). In connection with the proposed settlement,
  the plaintiffs  intended to apply for an award of attorney's fees and litigation
  expenses in an amount not to exceed $925,000,  and the defendants  agreed not to
  oppose this application.  Additionally,  Foamex  International agreed to pay the
  cost, if any, of sending notice of the settlement to the Public Shareholders. On
  September 24, 1998, a Notice of Pendency of Class Action, Proposed Settlement of
  Class Action and Settlement  Hearing was mailed to the members of the settlement
  class. On October 20, 1998, the parties to the Shareholder  Litigation requested
  that the Court cancel the Settlement  Hearing in light of the announcement  made
  by Trace on October 16,  1998,  that it had been unable to obtain the  necessary
  financing for the  contemplated  acquisition by Trace of Foamex  International's
  common stock at a price of $18.75 per share which was the subject  matter of the
  proposed settlement. This request was approved by the Court on October 21, 1998,
  and Foamex International issued a press release on October 21, 1998,  announcing
  that the Court had cancelled the Settlement Hearing.
  
                                         12
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.   COMMITMENTS AND CONTINGENCIES (continued)
  
       On  November  10,  1998,  counsel  for  certain  of the  defendants  in the
  Shareholder  Litigation  gave notice  pursuant to the  Stipulation of Settlement
  that such  defendants  were  withdrawing  from the  Stipulation of Settlement in
  light of the  notice  given by Trace to  Foamex  International  and the  special
  committee of the Board of Directors on November 5, 1998 whereby Trace terminated
  the First Merger  Agreement on the grounds that the  financing  condition in the
  First Merger Agreement was incapable of being satisfied.
  
       On November 12, 1998, the plaintiffs in the Shareholder Litigation filed an
  Amended Class Action Complaint (the "Amended Complaint").  The Amended Complaint
  named Foamex International, Trace, Merger Sub, Mr. Marshall S. Cogan, Mr. Andrea
  Farace,  Dr.  Stuart  Hershon,  Mr. John  Tunney,  and Mr.  Etienne  Davignon as
  defendants, alleging that they breached their fiduciary duties to plaintiffs and
  the other Public  Shareholders in connection with a second Agreement and Plan of
  Merger (the "Second Merger Agreement"),  that the proposal to acquire the Public
  Shares  for  $12.00  per  share  lacked  entire  fairness,  that the  individual
  defendants  violated  8  Del.  Code  ss.  251 in  approving  the  Second  Merger
  Agreement, and that Trace and Merger Sub breached the Stipulation of Settlement.
  On December 2, 1998,  plaintiffs  served a motion for a preliminary  injunction,
  seeking an Order to  preliminarily  enjoin the defendants from proceeding  with,
  consummating or otherwise effecting the merger contemplated by the Second Merger
  Agreement.  In January  1999,  Trace advised that it could not finance the offer
  reflected  in  the  Second  Merger  Agreement.  As  a  result,  the  preliminary
  injunction motion did not go forward.
  
       On June 9, 1999, the  plaintiffs in the  Shareholder  Litigation  moved for
  leave to file a Second  Amended and  Supplemental  Class  Action and  Derivative
  Complaint (the "Second  Amended  Complaint").  The Second Amended  Complaint was
  filed on July 14, 1999, and named Foamex  International,  Trace, Merger Sub, Mr.
  Marshall S. Cogan, Mr. Andrea Farace,  Dr. Stuart Hershon,  Mr. John Tunney, and
  Mr. Etienne Davignon as defendants, alleging that the named individuals breached
  their fiduciary  duties by causing Foamex  International  to waste assets in its
  transactions with Trace and by failing to enforce Foamex  International's rights
  under the First Merger Agreement,  seeking  appointment of a receiver for Foamex
  International,  and alleging that Trace and Merger Sub breached the  Stipulation
  of Settlement.
  
       On August 26, 1999, the plaintiffs in the Shareholder  Litigation moved for
  leave to file a Third  Amended  and  Supplemental  Class  Action and  Derivative
  Complaint (the "Third Amended Complaint"). The Third Amended Complaint was filed
  on October 27, 1999. The Third Amended  Complaint  alleges both class claims and
  derivative  claims, and names Foamex  International,  Mr. Marshall S. Cogan, Mr.
  Andrea Farace, Dr. Stuart Hershon,  Mr. John Tunney,  Mr. Etienne Davignon,  Mr.
  John Gutfreund, Mr. Robert Hay and Mr. John Johnson as defendants.
  
