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 March 31, 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 its therefore filing this
  form with the reduced disclosure format.
  
  The number of shares of Foamex Capital Corporation's common stock outstanding as
  of May 12, 1999 was 1,000.
  
                                    Page 1 of 23
                            Exhibit List on Page 22 of 23
  <PAGE>
                                     FOAMEX L.P.
                             FOAMEX CAPITAL CORPORATION
  
  <TABLE>
  <CAPTION>
                                        INDEX
                                                                                                                 Page
  <S>                                                                                                           <C> 
  
  Part I.   Financial Information:
  
            Item 1.  Financial Statements
  
                Condensed Consolidated Statements of Operations (unaudited) - Quarterly Periods Ended
                  March 31, 1999 and March 29, 1998                                                                3
  
                Condensed Consolidated Balance Sheets (unaudited) as of March 31, 1999
                  and December 31, 1998                                                                            4
  
                Condensed Consolidated Statements of Cash Flows (unaudited) - Quarterly Periods Ended
                  March 31, 1999 and March 29, 1998                                                                5
  
                Notes to Condensed Consolidated Financial Statements (unaudited)                                   6
  
  
            Item 2.  Management's Discussion and Analysis of Financial Condition and Results
                     of Operations                                                                                14
  
  Part II.  Other Information                                                                                     22
  
            Item 1.  Legal Proceedings                                                                            22
  
            Item 6.  Exhibits and Reports on Form 8-K                                                             22
  
  Signatures                                                                                                      23
  </TABLE>
  
  
  
                                         2
  
  <PAGE>
  PART I.  FINANCIAL INFORMATION
  ITEM 1.  FINANCIAL STATEMENTS
  
                            FOAMEX L.P. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
  
  <TABLE>
  <CAPTION>
                                                      Quarterly Periods Ended   
                                                     March 31,        March 29,
                                                       1999             1998 
                                                    ---------        ---------
                                                            (thousands)
  <S>                                               <C>              <C>      
  NET SALES                                         $ 299,877        $ 298,073
  
  COST OF GOODS SOLD                                  262,416          253,165
                                                    ---------        ---------
  
  GROSS PROFIT                                         37,461           44,908
  
  SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES                           14,333           20,999
  
  RESTRUCTURING AND OTHER CHARGES                       3,357               --
                                                    ---------        ---------
  
  INCOME FROM OPERATIONS                               19,771           23,909
  
  INTEREST AND DEBT ISSUANCE EXPENSE                   16,139           16,912
  
  OTHER EXPENSE, NET                                      439              313
                                                    ---------        ---------
  
  INCOME BEFORE PROVISION FOR INCOME TAXES              3,193            6,684
  
  PROVISION FOR INCOME TAXES                              585            1,076
                                                    ---------        ---------
  
  INCOME BEFORE EXTRAORDINARY LOSS                      2,608            5,608
  
  EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
     OF DEBT, NET OF INCOME TAXES                          --           (3,123)
                                                    ---------        ---------
  
  NET INCOME                                        $   2,608        $   2,485
                                                    =========        =========
  </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>
                                                              March 31,       December 31,
  ASSETS                                                         1999              1998       
                                                              ---------         ---------
  CURRENT ASSETS:                                       (thousands, except number of shares)
  <S>                                                         <C>               <C>      
     Cash and cash equivalents                                $   4,907         $   3,192
     Accounts receivable, net                                   154,130           143,301
     Accounts receivable from related parties                     9,650            17,533
     Inventories                                                108,451           127,636
     Other current assets                                        28,729            33,849
                                                              ---------         ---------
         Total current assets                                   305,867           325,511
  
  PROPERTY, PLANT AND EQUIPMENT, NET                            219,831           219,637
  
  COST IN EXCESS OF ASSETS ACQUIRED, NET                        187,187           188,205
  
  DEBT ISSUANCE COSTS, NET                                       14,612            13,946
  
  OTHER ASSETS                                                   22,217            21,229
                                                              ---------         ---------
  
  TOTAL ASSETS                                                $ 749,714         $ 768,528
                                                              =========         =========
  
  LIABILITIES AND PARTNERS' DEFICIT
  CURRENT LIABILITIES:
     Short-term borrowings                                    $   3,493         $   2,957
     Current portion of long-term debt                          682,766           689,478
     Current portion of long-term debt - related party           34,000            34,000
     Accounts payable                                           119,678           139,726
     Accrued interest                                             7,897             7,396
     Other accrued liabilities                                   53,835            52,944
                                                              ---------         ---------
         Total current liabilities                              901,669           926,501
  
  OTHER LIABILITIES                                              37,998            38,064
                                                              ---------         ---------
  
         Total liabilities                                      939,667           964,565
                                                              ---------         ---------
  
  COMMITMENTS AND CONTINGENCIES                                      --                --
                                                              ---------         ---------
  
  PARTNERS' DEFICIT:
     General partner                                           (138,818)         (141,426)
     Limited partner                                                 --                --
     Accumulated other comprehensive income (loss)              (25,796)          (26,208)
     Notes and advances receivable from partner                 (16,118)          (18,608)
     Notes receivable from related party                         (9,221)           (9,795)
                                                              ---------         ---------
  
         Total partners' deficit                               (189,953)         (196,037)
                                                              ---------         ---------
  
  TOTAL LIABILITIES AND PARTNERS' DEFICIT                     $ 749,714         $ 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>
                                                                            Quarterly Periods Ended     
                                                                          March 31,         March 29,
                                                                            1999              1998  
                                                                         ---------         ---------
                                                                                 (thousands)
  OPERATING ACTIVITIES:
  <S>                                                                    <C>               <C>      
     Net income                                                          $   2,608         $   2,485
     Adjustments to reconcile net income to net cash provided
       by operating activities:
       Depreciation and amortization                                         7,669             7,251
       Amortization of debt issuance costs, debt discount,
         debt premium and deferred swap adjustments                           (101)              247
       Extraordinary loss on early extinguishment of debt                       --             2,857
       Other operating activities                                              (96)            2,142
       Changes in operating assets and liabilities, net                        992           (44,073)
                                                                         ---------         ---------
  
           Net cash provided by (used for) operating activities             11,072           (29,091)
                                                                         ---------         ---------
  
  INVESTING ACTIVITIES:
     Capital expenditures                                                   (5,743)           (7,115)
     Acquisitions, net of cash acquired                                         --            (3,321)
     Sale of subsidiaries                                                       --            (8,971)
     Deposit for defeasance of indebtedness                                     --            (4,809)
     Repayments of (purchase of) note from partner                           2,490            (2,490)
     Proceeds from (payments for) note receivable - related party               --              (424)
     Other investing activities                                                 --              (451)
                                                                         ---------         ---------
  
           Net cash used for investing activities                           (3,253)          (27,581)
                                                                         ---------         ---------
  
  FINANCING ACTIVITIES:
     Net proceeds from short-term borrowings                                   536              (716)
     Net proceeds from (repayments of) revolving loans                      (5,237)           69,973
     Proceeds from long-term debt                                               --           129,000
     Repayment of long-term debt                                            (1,212)         (126,827)
     Debt issuance cost                                                     (1,154)           (1,149)
     Cash overdraft                                                            963                --
     Distribution to partners                                                   --           (20,000)
     Other financing activities                                                 --               (42)
                                                                         ---------         ---------
  
           Net cash provided by (used for) financing activities             (6,104)           50,239
                                                                         ---------         ---------
  
  NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS                                                        1,715            (6,433)
  
  CASH AND CASH EQUIVALENTS
     AT BEGINNING OF PERIOD                                                  3,192             9,405
                                                                         ---------         ---------
  
  CASH AND CASH EQUIVALENTS
     AT END OF PERIOD                                                    $   4,907         $   2,972
                                                                         =========         =========
  </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.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  
         Foamex  L.P.'s  condensed  consolidated  balance sheet as of December 31,
  1998 has been  condensed  from the audited  consolidated  balance  sheet at that
  date.  The  condensed  consolidated  balance  sheet as of March  31,  1999,  the
  condensed  consolidated  statements of  operations  and cash flows for quarterly
  periods  ended March 31,  1999 and March 29,  1998 have been  prepared by Foamex
  L.P. and  subsidiaries  and have not been audited by Foamex  L.P.'s  independent
  accountants.  In the opinion of management, all adjustments,  consisting only of
  normal recurring  adjustments,  considered  necessary for a fair presentation of
  the financial position, results of operations and cash flows have been included.
  Foamex L.P. is a wholly owned subsidiary of Foamex  International  Inc. ("Foamex
  International").
  
         Effective September 1998, management of Foamex L.P. elected to change the
  year-end  reporting  period 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 December 31st to improve the internal reporting requirements. This change
  was effective for the third fiscal  quarter of 1998 which ended on September 30,
  1998. Fiscal year 1997 was composed of fifty-two weeks and ended on December 28,
  1997. As a result,  the quarterly  financial data for the quarterly period ended
  March 29, 1998  represents a  thirteen-week  period.  The first  quarter of 1999
  ended on March  31st , which was the end of the third  full  month of 1999,  and
  included 91 calendar days.
  
         Certain  information  and  note  disclosures  normally  included  in  the
  financial  statements  prepared in accordance with generally accepted accounting
  principles  have been  condensed  or  omitted in  accordance  with the rules and
  regulations  of  the  Securities  and  Exchange   Commission.   These  condensed
  consolidated  financial  statements  should be read in  conjunction  with Foamex
  L.P.'s 1998 consolidated  financial statements and notes thereto as set forth in
  Foamex L.P.'s Annual Report on Form 10-K for the year ended December 31, 1998.
  
         Foamex L.P.  operates in the flexible  polyurethane  and advanced polymer
  foam products  industry.  As of March 31, 1999, Foamex L.P.'s operations consist
  of the following  operating  segments:  (i) foam  products,  (ii) carpet cushion
  products,  (iii)  automotive  products,  (iv) technical  products and (v) other,
  which primarily consists of certain foreign manufacturing operations,  corporate
  expenses not allocated to the other  operating  segments and  restructuring  and
  other  charges.  The net  sales  and  income  (loss)  from  operations  of these
  operating  segments for the quarterly periods ended March 31, 1999 and March 29,
  1998 are included in Note 7.
  
         The accompanying  condensed  consolidated  financial statements have been
  prepared  assuming  Foamex L.P. will continue as a going  concern.  For the year
  ended December 31, 1998,  Foamex L.P. had a loss from continuing  operations,  a
  working  capital  deficit and was not in compliance and does not expect to be in
  compliance  for future  periods  with  certain  debt  covenants  for which it is
  seeking amendments. Foamex L.P. received a waiver under its credit facility (the
  "Credit Facility")  through May 5, 1999, which was subsequently  extended on May
  6, 1999 through June 30, 1999,  for the  covenants for which Foamex L.P. was not
  in  compliance.   Non-compliance  under  the  Credit  Facility  and  other  debt
  agreements  provides the lenders under the  agreements,  which have an aggregate
  outstanding principal balance of approximately $409.2 million at March 31, 1999,
  with  the  right,  upon  notice  and  lapse  of  time,  to  declare  all of such
  indebtedness to be due.  Notwithstanding the fact that to date, the lenders have
  not exercised  such rights and have granted  waivers of such  covenants  through
  June 30, 1999 to enable Foamex L.P. to negotiate  amendments of such  covenants;
  there  can be no  assurance  that such  amendments  will be  obtained.  Were the
  lenders under the Credit Facility or the other debt agreements to accelerate the
  maturity of their  indebtedness,  such acceleration would constitute an event of
  default and all of Foamex L.P.'s  long-term  debt would become due. As a result,
  Foamex L.P. has reclassified  approximately $708.8 million and $715.8 million of
  long-term debt as current in the  accompanying  condensed  consolidated  balance
  sheets at March 31, 1999 and  December  31, 1998,  respectively.  These  matters
  raise  substantial  doubt  about  Foamex  L.P.'s  ability to continue as a going
  concern.
  
         Trace International  Holdings, Inc. ("Trace") is a privately held company
  which owned approximately 46.1% of Foamex  International's  outstanding stock as
  of April 1, 1999 and  whose  Chairman  also  serves  as the  Chairman  of Foamex
  International.  In 1998,  Trace  informed  Foamex  International  that Trace had
  substantial  debt  obligations that were due at the end of December 1998 and did
  not have the financial resources to pay those obligations.  Subsequently,  Trace
  informed  Foamex   International  that  waivers  and/or  modifications  of  such
  indebtedness had been
  
                                         6
  <PAGE>
  
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  1.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
  obtained for at least the near future;  however,  there can be no assurance that
  such  waivers  and/or  modifications  will remain in effect prior to obtaining a
  permanent  resolution.  Foamex  International's  common  stock owned by Trace is
  pledged as collateral against certain of Trace's  obligations.  If Trace were to
  default on such  indebtedness  collateralized by Foamex  International's  common
  stock or other Trace  creditors were to take steps  constituting a default under
  such indebtedness (such as filing an involuntary  bankruptcy  petition),  and if
  the holders of such  indebtedness  were to foreclose  on Foamex  International's
  common  stock owned by Trace,  such event could  trigger the "change of control"
  provisions and  correspondingly  the  acceleration  and put rights  contained in
  certain of Foamex L.P.'s debt agreements,  as described below. This could result
  in the acceleration of all of Foamex L.P.'s debt.  Although  management believes
  that  Foamex   L.P.'s  debt   obligations   could  be   refinanced   under  such
  circumstances,  there can be no assurance  that Foamex L.P. or its  subsidiaries
  would be able to do so. The financial  statements do not include any adjustments
  that might result from the outcome of these uncertainties.
  
         Certain credit agreements and promissory notes of Foamex L.P. pursuant to
  which  approximately  $434.3  million of debt has been  issued,  as of March 31,
  1999,  contain  provisions  that  would  result  in  the  acceleration  of  such
  indebtedness  if Trace  were to cease  to own at  least  30% of the  outstanding
  common stock of Foamex  International.  Similarly,  certain indentures of Foamex
  L.P. and Foamex Capital Corporation  relating to approximately $248.0 million of
  senior  subordinated  notes contain  provisions that provide the holders of such
  senior  subordinated  notes with the right to  require  the  issuers  thereof to
  repurchase  such senior  subordinated  notes at a price in cash equal to 101% of
  the  aggregate  principal  amount  thereof,  plus  accrued  and unpaid  interest
  thereon,  if Trace  falls below  certain  specified  ownership  levels of Foamex
  International's  common  stock  and  other  persons  or  group  owns  a  greater
  percentage of Foamex International's common stock than Trace.
  
  2.     INVENTORIES
  
         Inventories consist of:
  
                                           March 31,      December 31,
                                             1999            1998        
                                                 (thousands)
  
         Raw materials and supplies        $ 74,254        $ 93,241
         Work-in-process                     11,748          12,087
         Finished goods                      22,449          22,308
                                           --------        --------
  
         Total                             $108,451        $127,636
                                           ========        ========
  
  3.     CURRENT PORTION OF LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
  
         Foamex L.P. reclassified  approximately $708.8 million and $715.8 million
  of long-term debt as current in the accompanying  condensed consolidated balance
  sheets at March 31, 1999 and December 31, 1998, respectively, in connection with
  waivers   granted   through  June  30,  1999  under  the  Credit   Facility  for
  noncompliance with certain debt covenants. These matters raise substantial doubt
  about  Foamex  L.P.'s  ability to  continue as a going  concern.  Foamex L.P. is
  seeking amendments to its Credit Facility. (See Note 1.)
  
