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 June 30, 1999
  
                      Commission file numbers 1-11432; 1-11436
  
  
                                     FOAMEX L.P.
                             FOAMEX CAPITAL CORPORATION
               (Exact name of registrant as specified in its charter)
  
  
  
  
            Delaware                                     05-0475617
            Delaware                                     22-3182164
  (State or other jurisdiction of                      (I.R.S. Employer
  incorporation or organization)                        Identification Number)
  
  
  1000 Columbia Avenue
  Linwood, PA                                             19061
  (Address of principal                                   (Zip Code)
  executive offices)
  
  
  Registrant's telephone number, including area code: (610) 859-3000
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the  preceding 12 months (or for such  shorter  period that the  registrant  was
  required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
  requirements for the past 90 days.
  YES  X   NO
  
  Foamex L.P. and Foamex  Capital  Corporation  meet the  conditions  set forth in
  General  Instruction  H(1)(a) and (b) of Form 10-Q and are therefore filing this
  form with the reduced disclosure format.
  
  The number of shares of Foamex Capital Corporation's common stock outstanding as
  of August 10, 1999 was 1,000.
  
                                    Page 1 of 28
                            Exhibit List on Page 27 of 28
  <PAGE>
                                     FOAMEX L.P.
                             FOAMEX CAPITAL CORPORATION
  
                                        INDEX
                                                                              Page
  
  Part I.  Financial Information:
  
           Item 1.  Financial Statements
  
                 Condensed Consolidated Statements of Operations
                   (unaudited) - Quarterly and Year to Date Periods
                   Ended June 30, 1999 and June 28, 1998                        3
  
                 Condensed Consolidated Balance Sheets (unaudited) as of
                   June 30, 1999 and December 31, 1998                          4
  
                 Condensed Consolidated Statements of Cash Flows
                   (unaudited) - Year to Date Periods Ended June 30,
                   1999 and June 28, 1998                                       5
  
                 Notes to Condensed Consolidated Financial Statements
                   (unaudited)                                                  6
  
           Item 2.  Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                        16
  
           Item 3.  Quantitative and Qualitative Disclosure about
                    Market Risk                                                26
  
  Part II. Other Information                                                   27
  
           Item 1.  Legal Proceedings                                          27
  
           Item 6.  Exhibits and Reports on Form 8-K                           27
  
  Signatures                                                                   28
  
  
                                         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          Year to Date Periods Ended
                                                         June 30,         June 28,         June 30,           June 28,
                                                           1999             1998             1999               1998
                                                        ---------        ---------         ---------         ---------
                                                                                  (thousands)
  
  <S>                                                   <C>              <C>               <C>               <C>
       NET SALES                                        $ 292,229        $ 273,708         $ 592,106         $ 571,781
  
       COST OF GOODS SOLD                                 253,819          226,111           516,235           479,276
                                                        ---------        ---------         ---------         ---------
  
       GROSS PROFIT                                        38,410           47,597            75,871            92,505
  
       SELLING, GENERAL AND
          ADMINISTRATIVE EXPENSES                          13,653           17,824            27,986            38,823
  
       RESTRUCTURING AND OTHER CHARGES (CREDITS)            3,617             (700)            6,974              (700)
                                                        ---------        ---------         ---------         ---------
  
       INCOME FROM OPERATIONS                              21,140           30,473            40,911            54,382
  
       INTEREST AND DEBT ISSUANCE EXPENSE                  16,132           15,568            32,271            32,480
  
       OTHER INCOME (EXPENSE), NET                            244             (306)             (195)             (619)
                                                        ---------        ---------         ---------         ---------
  
       INCOME FROM CONTINUING OPERATIONS
          BEFORE PROVISION FOR INCOME TAXES                 5,252           14,599             8,445            21,283
  
       PROVISION FOR INCOME TAXES                             445              808             1,030             1,884
                                                        ---------        ---------         ---------         ---------
  
       INCOME FROM CONTINUING OPERATIONS                    4,807           13,791             7,415            19,399
  
       EXTRAORDINARY LOSS ON EARLY
          EXTINGUISHMENT OF DEBT                               --              (72)               --            (3,195)
                                                        ---------        ---------         ---------         ---------
  
       NET INCOME                                       $   4,807        $  13,719         $   7,415         $  16,204
                                                        =========        =========         =========         =========
  </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>
                                                              June 30,         December 31,
  ASSETS                                                        1999               1998
       CURRENT ASSETS:                                                 (thousands)
  <S>                                                         <C>               <C>
     Cash and cash equivalents                                $   3,057         $   3,192
     Accounts receivable, net                                   147,605           143,301
     Accounts receivable from related parties                    14,985            17,533
     Inventories                                                 99,212           127,636
     Other current assets                                        27,028            33,849
                                                              ---------         ---------
         Total current assets                                   291,887           325,511
  
  PROPERTY, PLANT AND EQUIPMENT, NET                            210,968           219,637
  
  COST IN EXCESS OF ASSETS ACQUIRED, NET                        186,026           188,205
  
  DEBT ISSUANCE COSTS, NET                                       16,261            13,946
  
  OTHER ASSETS                                                   22,112            21,229
                                                              ---------         ---------
  
  TOTAL ASSETS                                                $ 727,254         $ 768,528
                                                              =========         =========
  
  LIABILITIES AND PARTNERS' DEFICIT
  CURRENT LIABILITIES:
     Short-term borrowings                                    $   4,700         $   2,957
     Current portion of long-term debt                           13,022           689,478
     Current portion of long-term debt - related party               --            34,000
     Accounts payable                                           108,230           139,726
     Accrued interest                                             9,565             7,396
     Other accrued liabilities                                   45,584            52,944
                                                              ---------         ---------
         Total current liabilities                              181,101           926,501
  
  LONG-TERM DEBT                                                661,449                --
  
  LONG-TERM DEBT - RELATED PARTY                                 34,000                --
  
  OTHER LIABILITIES                                              36,554            38,064
                                                              ---------         ---------
  
         Total liabilities                                      913,104           964,565
                                                              ---------         ---------
  
  COMMITMENTS AND CONTINGENCIES                                      --                --
                                                              ---------         ---------
  
  PARTNERS' DEFICIT:
     General partner                                           (135,114)         (141,426)
     Limited partner                                                 --                --
     Accumulated other comprehensive income (loss)              (25,397)          (26,208)
     Notes and advances receivable from partner                 (16,118)          (18,608)
     Notes receivable from related party                         (9,221)           (9,795)
                                                              ---------         ---------
  
         Total partners' deficit                               (185,850)         (196,037)
                                                              ---------         ---------
  
  TOTAL LIABILITIES AND PARTNERS' DEFICIT                     $ 727,254         $ 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>
                                                                         Year to Date Periods Ended
                                                                         June 30,          June 28,
                                                                           1999              1998
                                                                         ---------         ---------
                                                                                    (thousands)
  OPERATING ACTIVITIES:
  <S>                                                                        <C>               <C>
     Net income                                                         $   7,415         $  16,204
     Adjustments to reconcile net income to net cash provided
       by (used for) operating activities:
       Depreciation and amortization                                       15,082            15,206
       Amortization of debt issuance costs, debt discount,
         debt premium and deferred swap adjustments                           (34)              (33)
       Asset writedown and other charges                                    2,073                --
       Extraordinary loss on early extinguishment of debt                      --             2,857
       Other operating activities                                           6,186             4,164
       Changes in operating assets and liabilities, net                       588           (72,420)
                                                                        ---------         ---------
  
           Net cash provided by (used for) operating activities            31,310           (34,022)
                                                                        ---------         ---------
  