       The Third Amended Complaint alleges that the individual defendants breached
  their duties to Foamex  International's  Public  Shareholders by agreeing to the
  Sorgenti   Transaction   at  an  inadequate   price  that  fails  to  take  into
  consideration  Foamex  International's  allegedly valuable claims arising out of
  purported diversions of money from Foamex International to Trace, and by failing
  to  maximize  shareholder  value in a sale of Foamex  International  and instead
  agreeing to a deal with a buyer who is willing to enter into a  consulting  deal
  with Mr. Cogan to get his and the Foamex  International  board's  approval.  The
  Third  Amended  Complaint  purports to assert a  derivative  claim for waste and
  breach of fiduciary duty against Mr. Cogan, Mr. Farace, Dr. Hershon, Mr. Tunney,
  Mr. Davignon, Mr. Gutfreund,  and Mr. Hay. The Third Amended Complaint seeks the
  appointment of a receiver for Foamex International,  alleging that the directors
  have mismanaged Foamex  International.  The Third Amended Complaint also alleges
  that Mr.  Cogan,  Mr.  Farace,  Dr.  Hershon,  Mr.  Davignon,  Mr.  Tunney,  Mr.
  Gutfreund,  and Mr. Hay breached  their  fiduciary  duties by failing to enforce
  Foamex International's rights under the First Merger Agreement.
  
       The Third  Amended  Complaint  seeks:  a  declaration  that the  individual
  defendants have breached their fiduciary  duties;  damages;  the imposition of a
  constructive  trust on profits and  benefits  Mr.  Cogan,  Trace,  and the other
  individual  defendants allegedly received as a result of the alleged wrongdoing;
  an  injunction  against  the  Sorgenti  Transaction  under  its  present  terms;
  rescission  and damages if the deal is  consummated;  and the  appointment  of a
  receiver for Foamex  International.  To date,  no response to the Third  Amended
  Complaint has been made.
  
                                         13
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.   COMMITMENTS AND CONTINGENCIES (continued)
  
       The  defendants  intend to vigorously  defend these  litigations,  which if
  adversely  determined,  could have a material  adverse  effect on the  financial
  position,  results of operations and cash flows of Foamex  International and its
  subsidiaries.
  
  Litigation - Breast Implants
  
       As of  November  8,  1999,  Foamex  L.P.  and  Trace  were two of  multiple
  defendants  in actions  filed on behalf of  approximately  4,157  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 39 residents of Australia,  New Zealand,  England, and Ireland.
  Foamex L.P. believes that the number of suits and claimants may increase. During
  1995,  Foamex L.P. and Trace were granted  summary  judgments  and  dismissed as
  defendants  from all cases in the  federal  courts of the United  States and the
  state courts of California.  Appeals for these  decisions were withdrawn and the
  decisions are final.
  
       Although breast implants do not contain foam, certain silicone gel implants
  were  produced  using a  polyurethane  foam covering  fabricated by  independent
  distributors or fabricators  from bulk foam purchased from Foamex L.P. or Trace.
  Neither Foamex L.P. nor Trace  recommended,  authorized,  or approved the use of
  its foam for these  purposes.  Foamex L.P. is also  indemnified by Trace for any
  such liabilities  relating to foam manufactured prior to October 1990.  Although
  Trace's insurance carrier has paid Foamex L.P.'s litigation expenses to date, in
  light of Trace's  recent filing under Chapter 11 of the Bankruptcy  Code,  there
  can be no  assurance  that  Trace  will be  able to  continue  to  provide  such
  indemnification. While it is not feasible to predict or determine the outcome of
  these actions, based on management's present assessment of the merits of pending
  claims, after consultation with the general counsel of Trace, and without taking
  into account  indemnification  provided by Trace, the coverage provided by Trace
  and  Foamex  L.P.'s  liability   insurance  and  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  consolidated  financial  position or results of  operations.  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 the financial
  position, results of operations and cash flows of Foamex L.P.
  
  Litigation - Other
  
       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.
  
  Environmental
  
       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. As of September 30, 1999, Foamex L.P. had accruals of
  approximately $3.5 million for environmental  matters.  During 1998, Foamex L.P.
  established an allowance of $0.6 million  relating to receivables from Trace for
  environmental indemnifications due to the financial difficulties of Trace.
  
                                         14
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.   COMMITMENTS AND CONTINGENCIES (continued)
  
       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. The final National
  Emission  Standard for  Hazardous  Air  Pollutants  ("NESHAP")  was  promulgated
  October 7,  1998.  NESHAP  requires  a  reduction  of  approximately  70% of the
  emission  of  methylene  chloride  for the slab  stock foam  industry  effective
  October 7, 2001.  Foamex L.P. does not believe  implementation of the regulation
  will  require  it to make  material  expenditures  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.  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 three
  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.  Foamex L.P. has accruals of $2.5 million
  for the estimated  cost of completing  remediation at these  facilities.  Foamex
  L.P. is in the process of addressing potential  contamination at its Morristown,
  Tennessee facility, and has submitted a sampling plan to the State of Tennessee.
  The extent of the  contamination  and responsible  parties,  if any, has not yet
  been determined.  A former owner may be liable for cleanup costs;  nevertheless,
  the cost of remediation, if any, is not expected to be material.
  
       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 upgraded all USTs at its  facilities  in  accordance
  with  these  regulations.  Foamex  L.P.  believes  that  its  USTs do not pose a
  significant risk of environmental liability. However, there can be no assurances
  that such USTs will not result in  significant  environmental  liability  in the
  future.
  