  
                                         7
  <PAGE>
  
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  3.     CURRENT PORTION OF LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY 
         (continued)
  
         Current portion of long-term debt consists of:
  <TABLE>
  <CAPTION>
                                                                               March 31,     December 31,
                                                                                 1999            1998
                                                                               --------        --------
         Credit Facility:                                                              (thousands)
  <S>                                                                          <C>             <C>     
           Term Loan B                                                         $ 82,504        $ 82,714
           Term Loan C                                                           75,003          75,194
           Term Loan D                                                          108,625         108,900
           Revolving credit facility                                            134,201         139,438
         9 7/8% Senior subordinated notes due 2007                              150,000         150,000
         13 1/2% Senior subordinated notes due 2005 (includes
           $11,445 and $11,893 of unamortized debt premium)                     109,445         109,893
         Industrial revenue bonds                                                 7,000           7,000
         Subordinated note payable (net of unamortized
           debt discount of $431 and $523)                                        6,583           6,491
         Other                                                                    9,405           9,848
                                                                               --------        --------
                                                                                682,766         689,478
  
         Less current portion                                                   682,766         689,478
                                                                               --------        --------
  
         Long-term debt-unrelated parties                                      $     --        $     --
                                                                               ========        ========
  
         Current portion of long-term debt - related party consists of:
  
         Foamex/GFI Note                                                       $ 34,000        $ 34,000
                                                                               ========        ========
  </TABLE>
  
         Debt Restrictions and Covenants
  
         The  indentures,  credit  facilities  and other  indebtedness  agreements
  contain certain covenants 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 (see Note 1). Also,  Foamex L.P. is required
  under certain of these  agreements  to maintain  specified  financial  ratios of
  which the most restrictive are the maintenance of net worth and interest,  fixed
  charge and leverage coverage ratios,  as defined.  Under the most restrictive of
  the  distribution  restrictions,  Foamex L.P. can make  distributions  to Foamex
  International  only to the extent  necessary to enable Foamex  International  to
  meet its operating and debt obligations.
  
         Foamex L.P.  amended its Credit Facility on March 11, 1999. The amendment
  adjusted  financial  covenants,  among other things, as of December 31, 1998 and
  provided  for future  measurement  periods  taking into  account  Foamex  L.P.'s
  estimated  operating  results and financial  condition for 1998 and managements'
  expectations  regarding future  measurement  periods.  As the Foamex L.P. actual
  1998 net loss was greater than originally  estimated,  on April 15, 1999, Foamex
  L.P. obtained a waiver through May 5, 1999, which was further extended on May 6,
  1999 through June 30, 1999, of the financial  covenants  contained in the Credit
  Facility and certain events of default arising out of its Mexican operations, in
  order to enable  Foamex L.P.  to  negotiate  a further  amendment  of the Credit
  Facility.
  
         During the  quarterly  periods  ended March 31, 1999 and March 29,  1998,
  Foamex L.P. paid  approximately  $0.5 million and $0.2 million,  respectively to
  Foam Funding LLC for interest on a note payable to them.
  
                                         8
  
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  4.     LITIGATION
  
         On April 26, 1999, a putative securities class action entitled Molitor v.
  Foamex  International  Inc., et al., 99 Civ. 3004 (DC),  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,   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 compliant 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. The defendants intend to vigorously
  defend the action.  To date,  no response to the  complaint has been made and no
  discovery or other  proceedings have taken place.  Foamex L.P. is not a party to
  such suit.
  
         On April 14, 1999, Foamex International received 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  and Foamex  L.P.,  which
  previously  have been  disclosed  in Foamex  International's  and Foamex  L.P.'s
  periodic filings.  Foamex  International's  Board of Directors,  in consultation
  with its special  counsel,  is in the process of evaluating such  communications
  and what  actions,  if any, to take with  respect  thereto.  Foamex L.P. was not
  named in such communications.
  
         Foamex L.P.'s Annual Report on Form 10-K for the year ended  December 31,
  1998 included the following  discussions of other material litigation  involving
  Foamex  L.P.  and  Foamex   International.   There  have  been  no   significant
  developments in such litigation  since the filing of Foamex L.P.'s Annual Report
  on Form 10-K.
  
         Beginning  on or about  March 17,  1998,  six actions  (collectively  the
  "Stockholder  Litigation")  were filed in the Court of  Chancery of the State of
  Delaware,   New  Castle  County  (the  "Court"),   by   stockholders  of  Foamex
  International. The Stockholder 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. The complaints  sought,  among other
  things,  class  certification,  a declaration  that the defendants have breached
  their  fiduciary  duties to the class,  preliminary  and  permanent  injunctions
  barring   implementation  of  the  proposed   transaction,   rescission  of  the
  transaction if  consummated,  unspecified  compensatory  damages,  and costs and
  attorneys' fees. 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.
  Foamex L.P. is not a party to the Stockholder Litigation.
  
         The parties to the  Stockholder  Litigation  entered into a Memorandum of
  Understanding,  dated June 25,  1998 (the  "Memorandum  of  Understanding"),  to
  settle the  Stockholder  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 Stockholder
  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 Agreement and Plan of Merger (the "First  Merger  Agreement")  which
  provided,  among other things, for all of the Foamex  International  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.
  
                                         9
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  4.     LITIGATION (continued)
  
         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  Stockholders"),  the  dismissal  of the  Stockholder
  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  Stockholders  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 to consider  whether the  settlement  should be approved for October 27,
  1998 (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 Stockholders. 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 Stockholder  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.
  
         On  November  10,  1998,  counsel for  certain of the  defendants  in the
  Stockholder  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 Stockholder  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 Stockholders in connection with a second Agreement and Plan
  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.
  
         The  defendants  have  denied,  and  continue  to deny,  that  they  have
  committed or have  threatened to commit any violation of law or breaches of duty
  to  plaintiffs  or the  purported  class or any  breach  of the  stipulation  of
  settlement.   The  defendants   intend  to  vigorously  defend  the  Stockholder
  Litigation. If the Stockholder Litigation is adversely determined, it could have
  a material adverse effect on the financial  position,  results of operations and
  cash flows of Foamex International.
  
         In addition,  on or about  November 18, 1998, a putative class action was
  filed in the United States  District Court for the Eastern  District of New York
  on behalf of all persons who purchased common stock of the Company between March
  16, 1998 and October 19, 1998, naming Trace as defendant and alleging that Trace
  breached a contract between the putative class members and Trace. By order dated
  January 8, 1999, the Court  transferred the action to the United States District
  Court for the Southern  District of New York. Trace made a motion to dismiss the
  action on February 8, 1999,  which motion is pending  before the Court,  and the
  Court has  stayed all  discovery  in the  action  until the  motion is  decided.
  Neither Foamex International, Foamex L.P. nor any of the individual directors of
  Foamex International are named as defendants in this litigation.
  
                                         10
  
  <PAGE>
  
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  4.     LITIGATION (continued)
  
         As of May 17, 1999, Foamex L.P. and Trace were two of multiple defendants
  in actions filed on behalf of approximately  4,300 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 has paid Foamex L.P.'s  litigation  expenses to date from
  insurance proceeds Trace received,  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 or  Trace'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.
  
         In November  1997, a complaint  was filed in the United  States  District
  Court for the  Southern  District of Texas  alleging  that  various  defendants,
  including Crain through the use of the CARDIO(R)  process  licensed from a third
  party, infringed on a patent held by plaintiff.  Foamex L.P. is negotiating with
  the licensor of the process for the  assumption  of the defense of the action by
  the licensor, however, the action is in the preliminary stages, and there can be
  no assurance as to the ultimate outcome of the action.  Such action could have a
  material  adverse  effect on the financial  position,  results of operations and
  cash flows of Foamex L.P.
  
         Other Litigation
  
         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.
  
  5.       COMPREHENSIVE INCOME
  
         Comprehensive  income for the quarterly  periods noted below is comprised
  of the following:
  
                                                       Quarterly Period Ended
                                                       March 31,    March 29,
                                                         1999          1998 
                                                        ------        ------
                                                            (thousands)
         Net income                                     $2,608        $2,485
         Foreign current translation adjustments           412           227
                                                        ------        ------
         Total comprehensive income                     $3,020        $2,712
                                                        ======        ======
  
                                         11
  
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  
  6.     RESTRUCTURING AND OTHER CHARGES
  
         As announced  previously  by Foamex  International  in its March 16, 1999
  press release,  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,  Foamex  L.P.  recorded  restructuring  charges  of
  approximately  $3.4 million in  connection  with this plan related  primarily to
  severance in connection  with replacing its former  Chairman and Chief Executive
  Officer and work force reductions of  approximately 78 employees.  Approximately
  $1.9  million  of  these  severance  costs  will  be  paid  by  June  30,  1999.
  Approximately $1.5 million, which relates to contractual severance costs payable
  to the former Chairman and Chief Executive  Officer,  will be paid through March
  2001.  Foamex L.P.  expects to record  additional  restructuring  charges in the
  future as it fully implements its restructuring plan.
  
  7.     OPERATING SEGMENT AND RELATED DATA
  
         Foamex L.P. reports  information about its business segments on the basis
  of how they are managed and  evaluated by the chief  operating  decision-makers.
  Each  of  the  operating  segments  is  headed  by one or  more  executive  vice
  presidents who are responsible for developing plans and directing the operations
  of the segment.
  
         Foamex L.P.'s  reportable  business  segments are foam  products,  carpet
  cushion products,  automotive products and technical products. The foam products
  segment  manufactures and markets foam used by the bedding  industry,  furniture
  industry and the retail  industry.  The carpet  cushion  products  segment sells
  prime,  rebond,  sponge  rubber and felt carpet  cushion  principally  to Foamex
  Carpet Cushion, Inc. ("Foamex Carpet"). The automotive products segment supplies
  foam primarily for automotive interior applications to automotive  manufacturers
  and to industry sub suppliers.  The technical products segment  manufactures and
  markets  reticulated  foams and other custom  polyester and polyether  foams for
  industrial, specialty and consumer and safety applications.
  
         The  "other"  column  in  the  table  below  represents  certain  foreign
  manufacturing  operations  that  do not  meet  the  quantitative  threshold  for
  determining  reportable segments,  corporate expenses not allocated to the other
  operating segments and restructuring and other charges.  Total asset information
  by operating  segment is not reported  because many of Foamex L.P.'s  facilities
  produce products for multiple operating segments.
  
         The  accounting  policies  of the  operating  segments  are  the  same as
  described in the "Summary of  Significant  Accounting  Policies"  (see Note 2 to
  Foamex L.P.'s Annual Report on Form 10-K for the year ended  December 31, 1998).
  Revenues and costs have been included in operating  segments where  specifically
  identified.  Costs shared by operating segments have been allocated on the basis
  of the amount utilized.
  
  <TABLE>
  <CAPTION>
                                                     Carpet
                                           Foam      Cushion     Automotive     Technical
                                         Products    Products      Products     Products       Other         Total      
  Quarterly period ended March 31, 1999:
  <S>                                  <C>         <C>             <C>          <C>          <C>          <C>     
  Net sales                            $139,379    $43,303         $88,771      $22,248      $6,176       $299,877
  Income (loss) from operations          12,921       (371)          6,792        5,035      (4,606)        19,771
  Depreciation and amortization           4,147      1,169           1,235          636         482          7,669
  
  Quarterly period ended March 29, 1998:
  Net sales                            $148,293    $56,164         $65,681      $21,116      $6,819       $298,073
  Income (loss) from operations          12,113      1,504           7,415        4,537      (1,660)        23,909
  Depreciation and amortization           3,806      1,071           1,177          629         568          7,251
  </TABLE>
  
  8.       RELATED PARTY TRANSACTIONS
  
         During the  quarterly  periods  ended March 31, 1999 and March 29,  1998,
  Foamex L.P. sold approximately $43.3 million and $56.2 million, respectively, of
  carpet cushion products to Foamex Carpet. In addition,  Foamex L.P. provided and
  invoiced approximately $0.6 million and $0.3 million of administrative  services
  to Foamex Carpet during the quarterly periods ended March 31, 1999 and March 29,
  1998, respectively.
  
                                         12
  
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.       RELATED PARTY TRANSACTIONS (continued)
  
         Also, Foamex L.P. chartered an aircraft (which is owned by a wholly owned
  subsidiary of Foamex International)  through a third party and incurred costs of
  approximately  $0.1 million and $0.2 million during the quarterly  periods ended
  March 31, 1999 and March 29, 1998, respectively.
  
  
                                         13
  <PAGE>
  
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
         Foamex L.P.  operates in the flexible  polyurethane  and advanced polymer
  foam products  industry.  As of March 31, 1999, Foamex L.P.'s operations consist
  of the following  operating  segments:  (i) foam  products,  (ii) carpet cushion
  products,  (iii)  automotive  products,  (iv) technical  products and (v) other,
  which primarily consists of certain foreign manufacturing operations,  corporate
  expenses not allocated to the other  operating  segments and  restructuring  and
  other  charges.  Certain  information  in this report  contains  forward-looking
  statements  and  should be read in  conjunction  with the  discussion  regarding
  forward-looking statements set forth on page 4 of Foamex L.P.'s Annual Report on
  Form 10-K for the year ended December 31, 1998.
  
         The accompanying  condensed  consolidated  financial statements have been
  prepared assuming Foamex L.P. will continue as a going concern.  As discussed in
  Note 1 to the accompanying condensed consolidated financial statements and under
  "Liquidity and Capital  Resources"  below,  at December 31, 1998 Foamex L.P. was
  not in  compliance  and does not expect to be in compliance  for future  periods
  with certain  financial  covenants  contained in certain of its debt agreements.
  These  debt   agreements  had   outstanding   principal   balances   aggregating
  approximately  $409.2  million at March 31, 1999.  Were the lenders  under these
  agreements to accelerate the maturity of their  indebtedness,  such acceleration
  would  constitute  an event of default and all of Foamex L.P.'s  long-term  debt
  would  become due.  Additionally,  as  discussed  in Note 1 to the  accompanying
  condensed  consolidated  financial  statements and under  "Liquidity and Capital
  Resources" below, if Trace defaults on its indebtedness collateralized by Foamex
  International's  common  stock and such  creditors  exercise  their  rights  and
  remedies under the related debt  agreements,  all of Foamex L.P.'s  indebtedness
  may be accelerated.  As a result, Foamex L.P. reclassified  approximately $708.8
  million  and $715.8  million of  long-term  debt as current in the  accompanying
  condensed  consolidated  balance sheets at March 31, 1999 and December 31, 1998,
  respectively.  These matters raise substantial doubt about Foamex L.P.'s ability
  to continue as a going  concern.  The  financial  statements  do not include any
  adjustments that might result from the outcome of these uncertainties.
  