  INVESTING ACTIVITIES:
     Capital expenditures                                                 (10,482)          (15,252)
     Acquisitions, net of cash acquired                                        --            (3,899)
     Sale of subsidiaries                                                      --            (8,971)
     Repayments of (purchase of) note from partner                          2,490                --
     Proceeds from (payments of) note receivable - related party               --              (424)
     Other investing activities                                               574              (382)
                                                                        ---------         ---------
  
           Net cash used for investing activities                          (7,418)          (28,928)
                                                                        ---------         ---------
  
  FINANCING ACTIVITIES:
     Net proceeds from short-term borrowings                                1,743               722
     Net proceeds from (repayments of) revolving loans                     (8,969)           82,426
     Proceeds from long-term debt                                              --           129,000
     Repayment of long-term debt                                           (5,385)         (132,318)
     Debt issuance cost                                                    (3,455)           (1,598)
     Cash overdraft                                                        (7,300)               --
     Distribution to partners                                                  --           (20,074)
     Other financing activities                                              (661)               84
                                                                        ---------         ---------
  
           Net cash provided by (used for) financing activities           (24,027)           58,242
                                                                        ---------         ---------
  
  NET DECREASE IN CASH AND CASH EQUIVALENTS                                  (135)           (4,708)
  
  CASH AND CASH EQUIVALENTS
     AT BEGINNING OF PERIOD                                                 3,192             9,405
                                                                        ---------         ---------
  
  CASH AND CASH EQUIVALENTS
     AT END OF PERIOD                                                   $   3,057         $   4,697
                                                                        =========         =========
  </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  June  30,  1999,  the  condensed
  consolidated statements of operations for the quarterly and year to date periods
  ended June 30, 1999 and June 28, 1998 and the condensed consolidated  statements
  of cash flows for the year to date periods ended June 30, 1999 and June 28, 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. As a result, the financial data for the quarterly and year to date periods
  ended  June 28,  1998  represent  thirteen-week  and  twenty-six  week  periods,
  respectively.  The  financial  data for the  quarterly  and year to date periods
  ended June 30, 1999  represent  three and six month periods,  respectively,  and
  include 91 and 181 calendar days, respectively.
  
       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 June 30, 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  and year to date periods  ended June 30,
  1999 and June 28, 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 and
  was not in compliance with certain covenants  contained in agreements  governing
  approximately  $415.4  million  of  principal  amount of  indebtedness.  Had the
  lenders  under  the  credit  facility  (the  "Credit  Facility")  or other  debt
  agreements  accelerated the maturity of their indebtedness as a result of Foamex
  L.P.'s  noncompliance,  such  acceleration  would have  constituted  an event of
  default  under or given the  holders  the right to  require  the  repurchase  of
  substantially all of Foamex L.P.'s long-term debt. As a result of these factors,
  Foamex  L.P.  classified  approximately  $715.8  million  of  long-term  debt at
  December 31, 1998 as current in the accompanying  condensed consolidated balance
  sheet,  which  resulted  in a working  capital  deficit.  These  matters  raised
  substantial  doubt as of  December  31,  1998  about  Foamex  L.P.'s  ability to
  continue as a going concern.
  
       On June 30, 1999,  Foamex L.P.  amended its Credit  Facility  (the "Amended
  Credit Facility") to, among other things, modify financial covenants and provide
  for future  measurement  periods  taking into account  Foamex  L.P.'s  estimated
  future operating results and financial  condition and management's  expectations
  regarding  compliance  with these covenants in future  measurement  periods (see
  Note 3).  For the year to date  period  ended June 30,  1999,  Foamex  L.P.  had
  consolidated  income from  continuing  operations and was in compliance with its
  debt  covenants.  As a result of these  factors  and  management's  expectations
  regarding compliance with these covenants in future measurement periods,  Foamex
  L.P.  classified  approximately  $695.4  million  of  debt as  long-term  in the
  accompanying  condensed  consolidated  balance  sheet  at June 30,  1999,  which
  resulted in positive  working  capital.  Foamex L.P.  continues to be subject to
  certain "change of control"  provisions  under its debt  agreements  which could
  result in an acceleration of the related debt, as discussed below.
  
                                         6
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
       Trace International  Holdings,  Inc.  ("Trace"),  a privately held company,
  owns  approximately  46.1% of Foamex  International's  outstanding voting common
  stock. Trace's Chairman also serves as Foamex International's  Chairman.  Foamex
  International's  common  stock owned by Trace is pledged as  collateral  against
  certain  of  Trace's   obligations.   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,  the
  "change of control"  provisions  of the debt  agreements  may be  triggered  and
  substantially all of Foamex L.P.'s indebtedness may be accelerated.  Foamex L.P.
  was informed by Trace that it filed a petition  for relief  under  Chapter 11 of
  the Bankruptcy Code in Federal Court in New York City on July 21, 1999.  Trace's
  bankruptcy  filing does not  automatically  constitute a change of control under
  the  provisions of the debt  agreements.  See "Change of Control  Provisions" in
  Note 3.
  
  2.   INVENTORIES
  
       Inventories consist of:
  
                                         June 30,        December 31,
                                           1999             1998
                                                (thousands)
  
       Raw materials and supplies        $ 66,623        $ 93,241
       Work-in-process                     12,731          12,087
       Finished goods                      19,858          22,308
                                         --------        --------
  
       Total                             $ 99,212        $127,636
                                         ========        ========
  
  3.   LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
  
       Foamex L.P.  classified  approximately  $715.8 million of long-term debt as
  current in the accompanying condensed consolidated balance sheet at December 31,
  1998 as a result of various  factors,  including  the fact that it had  received
  waivers for noncompliance  with certain debt covenants,  which were only granted
  through June 30, 1999.  The Amended Credit  Facility,  which was signed June 30,
  1999,  modify  financial  covenants  as of June 30, 1999 and provides for future
  measurement periods taking into account Foamex L.P.'s estimated future operating
  results and financial  condition and management's  expectations  regarding these
  future  measurement  periods.  For the year to date period  ended June 30, 1999,
  Foamex L.P. had income from continuing operations and was in compliance with its
  debt  covenants.  As a result of these  factors  and  management's  expectations
  regarding compliance with these covenants in future measurement periods,  Foamex
  L.P. has  classified  approximately  $695.4  million of debt as long-term in the
  accompanying  condensed consolidated balance sheet at June 30, 1999. Foamex L.P.
  continues  to be  subject  to  "change  of  control"  provisions  under its debt
  agreements  which could result in an acceleration of the related debt. See "Debt
  Restrictions and Covenants" and "Change of Control Provisions" below.
  
                                         7
  
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  3.   LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY (continued)
  
         Long-term debt consists of:
  
  <TABLE>
  <CAPTION>
                                                                    June 30,      December 31,
                                                                     1999            1998
                                                                   --------        --------
       Amended Credit Facility:                                           (thousands)
  <S>                                                              <C>             <C>
         Term Loan B                                               $ 82,294        $ 82,714
         Term Loan C                                                 74,812          75,194
         Term Loan D                                                108,350         108,900
         Revolving credit facility                                  130,384         139,438
       9 7/8% Senior subordinated notes due 2007                    150,000         150,000
       13 1/2% Senior subordinated notes due 2005 (includes
         $10,997 and $11,893 of unamortized debt premium)           108,997         109,893
       Industrial revenue bonds                                       7,000           7,000
       Subordinated note payable (net of unamortized
         debt discount of $356 and $523)                              4,320           6,491
       Other                                                          8,314           9,848
                                                                   --------        --------
                                                                    674,471         689,478
  
       Less current portion                                          13,022         689,478
                                                                   --------        --------
  
       Long-term debt-unrelated parties                            $661,449        $     --
                                                                   ========        ========
  
       Long-term debt - related party consists of:
  
       Foamex/GFI Note                                             $ 34,000        $ 34,000
  
       Less current portion                                              --          34,000
                                                                   --------        --------
  
       Long-term debt - related party                              $ 34,000        $     --
                                                                   ========        ========
  </TABLE>
  
       During the quarterly  periods ended June 30, 1999 and June 28, 1998, Foamex
  L.P. paid  approximately  $0.5 million and $0.6 million,  respectively,  to Foam
  Funding LLC for interest on the Foamex/GFI Note. During the year to date periods
  ended June 30, 1999 and June 28,  1998,  Foamex  L.P.  paid  approximately  $1.0
  million and $0.6 million, respectively, for interest on the Foamex/GFI Note.
  