       On April 10,  1997,  the  Occupational  Health  and  Safety  Administration
  promulgated new standards  governing  employee  exposure to methylene  chloride,
  which  is used  as a  blowing  agent  in some  of  Foamex  L.P.'s  manufacturing
  processes.  The phase-in of the  standards was completed in 1999 and Foamex L.P.
  has  developed  and  implemented  a  compliance  program.  Capital  expenditures
  required  and  changes  in  operating   procedures   are  not   anticipated   to
  significantly impact Foamex L.P.'s competitive position.
  
       Foamex L.P. has been designated as a Potentially  Responsible Party ("PRP")
  by the EPA with  respect  to six sites.  Estimates  of total  cleanup  costs and
  fractional  allocations  of liability are  generally  provided by the EPA or the
  committee  of PRP's  with  respect to the  specified  site.  In each  case,  the
  liability of Foamex L.P. is not considered to be material.
  
       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,  Foamex L.P. 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.
  
                                         15
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  Going Concern Issues
  
       The accompanying financial statements and notes have been prepared assuming
  Foamex L.P. will continue as a going concern.  As discussed in Note 1, there are
  going  concern  issues  involving  the  financial  condition  of Foamex L.P. and
  related impact of debt covenants, and change in control provisions that have the
  potential to accelerate certain debt obligations.
  
       Foamex L.P. is subject to various internal and external factors which could
  significantly impact its liquidity and capital structure, including, among other
  things,  (a)  Foamex  L.P.'s  debt  and  capital   structures,   (b)  the  Crain
  Consolidation,  (c) additional raw material cost  increases,  (d) the ability to
  increase  customers  selling price to recover raw material cost  increases,  (e)
  fluctuations in interest rates, and (f) Trace's financial  condition,  including
  the potential of triggering the "change of control"  provisions in Foamex L.P.'s
  debt agreements  (discussed  below),  and other such factors which may be beyond
  Foamex  L.P.'s  control.  Refer to page 4 of Foamex L.P.'s Annual Report on Form
  10-K  for the  year  ended  December  31,  1998 for a  discussion  of these  and
  additional  factors  which  management  believes  may impact  Foamex L.P.  These
  factors could cause future results to differ  materially from historical  trends
  and management's  current expectations and could impact Foamex L.P.'s ability to
  continue as a going concern.
  
       As discussed in the capital structure section below,  during the first half
  of 1999,  amendments to debt  agreements  were  completed and Foamex L.P. was in
  compliance  with the  financial  covenants of these  agreements on both June 30,
  1999 and September 30, 1999.  Although Foamex L.P. believes it can meet the debt
  covenant requirements under its financing agreements,  there can be no assurance
  these  covenants will be met.  Although  management  believes that Foamex L.P.'s
  debt  obligations  could be refinanced if accelerated as a result of the "change
  of control" provisions under related debt agreements,  there can be no assurance
  that  Foamex  L.P.  will be able to do so or that  Foamex  L.P.  will be able to
  obtain waivers of such provisions.  Additionally,  although Foamex L.P. believes
  that consolidated cash flow from its operating activities and borrowing capacity
  under its credit facility, if necessary,  will be adequate to meet its liquidity
  requirements,  there can be no assurance that Foamex L.P.'s internally generated
  funds and funds  from any  borrowings  will prove to be  sufficient  to fund its
  operations and permit it to continue as a going concern.
  
       Trace is a privately held company which owns approximately  46.1% of Foamex
  International's  outstanding  voting common stock and whose Chairman also serves
  as Foamex International's Chairman. Foamex International's common stock owned by
  Trace is pledged as  collateral  against  certain  of Trace's  obligations.  The
  Foamex L.P. Amended Credit Facility and the Foamex/GFI  Note,  pursuant to which
  approximately  $421.2 million of debt was  outstanding as of September 30, 1999,
  contain provisions that would result in the acceleration of such indebtedness if
  a person or group  other than Trace  were to  beneficially  own more than 25% of
  Foamex International's outstanding voting stock and a greater percentage of such
  voting stock than the amount beneficially owned by Trace. Additionally,  certain
  indentures  relating  to senior  subordinated  notes of $248.0  million  contain
  provisions  that provide the holders of such notes with the right to require the
  issuers  to  repurchase  such  notes  at a price  in cash  equal  to 101% of the
  aggregate principal amount thereof, plus accrued and unpaid interest thereon, if
  a person or group  other than Trace  were to  beneficially  own more than 25% of
  Foamex International's outstanding voting stock and a greater percentage of such
  voting stock than the amount beneficially owned by Trace.
  
       Foamex L.P. was informed by Trace that it filed a petition for relief under
  Chapter 11 of the Bankruptcy  Code in Federal Court in New York City on July 21,
  1999.  Trace's  bankruptcy  filing does not constitute a change of control under
  the provisions of the above  identified  debt  agreements  unless the bankruptcy
  court allows  Trace's  creditors  to  foreclose on and take  ownership of Foamex
  International's  common stock owned by Trace,  or otherwise  authorize a sale or
  transfer  of these  shares to a person or group  other  than Trace  which  would
  acquire more than 25% of Foamex  International's  outstanding voting stock and a
  greater  percentage of such voting stock than the amount  beneficially  owned by
  Trace. According to a filing made with the bankruptcy court on November 2, 1999,
  two of Trace's  creditors have  petitioned  the bankruptcy  court to permit such
  creditors  to  foreclose  on and take  ownership  of the shares of common  stock
  pledged  to  them,  representing  approximately  17% of  Foamex  International's
  outstanding voting stock.
  