         On March 16, 1999, Foamex International  announced that it had hired John
  G. Johnson,  Jr. as President,  Chief  Executive  Officer and director of Foamex
  International  following the  resignation of Andrea Farace from the positions of
  Chairman  of  the  Board,   Chief  Executive  Officer  and  director  of  Foamex
  International.  Mr.  Johnson  holds the position of Chief  Executive  Officer of
  Foamex L.P.  Foamex  International  also  announced  that it had hired JP Morgan
  Securities  Inc. as a financial  advisor to explore  strategic  alternatives  to
  maximize shareholder value.
  
         Restructuring Plan
  
         As announced  previously  by Foamex  International  in its March 16, 1999
  press release,  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,  Foamex  L.P.  recorded  restructuring  charges  of
  approximately  $3.4 million in  connection  with this plan related  primarily to
  severance in connection  with replacing its former  Chairman and Chief Executive
  Officer and work force reductions of  approximately 78 employees.  Approximately
  $1.9  million  of  these  severance  costs  will  be  paid  by  June  30,  1999.
  Approximately $1.5 million, which relates to contractual severance costs payable
  to the former Chairman and Chief Executive  Officer,  will be paid through March
  2001.  Foamex L.P.  expects to record  additional  restructuring  charges in the
  future as it fully  implements its  restructuring  plan.  Such amounts cannot be
  estimated at this time but are expected to relate primarily to severance costs.
  
         Acquisitions and Dispositions
  
         On February 27, 1998,  Foamex  International,  Foamex L.P. and certain of
  their affiliates completed a series of transactions  designed to simplify Foamex
  International's  and Foamex L.P.'s  structure and to provide future  operational
  flexibility (collectively, the "GFI Transaction").  Prior to the consummation of
  these transactions,  Foamex L.P. defeased the $4.5 million outstanding principal
  amount of its 9 1/2% senior  secured  notes due 2000.  Foamex  L.P.  settled its
  intercompany  payables to General Felt  Industries,  Inc.  ("General Felt") with
  $4.8 million in cash and a promissory note in the aggregate  principal amount of
  $34.0  million  supported by a $34.5  million  letter of credit under the Foamex
  L.P. credit facility (the "Foamex/GFI Note"). The initial  transaction  resulted
  in the transfer  from Foamex L.P. to Foam Funding LLC, an indirect  wholly owned
  subsidiary of Trace, of all of the outstanding  common stock of General Felt, in
  exchange for (i) the  assumption by Foam Funding LLC of $129.0 million of Foamex
  L.P.'s  indebtedness and (ii) the transfer by Foam Funding LLC to Foamex L.P. of
  a 1%  non-managing  general  partnership  interest  in Foamex  L.P. As a result,
  General Felt ceased being a subsidiary  of Foamex L.P. and was relieved from all
  
                                         14
  
  <PAGE>
  
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
  obligations under Foamex L.P.'s 9 7/8% senior subordinated notes due 2007 and 13
  1/2%  senior  subordinated  notes due 2005.  Upon  consummation  of the  initial
  transaction,  Foamex  Carpet,  a newly formed wholly owned  subsidiary of Foamex
  International,  Foamex L.P.,  Foam Funding LLC, and General Felt entered into an
  Asset  Purchase  Agreement  dated  February 27, 1998, in which General Felt sold
  substantially  all of its assets (other than cash, the  Foamex/GFI  Note and its
  operating facility in Pico Rivera,  California) to Foamex Carpet in exchange for
  (i) $20.0 million in cash and (ii) a promissory  note issued by Foamex Carpet to
  Foam Funding LLC in the aggregate  principal amount of $70.2 million.  The $20.0
  million cash payment was funded with a distribution  by Foamex L.P. Foam Funding
  LLC retained ownership of the $34.0 million Foamex/GFI Note.
  
         No gain was  recognized  on the GFI  Transaction.  The  impact of the GFI
  Transaction  recorded  during the  quarterly  period ended March 29, 1998 was an
  increase in Foamex L.P.'s partners'  capital  (deficit) of  approximately  $10.1
  million,   a  distribution  of  $20.0  million  to  Foamex   International   and
  approximately  $1.5 million of fees charged to earnings.  The $129.0  million of
  debt  assumed  by Foam  Funding  LLC in the GFI  Transaction  was  used to repay
  approximately  $125.1 million of term loan  borrowings that was accounted for as
  an  extinguishment   of  debt  which  resulted  in  an  extraordinary   loss  of
  approximately $3.2 million.  The 1% non-managing  general  partnership  interest
  acquired  in  connection  with  the  GFI  Transaction  was  accounted  for  as a
  redemption  of equity.  The GFI  Transaction  used cash of  approximately  $10.2
  million. The non-cash portion was insignificant.
  
         General
  
         Foamex  L.P.'s  automotive  foam  customers  are  predominantly  original
  equipment  manufacturers  or other automotive  suppliers.  As such, the sales of
  these product  lines are directly  related to the overall level of passenger car
  and light truck  production  in North  America.  Also,  Foamex  L.P.'s sales are
  sensitive to sales of new and  existing  homes,  changes in personal  disposable
  income and seasonality.  Foamex L.P.  typically  experiences two seasonally slow
  periods during each year, in early July and in late  December,  due to scheduled
  plant shutdowns and holidays.
  
         Operating  results  for 1999 are  expected  to be  influenced  by various
  internal and external factors.  These factors include,  among other things,  (a)
  Foamex L.P.'s debt structure and Foamex L.P.'s ability to successfully amend the
  terms of its Credit Facility and certain other  indebtedness,  (b) Foamex L.P.'s
  capital  structure,  (c)  continued  integration  of  the  operations  of  Crain
  Industries,   Inc.   ("Crain")  with  Foamex  L.P.'s   operations   (the  "Crain
  Consolidation"),  (d) raw  material  cost  increases,  if any, by Foamex  L.P.'s
  chemical  suppliers,  (e) Foamex  L.P.'s  success in passing on to its customers
  selling price  increases to recover any such raw material cost increases and (f)
  fluctuations in interest rates.
  
  RESULTS OF OPERATIONS
  
         Foamex L.P. reports  information about its business segments on the basis
  of how they are managed and  evaluated by the chief  operating  decision-makers.
  Each  of  the  operating  segments  is  headed  by one or  more  executive  vice
  presidents who are responsible for developing plans and directing the operations
  of the segment.
  
         Foamex L.P.'s  reportable  business  segments are foam  products,  carpet
  cushion products,  automotive products and technical products. The foam products
  segment  manufactures and markets foam used by the bedding  industry,  furniture
  industry and the retail  industry.  The carpet  cushion  products  segment sells
  prime, rebond,  sponge rubber and felt carpet cushion to Foamex Carpet through a
  supply  agreement.  The automotive  products segment supplies foam primarily for
  automotive interior applications to automotive manufacturers and to industry sub
  suppliers.  The technical products segment  manufactures and markets reticulated
  foams and other custom  polyester and polyether foams for industrial,  specialty
  and consumer and safety applications.
  
         The  "other"  column  in  the  table  below  represents  certain  foreign
  manufacturing  operations  that  do not  meet  the  quantitative  threshold  for
  determining  reportable segments,  corporate expenses not allocated to the other
  operating segments and restructuring and other charges.  Total asset information
  by operating  segment is not reported  because many of Foamex L.P.'s  facilities
  produce products for multiple operating segments.
  
                                         15
  <PAGE>
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  <TABLE>
  <CAPTION>
                                                     Carpet
                                           Foam      Cushion    Automotive     Technical
                                         Products    Products      Products     Products       Other         Total      
  Quarterly period ended March 31, 1999:
  <S>                                  <C>         <C>             <C>          <C>          <C>          <C>     
  Net sales                            $139,379    $43,303         $88,771      $22,248      $6,176       $299,877
  Income (loss) from operations          12,921       (371)          6,792        5,035      (4,606)        19,771
  Depreciation and amortization           4,147      1,169           1,235          636         482          7,669
  
  Quarterly period ended March 29, 1998:
  Net sales                            $148,293    $56,164         $65,681      $21,116      $6,819       $298,073
  Income (loss) from operations          12,113      1,504           7,415        4,537      (1,660)        23,909
  Depreciation and amortization           3,806      1,071           1,177          629         568          7,251
  </TABLE>
  
  Quarterly  Period Ended March 31, 1999 Compared to Quarterly  Period Ended March
  27, 1998
  
         Net sales for the first  quarter of 1999 were $299.9  million as compared
  to $298.1  million in the first  quarter of 1998, an increase of $1.8 million or
  0.6%. The increase in net sales was primarily associated with increased sales of
  lamination  products,  which was offset by decreased sales due to the closure of
  several  plants in connection  with the Crain  Consolidation  and a reduction in
  sales in  connection  with the GFI  Transaction,  which  occurred  at the end of
  February 1998.  Income from operations  decreased $4.1 million or 17.3% to $19.8
  million for the first quarter of 1999 from $23.9 million in the first quarter of
  1998.  The  decrease  in income  from  operations  resulted  primarily  from (a)
  restructuring  costs of $3.4 million  recorded  during the first quarter of 1999
  and (b) a decrease in gross  profit of $7.4  million  resulting  primarily  from
  increased raw material costs and a decrease in carpet cushion units sold, offset
  in part by a decrease in selling,  general and  administrative  expenses of $6.7
  million. The decrease in selling, general and administrative costs was primarily
  due to (a) the  elimination of duplicative  costs from the Crain  Consolidation,
  (b)  cost  reductions  implemented  during  the  first  quarter  of 1999 and (c)
  reductions  as a result  of the GFI  Transaction  which  occurred  at the end of
  February 1998.
  
         Foam Products
  
         Foam products net sales for the first quarter of 1999  decreased  6.0% to
  $139.4  million from $148.3  million in the first  quarter of 1998.  Income from
  operations  increased  6.7% to $12.9  million  (9.3% of net sales) for the first
  quarter of 1999 from $12.1  million  (8.2% of net sales) in the first quarter of
  1998.  The decrease in net sales was  primarily  associated  with the closure of
  several plants as part of the Crain  Consolidation.  The increase in income from
  operations  as a percentage  of net sales was  primarily  the result of improved
  operating efficiencies resulting from the Crain Consolidation.
  
         Carpet Cushion Products
  
         Carpet cushion products net sales for the first quarter of 1999 decreased
  22.9% to $43.3 million from $56.2 million in the first quarter of 1998 primarily
  due to the GFI  Transaction  and decreased  units sold.  Income from  operations
  decreased  124.7% to a loss of $0.4  million  (0.9% of net  sales) for the first
  quarter  of 1999 from  income of $1.5  million  (2.7% of net sales) in the first
  quarter of 1998.  This decrease was primarily  associated  with the factors that
  caused the decrease in net sales.
  
         Automotive Products
  
         Automotive  products  net sales for the first  quarter of 1999  increased
  35.2% to $88.8  million  from $65.7  million in the first  quarter of 1998.  The
  increase  in net sales  was  associated  with  increased  volume  of  lamination
  products.  Income from  operations  decreased  8.4% to $6.8 million (7.7% of net
  sales) for the first  quarter of 1999 from $7.4 million  (11.3% of net sales) in
  the first  quarter of 1998.  This  decrease  was  primarily a result of contract
  price reductions and the change in product mix to more laminated  products which
  have lower margins than other automotive products.
  
                                         16
  <PAGE>
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
         Technical Products
  
         Technical Products net sales for the first quarter of 1999 increased 5.4%
  to $22.2 million from $21.1  million in the first  quarter of 1998.  Income from
  operations  increased  11.0% to $5.0 million  (22.6% of net sales) for the first
  quarter of 1999 from $4.5 million  (21.5% of net sales) in the first  quarter of
  1998.  The  increase  in net sales and  income  from  operations  was  primarily
  associated with increased sales of foam for ink jet printers.
  
         Other
  
         Other  primarily  consists of certain foreign  manufacturing  operations,
  corporate   expenses  not  allocated  to  the  other   operating   segments  and
  restructuring and other charges.  The decrease in net sales associated with this
  segment  primarily  resulted  from a decrease  in net sales from  Foamex  L.P.'s
  Mexican  operations.   The  increase  in  loss  from  operations  was  primarily
  associated with the $3.4 million of restructuring  charges recorded in the first
  quarter of 1999 discussed previously.
  
         Income Before Provision for Income Taxes
  
         Income before  provision  for income taxes  decreased to $3.2 million for
  the first  quarter of 1999 as compared to $6.7  million in the first  quarter of
  1998. This decrease is primarily due to the decrease in income from  operations,
  as discussed above.
  
         Income Taxes
  
         The first  quarter of 1999  provision  for income  taxes of $0.6  million
  primarily  represents  statutory  taxes on  operations  in Mexico and Canada and
  state income taxes for those states who do not permit use of net operating  loss
  carryforwards.
  
         Extraordinary Loss
  
         The  extraordinary  loss on early  extinguishment of debt in 1998 of $3.1
  million was primarily  associated  with the write-off of debt issuance  costs in
  connection with the GFI Transaction.
  
  Liquidity and Capital Resources
  
         Liquidity
  
         Foamex L.P.'s operating cash requirements  consist principally of working
  capital   requirements,   scheduled   payments  of  principal  and  interest  on
  outstanding  indebtedness and capital  expenditures.  Foamex L.P.  believes that
  cash flow from Foamex  L.P.'s  operating  activities,  cash on hand and periodic
  borrowings under the Credit Facility,  if necessary,  (provided that such Credit
  Facility is successfully  amended,  as described below) will be adequate to meet
  Foamex  L.P.'s  liquidity  requirements.  The  ability  to meet  such  liquidity
  requirements  could be impaired  if Foamex L.P.  were to fail to comply with any
  covenants  contained in the Credit Facility and such noncompliance was not cured
  by Foamex L.P. or waived by the lenders. Foamex L.P. amended its Credit Facility
  in March 1999. Foamex L.P. paid approximately $1.2 million in financing fees and
  interest rates were increased in connection with this  amendment.  The amendment
  adjusted  financial  covenants,  among other things, as of December 31, 1998 and
  provided  for future  measurement  periods  taking into  account  Foamex  L.P.'s
  estimated  operating  results and financial  condition  for 1998 and  management
  expectations  regarding future  measurement  periods.  As the Foamex L.P. actual
  1998 net loss was greater than originally  estimated,  on April 15, 1999, Foamex
  L.P. obtained a waiver through May 5, 1999, which was further extended on May 6,
  1999 through June 30, 1999, of the financial  covenants  contained in the Credit
  Facility and certain events of default arising out of its Mexican operations, in
  order to enable it to  negotiate  a further  amendment  of the Credit  Facility.
  There can be no assurance that such an amendment  will be obtained.  The failure
  to obtain such an amendment would have a material adverse effect on Foamex L.P.
  