       Debt Restrictions and Covenants
  
       The  indentures  for the senior  subordinated  notes,  the  Amended  Credit
  Facility 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  (see "Change of
  Control  Provisions"  below) or the occurrence of an undefined  material adverse
  change  in  the  ability  of  the  obligor  to  perform  its  obligations,   the
  indebtedness  must be repaid,  in certain  cases,  at the option of the  holder.
  Also,  Foamex L.P. is required  under  certain of these  agreements  to maintain
  specified  financial ratios of which the most restrictive are the maintenance of
  net worth and interest, fixed charge and leverage coverage ratios, as defined.
  
       The Amended Credit Facility  modified the required limits for the net worth
  and interest,  fixed charge and leverage  coverage ratios through  December 2006
  and added an earnings before  interest,  taxes,  depreciation  and  amortization
  ("EBITDA")  covenant  requirement  through  September 30, 1999. Also,  effective
  March 31, 2000,  the interest rate on outstanding  borrowings  under the Amended
  Credit Facility will increase by 25 basis points each
  
                                         8
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  3.   LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY (continued)
  
  quarter  that  Foamex  L.P.'s  leverage  ratio  exceeds  5.00 to 1.00.  Once the
  leverage  ratio is reduced  below this level,  the  cumulative  amount of any 25
  basis point  adjustments to the interest rate on borrowings would be eliminated.
  The weighted average interest rate on such borrowings was approximately  8.6% at
  June 30, 1999. The Amended Credit Facility was also modified to no longer permit
  Foamex L.P. to make certain cash  payments,  including  the payment of an annual
  management fee to a subsidiary of Trace (which  aggregated  $3.0 million for the
  year ended December 31, 1998) and  distributions to Foamex L.P.'s partners,  and
  to limit future  investments  in foreign  subsidiaries  and joint  ventures.  In
  addition,   the  Amended  Credit  Facility  modified  the  "change  of  control"
  definition under the agreement (see "Change of Control Provisions" below).
  
       Prior to signing  the Amended  Credit  Facility,  Foamex  L.P.  amended the
  Credit Facility on March 11, 1999. This 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's  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 to this agreement.
  
       Certain of Foamex L.P.'s Mexican  subsidiaries  are in default of financial
  covenant  provisions  contained  in  loan  agreements  with a  Mexican  bank  as
  negotiations  continue to finalize amendments to the loan agreements to cure the
  defaults.  The defaults under the Mexican loan  agreements do not have any cross
  default consequences for Foamex L.P.'s domestic subsidiaries' debt agreements.
  
       Change of Control Provisions
  
       Trace is a privately held company which owns approximately  46.1% of Foamex
  International's  outstanding  voting common stock and whose Chairman also serves
  as the Chairman of Foamex  International.  Foamex  International's  common stock
  owned by Trace is pledged as collateral against certain of Trace's  obligations.
  Certain credit agreements and promissory notes of Foamex L.P., pursuant to which
  approximately  $429.8  million of debt was issued as of June 30,  1999,  contain
  provisions that would result in the  acceleration of such  indebtedness if Trace
  were to cease to beneficially own at least 25% of the outstanding  voting common
  stock of Foamex  International and other persons or groups were to own a greater
  percentage  of such  voting  common  stock  than  Trace.  Additionally,  certain
  indentures  of Foamex L.P.  and Foamex  Capital  Corporation  relating to senior
  subordinated  notes of  approximately  $248.0 million  contain  provisions  that
  provide  the  holders of such notes  with the right to  require  the  issuers to
  repurchase  such  notes  at a price  in  cash  equal  to  101% of the  aggregate
  principal  amount thereof,  plus accrued and unpaid interest  thereon,  if Trace
  were to cease to beneficially own at least 25% of the outstanding  voting common
  stock of Foamex  International and other persons or groups were to own a greater
  percentage of such voting common stock than Trace.
  
       Foamex L.P. was informed by Trace that it filed a petition for relief under
  Chapter 11 of the Bankruptcy  Code in Federal Court in New York City on July 21,
  1999.  Trace's  bankruptcy  filing does not constitute a change of control under
  the provisions of the debt agreements unless the bankruptcy court allows Trace's
  creditors to foreclose on and take  ownership of Foamex  International's  common
  stock  owned by Trace,  or  otherwise  authorizes  a sale or  transfer  of these
  shares,  and Trace, its affiliates and subsidiaries cease to own at least 25% of
  Foamex  International's  outstanding  voting  common stock and other  persons or
  groups own a greater percentage of voting common stock than Trace.
  
       Foamex  L.P.  will seek to resolve the issues that may arise if the "change
  of control"  provisions are triggered in the future,  including  waivers of such
  provisions and/or refinancing  certain debt, if necessary.  Although  management
  believes that Foamex L.P.'s debt obligations  could be refinanced if accelerated
  as a result of the "change of control" provisions under related debt agreements,
  there can be no assurance  that Foamex L.P. will be able to do so or that Foamex
  L.P.  will be able to  obtain  waivers  of  such  provisions.  The  accompanying
  condensed
  
                                         9
  
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  3.   LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY (continued)
  
  consolidated  financial  statements  do not include any  adjustments  that might
  result from the outcome of these uncertainties.
  
  4.   LITIGATION
  
       During 1999, Foamex International received several communications addressed
  to its Board of Directors  from certain of Foamex  International's  stockholders
  regarding  aspects of the relationship  between Trace and Foamex  International.
  Such stockholders  questioned the propriety of certain relationships and related
  transactions between Trace and Foamex  International,  which previously had been
  disclosed in Foamex  International's  periodic filings. On June 14, 1999, Foamex
  International  received a draft  complaint from counsel to certain  stockholders
  naming Foamex  International  and certain  current and former  directors,  which
  include allegations similar to those in the Second Amended Complaint, as defined
  below.  Foamex  International  has  been  advised  by  such  counsel  that  such
  stockholders intend to file an action shortly.  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.
  
       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 complaint seeks class certification,  a declaration that defendants violated
  the  federal  securities  laws,  an  award  of  money  damages,  and  costs  and
  attorneys',  accountants' and experts' fees. The defendants intend to vigorously
  defend the action. On May 18, 1999, a similar action entitled Thomas W. Riley v.
  Foamex  International  Inc.,  et al.,  99 Civ.  3653  (DC) was filed in the same
  court.  The two  actions  have been  consolidated.  To date,  no response to the
  complaint has been made and no discovery or other  proceedings  has taken place.
  Foamex L.P. is not a party to such suit.
  