       Foamex  L.P.  will seek to resolve the issues that may arise if the "change
  of control"  provisions are triggered in the future,  including  waivers of such
  provisions and/or refinancing  certain debt, if necessary.  Although  management
  
                                         16
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  believes that Foamex L.P.'s debt obligations  could be refinanced if accelerated
  as a result of the "change of  control"  provisions,  there can be no  assurance
  that  Foamex  L.P.  will be able to do so or that  Foamex  L.P.  will be able to
  obtain waivers of such provisions.
  
  Potential Business Combinations
  
       On  August  5,  1999,  Foamex  International  announced  that its  Board of
  Directors  signed  a  letter  of  intent  with  the  Purchasers  for a  business
  combination  providing  for $11.50  per share for all of Foamex  International's
  outstanding  common stock.  The  transaction  is subject to due  diligence,  the
  execution of definitive agreements and other conditions.  Under the terms of the
  letter of intent,  if Foamex  International  enters into a business  combination
  with another party,  the  Purchasers  will be entitled to a break-up fee of $6.0
  million plus reimbursement of certain expenses, subject to certain conditions.
  
       The  transaction  is  subject  to a number  of  conditions,  including  the
  negotiation  of  definitive  documents  that  will  contain  certain  conditions
  relating  to the bank  credit  facilities  and the  public  debt of Foamex  L.P.
  Additional issues that will need to be addressed  include,  minimum  shareholder
  acceptance,   change  of  Foamex  International  board  membership,   and  other
  provisions  providing  for a higher  break-up fee and expense  reimbursement  if
  Foamex  International  enters  into  a  business  combination  providing  a more
  favorable transaction.  The definitive buyout agreement will require appropriate
  filings  with the  Securities  and  Exchange  Commission  and  other  regulatory
  agencies.
  
       On  November 1, 1999,  Foamex  International  announced  that the letter of
  intent expired by its terms.  However,  the Purchasers requested an extension of
  the  letter of  intent  until  December  15,  1999.  The  parties  agreed to the
  extension and are continuing discussions towards a possible transaction.
  
       Also on  November  1,  1999,  Foamex  International  announced  that it has
  authorized a due diligence  review for a possible  business  combination  led by
  John  G.  Johnson,   Jr.,  President  and  Chief  Executive  Officer  of  Foamex
  International.  Mr.  Johnson  has  informed  the Board of  Directors  that he is
  working with various possible sources of equity funding, but that he has no firm
  commitments for the financing of a transaction. No formal proposal has been made
  to Foamex International by Mr. Johnson.
  
  RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
  
  Income from Operations
  
       Net sales for the  third  quarter  of 1999  were  $302.8  million,  up 1.0%
  compared to $299.8  million in the third  quarter of 1998.  The  increase in the
  third quarter  versus the prior year reflects a decrease in Foam Products  sales
  due to  manufacturing  consolidations  and a decrease in Carpet Cushion Products
  volume  offset  by  increased  volume  of  automotive  lamination  products  and
  Technical Products sales.
  
       Income  from  operations  decreased  6.6% to $23.0  million  for the  third
  quarter of 1999 compared to $24.6 million in the 1998 third quarter.  Results in
  1999 included a $3.0 million  provision for  restructuring  and other costs. The
  decrease in margins versus the prior year resulted  principally  from lower Foam
  Products  and Carpet  Cushion  Products  sales and an increase  in lower  margin
  automotive   lamination   business.   The  decrease  in  selling,   general  and
  administrative  costs included the  elimination  of  duplicative  costs from the
  Crain Consolidation and cost reductions implemented during 1999.
  
  Interest and Debt Issuance Expense
  
       Interest and debt issuance expense totaled $17.2 million for the 1999 third
  quarter, 2.9% higher than the comparable 1998 expense.
  
                                         17
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  Other Income (Expense), Net
  
       Other  expense of $0.1 million was  significantly  lower in 1999.  The 1998
  third quarter net other expense of $1.1 million included foreign currency losses
  from Foamex L.P.'s Canadian and Mexican operations.
  
  Net Income
  
       Net  income for the third  quarter  of 1999 was down 18.6% to $5.4  million
  compared to $6.6 million in the 1998 third quarter.
  
  Segment Results
  Carpet
                                       Foam        Cushion       Automotive    Technical
                                     Products      Products       Products      Products        Other         Total
                                     --------      --------       --------      --------        -----         -----
                                                                       (thousands)
  Third Quarter 1999
  Net sales                          $139,111      $ 46,030       $ 83,355      $ 24,322      $ 10,001       $302,819
  Income (loss) from operations        16,064        (1,080)         7,024         6,573        (5,556)        23,025
  
  Third Quarter 1998
  Net sales                          $152,854      $ 51,263       $ 69,843      $ 19,891      $  5,932       $299,783
  Income (loss) from operations        21,711           (40)         4,425         4,156        (5,608)        24,644
  Foam Products
  
       Foam Products net sales for the third quarter of 1999 decreased 9.0%. Lower
  margins resulted in a 26.0% drop in income from operations.  Improved  operating
  efficiencies  and cost reductions as part of the Crain  Consolidation  helped to
  offset the income decline.
  