           Certain credit  agreements and promissory notes of Foamex L.P. pursuant
  to which  approximately  $434.3 million of debt has been issued, as of March 31,
  1999,  contain  provisions  that  would  result  in  the  acceleration  of  such
  indebtedness  if Trace  were to cease  to own at  least  30% of the  outstanding
  
                                         17
  
  <PAGE>
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
  common stock of Foamex  International.  Similarly,  certain indentures of Foamex
  L.P. and Foamex Capital Corporation  relating to approximately $248.0 million of
  senior  subordinated  notes contain  provisions that provide the holders of such
  senior  subordinated  notes with the right to  require  the  issuers  thereof to
  repurchase  such senior  subordinated  notes at a price in cash equal to 101% of
  the  aggregate  principal  amount  thereof,  plus  accrued  and unpaid  interest
  thereon,  if Trace  falls below  certain  specified  ownership  levels of Foamex
  International's  common  stock  and  other  persons  or  group  owns  a  greater
  percentage  of  Foamex  International's  common  stock  than  Trace.  Trace is a
  privately held company which owned approximately 46.1% of Foamex International's
  outstanding  common stock as of April 1, 1999 and whose  Chairman also serves as
  the  Chairman  of  Foamex   International.   In  1998,   Trace  informed  Foamex
  International  that Trace had substantial  debt obligations that were due at the
  end of December  1998 and it did not have the  financial  resources to pay those
  obligations.  Subsequently,  Trace informed  Foamex  International  that waivers
  and/or  modifications  of such  indebtedness  had been obtained for at least the
  near  future;  however,  there  can be no  assurance  that such  waivers  and/or
  modifications  will remain in effect prior to obtaining a permanent  resolution.
  Foamex  International's  common  stock  owned by Trace is pledged as  collateral
  against  certain of Trace's debt  obligations.  If Trace were to default on such
  indebtedness  collateralized  by Foamex  International's  common  stock or other
  Trace   creditors  were  to  take  steps   constituting  a  default  under  such
  indebtedness  (such as filing an involuntary  bankruptcy  petition),  and if the
  holders of such secured indebtedness were to foreclose on Foamex International's
  common  stock owned by Trace,  such event could  trigger the "change of control"
  provisions and  correspondingly  the  acceleration  and put rights  contained in
  certain of Foamex L.P.'s debt agreements,  as described below. This could result
  in the acceleration of all of Foamex L.P.'s debt.  Although  management believes
  that all such debt  obligations  could be refinanced  under such  circumstances,
  there can be no assurance that Foamex L.P. or its subsidiaries  would be able to
  do so.
  
         The accompanying  condensed  consolidated  financial statements have been
  prepared assuming Foamex L.P. will continue as a going concern.  As discussed in
  Note 1 to the  accompanying  condensed  consolidated  financial  statements,  at
  December 31, 1998 Foamex L.P. was not in compliance and does not expect to be in
  compliance  in the future with  certain debt  covenants  for which it is seeking
  amendments.  These  agreements had outstanding  principal  balances  aggregating
  approximately  $409.2 million at March 31, 1999.  Foamex L.P.  received a waiver
  under the Credit Facility through May 5, 1999,  which was subsequently  extended
  on May 6, 1999 through June 30, 1999,  for the  covenants  for which Foamex L.P.
  was not in compliance.  Non-compliance  under the Credit Facility and other debt
  agreements  provides the lenders  under the  agreements,  with the rights,  upon
  notice and the lapse of time,  to declare  all of such  indebtedness  to be due.
  Notwithstanding the fact that to date the lenders have not exercised such rights
  and have granted  waivers of such  covenants  through  June 30, 1999,  to enable
  Foamex L.P. to negotiate amendment of such covenants;  there can be no assurance
  that such amendments will be obtained. Were the lenders under these agreement to
  accelerate  the  maturity  of  their   indebtedness,   such  acceleration  would
  constitute  an event of default and all of Foamex  L.P.'s  long-term  debt would
  become  due.  Additionally,  as  discussed  above,  if  Trace  defaults  on  its
  indebtedness  collateralized  by Foamex  International's  common  stock and such
  creditors  exercise their rights and remedies under the related debt agreements,
  all of Foamex L.P.'s indebtedness may be accelerated.  As a result,  Foamex L.P.
  reclassified  approximately  $708.8 million and $715.8 million of long-term debt
  as current in the accompanying  condensed  consolidated  balance sheets at March
  31, 1999 and December 31, 1998,  respectively.  These matters raise  substantial
  doubt about Foamex L.P.'s ability to continue as a going concern.  The financial
  statements do not include any adjustments  that might result from the outcome of
  these uncertainties.
  
         If Foamex  L.P.  is able to amend the  relevant  covenants  in its credit
  agreements  and  other  financial  arrangements,  Foamex  L.P.  may be  able  to
  reclassify  its  long-term  debt included in current  liabilities  as long-term.
  However,  there can be no assurance  that Foamex L.P. will be able to obtain the
  necessary  amendments,  or if  obtained,  that it  will  once  again  be able to
  classify such liabilities as long-term.
  
         As of March 31,  1999,  there were  $134.2  million of  revolving  credit
  borrowings, at an average interest rate of 8.30%, under the Credit Facility with
  $10.7 million  available  for  additional  borrowings  and  approximately  $47.6
  million of  letters  of credit  outstanding  which are  supported  by the Credit
  Facility.   Borrowings  by  Foamex  Canada  Inc.  as  of  March  31,  1999  were
  approximately  $3.5 million,  at an interest rate of 7.25%,  under Foamex Canada
  Inc.'s revolving credit agreement with unused availability of approximately $1.9
  million.
  
         Foamex L.P. paid an aggregate $1.2 million in financing  fees  associated
  with  the  March  1999  amendment  to  the  Credit  Facility.  Foamex  L.P.  has
  capitalized  these  costs  and is  currently  amortizing  them  along  with  the
  previously  paid deferred  financing costs over the remaining life of the Credit
  Facility as Foamex L.P. expects to successfully amend the Credit Facility during
  
                                         18
  
  <PAGE>
  
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
  the current waiver period.  Foamex L.P. is in the process of negotiating further
  amendments  to the Credit  Facility and certain  other  financing  agreements as
  discussed previously.  Generally,  amendments to financing agreements may result
  in changes to terms and conditions under the existing debt agreements, including
  but not limited to,  changes in interest  rates and financial and  non-financial
  covenants.  Additionally, there may be additional financing fees associated with
  obtaining such  amendments.  Foamex L.P. cannot  determine the changes which may
  occur to the Credit Facility at this time, or the amount of financing fees which
  may be required in connection with this future amendment.
  
         Cash and cash  equivalents  increased  to $4.9  million at March 31, 1999
  from $3.2 million at December 31, 1998 due primarily to the increase in net cash
  provided by operating activities offset by the repayment of revolver borrowings.
  Excluding  the  reclassification  of other  long-term  debt to current,  working
  capital  decreased  $1.8 million to $113.0 million at March 31, 1999 from $114.8
  million at December 31, 1998. Net operating assets and liabilities (comprised of
  accounts receivable,  accounts receivable from related parties,  inventories and
  accounts payable)  increased $3.9 million to $152.6 million at March 31, 1999 as
  compared to $148.7  million at December 31, 1998. The increase was primarily due
  to an aggregate  $2.9 million net increase in accounts  receivable  and accounts
  receivable  from  related  parties and a decrease  in accounts  payable of $20.0
  million offset by a decrease in  inventories  of $19.2 million.  The increase in
  accounts  receivable  and  accounts  receivable  related  parties was  primarily
  associated  with an increase in sales  during March 1999 as compared to December
  1998 and the timing of receipts from Foamex Carpet.  The decrease in inventories
  was  primarily  due to the  December  31,  1998  balance  including  significant
  purchases  of raw  materials at  year-end.  The decrease in accounts  payable is
  primarily  associated with the timing of payments to vendors and the decrease in
  inventories from December 31, 1998 to March 31, 1999.
  
         Cash Flow from Operating Activities
  
         Cash flow  provided by  operating  activities  was $11.1  million for the
  quarterly  period ended March 31, 1999 as compared to cash used of $29.1 million
  for the  quarterly  period  ended March 29,  1998.  The  increase is primarily a
  result of a decrease in the use of cash by the operating  assets and liabilities
  during 1999 as compared to 1998.
  
         Cash Flow from Investing Activities
  
         During  1999,  Foamex L.P.  spent  approximately  $5.7 million on capital
  improvements  as compared to $7.1 million  during the first quarter of 1998. The
  1999 expenditures were primarily for recurring  capital  replacement  additions.
  The  1998  expenditures   included:   (a)  finalization  of  the  expansion  and
  modernization  of a  facility  in  Orlando,  Florida  to  improve  manufacturing
  efficiencies,  (b)  installation  of more efficient foam production line systems
  and  fabricating  equipment  in a number  of  manufacturing  facilities  and (c)
  installation of flame  laminators to support the increased  volume of automotive
  laminated  products.  Foamex L.P.  expects to reduce capital  expenditures  from
  historical levels for the foreseeable future.
  
         On  March  31,  1999,  Foamex   International  repaid  its  $2.5  million
  promissory note dated December 31, 1998 to Foamex L.P.
  
         Cash Flow from Financing Activities
  
         In connection  with the GFI  Transaction  in February  1998,  Foamex L.P.
  extinguished  approximately  $125.1  million  of term  loans  under  the  Credit
  Facility funded with $129.0 million of cash proceeds from  borrowings  under new
  term loan  agreements  which were  subsequently  assumed by Foam Funding LLC. In
  connection with the GFI Transaction,  Foamex L.P.  distributed  $20.0 million in
  cash pro rata to its  partners,  such  distribution  was funded with  borrowings
  under the Credit Facility. See "Acquisitions and Dispositions."
  
  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 March 31,  1999 was $3.5  million.  Although  it is
  
                                         19
  
  <PAGE>
  
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
  possible that new information or future  developments  could require Foamex L.P.
  to  reassess  its  potential  exposure  to all  pending  environmental  matters,
  including  those  described  in the  footnotes  to  Foamex  L.P.'s  consolidated
  financial  statements 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
  L.P.'s  operations,  financial  position,  capital  expenditures  or competitive
  position.  See  Note  16 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.
  
  Inflation and Other Matters
  
         There was no significant  impact on Foamex L.P.'s  operations as a result
  of  inflation  during  the  periods  presented.  In some  circumstances,  market
  conditions or customer  expectations may prevent Foamex L.P. from increasing the
  price of its products to offset the inflationary pressures that may increase its
  costs in the future.
  
         Foamex L.P.'s automotive products customers are predominantly  automotive
  original  equipment  manufacturers or other automotive  suppliers.  As such, the
  sales of these  product  lines are  directly  related  to the  overall  level of
  passenger car and light truck production in North America.  Also,  Foamex L.P.'s
  sales are  sensitive  to sales of new and  existing  homes,  changes in personal
  disposable  income  and  seasonality.  Foamex  L.P.  typically  experiences  two
  seasonally  slow periods  during each year, in early July and in late  December,
  due to scheduled plant shutdowns and holidays.
  
  Year 2000 Compliance
  
         Foamex  L.P.  uses  numerous  business  information  systems  as  well as
  manufacturing support systems that could be impacted by the "Year 2000 Problem".
  The Year 2000 Problem arises from computer  programs that were written using two
  digits rather than four to designate the year. In connection  with the Year 2000
  Problem, date-sensitive computer software may recognize a date using "00" as the
  year 1900 rather  than the year 2000.  This could  result in system  failures or
  miscalculations, which would cause significant operational disruptions.
  
         Foamex  L.P.  has  a  Year  2000  Executive  Sponsor  Team  comprised  of
  representatives of Foamex L.P. The Year 2000 Executive Sponsor Team is providing
  direction to and receiving  reports from the Year 2000 Steering  Committee  (the
  "Steering  Committee")  within the  organization.  The  Steering  Committee  has
  completed an assessment of the state of readiness of the Information  Technology
  ("IT") and  non-IT  systems  of Foamex  L.P.  These  assessments  cover  desktop
  computers,  environmental  systems,  manufacturing systems (including laboratory
  information systems), field instrumentation,  and significant third party vendor
  and supplier  systems,  which  include  employee  compensation  and benefit plan
  maintenance  systems. The Steering Committee is also in the process of assessing
  the readiness of Foamex L.P.'s significant customers and suppliers.
  
         The Year  2000  assessment  process  for  each  facility  consists  of an
  inventory  of Year 2000  sensitive  equipment,  an  assessment  of the impact of
  possible failures,  determination of required  remediation  actions, if any, and
  testing  and  implementation  of these  solutions.  The  inventory,  assessment,
  remediation and testing phases were completed at the end of 1998, with fail safe
  testing and final implementation currently taking place in 1999. The progress of
  these phases as of March 31, 1999 is summarized below
  
         Foamex L.P.  completed the inventory and assessment phases of the project
  by  December  31,  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.  The completion of these
  phases  included the  modification  of several million lines of system code, the
  conversion of the systems acquired from Crain to standard  business  information
  computer  systems,  upgrading  system  hardware and operating  system  software,
  testing  of the  applicable  systems  in a  development  testing  area,  and the
  migration of the remediated systems into the production environment.
  
                                         20
  
  <PAGE>
  
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
         Foamex L.P.  estimates it will spend $2.0 million in connection  with the
  Year 2000  Problem.  The  spending  estimate  will be  refined  as phases of the
  project  are  completed.  Spending  on the Year 2000  Problem  is funded by cash
  generated from operations.
  
         Management  believes that all  significant  systems  controlled by Foamex
  L.P.  will be Year 2000 ready in the  latter  half of 1999.  While the  Steering
  Committee is communicating readiness to third party 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. As
  part of the  overall  response to the Year 2000  Problem,  Foamex L.P. is in the
  process of developing contingency plans in the event of Year 2000 non-compliance
  of certain systems or third parties.  Details of such contingency  plans will be
  determined  after the Steering  Committee has  completed  its  assessment of its
  supply chain, other third parties and the potential for possible failures.
  
         There is inherent  uncertainty  in connection  with the Year 2000 Problem
  due to the  possibility of  unanticipated  failures by third party customers and
  suppliers.  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  continues to provide  information in order to
  reduce the level of  uncertainty  regarding the impact of the Year 2000 Problem.
  Management believes that if Foamex L.P.'s solutions to the Year 2000 Problem are
  completed as scheduled;  such  solutions may help  minimize the  possibility  of
  significant disruptions to Foamex L.P.'s operations.
  
                                         21
  <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 4 of the condensed  consolidated  financial
             statements  of  Foamex  L.P.  as of March  31,  1999  (unaudited)  is
             incorporated herein by reference.
  
  Item 6.    Exhibits and Reports on Form 8-K
  
         (a)    Exhibits
  
                27     Financial  Data  Schedule  for the  quarterly  period ended
                       March 31, 1999.
  
         (b)    Foamex L.P. filed the following  Current Reports on Form 8-K since
                December 31, 1998 through the date of this report:
  
                Form 8-K,  as of dated  March 11,  1999  reporting  amendments  to
                aspects of its credit agreements.
  