       Beginning  on or about  March  17,  1998,  six  actions  (collectively  the
  "Shareholder  Litigation")  were filed in the Court of  Chancery of the State of
  Delaware,   New  Castle  County  (the  "Court"),   by   stockholders  of  Foamex
  International. The Shareholder Litigation,  purportedly brought as class actions
  on  behalf  of  all   stockholders   of  Foamex   International,   named  Foamex
  International,  certain of its  directors,  certain of its  officers,  Trace and
  Trace Merger Sub,  Inc.  ("Merger  Sub") as  defendants  alleging  that they had
  breached their  fiduciary  duties to the plaintiffs  and other  stockholders  of
  Foamex  International  unaffiliated  with Trace in connection  with the original
  proposal of Trace to acquire the  publicly  traded  outstanding  common stock of
  Foamex  International for $17.00 per share. 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 Shareholder Litigation.
  
       The parties to the  Shareholder  Litigation  entered into a  Memorandum  of
  Understanding,  dated June 25,  1998 (the  "Memorandum  of  Understanding"),  to
  settle the  Shareholder  Litigation,  subject  to,  inter alia,  execution  of a
  definitive  Stipulation  of  Settlement  between the parties and approval by the
  Court  following  notice  to  the  class  and  a  hearing.   The  Memorandum  of
  Understanding  provided that as a result of, among other things, the Shareholder
  Litigation and  negotiations  among counsel for the parties to the Memorandum of
  Understanding,  a special meeting of stockholders would be held to vote upon and
  approve the Agreement and Plan of Merger (the "First  Merger  Agreement")  which
  provided,  among other things, for all of the Foamex  International  outstanding
  common stock not
  
                                         10
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  4.   LITIGATION (continued)
  
  owned by Trace and its  subsidiaries  (the "Public Shares") to be converted into
  the right to receive $18.75 in cash, without interest.
  
       The Memorandum of Understanding also provided for certification of a class,
  for  settlement  purposes  only,  consisting  of  the  Public  Shares  owned  by
  stockholders   of  Foamex   International   unaffiliated   with  Trace  and  its
  subsidiaries  (the "Public  Shareholders"),  the  dismissal  of the  Shareholder
  Litigation  with  prejudice and the release by the plaintiffs and all members of
  the  class of all  claims  and  causes of  action  that were or could  have been
  asserted against Trace,  Foamex  International and the individual  defendants in
  the  Shareholders  Litigation  or  that  arise  out of the  matters  alleged  by
  plaintiffs.  Following the completion of the  confirmatory  discovery  which was
  provided for in the  Memorandum  of  Understanding,  on  September 9, 1998,  the
  parties entered into a definitive  Stipulation of Settlement and the Court set a
  hearing  for October 27,  1998 to  consider  whether  the  settlement  should be
  approved (the "Settlement Hearing"). In connection with the proposed settlement,
  the plaintiffs  intended to apply for an award of attorney's fees and litigation
  expenses in an amount not to exceed $925,000,  and the defendants  agreed not to
  oppose this application.  Additionally,  Foamex  International agreed to pay the
  cost, if any, of sending notice of the settlement to the Public Shareholders. On
  September 24, 1998, a Notice of Pendency of Class Action, Proposed Settlement of
  Class Action and Settlement  Hearing was mailed to the members of the settlement
  class. On October 20, 1998, the parties to the Shareholder  Litigation requested
  that the Court cancel the Settlement  Hearing in light of the announcement  made
  by Trace on October 16,  1998,  that it had been unable to obtain the  necessary
  financing for the  contemplated  acquisition by Trace of Foamex  International's
  common stock at a price of $18.75 per share which was the subject  matter of the
  proposed settlement. This request was approved by the Court on October 21, 1998,
  and Foamex International issued a press release on October 21, 1998,  announcing
  that the Court had cancelled the Settlement Hearing.
  
       On  November  10,  1998,  counsel  for  certain  of the  defendants  in the
  Shareholder  Litigation  gave notice  pursuant to the  Stipulation of Settlement
  that such  defendants  were  withdrawing  from the  Stipulation of Settlement in
  light of the  notice  given by Trace to  Foamex  International  and the  special
  committee of the Board of Directors on November 5, 1998 whereby Trace terminated
  the First Merger  Agreement on the grounds that the  financing  condition in the
  First Merger Agreement was incapable of being satisfied.
  
       On November 12, 1998, the plaintiffs in the Shareholder Litigation filed an
  Amended Class Action Complaint (the "Amended Complaint").  The Amended Complaint
  named Foamex International, Trace, Merger Sub, Mr. Marshall S. Cogan, Mr. Andrea
  Farace,  Dr.  Stuart  Hershon,  Mr. John  Tunney,  and Mr.  Etienne  Davignon as
  defendants, alleging that they breached their fiduciary duties to plaintiffs and
  the other Public  Shareholders in connection with a second agreement and plan of
  merger (the "Second Merger Agreement"),  that the proposal to acquire the Public
  Shares  for  $12.00  per  share  lacked  entire  fairness,  that the  individual
  defendants  violated  8  Del.  Code  ss.  251 in  approving  the  Second  Merger
  Agreement, and that Trace and Merger Sub breached the Stipulation of Settlement.
  On December 2, 1998,  plaintiffs  served a motion for a preliminary  injunction,
  seeking an Order to  preliminarily  enjoin the defendants from proceeding  with,
  consummating or otherwise effecting the merger contemplated by the Second Merger
  Agreement.
  
       On June 9, 1999, the  plaintiffs in the  Shareholder  Litigation  moved for
  leave to file a Second  Amended and  Supplemental  Class  Action and  Derivative
  Complaint (the "Second  Amended  Complaint").  The Second Amended  Complaint was
  filed on July 14, 1999, and named Foamex  International,  Trace, Merger Sub, Mr.
  Marshall S. Cogan, Mr. Andrea Farace,  Dr. Stuart Hershon,  Mr. John Tunney, and
  Mr. Etienne Davignon as defendants, alleging that the named individuals breached
  their fiduciary  duties by causing Foamex  International  to waste assets in its
  transactions with Trace and by failing to enforce Foamex  International's rights
  under the First Merger Agreement,  seeking  appointment of a receiver for Foamex
  International,  and alleging that Trace and Merger Sub breached the  Stipulation
  of Settlement.
  
                                         11
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  
  4.   LITIGATION (continued)
  
       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  Shareholder
  Litigation. If the Shareholder 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 Foamex  International
  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 was  granted  during
  August 1999. Neither Foamex International, Foamex L.P. nor any of the individual
  directors of Foamex International are named as defendants in this litigation.
  
       As of August 9, 1999, Foamex L.P. and Trace were two of multiple defendants
  in actions filed on behalf of approximately  4,209 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,  in light of  Trace's  recent  filing  under  Chapter 11 of the
  Bankruptcy  Code,  there can be no assurance that Trace will be able to continue
  to  provide  such  indemnification.  While  it is not  feasible  to  predict  or
  determine the outcome of these actions, based on management's present assessment
  of the merits of pending claims,  after consultation with the general counsel of
  Trace,  and without taking into account  indemnification  provided by Trace, the
  coverage  provided by Trace and Foamex L.P.'s liability  insurance and potential
  indemnity  from the  manufacturers  of  polyurethane  covered  breast  implants,
  management believes that the disposition of matters that are pending or that may
  reasonably  be  anticipated  to be asserted  should not have a material  adverse
  effect  on  Foamex  L.P.'s   consolidated   financial  position  or  results  of
  operations.  If management's  assessment of Foamex L.P.'s liability with respect
  to these actions is incorrect, such actions could have a material adverse effect
  on the financial position, results of operations and cash flows of Foamex L.P.
  
       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 the 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.
  