  Carpet Cushion Products
  
       Carpet  Cushion  Products net sales for the third quarter of 1999 decreased
  10.2% primarily due to lower shipments. Lower margins resulted in a loss for the
  third quarter of 1999.
  
  Automotive Products
  
       Automotive  Products  net  sales for the third  quarter  of 1999  increased
  19.3%. The increase  reflected higher shipments of lamination  products.  Income
  from operations  increased 58.7% from the combination of operating  efficiencies
  and sales gains.
  
  Technical Products
  
       Technical Products net sales for the third quarter of 1999 increased 22.3%.
  Income from operations increased 58.2% and reflected higher margin sales.
  
  Other
  
       Other  primarily  consists  of certain  foreign  manufacturing  operations,
  corporate  expenses not allocated to operating  segments and  restructuring  and
  other charges.  The increase in net sales associated with this segment primarily
  resulted  from an increase in net sales from Foamex L.P.'s  Mexican  operations.
  The loss from operations in 1999 was primarily  associated with the $3.0 million
  of restructuring and other charges.
  
                                         18
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
  
  Income from Operations
  
       Net sales for the first three quarters of 1999 were $894.9 million compared
  to $871.6  million for the  comparable  period in 1998.  The 2.7%  increase  was
  primarily  the result of sales gains in the  Automotive  Products and  Technical
  Products  segments  partially offset by declines in the Foam Products and Carpet
  Cushion Products segments.
  
       Despite the sales improvement,  income from operations of $63.9 million was
  down 19.1% from $79.0 million for the  comparable  1998 period.  Results in 1999
  included $10.0 million of restructuring and other charges. The remaining decline
  primarily  reflected  lower  results in the Foam  Products  and  Carpet  Cushion
  Products segments.  The Foam Products segment was impacted by lower sales due to
  plant  closures  in  connection  with the Crain  Consolidation.  Carpet  Cushion
  Products 1999 results were impacted by lower margins. The increase in Automotive
  Products and Technical Products segment results translated to improved earnings.
  Partially  offsetting  these negative  factors were lower  selling,  general and
  administrative  expenses that primarily reflected the elimination of duplicative
  costs from the Crain Consolidation and cost reductions implemented during 1999.
  
  Interest and Debt Issuance Expense
  
       Interest and debt issuance expense totaled $49.5 million in 1999,  slightly
  higher than the 1998 expense of $49.2 million.
  
  Other Income (Expense), Net
  
       Other expense was  significantly  lower in 1999. The 1998 net other expense
  included  foreign  currency  losses  from  Foamex  L.P.'s  Canadian  and Mexican
  operations.
  
  Extraordinary Loss
  
         The  extraordinary  loss on the early  extinguishment of debt in 1998 was
  $3.2  million.  The charge  primarily  reflected  the write off of debt issuance
  costs in connection  with a series of  transaction  designed to simplify  Foamex
  L.P.'s capital structure and to provide future operational flexibility.
  
  Net Income
  
       Net income for the first  three  quarters of 1999 was $12.8  million,  down
  43.9% from the comparable period in 1998.
  
  Segment Results
  Carpet
                                        Foam        Cushion       Automotive       Technical
                                      Products      Products        Products        Products        Other          Total
                                      --------      --------        --------        --------        -----          -----
                                                                        (thousands)
  Year to Date 1999
  Net sales                          $ 403,399      $ 136,020       $ 262,936      $  69,598      $  22,972       $ 894,925
  Income (loss) from operations         41,933         (1,516)         19,849         17,811        (14,141)         63,936
  
  Year to Date 1998
  Net sales                          $ 434,569      $ 162,603       $ 197,447      $  61,163      $  15,782       $ 871,564
  Income (loss) from operations         56,737          1,711          17,661         12,744         (9,827)         79,026
  19
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  Foam Products
  
       Foam Products net sales for the first three  quarters  decreased  7.2%. The
  decrease primarily  reflected the closure of several plants as part of the Crain
  Consolidation.  Income from  operations  decreased  26.1% primarily due to lower
  margins.
  
  Carpet Cushion Products
  
       Carpet Cushion  Products net sales for the first three  quarters  decreased
  16.3% primarily due to lower  shipments.  Lower margins  resulted in a loss from
  operations for the first three quarters of 1999.
  
  Automotive Products
  
       Automotive Products net sales for the first three quarters increased 33.2%.
  The increase  reflected  higher  shipments of lamination  products.  Income from
  operations  increased 12.4% from the combination of operating  efficiencies  and
  sales gains that were especially evident during the third quarter of 1999.
  
  Technical Products
  
       Technical  Products net sales for the first three quarter  increased 13.8%.
  Income from operations increased 39.8% and reflected higher margin sales.
  