  
                                         22
  
  <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: May 17, 1999                          By: /s/ John A. Feenan
                                                  --------------------------------
                                                  John A. Feenan
                                                  Vice President, Treasurer, Chief
                                                  Financial Officer and Assistant
                                                  Secretary
  
                                              FOAMEX CAPITAL CORPORATION
  
  
  Date: May 17, 1999                          By: /s/ John A. Feenan
                                                  --------------------------------
                                                  John A. Feenan
                                                  Vice President, Treasurer and 
                                                  Chief Financial Officer
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 90944}]
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": "99628685"}, "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": "99628686"}, "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 March 31, 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 its therefore filing this
  form with the reduced disclosure format.
  
  The number of shares of Foamex Capital Corporation's common stock outstanding as
  of May 12, 1999 was 1,000.
  
                                    Page 1 of 23
                            Exhibit List on Page 22 of 23
  FOAMEX L.P.
                             FOAMEX CAPITAL CORPORATION
  INDEX
                                                                                                                 Page
  Part I.   Financial Information:
  
            Item 1.  Financial Statements
  
                Condensed Consolidated Statements of Operations (unaudited) - Quarterly Periods Ended
                  March 31, 1999 and March 29, 1998                                                                3
  
                Condensed Consolidated Balance Sheets (unaudited) as of March 31, 1999
                  and December 31, 1998                                                                            4
  
                Condensed Consolidated Statements of Cash Flows (unaudited) - Quarterly Periods Ended
                  March 31, 1999 and March 29, 1998                                                                5
  
                Notes to Condensed Consolidated Financial Statements (unaudited)                                   6
  
            Item 2.  Management's Discussion and Analysis of Financial Condition and Results
                     of Operations                                                                                14
  
  Part II.  Other Information                                                                                     22
  
            Item 1.  Legal Proceedings                                                                            22
  
            Item 6.  Exhibits and Reports on Form 8-K                                                             22
  
  Signatures                                                                                                      23
  2
  PART I.  FINANCIAL INFORMATION
  ITEM 1.  FINANCIAL STATEMENTS
  
                            FOAMEX L.P. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
  Quarterly Periods Ended   
                                                     March 31,        March 29,
                                                       1999             1998 
                                                    ---------        ---------
                                                            (thousands)
  NET SALES                                         $ 299,877        $ 298,073
  
  COST OF GOODS SOLD                                  262,416          253,165
                                                    ---------        ---------
  
  GROSS PROFIT                                         37,461           44,908
  
  SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES                           14,333           20,999
  
  RESTRUCTURING AND OTHER CHARGES                       3,357               --
                                                    ---------        ---------
  
  INCOME FROM OPERATIONS                               19,771           23,909
  
  INTEREST AND DEBT ISSUANCE EXPENSE                   16,139           16,912
  
  OTHER EXPENSE, NET                                      439              313
                                                    ---------        ---------
  
  INCOME BEFORE PROVISION FOR INCOME TAXES              3,193            6,684
  
  PROVISION FOR INCOME TAXES                              585            1,076
                                                    ---------        ---------
  
  INCOME BEFORE EXTRAORDINARY LOSS                      2,608            5,608
  
  EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
     OF DEBT, NET OF INCOME TAXES                          --           (3,123)
                                                    ---------        ---------
  
  NET INCOME                                        $   2,608        $   2,485
                                                    =========        =========
  The accompanying notes are an integral part of the condensed
                         consolidated financial statements.
  
                                         3
  FOAMEX L.P. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
  March 31,       December 31,
  ASSETS                                                         1999              1998       
                                                              ---------         ---------
  CURRENT ASSETS:                                       (thousands, except number of shares)
  Cash and cash equivalents                                $   4,907         $   3,192
     Accounts receivable, net                                   154,130           143,301
     Accounts receivable from related parties                     9,650            17,533
     Inventories                                                108,451           127,636
     Other current assets                                        28,729            33,849
                                                              ---------         ---------
         Total current assets                                   305,867           325,511
  
  PROPERTY, PLANT AND EQUIPMENT, NET                            219,831           219,637
  
  COST IN EXCESS OF ASSETS ACQUIRED, NET                        187,187           188,205
  
  DEBT ISSUANCE COSTS, NET                                       14,612            13,946
  
  OTHER ASSETS                                                   22,217            21,229
                                                              ---------         ---------
  
  TOTAL ASSETS                                                $ 749,714         $ 768,528
                                                              =========         =========
  
  LIABILITIES AND PARTNERS' DEFICIT
  CURRENT LIABILITIES:
     Short-term borrowings                                    $   3,493         $   2,957
     Current portion of long-term debt                          682,766           689,478
     Current portion of long-term debt - related party           34,000            34,000
     Accounts payable                                           119,678           139,726
     Accrued interest                                             7,897             7,396
     Other accrued liabilities                                   53,835            52,944
                                                              ---------         ---------
         Total current liabilities                              901,669           926,501
  
  OTHER LIABILITIES                                              37,998            38,064
                                                              ---------         ---------
  
         Total liabilities                                      939,667           964,565
                                                              ---------         ---------
  
  COMMITMENTS AND CONTINGENCIES                                      --                --
                                                              ---------         ---------
  
  PARTNERS' DEFICIT:
     General partner                                           (138,818)         (141,426)
     Limited partner                                                 --                --
     Accumulated other comprehensive income (loss)              (25,796)          (26,208)
     Notes and advances receivable from partner                 (16,118)          (18,608)
     Notes receivable from related party                         (9,221)           (9,795)
                                                              ---------         ---------
  
         Total partners' deficit                               (189,953)         (196,037)
                                                              ---------         ---------
  
  TOTAL LIABILITIES AND PARTNERS' DEFICIT                     $ 749,714         $ 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)
  Quarterly Periods Ended     
                                                                          March 31,         March 29,
                                                                            1999              1998  
                                                                         ---------         ---------
                                                                                 (thousands)
  OPERATING ACTIVITIES:
  Net income                                                          $   2,608         $   2,485
     Adjustments to reconcile net income to net cash provided
       by operating activities:
       Depreciation and amortization                                         7,669             7,251
       Amortization of debt issuance costs, debt discount,
         debt premium and deferred swap adjustments                           (101)              247
       Extraordinary loss on early extinguishment of debt                       --             2,857
       Other operating activities                                              (96)            2,142
       Changes in operating assets and liabilities, net                        992           (44,073)
                                                                         ---------         ---------
  
           Net cash provided by (used for) operating activities             11,072           (29,091)
                                                                         ---------         ---------
  
  INVESTING ACTIVITIES:
     Capital expenditures                                                   (5,743)           (7,115)
     Acquisitions, net of cash acquired                                         --            (3,321)
     Sale of subsidiaries                                                       --            (8,971)
     Deposit for defeasance of indebtedness                                     --            (4,809)
     Repayments of (purchase of) note from partner                           2,490            (2,490)
     Proceeds from (payments for) note receivable - related party               --              (424)
     Other investing activities                                                 --              (451)
                                                                         ---------         ---------
  
           Net cash used for investing activities                           (3,253)          (27,581)
                                                                         ---------         ---------
  
  FINANCING ACTIVITIES:
     Net proceeds from short-term borrowings                                   536              (716)
     Net proceeds from (repayments of) revolving loans                      (5,237)           69,973
     Proceeds from long-term debt                                               --           129,000
     Repayment of long-term debt                                            (1,212)         (126,827)
     Debt issuance cost                                                     (1,154)           (1,149)
     Cash overdraft                                                            963                --
     Distribution to partners                                                   --           (20,000)
     Other financing activities                                                 --               (42)
                                                                         ---------         ---------
  
           Net cash provided by (used for) financing activities             (6,104)           50,239
                                                                         ---------         ---------
  
  NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS                                                        1,715            (6,433)
  
  CASH AND CASH EQUIVALENTS
     AT BEGINNING OF PERIOD                                                  3,192             9,405
                                                                         ---------         ---------
  
  CASH AND CASH EQUIVALENTS
     AT END OF PERIOD                                                    $   4,907         $   2,972
                                                                         =========         =========
  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.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  
         Foamex  L.P.'s  condensed  consolidated  balance sheet as of December 31,
  1998 has been  condensed  from the audited  consolidated  balance  sheet at that
  date.  The  condensed  consolidated  balance  sheet as of March  31,  1999,  the
  condensed  consolidated  statements of  operations  and cash flows for quarterly
  periods  ended March 31,  1999 and March 29,  1998 have been  prepared by Foamex
  L.P. and  subsidiaries  and have not been audited by Foamex  L.P.'s  independent
  accountants.  In the opinion of management, all adjustments,  consisting only of
  normal recurring  adjustments,  considered  necessary for a fair presentation of
  the financial position, results of operations and cash flows have been included.
  Foamex L.P. is a wholly owned subsidiary of Foamex  International  Inc. ("Foamex
  International").
  
         Effective September 1998, management of Foamex L.P. elected to change the
  year-end  reporting  period 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 December 31st to improve the internal reporting requirements. This change
  was effective for the third fiscal  quarter of 1998 which ended on September 30,
  1998. Fiscal year 1997 was composed of fifty-two weeks and ended on December 28,
  1997. As a result,  the quarterly  financial data for the quarterly period ended
  March 29, 1998  represents a  thirteen-week  period.  The first  quarter of 1999
  ended on March  31st , which was the end of the third  full  month of 1999,  and
  included 91 calendar days.
  
         Certain  information  and  note  disclosures  normally  included  in  the
  financial  statements  prepared in accordance with generally accepted accounting
  principles  have been  condensed  or  omitted in  accordance  with the rules and
  regulations  of  the  Securities  and  Exchange   Commission.   These  condensed
  consolidated  financial  statements  should be read in  conjunction  with Foamex
  L.P.'s 1998 consolidated  financial statements and notes thereto as set forth in
  Foamex L.P.'s Annual Report on Form 10-K for the year ended December 31, 1998.
  
         Foamex L.P.  operates in the flexible  polyurethane  and advanced polymer
  foam products  industry.  As of March 31, 1999, Foamex L.P.'s operations consist
  of the following  operating  segments:  (i) foam  products,  (ii) carpet cushion
  products,  (iii)  automotive  products,  (iv) technical  products and (v) other,
  which primarily consists of certain foreign manufacturing operations,  corporate
  expenses not allocated to the other  operating  segments and  restructuring  and
  other  charges.  The net  sales  and  income  (loss)  from  operations  of these
  operating  segments for the quarterly periods ended March 31, 1999 and March 29,
  1998 are included in Note 7.
  
         The accompanying  condensed  consolidated  financial statements have been
  prepared  assuming  Foamex L.P. will continue as a going  concern.  For the year
  ended December 31, 1998,  Foamex L.P. had a loss from continuing  operations,  a
  working  capital  deficit and was not in compliance and does not expect to be in
  compliance  for future  periods  with  certain  debt  covenants  for which it is
  seeking amendments. Foamex L.P. received a waiver under its credit facility (the
  "Credit Facility")  through May 5, 1999, which was subsequently  extended on May
  6, 1999 through June 30, 1999,  for the  covenants for which Foamex L.P. was not
  in  compliance.   Non-compliance  under  the  Credit  Facility  and  other  debt
  agreements  provides the lenders under the  agreements,  which have an aggregate
  outstanding principal balance of approximately $409.2 million at March 31, 1999,
  with  the  right,  upon  notice  and  lapse  of  time,  to  declare  all of such
  indebtedness to be due.  Notwithstanding the fact that to date, the lenders have
  not exercised  such rights and have granted  waivers of such  covenants  through
  June 30, 1999 to enable Foamex L.P. to negotiate  amendments of such  covenants;
  there  can be no  assurance  that such  amendments  will be  obtained.  Were the
  lenders under the Credit Facility or the other debt agreements to accelerate the
  maturity of their  indebtedness,  such acceleration would constitute an event of
  default and all of Foamex L.P.'s  long-term  debt would become due. As a result,
  Foamex L.P. has reclassified  approximately $708.8 million and $715.8 million of
  long-term debt as current in the  accompanying  condensed  consolidated  balance
  sheets at March 31, 1999 and  December  31, 1998,  respectively.  These  matters
  raise  substantial  doubt  about  Foamex  L.P.'s  ability to continue as a going
  concern.
  
         Trace International  Holdings, Inc. ("Trace") is a privately held company
  which owned approximately 46.1% of Foamex  International's  outstanding stock as
  of April 1, 1999 and  whose  Chairman  also  serves  as the  Chairman  of Foamex
  International.  In 1998,  Trace  informed  Foamex  International  that Trace had
  substantial  debt  obligations that were due at the end of December 1998 and did
  not have the financial resources to pay those obligations.  Subsequently,  Trace
  informed  Foamex   International  that  waivers  and/or  modifications  of  such
  indebtedness had been
  
                                         6
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  1.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
  obtained for at least the near future;  however,  there can be no assurance that
  such  waivers  and/or  modifications  will remain in effect prior to obtaining a
  permanent  resolution.  Foamex  International's  common  stock owned by Trace is
  pledged as collateral against certain of Trace's  obligations.  If Trace were to
  default on such  indebtedness  collateralized by Foamex  International's  common
  stock or other Trace  creditors were to take steps  constituting a default under
  such indebtedness (such as filing an involuntary  bankruptcy  petition),  and if
  the holders of such  indebtedness  were to foreclose  on Foamex  International's
  common  stock owned by Trace,  such event could  trigger the "change of control"
  provisions and  correspondingly  the  acceleration  and put rights  contained in
  certain of Foamex L.P.'s debt agreements,  as described below. This could result
  in the acceleration of all of Foamex L.P.'s debt.  Although  management believes
  that  Foamex   L.P.'s  debt   obligations   could  be   refinanced   under  such
  circumstances,  there can be no assurance  that Foamex L.P. or its  subsidiaries
  would be able to do so. The financial  statements do not include any adjustments
  that might result from the outcome of these uncertainties.
  
         Certain credit agreements and promissory notes of Foamex L.P. pursuant to
  which  approximately  $434.3  million of debt has been  issued,  as of March 31,
  1999,  contain  provisions  that  would  result  in  the  acceleration  of  such
  indebtedness  if Trace  were to cease  to own at  least  30% of the  outstanding
  common stock of Foamex  International.  Similarly,  certain indentures of Foamex
  L.P. and Foamex Capital Corporation  relating to approximately $248.0 million of
  senior  subordinated  notes contain  provisions that provide the holders of such
  senior  subordinated  notes with the right to  require  the  issuers  thereof to
  repurchase  such senior  subordinated  notes at a price in cash equal to 101% of
  the  aggregate  principal  amount  thereof,  plus  accrued  and unpaid  interest
  thereon,  if Trace  falls below  certain  specified  ownership  levels of Foamex
  International's  common  stock  and  other  persons  or  group  owns  a  greater
  percentage of Foamex International's common stock than Trace.
  