                                         12
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  4.   LITIGATION (continued)
  
       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  periods  noted  below is  comprised  of the
  following:
  
  <TABLE>
  <CAPTION>
                                                       Quarterly Periods Ended     Year to Date Periods Ended
                                                       June 30,       June 28,      June 30,         June 28,
                                                         1999           1998          1999            1998
                                                                           (thousands)
  <S>                                                  <C>            <C>            <C>            <C>
       Net income                                      $ 4,807        $13,719        $ 7,415        $16,204
       Foreign currency translation adjustments            399              3            811            230
                                                       -------        -------        -------        -------
       Total comprehensive income                      $ 5,206        $13,722        $ 8,226        $16,434
                                                       =======        =======        =======        =======
  </TABLE>
  
  6.   RESTRUCTURING AND OTHER CHARGES
  
       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 and other 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.  During the second quarter
  of 1999, Foamex L.P.  recorded  restructuring and other charges of approximately
  $3.6 million.  The $3.6 million of restructuring  and other charges is comprised
  of $1.2 million of severance  costs in  connection  with  additional  work force
  reductions of approximately 60 employees,  $2.3 million of costs associated with
  the closure of two additional  manufacturing  operations and facilities and $0.1
  million of other charges. Approximately $2.5 million of severance costs incurred
  in 1999 have been paid as of June 30,  1999.  Approximately  $1.5 million of the
  total 1999  severance  costs  primarily  relate to contractual  severance  costs
  payable to the former Chairman and Chief Executive  Officer,  which will be paid
  through March 2001. Foamex L.P. may record additional  restructuring  charges in
  the future as it finalizes implementation of 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,  furniture and retail
  industries.  The carpet cushion  products  segment sells prime,  rebond,  sponge
  rubber and felt  carpet  cushion  principally  to Foamex  Carpet  Cushion,  Inc.
  ("Foamex  Carpet"),  a wholly  owned  subsidiary  of Foamex  International.  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.
  
                                         13
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  7.   OPERATING SEGMENT AND RELATED DATA (continued)
  
       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" in Note 2 to Foamex L.P.'s
  consolidated financial statements in its 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
  <S>                                          <C>           <C>            <C>           <C>           <C>            <C>
  Quarterly period ended June 30, 1999:
  Net sales                                    $ 124,909     $  46,687      $  90,810     $  23,028     $   6,795      $ 292,229
  Income (loss) from operations                   12,948           (65)         6,033         6,203        (3,979)        21,140
  Depreciation and amortization                    4,094         1,266          1,235           636           182          7,413
  
  Quarterly period ended June 28, 1998:
  Net sales                                    $ 133,422     $  55,176      $  61,923     $  20,156     $   3,031      $ 273,708
  Income (loss) from operations                   22,913           247          5,821         4,051        (2,559)        30,473
  Depreciation and amortization                    4,369         1,114          1,264           655           553          7,955
  
  Year to date period ended June 30, 1999:
  Net sales                                    $ 264,288     $  89,990      $ 179,581     $  45,276     $  12,971      $ 592,106
  Income (loss) from operations                   25,869          (436)        12,825        11,239        (8,586)        40,911
  Depreciation and amortization                    8,242         2,436          2,469         1,273           662         15,082
  
  Year to date period ended June 28, 1998:
  Net sales                                    $ 281,715     $ 111,340      $ 127,604     $  41,272     $   9,850      $ 571,781
  Income (loss) from operations                   35,027         1,751         13,236         8,588        (4,220)        54,382
  Depreciation and amortization                    8,175         2,185          2,441         1,285         1,120         15,206
  </TABLE>
  
  8.   RELATED PARTY TRANSACTIONS
  
       Effective  June 30, 1999,  the Amended  Credit  Facility no longer  permits
  Foamex L.P. or its  subsidiaries to pay management fees to a subsidiary of Trace
  in  connection  with a  management  agreement  with the  Trace  subsidiary  (the
  "Management Agreement"). Such management fee was $3.0 million for the year ended
  December  31,  1998.  On July 29,  1999,  Foamex  L.P.  submitted  to the  Trace
  subsidiary formal notice of the termination of the Management  Agreement,  which
  Foamex L.P. believes took place by informal action on June 29, 1999.
  
       Foamex L.P.  subleases  certain  space in its New York office to Trace (the
  "New York  Sublease").  Foamex  L.P.  gave notice on June 30, 1999 that if prior
  unpaid rent under the New York  Sublease was not paid,  Foamex L.P.  intended to
  give  notice  pursuant  to Article 7 of the New York Real  Property  Actions and
  Proceedings  Law (the "Notice") that the space be vacated by September 30, 1999.
  However,  as a result of Trace's  bankruptcy  filing and the  imposition  of the
  automatic  stay under  Section 362 of the  Bankruptcy  Code,  Foamex L.P. is not
  permitted  to give Notice or  otherwise  pursue state law remedies for breach of
  the New  York  Sublease  without  relief  from the  automatic  stay.  Under  the
  Bankruptcy  Code,  Trace has 60 days (which period may be extended for cause) to
  determine whether to assume or reject the New York Sublease.  Pending assumption
  or rejection,  Trace is required under the Bankruptcy Code to timely perform its
  post-bankruptcy obligations under the New York Sublease.
  
                                         14
  <PAGE>
                            FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.   RELATED PARTY TRANSACTIONS (continued)
  
       Foamex  L.P.  sold   approximately   $46.7   million  and  $55.2   million,
  respectively,  of carpet cushion  products to Foamex Carpet during the quarterly
  period  ended  June 30,  1999 and June 28,  1998 and $90.0  million  and  $111.3
  million, respectively, for the year to date periods ended June 30, 1999 and June
  28, 1998.  In addition,  Foamex L.P.  provided and invoiced  approximately  $0.7
  million and $0.5 million of administrative  services to Foamex Carpet during the
  quarterly periods ended June 30, 1999 and June 28, 1998, respectively,  and $1.3
  million and $0.6  million for the year to date  periods  ended June 30, 1999 and
  June 28, 1998, respectively.
  
       Also,  Foamex L.P.  chartered an aircraft which was owned by a wholly owned
  subsidiary of Foamex  International  and incurred  costs of  approximately  $0.3
  million  during the  quarterly  period  ended June 28, 1998 and $0.1 million and
  $0.5 million  during the year to date  periods  ended June 30, 1999 and June 28,
  1998, respectively. Foamex International sold this aircraft on March 31, 1999.
  
  9.   SUBSEQUENT EVENT
  
       On  August  5,  1999,  Foamex  International  announced  that its  Board of
  Directors signed a letter of intent with Sorgenti Chemical  Industries,  LLC and
  Liberty  Partners  Holdings  20,  LLC  (collectively,  the  "Purchasers")  for a
  business  combination   providing  for  $11.50  per  share  for  all  of  Foamex
  International's   outstanding  common  stock,  subject  to  due  diligence,  the
  execution of definitive agreements and other conditions.  Under the terms of the
  letter of intent,  if Foamex  International  enters into a business  combination
  with another party,  the  Purchasers  will be entitled to a break-up fee of $6.0
  million plus reimbursement of certain expenses. The buyout offer is subject to a
  number of conditions,  including the negotiation of definitive documents,  which
  will  contain  certain  conditions  relating to the bank credit  facilities  and
  public debt of Foamex  International's  subsidiaries,  including Foamex L.P., as
  well as certain other conditions relating to minimum shareholder  acceptance and
  change of board membership, and other provisions providing for a higher break-up
  fee and expense  reimbursement  if Foamex  International  enters into a business
  combination  providing  a more  favorable  transaction.  The  definitive  buyout
  agreement  will require  appropriate  filings with the  Securities  and Exchange
  Commission and regulatory agencies.
  