  Other
  
       Other  primarily  consists  of certain  foreign  manufacturing  operations,
  corporate  expenses not allocated to operating  segments and  restructuring  and
  other charges.  The increase in net sales associated with this segment primarily
  resulted  from an increase in net sales from Foamex L.P.'s  Mexican  operations.
  The loss from operations in 1999 was primarily associated with the $10.0 million
  of restructuring and other charges.
  
  Capital Structure
  
       As of December 31, 1998,  Foamex L.P.  was not in  compliance  with various
  debt covenants included in agreements  totaling $415.4 million.  Had the lenders
  under these debt agreements  accelerated the maturity of their indebtedness as a
  result of  noncompliance,  the  acceleration  would have constituted an event of
  default  and  given  the  holders  the  right  to  require  the   repurchase  of
  substantially all of Foamex L.P.'s long-term debt. As a result of these factors,
  approximately  $715.8  million  of  long-term  debt at  December  31,  1998  was
  classified  as a current  liability in the  consolidated  balance  sheet,  which
  produced a working capital  deficit.  These issues raised  substantial  doubt at
  year-end 1998 about Foamex L.P.'s ability to continue as a going concern.
  
       In response to these  financial  conditions,  amendments to debt agreements
  were executed during the first half of 1999, as discussed  below.  Additionally,
  Foamex L.P. generated net income,  provided over $40.0 million of cash flow from
  operations  and reduced  total debt by 3% from the  beginning  of the year.  The
  combination  of  debt   amendments,   year  to  date  results  and  management's
  expectations  regarding  compliance  with debt  covenants in future  measurement
  periods  represented an improved  financial  position relative to year-end 1998.
  Accordingly,  $695.4  million of debt at the end of the second  quarter 1999 and
  $686.5 million at the end of the third quarter 1999 were classified as long term
  in the balance sheet.
  
       Amendments to the Foamex L.P. Amended Credit Facility, as of June 30, 1999,
  modified  the  financial  covenants  for net worth and  interest,  fixed  charge
  coverage and leverage ratios through December 2006. An earnings requirement,  as
  defined in the debt agreement, was added through September 30, 1999. Foamex L.P.
  was in compliance  with the interim  requirement at the end of the third quarter
  of 1999. Effective January 1, 2000, the interest rate on outstanding  borrowings
  under the Foamex L.P.  Amended Credit  Facility will increase by 25 basis points
  each quarter that Foamex L.P.'s  leverage  ratio exceeds 5.00 to 1.00.  Once the
  leverage  ratio is reduced  below this level,  the  cumulative  amount of any 25
  basis point  adjustments to the interest rate on borrowings would be eliminated.
  The  agreement was also modified to no longer permit Foamex L.P. to make certain
  cash payments, including the payment of an annual management fee to a subsidiary
  
                                         20
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  of  Trace  (totaling  $3.0  million  in  1998)  and   distributions   to  Foamex
  International, and to limit future investments in foreign subsidiaries and joint
  ventures.  The  "change of  control"  definition  under the  agreement  was also
  modified.
  
       During 1999, the Foamex/GFI Note was amended to incorporate the same change
  in control  provisions  that are  included  in the Foamex  L.P.  Amended  Credit
  Facility.
  
       Foamex L.P. continues to be subject to covenants  contained in various debt
  agreements  that limit,  among other things to varying  degrees,  the ability of
  Foamex L.P. (a) to pay  distributions or redeem  partnership  interests,  (b) to
  make  certain  restrictive  payments  or  investments,  (c) to incur  additional
  indebtedness  or issue  Preferred  Equity  Interest,  as defined,  (d) to merge,
  consolidate or sell all or substantially  all of its assets or (e) to enter into
  certain  transactions with affiliates or related persons.  In addition,  certain
  agreements  contain provisions that, in the event of a defined change of control
  or the occurrence of an undefined  material adverse change in the ability of the
  obligor to perform its obligations,  the indebtedness must be repaid, in certain
  cases, at the option of the holder.
  
       Certain of Foamex L.P.'s Mexican  subsidiaries were in default of financial
  covenant provisions contained in loan agreements with a Mexican bank. Amendments
  to  the  loan  agreements  were  finalized  to  modify  the  financial  covenant
  provisions.  As of  September  30,  1999,  these  Mexican  subsidiaries  were in
  compliance with the financial covenant provisions under the loan agreements.
  
  Liquidity
  
       Cash provided by operating activities was $40.9 million for the first three
  quarters of 1999 as  compared to cash used of $27.5  million for the same period
  in 1998.  The  improvement  is  primarily  due to a  decrease  in cash  used for
  operating assets and liabilities.
  
       Cash used for investing  activities  was $11.3 million for the year to date
  period ended  September  30, 1999 as compared to cash used of $35.6  million for
  the comparable 1998 period.  Cash requirements in 1998 included $3.9 million for
  the  acquisition-related  payments and $9.0  million of payments  related to the
  redemption of General Felt Industries,  Inc. Capital  expenditures  were down in
  1999.
  