  2.     INVENTORIES
  
         Inventories consist of:
  
                                           March 31,      December 31,
                                             1999            1998        
                                                 (thousands)
  
         Raw materials and supplies        $ 74,254        $ 93,241
         Work-in-process                     11,748          12,087
         Finished goods                      22,449          22,308
                                           --------        --------
  
         Total                             $108,451        $127,636
                                           ========        ========
  
  3.     CURRENT PORTION OF LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
  
         Foamex L.P. reclassified  approximately $708.8 million and $715.8 million
  of long-term debt as current in the accompanying  condensed consolidated balance
  sheets at March 31, 1999 and December 31, 1998, respectively, in connection with
  waivers   granted   through  June  30,  1999  under  the  Credit   Facility  for
  noncompliance with certain debt covenants. These matters raise substantial doubt
  about  Foamex  L.P.'s  ability to  continue as a going  concern.  Foamex L.P. is
  seeking amendments to its Credit Facility. (See Note 1.)
  
                                         7
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  3.     CURRENT PORTION OF LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY 
         (continued)
  
         Current portion of long-term debt consists of:
  March 31,     December 31,
                                                                                 1999            1998
                                                                               --------        --------
         Credit Facility:                                                              (thousands)
  Term Loan B                                                         $ 82,504        $ 82,714
           Term Loan C                                                           75,003          75,194
           Term Loan D                                                          108,625         108,900
           Revolving credit facility                                            134,201         139,438
         9 7/8% Senior subordinated notes due 2007                              150,000         150,000
         13 1/2% Senior subordinated notes due 2005 (includes
           $11,445 and $11,893 of unamortized debt premium)                     109,445         109,893
         Industrial revenue bonds                                                 7,000           7,000
         Subordinated note payable (net of unamortized
           debt discount of $431 and $523)                                        6,583           6,491
         Other                                                                    9,405           9,848
                                                                               --------        --------
                                                                                682,766         689,478
  
         Less current portion                                                   682,766         689,478
                                                                               --------        --------
  
         Long-term debt-unrelated parties                                      $     --        $     --
                                                                               ========        ========
  
         Current portion of long-term debt - related party consists of:
  
         Foamex/GFI Note                                                       $ 34,000        $ 34,000
                                                                               ========        ========
  Debt Restrictions and Covenants
  
         The  indentures,  credit  facilities  and other  indebtedness  agreements
  contain certain covenants 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 (see Note 1). Also,  Foamex L.P. is required
  under certain of these  agreements  to maintain  specified  financial  ratios of
  which the most restrictive are the maintenance of net worth and interest,  fixed
  charge and leverage coverage ratios,  as defined.  Under the most restrictive of
  the  distribution  restrictions,  Foamex L.P. can make  distributions  to Foamex
  International  only to the extent  necessary to enable Foamex  International  to
  meet its operating and debt obligations.
  
         Foamex L.P.  amended its Credit Facility on March 11, 1999. The amendment
  adjusted  financial  covenants,  among other things, as of December 31, 1998 and
  provided  for future  measurement  periods  taking into  account  Foamex  L.P.'s
  estimated  operating  results and financial  condition for 1998 and managements'
  expectations  regarding future  measurement  periods.  As the Foamex L.P. actual
  1998 net loss was greater than originally  estimated,  on April 15, 1999, Foamex
  L.P. obtained a waiver through May 5, 1999, which was further extended on May 6,
  1999 through June 30, 1999, of the financial  covenants  contained in the Credit
  Facility and certain events of default arising out of its Mexican operations, in
  order to enable  Foamex L.P.  to  negotiate  a further  amendment  of the Credit
  Facility.
  
         During the  quarterly  periods  ended March 31, 1999 and March 29,  1998,
  Foamex L.P. paid  approximately  $0.5 million and $0.2 million,  respectively to
  Foam Funding LLC for interest on a note payable to them.
  
                                         8
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  4.     LITIGATION
  
         On April 26, 1999, a putative securities class action entitled Molitor v.
  Foamex  International  Inc., et al., 99 Civ. 3004 (DC),  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,   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 compliant 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. The defendants intend to vigorously
  defend the action.  To date,  no response to the  complaint has been made and no
  discovery or other  proceedings have taken place.  Foamex L.P. is not a party to
  such suit.
  
         On April 14, 1999, Foamex International received 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  and Foamex  L.P.,  which
  previously  have been  disclosed  in Foamex  International's  and Foamex  L.P.'s
  periodic filings.  Foamex  International's  Board of Directors,  in consultation
  with its special  counsel,  is in the process of evaluating such  communications
  and what  actions,  if any, to take with  respect  thereto.  Foamex L.P. was not
  named in such communications.
  
         Foamex L.P.'s Annual Report on Form 10-K for the year ended  December 31,
  1998 included the following  discussions of other material litigation  involving
  Foamex  L.P.  and  Foamex   International.   There  have  been  no   significant
  developments in such litigation  since the filing of Foamex L.P.'s Annual Report
  on Form 10-K.
  
         Beginning  on or about  March 17,  1998,  six actions  (collectively  the
  "Stockholder  Litigation")  were filed in the Court of  Chancery of the State of
  Delaware,   New  Castle  County  (the  "Court"),   by   stockholders  of  Foamex
  International. The Stockholder 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. The complaints  sought,  among other
  things,  class  certification,  a declaration  that the defendants have breached
  their  fiduciary  duties to the class,  preliminary  and  permanent  injunctions
  barring   implementation  of  the  proposed   transaction,   rescission  of  the
  transaction if  consummated,  unspecified  compensatory  damages,  and costs and
  attorneys' fees. 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.
  Foamex L.P. is not a party to the Stockholder Litigation.
  
         The parties to the  Stockholder  Litigation  entered into a Memorandum of
  Understanding,  dated June 25,  1998 (the  "Memorandum  of  Understanding"),  to
  settle the  Stockholder  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 Stockholder
  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 Agreement and Plan of Merger (the "First  Merger  Agreement")  which
  provided,  among other things, for all of the Foamex  International  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.
  
                                         9
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  4.     LITIGATION (continued)
  
         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  Stockholders"),  the  dismissal  of the  Stockholder
  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  Stockholders  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 to consider  whether the  settlement  should be approved for October 27,
  1998 (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 Stockholders. 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 Stockholder  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.
  
         On  November  10,  1998,  counsel for  certain of the  defendants  in the
  Stockholder  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 Stockholder  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 Stockholders in connection with a second Agreement and Plan
  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.
  
         The  defendants  have  denied,  and  continue  to deny,  that  they  have
  committed or have  threatened to commit any violation of law or breaches of duty
  to  plaintiffs  or the  purported  class or any  breach  of the  stipulation  of
  settlement.   The  defendants   intend  to  vigorously  defend  the  Stockholder
  Litigation. If the Stockholder Litigation is adversely determined, it could have
  a material adverse effect on the financial  position,  results of operations and
  cash flows of Foamex International.
  
         In addition,  on or about  November 18, 1998, a putative class action was
  filed in the United States  District Court for the Eastern  District of New York
  on behalf of all persons who purchased common stock of the Company between March
  16, 1998 and October 19, 1998, naming Trace as defendant and alleging that Trace
  breached a contract between the putative class members and Trace. By order dated
  January 8, 1999, the Court  transferred the action to the United States District
  Court for the Southern  District of New York. Trace made a motion to dismiss the
  action on February 8, 1999,  which motion is pending  before the Court,  and the
  Court has  stayed all  discovery  in the  action  until the  motion is  decided.
  Neither Foamex International, Foamex L.P. nor any of the individual directors of
  Foamex International are named as defendants in this litigation.
  
                                         10
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  4.     LITIGATION (continued)
  
         As of May 17, 1999, Foamex L.P. and Trace were two of multiple defendants
  in actions filed on behalf of approximately  4,300 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 has paid Foamex L.P.'s  litigation  expenses to date from
  insurance proceeds Trace received,  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 or  Trace'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.
  
         In November  1997, a complaint  was filed in the United  States  District
  Court for the  Southern  District of Texas  alleging  that  various  defendants,
  including Crain through the use of the CARDIO(R)  process  licensed from a third
  party, infringed on a patent held by plaintiff.  Foamex L.P. is negotiating with
  the licensor of the process for the  assumption  of the defense of the action by
  the licensor, however, the action is in the preliminary stages, and there can be
  no assurance as to the ultimate outcome of the action.  Such action could have a
  material  adverse  effect on the financial  position,  results of operations and
  cash flows of Foamex L.P.
  
         Other Litigation
  
         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.
  
  5.       COMPREHENSIVE INCOME
  
         Comprehensive  income for the quarterly  periods noted below is comprised
  of the following:
  
                                                       Quarterly Period Ended
                                                       March 31,    March 29,
                                                         1999          1998 
                                                        ------        ------
                                                            (thousands)
         Net income                                     $2,608        $2,485
         Foreign current translation adjustments           412           227
                                                        ------        ------
         Total comprehensive income                     $3,020        $2,712
                                                        ======        ======
  
                                         11
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  6.     RESTRUCTURING AND OTHER CHARGES
  
         As announced  previously  by Foamex  International  in its March 16, 1999
  press release,  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,  Foamex  L.P.  recorded  restructuring  charges  of
  approximately  $3.4 million in  connection  with this plan related  primarily to
  severance in connection  with replacing its former  Chairman and Chief Executive
  Officer and work force reductions of  approximately 78 employees.  Approximately
  $1.9  million  of  these  severance  costs  will  be  paid  by  June  30,  1999.
  Approximately $1.5 million, which relates to contractual severance costs payable
  to the former Chairman and Chief Executive  Officer,  will be paid through March
  2001.  Foamex L.P.  expects to record  additional  restructuring  charges in the
  future as it fully implements its restructuring plan.
  
  7.     OPERATING SEGMENT AND RELATED DATA
  
         Foamex L.P. reports  information about its business segments on the basis
  of how they are managed and  evaluated by the chief  operating  decision-makers.
  Each  of  the  operating  segments  is  headed  by one or  more  executive  vice
  presidents who are responsible for developing plans and directing the operations
  of the segment.
  
         Foamex L.P.'s  reportable  business  segments are foam  products,  carpet
  cushion products,  automotive products and technical products. The foam products
  segment  manufactures and markets foam used by the bedding  industry,  furniture
  industry and the retail  industry.  The carpet  cushion  products  segment sells
  prime,  rebond,  sponge  rubber and felt carpet  cushion  principally  to Foamex
  Carpet Cushion, Inc. ("Foamex Carpet"). The automotive products segment supplies
  foam primarily for automotive interior applications to automotive  manufacturers
  and to industry sub suppliers.  The technical products segment  manufactures and
  markets  reticulated  foams and other custom  polyester and polyether  foams for
  industrial, specialty and consumer and safety applications.
  
         The  "other"  column  in  the  table  below  represents  certain  foreign
  manufacturing  operations  that  do not  meet  the  quantitative  threshold  for
  determining  reportable segments,  corporate expenses not allocated to the other
  operating segments and restructuring and other charges.  Total asset information
  by operating  segment is not reported  because many of Foamex L.P.'s  facilities
  produce products for multiple operating segments.
  
         The  accounting  policies  of the  operating  segments  are  the  same as
  described in the "Summary of  Significant  Accounting  Policies"  (see Note 2 to
  Foamex L.P.'s Annual Report on Form 10-K for the year ended  December 31, 1998).
  Revenues and costs have been included in operating  segments where  specifically
  identified.  Costs shared by operating segments have been allocated on the basis
  of the amount utilized.
  Carpet
                                           Foam      Cushion     Automotive     Technical
                                         Products    Products      Products     Products       Other         Total      
  Quarterly period ended March 31, 1999:
  Net sales                            $139,379    $43,303         $88,771      $22,248      $6,176       $299,877
  Income (loss) from operations          12,921       (371)          6,792        5,035      (4,606)        19,771
  Depreciation and amortization           4,147      1,169           1,235          636         482          7,669
  
  Quarterly period ended March 29, 1998:
  Net sales                            $148,293    $56,164         $65,681      $21,116      $6,819       $298,073
  Income (loss) from operations          12,113      1,504           7,415        4,537      (1,660)        23,909
  Depreciation and amortization           3,806      1,071           1,177          629         568          7,251
  8.       RELATED PARTY TRANSACTIONS
  
         During the  quarterly  periods  ended March 31, 1999 and March 29,  1998,
  Foamex L.P. sold approximately $43.3 million and $56.2 million, respectively, of
  carpet cushion products to Foamex Carpet. In addition,  Foamex L.P. provided and
  invoiced approximately $0.6 million and $0.3 million of administrative  services
  to Foamex Carpet during the quarterly periods ended March 31, 1999 and March 29,
  1998, respectively.
  
                                         12
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.       RELATED PARTY TRANSACTIONS (continued)
  
         Also, Foamex L.P. chartered an aircraft (which is owned by a wholly owned
  subsidiary of Foamex International)  through a third party and incurred costs of
  approximately  $0.1 million and $0.2 million during the quarterly  periods ended
  March 31, 1999 and March 29, 1998, respectively.
  
                                         13
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
         Foamex L.P.  operates in the flexible  polyurethane  and advanced polymer
  foam products  industry.  As of March 31, 1999, Foamex L.P.'s operations consist
  of the following  operating  segments:  (i) foam  products,  (ii) carpet cushion
  products,  (iii)  automotive  products,  (iv) technical  products and (v) other,
  which primarily consists of certain foreign manufacturing operations,  corporate
  expenses not allocated to the other  operating  segments and  restructuring  and
  other  charges.  Certain  information  in this report  contains  forward-looking
  statements  and  should be read in  conjunction  with the  discussion  regarding
  forward-looking statements set forth on page 4 of Foamex L.P.'s Annual Report on
  Form 10-K for the year ended December 31, 1998.
  
         The accompanying  condensed  consolidated  financial statements have been
  prepared assuming Foamex L.P. will continue as a going concern.  As discussed in
  Note 1 to the accompanying condensed consolidated financial statements and under
  "Liquidity and Capital  Resources"  below,  at December 31, 1998 Foamex L.P. was
  not in  compliance  and does not expect to be in compliance  for future  periods
  with certain  financial  covenants  contained in certain of its debt agreements.
  These  debt   agreements  had   outstanding   principal   balances   aggregating
  approximately  $409.2  million at March 31, 1999.  Were the lenders  under these
  agreements to accelerate the maturity of their  indebtedness,  such acceleration
  would  constitute  an event of default and all of Foamex L.P.'s  long-term  debt
  would  become due.  Additionally,  as  discussed  in Note 1 to the  accompanying
  condensed  consolidated  financial  statements and under  "Liquidity and Capital
  Resources" below, if Trace defaults on its indebtedness collateralized by Foamex
  International's  common  stock and such  creditors  exercise  their  rights  and
  remedies under the related debt  agreements,  all of Foamex L.P.'s  indebtedness
  may be accelerated.  As a result, Foamex L.P. reclassified  approximately $708.8
  million  and $715.8  million of  long-term  debt as current in the  accompanying
  condensed  consolidated  balance sheets at March 31, 1999 and December 31, 1998,
  respectively.  These matters raise substantial doubt about Foamex L.P.'s ability
  to continue as a going  concern.  The  financial  statements  do not include any
  adjustments that might result from the outcome of these uncertainties.
  