       Following  the  execution  of the letter of  intent,  the  Purchasers  will
  commence their due diligence investigation of Foamex International.  The parties
  are discussing the process by which waivers and/or  consents from the holders of
  the bank and public  indebtedness of Foamex  International and subsidiaries will
  be sought in  connection  with the  buyout and will seek such to  negotiate  the
  terms of a definitive buyout agreement prior to October 31, 1999.
  
  
                                         15
  
  <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 June 30, 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.  See Note 1 to
  the accompanying  condensed consolidated financial statements and "Liquidity and
  Capital Resources" below.
  
       On March 16, 1999,  Foamex  International  announced  that it 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. On May 26, 1999,  Foamex  International  announced
  major   executive   changes  in  connection   with  its  ongoing   restructuring
  initiatives, which included the appointment of John Televantos, an ARCO Chemical
  Company veteran, as President of the Foam Business Group.
  
       On  August  5,  1999,  Foamex  International  announced  that its  Board of
  Directors  signed  a  letter  of  intent  with  the  Purchasers  for a  business
  combination  providing  for $11.50  per share for all of Foamex  International's
  outstanding common stock, subject to due diligence,  the execution of definitive
  agreements  and other  conditions.  Under the terms of the letter of intent,  if
  Foamex  International enters into a business combination with another party, the
  Purchasers will be entitled to a break-up fee of $6.0 million plus reimbursement
  of  certain  expenses.  The buyout  offer is subject to a number of  conditions,
  including the  negotiation of definitive  documents,  which will contain certain
  conditions  relating  to the bank  credit  facilities  and public debt of Foamex
  International's  subsidiaries,  including  Foamex L.P., as well as certain other
  conditions  relating  to  minimum  shareholder  acceptance  and  change of board
  membership, and other provisions providing for a higher break-up fee and expense
  reimbursement  if  Foamex  International  enters  into  a  business  combination
  providing a more favorable  transaction.  The definitive  buyout  agreement will
  require  appropriate  filings with the  Securities  and Exchange  Commission and
  regulatory agencies.
  
       Following  the  execution  of the letter of  intent,  the  Purchasers  will
  commence their due diligence investigation of Foamex International.  The parties
  are discussing the process by which waivers and/or  consents from the holders of
  the bank and public  indebtedness of Foamex  International and subsidiaries will
  be sought in  connection  with the  buyout and will seek such to  negotiate  the
  terms of a definitive buyout agreement prior to October 31, 1999.
  
       Restructuring Plan
  
       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 and other 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.  During the second quarter
  of 1999, Foamex L.P.  recorded  restructuring and other charges of approximately
  $3.6 million.  The $3.6 million of restructuring  and other charges is comprised
  of $1.2 million of severance  costs in  connection  with  additional  work force
  reductions of approximately 60 employees,  $2.3 million of costs associated with
  the closure of two additional  manufacturing  operations and facilities and $0.1
  million of other charges. Approximately $2.5 million of severance costs incurred
  in 1999 have been paid as of June 30,  1999.  Approximately  $1.5 million of the
  total 1999  severance  costs  primarily  relate to contractual  severance  costs
  payable to the former Chairman and Chief Executive  Officer,  which will be paid
  through March 2001. Foamex L.P. may record additional  restructuring  charges in
  the future as it finalizes implementation of its restructuring plan.
  
                                         16
  <PAGE>
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
       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
  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. to Foamex
  International.  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.
  
       Foamex L.P. is subject to various internal and external factors which could
  significantly  impact its business,  including,  among other things,  (a) Foamex
  L.P.'s debt and capital structures, (b) the Crain Consolidation,  (c) additional
  raw material cost increases,  if any, by Foamex L.P.'s chemical  suppliers,  (d)
  Foamex L.P.'s success in passing on to its customers  selling price increases to
  recover such raw material cost  increases,  (e)  fluctuations in interest rates,
  and (f) Trace's financial  condition,  including the potential of triggering the
  "change of control" provisions of Foamex L.P.'s debt agreements,  and other such
  factors  which may be beyond Foamex  L.P.'s  control.  Refer to page 4 of Foamex
  L.P.'s  Annual  Report on Form 10-K for the year ended  December  31, 1998 for a
  discussion of these and additional factors which management  believes may impact
  Foamex L.P. These factors could cause future results to differ  materially  from
  historical trends and management's  current expectations and could impact Foamex
  L.P.'s ability to continue as a going concern.  Although Foamex L.P. believes it
  can meet the debt covenant  requirements under its financing  agreements,  there
  can be no assurance such covenants will be met and the related indebtedness will
  continue to be classified as long-term. Although management believes that Foamex
  L.P.'s debt  obligations  could be refinanced if  accelerated as a result of the
  "change in control"  provisions under its related debt agreements,  there can be
  no assurance that Foamex L.P. or its subsidiaries  will be able to do so or that
  Foamex L.P.  will be able to obtain  waivers of such  provisions.  Additionally,
  although Foamex L.P. believes that cash flow from its operating activities, cash
  on hand and periodic borrowings under the Amended Credit Facility, if necessary,
  
                                         17
  
  <PAGE>
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  will be adequate to meet Foamex L.P.'s liquidity  requirements,  there can be no
  assurance  that  Foamex  L.P.'s  internally  generated  funds and funds from any
  borrowings  will prove to be  sufficient to fund Foamex  L.P.'s  operations  and
  permit it to continue as a going concern.
  
  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,  furniture and retail
  industries.  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.
  
  <TABLE>
  <CAPTION>
                                                               Carpet
                                                  Foam        Cushion      Automotive     Technical
                                                Products      Products      Products      Products       Other           Total
  <S>                                          <C>           <C>            <C>           <C>           <C>            <C>
  Quarterly period ended June 30, 1999:
  Net sales                                    $ 124,909     $  46,687      $  90,810     $  23,028     $   6,795      $ 292,229
  Income (loss) from operations                   12,948           (65)         6,033         6,203        (3,979)        21,140
  Depreciation and amortization                    4,094         1,266          1,235           636           182          7,413
  
  Quarterly period ended June 28, 1998:
  Net sales                                    $ 133,422     $  55,176      $  61,923     $  20,156     $   3,031      $ 273,708
  Income (loss) from operations                   22,913           247          5,821         4,051        (2,559)        30,473
  Depreciation and amortization                    4,369         1,114          1,264           655           553          7,955
  
  Year to date period ended June 30, 1999:
  Net sales                                    $ 264,288     $  89,990      $ 179,581     $  45,276     $  12,971      $ 592,106
  Income (loss) from operations                   25,869          (436)        12,825        11,239        (8,586)        40,911
  Depreciation and amortization                    8,242         2,436          2,469         1,273           662         15,082
  
  Year to date period ended June 28, 1998:
  Net sales                                    $ 281,715     $ 111,340      $ 127,604     $  41,272     $   9,850      $ 571,781
  Income (loss) from operations                   35,027         1,751         13,236         8,588        (4,220)        54,382
  Depreciation and amortization                    8,175         2,185          2,441         1,285         1,120         15,206
  </TABLE>
  
  Quarterly Period Ended June 30, 1999 Compared to Quarterly Period Ended June 28,
  1998
  
       Net sales for the second quarter of 1999 were $292.2 million as compared to
  $273.7  million in the second  quarter of 1998,  an increase of $18.5 million or
  6.8%.  The increase in net sales was  primarily  associated  with an increase in
  automotive  lamination products,  which was offset by decreased sales due to the
  closure of several  plants in connection  with the Crain  Consolidation.  Income
  from operations  decreased $9.3 million or 30.6% to $21.1 million for the second
  quarter of 1999 from $30.5 million in the second  quarter of 1998.  The decrease
  in income from operations  resulted  primarily from (a)  restructuring  costs of
  $3.6 million  recorded  during the second  quarter of 1999 and (b) a decrease in
  gross profit of $9.2 million  resulting  primarily  from  increased raw material
  costs and a shift in product mix  resulting  from a decrease  in carpet  cushion
  units  sold and lower  sales of foam  products  offset by an  increase  in lower
  margin  automotive  lamination  sales,  offset in part by a decrease in selling,
  general
  
                                         18
  <PAGE>
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  and administrative  expenses of $4.2 million.  The decrease in selling,  general
  and  administrative  costs was primarily due to the  elimination  of duplicative
  costs from the Crain  Consolidation and cost reductions  implemented  during the
  first and second quarters of 1999.
  