       Cash  required for  financing  activities  was $29.3  million for the first
  three quarters and primarily  reflected net debt  repayments and $3.5 million of
  debt issuance costs.
  
       The ability of Foamex L.P. to make distributions to Foamex International is
  restricted  by the  terms  of its  financing  agreements.  Consequently,  Foamex
  International  is not  expected  to have  access to the cash flow  generated  by
  Foamex L.P. for the foreseeable future.
  
       As of September  30, 1999,  there were $122.4  million of revolving  credit
  borrowings,  at a weighted  average interest rate of 8.8%, under the Foamex L.P.
  Amended Credit Facility with $17.5 million  available for additional  borrowings
  and  approximately  $47.6  million of letters  of credit  outstanding  which are
  supported  by the Foamex L.P.  Amended  Credit  Facility.  Borrowings  by Foamex
  Canada Inc. as of September  30, 1999 were  approximately  $3.6  million,  at an
  interest rate of 7.0%,  under Foamex Canada Inc.'s  revolving  credit  agreement
  with unused availability of approximately $1.8 million.
  
       Foamex  L.P.  expects  to  continue  to reduce  capital  expenditures  from
  historical levels for the foreseeable  future.  Lower capital expenditure levels
  are not anticipated to materially impact Foamex L.P.'s competitive position.
  
  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 Foamex
  L.P.'s  operations,  financial  position,  capital  expenditures  or competitive
  position.  The amount of liabilities  recorded by Foamex L.P. in connection with
  environmental matters as of September 30, 1999 was $3.5 million.  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 notes to Foamex L.P.'s  consolidated  financial
  statements  for the year ended  December 31, 1998,  Foamex L.P.  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
  
                                         21
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  L.P.'s  operations,  financial  position,  capital  expenditures  or competitive
  position.  See  Note  17 to  Foamex  L.P.'s  consolidated  financial  statements
  included in Foamex L.P.'s Annual Report on Form 10-K for the year ended December
  31, 1998.
  
  Market Risk
  
       Foamex L.P.'s debt securities  with variable  interest rates are subject to
  market risk for changes in interest rates.  On September 30, 1999,  indebtedness
  with variable interest rates totaled $439.1 million.  On an annualized basis, if
  the interest rates on these debt  instruments  increased by 1%, interest expense
  would increase by approximately $4.4 million.
  
  Year 2000 Compliance
  
       Status Update
  
       By the end of the  third  quarter  of 1999,  Foamex  L.P.  has  essentially
  completed  its  program to  address  potential  disruptions  to  operations  and
  relationships  with our  business  partners  related  to the Year 2000  software
  problem.
  
       Foamex L.P. utilized a cross-functional  team approach that was directed by
  a  Year  2000  Executive  Sponsor  Team.  A  comprehensive  assessment  of  both
  information  technology  (IT)  and  non-IT  systems  has been  completed.  These
  assessments included:
  
       o    administrative, manufacturing and laboratory computer systems
       o    desktop and telecommunications systems
       o    safety and environmental systems
       o    systems  provided  by  vendors  and  suppliers,   including   employee
            compensation and benefit plan maintenance systems
       o    process control systems and manufacturing equipment
       o    significant customers and suppliers.
  
       Assessment & Remediation Process
  
       The assessment process for each facility consisted of:
  
       o    an inventory of potential Year 2000 sensitive equipment and systems
       o    an  impact  evaluation  of  possible  failures  and  determination  of
            required remediation actions
       o    testing and implementation of remediation actions.
  
       The assessment process, including fail safe testing, was completed in 1999.
  The following discussion focuses on the process.
  
       The  inventory  and  assessment  phases were  completed by the end of 1998.
  These phases  consisted of a visit to each critical  location by team members to
  promote  awareness of the project and verify the initial  inventory  provided by
  the  contact at each  facility.  Testing  plans were  developed  which  included
  correspondence  with suppliers  regarding  date-sensitive  devices. In addition,
  local management was advised of their roles and  responsibilities  in connection
  with the Year 2000 Problem.
  
       Foamex L.P.  completed  the  remediation  and testing of critical  business
  information  computer  systems as of  December  31,  1998.  Remediation  actions
  included:
  
       o    the modification of several million lines of system code
       o    the  conversion of the systems  acquired in business  combinations  to
            standard business information computer systems
  
                                         22
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
       o    upgrading system hardware and operating system software
       o    testing of the applicable systems in a development testing area
       o    the  migration  of  the   remediated   systems  into  the   production
            environment.
  
       Cost and Project Impact
  
       The cost to address the Year 2000 Problem is  approximately  $2.0  million.
  The majority of this total  project cost has already been  incurred  during 1998
  and 1999. The project cost primarily represents the cost for various consultants
  and  system  upgrades.  Project  cost  includes  internal  Company  cost  for IT
  employees that worked directly on software programming modifications.
  
       Spending on the Year 2000  Problem has been funded by cash  generated  from
  operations.  The project did not significantly impact the other responsibilities
  and project schedule of the IT department during the past two years.
  