         On March 16, 1999, Foamex International  announced that it had hired John
  G. Johnson,  Jr. as President,  Chief  Executive  Officer and director of Foamex
  International  following the  resignation of Andrea Farace from the positions of
  Chairman  of  the  Board,   Chief  Executive  Officer  and  director  of  Foamex
  International.  Mr.  Johnson  holds the position of Chief  Executive  Officer of
  Foamex L.P.  Foamex  International  also  announced  that it had hired JP Morgan
  Securities  Inc. as a financial  advisor to explore  strategic  alternatives  to
  maximize shareholder value.
  
         Restructuring Plan
  
         As announced  previously  by Foamex  International  in its March 16, 1999
  press release,  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,  Foamex  L.P.  recorded  restructuring  charges  of
  approximately  $3.4 million in  connection  with this plan related  primarily to
  severance in connection  with replacing its former  Chairman and Chief Executive
  Officer and work force reductions of  approximately 78 employees.  Approximately
  $1.9  million  of  these  severance  costs  will  be  paid  by  June  30,  1999.
  Approximately $1.5 million, which relates to contractual severance costs payable
  to the former Chairman and Chief Executive  Officer,  will be paid through March
  2001.  Foamex L.P.  expects to record  additional  restructuring  charges in the
  future as it fully  implements its  restructuring  plan.  Such amounts cannot be
  estimated at this time but are expected to relate primarily to severance costs.
  
         Acquisitions and Dispositions
  
         On February 27, 1998,  Foamex  International,  Foamex L.P. and certain of
  their affiliates completed a series of transactions  designed to simplify Foamex
  International's  and Foamex L.P.'s  structure and to provide future  operational
  flexibility (collectively, the "GFI Transaction").  Prior to the consummation of
  these transactions,  Foamex L.P. defeased the $4.5 million outstanding principal
  amount of its 9 1/2% senior  secured  notes due 2000.  Foamex  L.P.  settled its
  intercompany  payables to General Felt  Industries,  Inc.  ("General Felt") with
  $4.8 million in cash and a promissory note in the aggregate  principal amount of
  $34.0  million  supported by a $34.5  million  letter of credit under the Foamex
  L.P. credit facility (the "Foamex/GFI Note"). The initial  transaction  resulted
  in the transfer  from Foamex L.P. to Foam Funding LLC, an indirect  wholly owned
  subsidiary of Trace, of all of the outstanding  common stock of General Felt, in
  exchange for (i) the  assumption by Foam Funding LLC of $129.0 million of Foamex
  L.P.'s  indebtedness and (ii) the transfer by Foam Funding LLC to Foamex L.P. of
  a 1%  non-managing  general  partnership  interest  in Foamex  L.P. As a result,
  General Felt ceased being a subsidiary  of Foamex L.P. and was relieved from all
  
                                         14
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
  obligations under Foamex L.P.'s 9 7/8% senior subordinated notes due 2007 and 13
  1/2%  senior  subordinated  notes due 2005.  Upon  consummation  of the  initial
  transaction,  Foamex  Carpet,  a newly formed wholly owned  subsidiary of Foamex
  International,  Foamex L.P.,  Foam Funding LLC, and General Felt entered into an
  Asset  Purchase  Agreement  dated  February 27, 1998, in which General Felt sold
  substantially  all of its assets (other than cash, the  Foamex/GFI  Note and its
  operating facility in Pico Rivera,  California) to Foamex Carpet in exchange for
  (i) $20.0 million in cash and (ii) a promissory  note issued by Foamex Carpet to
  Foam Funding LLC in the aggregate  principal amount of $70.2 million.  The $20.0
  million cash payment was funded with a distribution  by Foamex L.P. Foam Funding
  LLC retained ownership of the $34.0 million Foamex/GFI Note.
  
         No gain was  recognized  on the GFI  Transaction.  The  impact of the GFI
  Transaction  recorded  during the  quarterly  period ended March 29, 1998 was an
  increase in Foamex L.P.'s partners'  capital  (deficit) of  approximately  $10.1
  million,   a  distribution  of  $20.0  million  to  Foamex   International   and
  approximately  $1.5 million of fees charged to earnings.  The $129.0  million of
  debt  assumed  by Foam  Funding  LLC in the GFI  Transaction  was  used to repay
  approximately  $125.1 million of term loan  borrowings that was accounted for as
  an  extinguishment   of  debt  which  resulted  in  an  extraordinary   loss  of
  approximately $3.2 million.  The 1% non-managing  general  partnership  interest
  acquired  in  connection  with  the  GFI  Transaction  was  accounted  for  as a
  redemption  of equity.  The GFI  Transaction  used cash of  approximately  $10.2
  million. The non-cash portion was insignificant.
  
         General
  
         Foamex  L.P.'s  automotive  foam  customers  are  predominantly  original
  equipment  manufacturers  or other automotive  suppliers.  As such, the sales of
  these product  lines are directly  related to the overall level of passenger car
  and light truck  production  in North  America.  Also,  Foamex  L.P.'s sales are
  sensitive to sales of new and  existing  homes,  changes in personal  disposable
  income and seasonality.  Foamex L.P.  typically  experiences two seasonally slow
  periods during each year, in early July and in late  December,  due to scheduled
  plant shutdowns and holidays.
  
         Operating  results  for 1999 are  expected  to be  influenced  by various
  internal and external factors.  These factors include,  among other things,  (a)
  Foamex L.P.'s debt structure and Foamex L.P.'s ability to successfully amend the
  terms of its Credit Facility and certain other  indebtedness,  (b) Foamex L.P.'s
  capital  structure,  (c)  continued  integration  of  the  operations  of  Crain
  Industries,   Inc.   ("Crain")  with  Foamex  L.P.'s   operations   (the  "Crain
  Consolidation"),  (d) raw  material  cost  increases,  if any, by Foamex  L.P.'s
  chemical  suppliers,  (e) Foamex  L.P.'s  success in passing on to its customers
  selling price  increases to recover any such raw material cost increases and (f)
  fluctuations in interest rates.
  
  RESULTS OF OPERATIONS
  
         Foamex L.P. reports  information about its business segments on the basis
  of how they are managed and  evaluated by the chief  operating  decision-makers.
  Each  of  the  operating  segments  is  headed  by one or  more  executive  vice
  presidents who are responsible for developing plans and directing the operations
  of the segment.
  
         Foamex L.P.'s  reportable  business  segments are foam  products,  carpet
  cushion products,  automotive products and technical products. The foam products
  segment  manufactures and markets foam used by the bedding  industry,  furniture
  industry and the retail  industry.  The carpet  cushion  products  segment sells
  prime, rebond,  sponge rubber and felt carpet cushion to Foamex Carpet through a
  supply  agreement.  The automotive  products segment supplies foam primarily for
  automotive interior applications to automotive manufacturers and to industry sub
  suppliers.  The technical products segment  manufactures and markets reticulated
  foams and other custom  polyester and polyether foams for industrial,  specialty
  and consumer and safety applications.
  
         The  "other"  column  in  the  table  below  represents  certain  foreign
  manufacturing  operations  that  do not  meet  the  quantitative  threshold  for
  determining  reportable segments,  corporate expenses not allocated to the other
  operating segments and restructuring and other charges.  Total asset information
  by operating  segment is not reported  because many of Foamex L.P.'s  facilities
  produce products for multiple operating segments.
  
                                         15
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  Carpet
                                           Foam      Cushion    Automotive     Technical
                                         Products    Products      Products     Products       Other         Total      
  Quarterly period ended March 31, 1999:
  Net sales                            $139,379    $43,303         $88,771      $22,248      $6,176       $299,877
  Income (loss) from operations          12,921       (371)          6,792        5,035      (4,606)        19,771
  Depreciation and amortization           4,147      1,169           1,235          636         482          7,669
  
  Quarterly period ended March 29, 1998:
  Net sales                            $148,293    $56,164         $65,681      $21,116      $6,819       $298,073
  Income (loss) from operations          12,113      1,504           7,415        4,537      (1,660)        23,909
  Depreciation and amortization           3,806      1,071           1,177          629         568          7,251
  Quarterly  Period Ended March 31, 1999 Compared to Quarterly  Period Ended March
  27, 1998
  
         Net sales for the first  quarter of 1999 were $299.9  million as compared
  to $298.1  million in the first  quarter of 1998, an increase of $1.8 million or
  0.6%. The increase in net sales was primarily associated with increased sales of
  lamination  products,  which was offset by decreased sales due to the closure of
  several  plants in connection  with the Crain  Consolidation  and a reduction in
  sales in  connection  with the GFI  Transaction,  which  occurred  at the end of
  February 1998.  Income from operations  decreased $4.1 million or 17.3% to $19.8
  million for the first quarter of 1999 from $23.9 million in the first quarter of
  1998.  The  decrease  in income  from  operations  resulted  primarily  from (a)
  restructuring  costs of $3.4 million  recorded  during the first quarter of 1999
  and (b) a decrease in gross  profit of $7.4  million  resulting  primarily  from
  increased raw material costs and a decrease in carpet cushion units sold, offset
  in part by a decrease in selling,  general and  administrative  expenses of $6.7
  million. The decrease in selling, general and administrative costs was primarily
  due to (a) the  elimination of duplicative  costs from the Crain  Consolidation,
  (b)  cost  reductions  implemented  during  the  first  quarter  of 1999 and (c)
  reductions  as a result  of the GFI  Transaction  which  occurred  at the end of
  February 1998.
  
         Foam Products
  
         Foam products net sales for the first quarter of 1999  decreased  6.0% to
  $139.4  million from $148.3  million in the first  quarter of 1998.  Income from
  operations  increased  6.7% to $12.9  million  (9.3% of net sales) for the first
  quarter of 1999 from $12.1  million  (8.2% of net sales) in the first quarter of
  1998.  The decrease in net sales was  primarily  associated  with the closure of
  several plants as part of the Crain  Consolidation.  The increase in income from
  operations  as a percentage  of net sales was  primarily  the result of improved
  operating efficiencies resulting from the Crain Consolidation.
  
         Carpet Cushion Products
  
         Carpet cushion products net sales for the first quarter of 1999 decreased
  22.9% to $43.3 million from $56.2 million in the first quarter of 1998 primarily
  due to the GFI  Transaction  and decreased  units sold.  Income from  operations
  decreased  124.7% to a loss of $0.4  million  (0.9% of net  sales) for the first
  quarter  of 1999 from  income of $1.5  million  (2.7% of net sales) in the first
  quarter of 1998.  This decrease was primarily  associated  with the factors that
  caused the decrease in net sales.
  
         Automotive Products
  
         Automotive  products  net sales for the first  quarter of 1999  increased
  35.2% to $88.8  million  from $65.7  million in the first  quarter of 1998.  The
  increase  in net sales  was  associated  with  increased  volume  of  lamination
  products.  Income from  operations  decreased  8.4% to $6.8 million (7.7% of net
  sales) for the first  quarter of 1999 from $7.4 million  (11.3% of net sales) in
  the first  quarter of 1998.  This  decrease  was  primarily a result of contract
  price reductions and the change in product mix to more laminated  products which
  have lower margins than other automotive products.
  
                                         16
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
         Technical Products
  
         Technical Products net sales for the first quarter of 1999 increased 5.4%
  to $22.2 million from $21.1  million in the first  quarter of 1998.  Income from
  operations  increased  11.0% to $5.0 million  (22.6% of net sales) for the first
  quarter of 1999 from $4.5 million  (21.5% of net sales) in the first  quarter of
  1998.  The  increase  in net sales and  income  from  operations  was  primarily
  associated with increased sales of foam for ink jet printers.
  
         Other
  
         Other  primarily  consists of certain foreign  manufacturing  operations,
  corporate   expenses  not  allocated  to  the  other   operating   segments  and
  restructuring and other charges.  The decrease in net sales associated with this
  segment  primarily  resulted  from a decrease  in net sales from  Foamex  L.P.'s
  Mexican  operations.   The  increase  in  loss  from  operations  was  primarily
  associated with the $3.4 million of restructuring  charges recorded in the first
  quarter of 1999 discussed previously.
  
         Income Before Provision for Income Taxes
  
         Income before  provision  for income taxes  decreased to $3.2 million for
  the first  quarter of 1999 as compared to $6.7  million in the first  quarter of
  1998. This decrease is primarily due to the decrease in income from  operations,
  as discussed above.
  
         Income Taxes
  
         The first  quarter of 1999  provision  for income  taxes of $0.6  million
  primarily  represents  statutory  taxes on  operations  in Mexico and Canada and
  state income taxes for those states who do not permit use of net operating  loss
  carryforwards.
  
         Extraordinary Loss
  
         The  extraordinary  loss on early  extinguishment of debt in 1998 of $3.1
  million was primarily  associated  with the write-off of debt issuance  costs in
  connection with the GFI Transaction.
  
  Liquidity and Capital Resources
  
         Liquidity
  
         Foamex L.P.'s operating cash requirements  consist principally of working
  capital   requirements,   scheduled   payments  of  principal  and  interest  on
  outstanding  indebtedness and capital  expenditures.  Foamex L.P.  believes that
  cash flow from Foamex  L.P.'s  operating  activities,  cash on hand and periodic
  borrowings under the Credit Facility,  if necessary,  (provided that such Credit
  Facility is successfully  amended,  as described below) will be adequate to meet
  Foamex  L.P.'s  liquidity  requirements.  The  ability  to meet  such  liquidity
  requirements  could be impaired  if Foamex L.P.  were to fail to comply with any
  covenants  contained in the Credit Facility and such noncompliance was not cured
  by Foamex L.P. or waived by the lenders. Foamex L.P. amended its Credit Facility
  in March 1999. Foamex L.P. paid approximately $1.2 million in financing fees and
  interest rates were increased in connection with this  amendment.  The amendment
  adjusted  financial  covenants,  among other things, as of December 31, 1998 and
  provided  for future  measurement  periods  taking into  account  Foamex  L.P.'s
  estimated  operating  results and financial  condition  for 1998 and  management
  expectations  regarding future  measurement  periods.  As the Foamex L.P. actual
  1998 net loss was greater than originally  estimated,  on April 15, 1999, Foamex
  L.P. obtained a waiver through May 5, 1999, which was further extended on May 6,
  1999 through June 30, 1999, of the financial  covenants  contained in the Credit
  Facility and certain events of default arising out of its Mexican operations, in
  order to enable it to  negotiate  a further  amendment  of the Credit  Facility.
  There can be no assurance that such an amendment  will be obtained.  The failure
  to obtain such an amendment would have a material adverse effect on Foamex L.P.
  