       Foam Products
  
       Foam products net sales for the second  quarter of 1999  decreased  6.4% to
  $124.9  million from $133.4  million in the second quarter of 1998. The decrease
  in net sales was primarily associated with the closure of several plants as part
  of the Crain  Consolidation.  Income from  operations  decreased  43.5% to $12.9
  million  (10.4% of net sales) for the second  quarter of 1999 from $22.9 million
  (17.2% of net sales) in the second  quarter of 1998. The decrease in income from
  operations  was  primarily  the result of increased  raw material  costs and the
  decrease in net sales,  offset in part by improved  operating  efficiencies  and
  cost reductions as part of the Crain Consolidation.
  
       Carpet Cushion Products
  
       Carpet cushion  products net sales for the second quarter of 1999 decreased
  15.4%  to $46.7  million  from  $55.2  million  in the  second  quarter  of 1998
  primarily due to decreased units sold.  Income from operations  decreased 126.3%
  to a loss of $0.1  million  (0.1% of net sales)  for the second  quarter of 1999
  from income of $0.2 million  (0.4% of net sales) in the second  quarter of 1998.
  This decrease was primarily due to the decrease in net sales.
  
       Automotive Products
  
       Automotive  products  net sales for the second  quarter  of 1999  increased
  46.6% to $90.8  million from $61.9  million in the second  quarter of 1998.  The
  increase  in net sales  was  associated  with  increased  volume  of  lamination
  products.  Income from  operations  increased  3.6% to $6.0 million (6.6% of net
  sales) for the second  quarter of 1999 from $5.8 million  (9.4% of net sales) in
  the second quarter of 1998. This increase was primarily a result of the increase
  in net sales  offset in part by  contract  price  reductions  and the  change in
  product  mix to more  laminated  products  which have lower  margins  than other
  automotive products.
  
       Technical Products
  
       Technical products net sales for the second quarter of 1999 increased 14.2%
  to $23.0 million from $20.2 million in the second  quarter of 1998.  Income from
  operations  increased  53.1% to $6.2 million (26.9% of net sales) for the second
  quarter of 1999 from $4.1 million  (20.1% of net sales) in the second 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 increase in net sales associated with this
  segment  primarily  resulted  from an increase  in net sales from Foamex  L.P.'s
  Mexican operations.  The decrease in income (loss) from operations was primarily
  associated with the $3.6 million of restructuring  and other charges recorded in
  the second quarter of 1999 discussed previously.
  
       Income Before Provision for Income Taxes
  
       Income before  provision for income taxes decreased to $5.3 million for the
  second  quarter of 1999 as  compared to $14.6  million in the second  quarter of
  1998.  This decrease is primarily due to the decrease in income from  operations
  of $9.3 million discussed above.
  
       Income Taxes
  
       The second  quarter of 1999  provision  for  income  taxes of $0.4  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.
  
                                         19
  <PAGE>
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  Year to Date Period  Ended June 30, 1999  Compared to Year to Date Period  Ended
  June 28, 1998
  
       Net sales  for the year to date  period  ended  June 30,  1999 were  $592.1
  million as compared to $571.8  million in the year to date period ended June 28,
  1998,  an  increase  of $20.3  million or 3.6%.  The  increase  in net sales was
  primarily associated with the increase in automotive 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  $13.5  million or 24.8% to $40.9  million for the year to date period
  ended June 30, 1999 from $54.4 million in the year to date period ended June 28,
  1998.  The  decrease  in income  from  operations  resulted  primarily  from (a)
  restructuring  costs recorded during the year to date period ended June 30, 1999
  of $7.0  million and (b) a decrease in gross profit of $16.6  million  resulting
  primarily from increased raw material costs and a shift in product mix resulting
  from a decrease in carpet  cushion  units sold and lower sales of foam  products
  offset by an increase in lower margin  automotive  lamination  sales,  offset in
  part by a decrease in  selling,  general  and  administrative  expenses of $10.8
  million. The decrease in selling, general and administrative costs was primarily
  due to the  elimination of duplicative  costs from the Crain  Consolidation  and
  cost reductions implemented during the year to date period ended June 30, 1999.
  
       Foam Products
  
       Foam  products  net sales for the year to date  period  ended June 30, 1999
  decreased  6.2% to $264.3 million from $281.7 million in the year to date period
  ended June 28, 1998. The decrease in net sales was primarily associated with the
  closure  of  several  plants as part of the  Crain  Consolidation.  Income  from
  operations  decreased 26.1% to $25.9 million (9.8% of net sales) for the year to
  date period ended June 30, 1999 from $35.0  million  (12.4% of net sales) in the
  year to date period ended June 28, 1998. The decrease in income from  operations
  was primarily the result of increased raw material costs and the decrease in net
  sales,  offset in part by improved  operating  efficiencies  resulting  from the
  Crain Consolidation.
  
       Carpet Cushion Products
  
       Carpet  cushion  products  net sales for the year to date period ended June
  30, 1999  decreased  19.2% to $90.0  million from $111.3  million in the year to
  date  period  ended  June 28,  1998  primarily  due to the GFI  Transaction  and
  decreased units sold. Income from operations  decreased 124.9% to a loss of $0.4
  million (0.5% of net sales) for the year to date period ended June 30, 1999 from
  income of $1.8 million (1.6% of net sales) in the year to date period ended June
  28, 1998. This decrease was primarily due to the decrease in net sales.
  
       Automotive Products
  
       Automotive  products  net sales for the year to date period  ended June 30,
  1999  increased  40.7% to $179.6 million from $127.6 million in the year to date
  period  ended June 28,  1998.  The  increase  in net sales was  associated  with
  increased volume of lamination  products.  Income from operations decreased 3.1%
  to $12.8  million (7.1% of net sales) for the year to date period ended June 30,
  1999 from $13.2  million  (10.4% of net sales) in the year to date period  ended
  June 28, 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.
  
       Technical Products
  
       Technical  products  net sales for the year to date  period  ended June 30,
  1999  increased  9.7% to $45.3  million  from $41.3  million in the year to date
  period  ended June 28, 1998.  Income from  operations  increased  30.9% to $11.2
  million  (24.8% of net sales) for the year to date  period  ended June 30,  1999
  from $8.6 million (20.8% of net sales) in the year to date period ended June 28,
  1998.  The  increase  in net sales and  income  from  operations  was  primarily
  associated with increased sales of foam for ink jet printers.
  
                                         20
  <PAGE>
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
       Other
  
       Other  primarily  consists  of certain  foreign  manufacturing  operations,
  corporate   expenses  not  allocated  to  the  other   operating   segments  and
  restructuring and other charges.  The increase in net sales associated with this
  segment  primarily  resulted  from an increase  in net sales from Foamex  L.P.'s
  Mexican operations.  The decrease in income (loss) from operations was primarily
  associated with the $7.0 million of restructuring  and other charges recorded in
  the year to date period ended June 30, 1999 discussed previously.
  