       Contingency Plans
  
       As part of the overall  response to the Year 2000 Problem,  Foamex L.P. has
  developed  contingency plans in the event of Year 2000 non-compliance of certain
  systems or third parties. These contingency plans include:
  
       o    additional security of manufacturing and administrative facilities
       o    response teams to address incidents
       o    status review and testing of critical applications prior to initiation
            of normal processing requirements on or about January 1, 2000
       o    alternative   production  and  shipping  locations  in  the  event  of
            localized power outages.
  
       Risks
  
       Management  believes that all significant systems controlled by Foamex L.P.
  are ready.  While  Foamex L.P.  is  communicating  readiness  to  customers,  as
  requested, and is assessing the readiness of critical suppliers, there can be no
  assurance  that third  parties with a  significant  business  relationship  will
  successfully test, reprogram,  and replace all of their IT and non-IT systems on
  a timely basis.
  
       There is inherent  uncertainty in connection with the Year 2000 Problem due
  to the  possibility  of  unanticipated  failures  by  customers,  suppliers  and
  infrastructure  services.  Accordingly,  Foamex L.P. is unable, at this time, to
  assess the extent and resulting  materiality of the impact of possible Year 2000
  failures on its  operations,  liquidity  or  financial  position.  The Year 2000
  assessment,  remediation,  and testing process has provided information in order
  to  reduce  the  level of  uncertainty  regarding  the  impact  of the Year 2000
  Problem.  Management  believes  that Foamex  L.P.'s  solutions  to the Year 2000
  Problem will help minimize the possibility of significant  disruptions to Foamex
  L.P.'s operations.
  
       Forward-Looking Statements Relating to the Year 2000 Problem
  
       The Year 2000  Problem  discussion  includes  a number  of  forward-looking
  statements that are based on Foamex L.P.'s best estimates.  The actual impact of
  the Year 2000 Problem could differ  materially from these estimates because of a
  number of factors,  including  the failure of third parties to achieve Year 2000
  compliance and the inability of Foamex to:
  
       o    accurately assess which systems and  relationships  with third parties
            are important
       o    identify and correct all computer code in key systems
       o    identify  and  correct  all  production  equipment  that could have an
            embedded date sensitive chip
       o    identify all significant issues.
  
         The factors  identified above are not necessarily all of the factors that
  could  result in  materially  different  impact from the  estimates  included in
  Foamex L.P.'s forward-looking statements.
  
                                         23
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
  
  Forward-Looking Statements
  
       This  report  contains  forward-looking  statements  and  should be read in
  conjunction with the discussion regarding  forward-looking  statements set forth
  on page 4 of  Foamex  L.P.'s  Annual  Report  on Form  10-K for the  year  ended
  December 31, 1998.
  
                                         24
  ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
       See the "Market  Risk" section under Item 2,  Management's  Discussion  and
  Analysis of Financial Condition and Results of Operations.
  
                                         25
  Part II -  Other Information
  
  Item 1.    Legal Proceedings
  
             Reference  is  made  to  the  description  of the  legal  proceedings
             contained in Foamex  L.P.'s  Annual  Report on Form 10-K for the year
             ended December 31, 1998.
  
             The information from Note 8 of the condensed  consolidated  financial
             statements  of Foamex L.P. as of September  30, 1999  (unaudited)  is
             incorporated herein by reference.
  
  Item 5.    Other Information
  
             Information  concerning  the  extension of a Letter of Intent for the
             acquisition of Foamex  International  is incorporated by reference to
             Exhibit No. 99.
  
  Item 6.    Exhibits and Reports on Form 8-K
  
             (a)  Exhibits
  
                   4.5(a) Commitment Letter dated August 9, 1999, from The Bank of
                          Nova Scotia to Foamex Canada Inc.
  
                   27     Financial  Data  Schedule  for the  year to date  period
                          ended September 30, 1999.
  
                   99(a)  Press  release  concerning  the extension of a Letter of
                          Intent for the acquisition of Foamex International.
  
             (b)  Foamex L.P. filed the following  Current Reports on Form 8-K for
                  the quarter ended September 30, 1999:
  
                  A report,  dated  August 5,  1999,  was filed for Item 5.  Other
                  Events,  reporting  press  release of proposed  buyout of Foamex
                  International.
  
                  A report,  dated August 13, 1999,  was filed for Item.  5. Other
                  Events, concerning a purported class action complaint by certain
                  shareholders of Foamex International.
  
  (a)  Incorporated  herein by reference to the Exhibit to the Form 10-Q of Foamex
       International for the quarter ended September 30, 1999.
  
                                         26
  SIGNATURES
  
       Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
  registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned thereunto duly authorized.
  
                                              FOAMEX L.P.
                                              By:  FMXI, Inc.
                                                   General Partner
  
  Date: November 12, 1999                     By: /s/ George L. Karpinski
                                                  --------------------------------
                                                  George L. Karpinski
                                                  Vice President
  
                                              FOAMEX CAPITAL CORPORATION
  
  Date: November 12, 1999                     By: /s/ George L. Karpinski
                                                  --------------------------------
                                                  George L. Karpinski
                                                  Vice President
  
                                         27