           Certain credit  agreements and promissory notes of Foamex L.P. pursuant
  to which  approximately  $434.3 million of debt has been issued, as of March 31,
  1999,  contain  provisions  that  would  result  in  the  acceleration  of  such
  indebtedness  if Trace  were to cease  to own at  least  30% of the  outstanding
  
                                         17
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
  common stock of Foamex  International.  Similarly,  certain indentures of Foamex
  L.P. and Foamex Capital Corporation  relating to approximately $248.0 million of
  senior  subordinated  notes contain  provisions that provide the holders of such
  senior  subordinated  notes with the right to  require  the  issuers  thereof to
  repurchase  such senior  subordinated  notes at a price in cash equal to 101% of
  the  aggregate  principal  amount  thereof,  plus  accrued  and unpaid  interest
  thereon,  if Trace  falls below  certain  specified  ownership  levels of Foamex
  International's  common  stock  and  other  persons  or  group  owns  a  greater
  percentage  of  Foamex  International's  common  stock  than  Trace.  Trace is a
  privately held company which owned approximately 46.1% of Foamex International's
  outstanding  common stock as of April 1, 1999 and whose  Chairman also serves as
  the  Chairman  of  Foamex   International.   In  1998,   Trace  informed  Foamex
  International  that Trace had substantial  debt obligations that were due at the
  end of December  1998 and it did not have the  financial  resources to pay those
  obligations.  Subsequently,  Trace informed  Foamex  International  that waivers
  and/or  modifications  of such  indebtedness  had been obtained for at least the
  near  future;  however,  there  can be no  assurance  that such  waivers  and/or
  modifications  will remain in effect prior to obtaining a permanent  resolution.
  Foamex  International's  common  stock  owned by Trace is pledged as  collateral
  against  certain of Trace's debt  obligations.  If Trace were to default on such
  indebtedness  collateralized  by Foamex  International's  common  stock or other
  Trace   creditors  were  to  take  steps   constituting  a  default  under  such
  indebtedness  (such as filing an involuntary  bankruptcy  petition),  and if the
  holders of such secured indebtedness were to foreclose on Foamex International's
  common  stock owned by Trace,  such event could  trigger the "change of control"
  provisions and  correspondingly  the  acceleration  and put rights  contained in
  certain of Foamex L.P.'s debt agreements,  as described below. This could result
  in the acceleration of all of Foamex L.P.'s debt.  Although  management believes
  that all such debt  obligations  could be refinanced  under such  circumstances,
  there can be no assurance that Foamex L.P. or its subsidiaries  would be able to
  do so.
  
         The accompanying  condensed  consolidated  financial statements have been
  prepared assuming Foamex L.P. will continue as a going concern.  As discussed in
  Note 1 to the  accompanying  condensed  consolidated  financial  statements,  at
  December 31, 1998 Foamex L.P. was not in compliance and does not expect to be in
  compliance  in the future with  certain debt  covenants  for which it is seeking
  amendments.  These  agreements had outstanding  principal  balances  aggregating
  approximately  $409.2 million at March 31, 1999.  Foamex L.P.  received a waiver
  under the Credit Facility through May 5, 1999,  which was subsequently  extended
  on May 6, 1999 through June 30, 1999,  for the  covenants  for which Foamex L.P.
  was not in compliance.  Non-compliance  under the Credit Facility and other debt
  agreements  provides the lenders  under the  agreements,  with the rights,  upon
  notice and the lapse of time,  to declare  all of such  indebtedness  to be due.
  Notwithstanding the fact that to date the lenders have not exercised such rights
  and have granted  waivers of such  covenants  through  June 30, 1999,  to enable
  Foamex L.P. to negotiate amendment of such covenants;  there can be no assurance
  that such amendments will be obtained. Were the lenders under these agreement to
  accelerate  the  maturity  of  their   indebtedness,   such  acceleration  would
  constitute  an event of default and all of Foamex  L.P.'s  long-term  debt would
  become  due.  Additionally,  as  discussed  above,  if  Trace  defaults  on  its
  indebtedness  collateralized  by Foamex  International's  common  stock and such
  creditors  exercise their rights and remedies under the related debt agreements,
  all of Foamex L.P.'s indebtedness may be accelerated.  As a result,  Foamex L.P.
  reclassified  approximately  $708.8 million and $715.8 million of long-term debt
  as current in the accompanying  condensed  consolidated  balance sheets at March
  31, 1999 and December 31, 1998,  respectively.  These matters raise  substantial
  doubt about Foamex L.P.'s ability to continue as a going concern.  The financial
  statements do not include any adjustments  that might result from the outcome of
  these uncertainties.
  
         If Foamex  L.P.  is able to amend the  relevant  covenants  in its credit
  agreements  and  other  financial  arrangements,  Foamex  L.P.  may be  able  to
  reclassify  its  long-term  debt included in current  liabilities  as long-term.
  However,  there can be no assurance  that Foamex L.P. will be able to obtain the
  necessary  amendments,  or if  obtained,  that it  will  once  again  be able to
  classify such liabilities as long-term.
  
         As of March 31,  1999,  there were  $134.2  million of  revolving  credit
  borrowings, at an average interest rate of 8.30%, under the Credit Facility with
  $10.7 million  available  for  additional  borrowings  and  approximately  $47.6
  million of  letters  of credit  outstanding  which are  supported  by the Credit
  Facility.   Borrowings  by  Foamex  Canada  Inc.  as  of  March  31,  1999  were
  approximately  $3.5 million,  at an interest rate of 7.25%,  under Foamex Canada
  Inc.'s revolving credit agreement with unused availability of approximately $1.9
  million.
  
         Foamex L.P. paid an aggregate $1.2 million in financing  fees  associated
  with  the  March  1999  amendment  to  the  Credit  Facility.  Foamex  L.P.  has
  capitalized  these  costs  and is  currently  amortizing  them  along  with  the
  previously  paid deferred  financing costs over the remaining life of the Credit
  Facility as Foamex L.P. expects to successfully amend the Credit Facility during
  
                                         18
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
  the current waiver period.  Foamex L.P. is in the process of negotiating further
  amendments  to the Credit  Facility and certain  other  financing  agreements as
  discussed previously.  Generally,  amendments to financing agreements may result
  in changes to terms and conditions under the existing debt agreements, including
  but not limited to,  changes in interest  rates and financial and  non-financial
  covenants.  Additionally, there may be additional financing fees associated with
  obtaining such  amendments.  Foamex L.P. cannot  determine the changes which may
  occur to the Credit Facility at this time, or the amount of financing fees which
  may be required in connection with this future amendment.
  
         Cash and cash  equivalents  increased  to $4.9  million at March 31, 1999
  from $3.2 million at December 31, 1998 due primarily to the increase in net cash
  provided by operating activities offset by the repayment of revolver borrowings.
  Excluding  the  reclassification  of other  long-term  debt to current,  working
  capital  decreased  $1.8 million to $113.0 million at March 31, 1999 from $114.8
  million at December 31, 1998. Net operating assets and liabilities (comprised of
  accounts receivable,  accounts receivable from related parties,  inventories and
  accounts payable)  increased $3.9 million to $152.6 million at March 31, 1999 as
  compared to $148.7  million at December 31, 1998. The increase was primarily due
  to an aggregate  $2.9 million net increase in accounts  receivable  and accounts
  receivable  from  related  parties and a decrease  in accounts  payable of $20.0
  million offset by a decrease in  inventories  of $19.2 million.  The increase in
  accounts  receivable  and  accounts  receivable  related  parties was  primarily
  associated  with an increase in sales  during March 1999 as compared to December
  1998 and the timing of receipts from Foamex Carpet.  The decrease in inventories
  was  primarily  due to the  December  31,  1998  balance  including  significant
  purchases  of raw  materials at  year-end.  The decrease in accounts  payable is
  primarily  associated with the timing of payments to vendors and the decrease in
  inventories from December 31, 1998 to March 31, 1999.
  
         Cash Flow from Operating Activities
  
         Cash flow  provided by  operating  activities  was $11.1  million for the
  quarterly  period ended March 31, 1999 as compared to cash used of $29.1 million
  for the  quarterly  period  ended March 29,  1998.  The  increase is primarily a
  result of a decrease in the use of cash by the operating  assets and liabilities
  during 1999 as compared to 1998.
  
         Cash Flow from Investing Activities
  
         During  1999,  Foamex L.P.  spent  approximately  $5.7 million on capital
  improvements  as compared to $7.1 million  during the first quarter of 1998. The
  1999 expenditures were primarily for recurring  capital  replacement  additions.
  The  1998  expenditures   included:   (a)  finalization  of  the  expansion  and
  modernization  of a  facility  in  Orlando,  Florida  to  improve  manufacturing
  efficiencies,  (b)  installation  of more efficient foam production line systems
  and  fabricating  equipment  in a number  of  manufacturing  facilities  and (c)
  installation of flame  laminators to support the increased  volume of automotive
  laminated  products.  Foamex L.P.  expects to reduce capital  expenditures  from
  historical levels for the foreseeable future.
  
         On  March  31,  1999,  Foamex   International  repaid  its  $2.5  million
  promissory note dated December 31, 1998 to Foamex L.P.
  
         Cash Flow from Financing Activities
  
         In connection  with the GFI  Transaction  in February  1998,  Foamex L.P.
  extinguished  approximately  $125.1  million  of term  loans  under  the  Credit
  Facility funded with $129.0 million of cash proceeds from  borrowings  under new
  term loan  agreements  which were  subsequently  assumed by Foam Funding LLC. In
  connection with the GFI Transaction,  Foamex L.P.  distributed  $20.0 million in
  cash pro rata to its  partners,  such  distribution  was funded with  borrowings
  under the Credit Facility. See "Acquisitions and Dispositions."
  
  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 March 31,  1999 was $3.5  million.  Although  it is
  
                                         19
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
  possible that new information or future  developments  could require Foamex L.P.
  to  reassess  its  potential  exposure  to all  pending  environmental  matters,
  including  those  described  in the  footnotes  to  Foamex  L.P.'s  consolidated
  financial  statements 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
  L.P.'s  operations,  financial  position,  capital  expenditures  or competitive
  position.  See  Note  16 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.
  
  Inflation and Other Matters
  
         There was no significant  impact on Foamex L.P.'s  operations as a result
  of  inflation  during  the  periods  presented.  In some  circumstances,  market
  conditions or customer  expectations may prevent Foamex L.P. from increasing the
  price of its products to offset the inflationary pressures that may increase its
  costs in the future.
  
         Foamex L.P.'s automotive products customers are predominantly  automotive
  original  equipment  manufacturers or other automotive  suppliers.  As such, the
  sales of these  product  lines are  directly  related  to the  overall  level of
  passenger car and light truck production in North America.  Also,  Foamex L.P.'s
  sales are  sensitive  to sales of new and  existing  homes,  changes in personal
  disposable  income  and  seasonality.  Foamex  L.P.  typically  experiences  two
  seasonally  slow periods  during each year, in early July and in late  December,
  due to scheduled plant shutdowns and holidays.
  
  Year 2000 Compliance
  
         Foamex  L.P.  uses  numerous  business  information  systems  as  well as
  manufacturing support systems that could be impacted by the "Year 2000 Problem".
  The Year 2000 Problem arises from computer  programs that were written using two
  digits rather than four to designate the year. In connection  with the Year 2000
  Problem, date-sensitive computer software may recognize a date using "00" as the
  year 1900 rather  than the year 2000.  This could  result in system  failures or
  miscalculations, which would cause significant operational disruptions.
  
         Foamex  L.P.  has  a  Year  2000  Executive  Sponsor  Team  comprised  of
  representatives of Foamex L.P. The Year 2000 Executive Sponsor Team is providing
  direction to and receiving  reports from the Year 2000 Steering  Committee  (the
  "Steering  Committee")  within the  organization.  The  Steering  Committee  has
  completed an assessment of the state of readiness of the Information  Technology
  ("IT") and  non-IT  systems  of Foamex  L.P.  These  assessments  cover  desktop
  computers,  environmental  systems,  manufacturing systems (including laboratory
  information systems), field instrumentation,  and significant third party vendor
  and supplier  systems,  which  include  employee  compensation  and benefit plan
  maintenance  systems. The Steering Committee is also in the process of assessing
  the readiness of Foamex L.P.'s significant customers and suppliers.
  
         The Year  2000  assessment  process  for  each  facility  consists  of an
  inventory  of Year 2000  sensitive  equipment,  an  assessment  of the impact of
  possible failures,  determination of required  remediation  actions, if any, and
  testing  and  implementation  of these  solutions.  The  inventory,  assessment,
  remediation and testing phases were completed at the end of 1998, with fail safe
  testing and final implementation currently taking place in 1999. The progress of
  these phases as of March 31, 1999 is summarized below
  
         Foamex L.P.  completed the inventory and assessment phases of the project
  by  December  31,  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.  The completion of these
  phases  included the  modification  of several million lines of system code, the
  conversion of the systems acquired from Crain to standard  business  information
  computer  systems,  upgrading  system  hardware and operating  system  software,
  testing  of the  applicable  systems  in a  development  testing  area,  and the
  migration of the remediated systems into the production environment.
  
                                         20
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS
  
         Foamex L.P.  estimates it will spend $2.0 million in connection  with the
  Year 2000  Problem.  The  spending  estimate  will be  refined  as phases of the
  project  are  completed.  Spending  on the Year 2000  Problem  is funded by cash
  generated from operations.
  
         Management  believes that all  significant  systems  controlled by Foamex
  L.P.  will be Year 2000 ready in the  latter  half of 1999.  While the  Steering
  Committee is communicating readiness to third party 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. As
  part of the  overall  response to the Year 2000  Problem,  Foamex L.P. is in the
  process of developing contingency plans in the event of Year 2000 non-compliance
  of certain systems or third parties.  Details of such contingency  plans will be
  determined  after the Steering  Committee has  completed  its  assessment of its
  supply chain, other third parties and the potential for possible failures.
  
         There is inherent  uncertainty  in connection  with the Year 2000 Problem
  due to the  possibility of  unanticipated  failures by third party customers and
  suppliers.  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  continues to provide  information in order to
  reduce the level of  uncertainty  regarding the impact of the Year 2000 Problem.
  Management believes that if Foamex L.P.'s solutions to the Year 2000 Problem are
  completed as scheduled;  such  solutions may help  minimize the  possibility  of
  significant disruptions to Foamex L.P.'s operations.
  
                                         21
  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 4 of the condensed  consolidated  financial
             statements  of  Foamex  L.P.  as of March  31,  1999  (unaudited)  is
             incorporated herein by reference.
  
  Item 6.    Exhibits and Reports on Form 8-K
  
         (a)    Exhibits
  
                27     Financial  Data  Schedule  for the  quarterly  period ended
                       March 31, 1999.
  
         (b)    Foamex L.P. filed the following  Current Reports on Form 8-K since
                December 31, 1998 through the date of this report:
  
                Form 8-K,  as of dated  March 11,  1999  reporting  amendments  to
                aspects of its credit agreements.
  
                                         22
  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: May 17, 1999                          By: /s/ John A. Feenan
                                                  --------------------------------
                                                  John A. Feenan
                                                  Vice President, Treasurer, Chief
                                                  Financial Officer and Assistant
                                                  Secretary
  
                                              FOAMEX CAPITAL CORPORATION
  
  Date: May 17, 1999                          By: /s/ John A. Feenan
                                                  --------------------------------
                                                  John A. Feenan
                                                  Vice President, Treasurer and 
                                                  Chief Financial Officer