       Income Before Provision for Income Taxes
  
       Income before  provision for income taxes decreased to $8.4 million for the
  year to date period ended June 30, 1999 as compared to $21.3 million in the year
  to date  period  ended June 28,  1998.  This  decrease is  primarily  due to the
  decrease in income from operations of $13.5 million discussed above.
  
       Income Taxes
  
       The year to date period ended June 30, 1999  provision  for income taxes of
  $1.0 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 $3.2
  million was primarily  associated  with the write-off of debt issuance  costs in
  connection with the GFI Transaction.
  
  Liquidity and Capital Resources
  
       Foamex L.P.'s operating cash  requirements  consist  principally of working
  capital   requirements,   scheduled   payments  of  principal  and  interest  on
  outstanding  indebtedness and capital  expenditures.  Foamex L.P.  believes that
  cash flow from Foamex  L.P.'s  operating  activities,  cash on hand and periodic
  borrowings under the Amended Credit Facility, if necessary,  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
  covenants  contained in the Amended Credit Facility and such  noncompliance  was
  not cured by Foamex L.P. or waived by the lenders.  Foamex L.P. obtained various
  waivers and amendments under the Credit Facility in March, May and June 1999 and
  was in compliance  with the covenants  under the Amended  Credit  Facility as of
  June 30, 1999. See Note 3 to the accompanying  condensed  consolidated financial
  statements.  Foamex L.P. incurred aggregate financing fees of approximately $3.5
  million in connection with the March and June 1999  amendments.  These financing
  fees will be  amortized  along  with  previously  paid  financing  fees  through
  December 2006, the remaining term of the Amended Credit Facility.
  
       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 and
  was not in compliance with certain covenants  contained in agreements  governing
  approximately  $415.4 million principal amount of indebtedness.  Had the lenders
  under the Credit Facility or other debt  agreements  accelerated the maturity of
  their indebtedness as a result of Foamex L.P.'s noncompliance, such acceleration
  would have  constituted an event of default under or given the holders the right
  to require the repurchase of substantially  all of Foamex L.P.'s long-term debt.
  As a result  of these  factors,  Foamex  L.P.  classified  approximately  $715.8
  million of long-term  debt at December  31, 1998 as current in the  accompanying
  condensed  consolidated  balance  sheet,  which  resulted  in a working  capital
  deficit.  These matters raised  substantial  doubt as of December 31, 1998 about
  Foamex L.P.'s ability to continue as a going concern.
  
       The Amended  Credit  Facility,  which was signed on June 30,  1999,  modify
  financial  covenants as of June 30, 1999,  among other things,  and provided for
  future  measurement  periods taking into account Foamex L.P.'s  estimated future
  operating  results  and  financial   condition  and  management's   expectations
  regarding  these  future  measurement  periods.  See Note 3 to the  accompanying
  condensed consolidated  financial statements.  For the year to date period ended
  June 30, 1999,  Foamex L.P.  had income from  continuing  operations  and was in
  compliance  with  its  debt
  
  
                                         21
  
  <PAGE>
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  covenants. As a result of these factors and management's  expectations regarding
  compliance with these covenants in future measurement  periods,  Foamex L.P. has
  classified approximately $695.4 million of debt as long-term in the accompanying
  condensed  consolidated  balance  sheet at June 30,  1999,  which  resulted in a
  positive working capital. Foamex L.P. continues to be subject to certain "change
  of  control"  provisions  under its debt  agreements  which  could  result in an
  acceleration of the related debt.
  
       Certain of Foamex L.P.'s Mexican  subsidiaries  are in default of financial
  covenant  provisions  contained  in  loan  agreements  with a  Mexican  bank  as
  negotiations  continue to finalize amendments to the loan agreements to cure the
  defaults.  The defaults under the Mexican loan  agreements do not have any cross
  default consequences for Foamex L.P.'s domestic subsidiaries' debt agreements.
  
       Trace is a privately held company which owns approximately  46.1% of Foamex
  International's  outstanding  voting common stock and whose Chairman also serves
  as the Chairman of Foamex  International.  Foamex  International's  common stock
  owned by Trace  is  pledged  as  collateral  against  certain  of  Trace's  debt
  obligations.  Certain credit  agreements  and  promissory  notes of Foamex L.P.,
  pursuant to which approximately $429.8 million of debt was issued as of June 30,
  1999,  contain  provisions  that  would  result  in  the  acceleration  of  such
  indebtedness  if Trace  were to cease to  beneficially  own at least  25% of the
  outstanding  voting  common stock of Foamex  International  and other persons or
  groups were to own a greater  percentage of such voting common stock than Trace.
  Additionally,  certain  indentures  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  were to  cease  to  beneficially  own at  least  25% of the
  outstanding  voting  common stock of Foamex  International  and other persons or
  groups were to own a greater percentage of such voting common stock than Trace.
  
       Foamex L.P. was informed by Trace that it filed a petition for relief under
  Chapter 11 of the Bankruptcy  Code in Federal Court in New York City on July 21,
  1999.  Trace's  bankruptcy  filing does not constitute a change of control under
  the provisions of the debt agreements unless the bankruptcy court allows Trace's
  creditors to foreclose on and take  ownership of Foamex  International's  common
  stock  owned by Trace,  or  otherwise  authorizes  a sale or  transfer  of these
  shares,  and Trace, its affiliates and subsidiaries cease to own at least 25% of
  Foamex  International's  outstanding  voting  common stock and other  persons or
  groups own a greater percentage of voting common stock than Trace.
  
       Foamex  L.P.  will seek to resolve the issues that may arise if the "change
  of control"  provisions are triggered in the future,  including  waivers of such
  provisions and/or refinancing  certain debt, if necessary.  Although  management
  believes that Foamex L.P.'s debt obligations  could be refinanced if accelerated
  as a result of the "change of control" provisions under related debt agreements,
  there can be no assurance  that Foamex L.P. will be able to do so or that Foamex
  L.P.  will be able to  obtain  waivers  of  such  provisions.  The  accompanying
  condensed  consolidated financial statements do not include any adjustments that
  might result from the outcome of these uncertainties.
  
       As of June  30,  1999,  there  were  $130.4  million  of  revolving  credit
  borrowings,  at an average  interest  rate of 8.34%,  under the  Amended  Credit
  Facility with $12.0 million available for additional borrowing and approximately
  $47.6  million of  letters  of credit  outstanding  which are  supported  by the
  Amended  Credit  Facility.  Borrowings by Foamex Canada Inc. as of June 30, 1999
  were  approximately  $4.7 million,  at an interest  rate of 6.75%,  under Foamex
  Canada  Inc.'s   revolving   credit   agreement  with  unused   availability  of
  approximately $0.7 million.
  
       Cash and cash  equivalents  decreased to $3.1 million at June 30, 1999 from
  $3.2 million at December  31,  1998.  Excluding  the  reclassification  of other
  long-term debt to current at December 31, 1998,  working capital  decreased $4.0
  million to $110.8  million at June 30, 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  $4.9 million to $153.6 million at June 30, 1999 as compared to $148.7
  million at
  
                                         22
  
  <PAGE>
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  December 31, 1998.  The increase was  primarily due to an aggregate net increase
  in accounts  receivable  and accounts  receivable  from related  parties of $1.8
  million and a decrease in accounts payable of $31.5 million offset by a decrease
  in  inventories of $28.4  million.  The net increase in accounts  receivable and
  accounts receivable related parties was primarily associated with an increase in
  sales  during June 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 June 30, 1999.
  
       Cash Flow from Operating Activities
  
       Cash flow provided by operating  activities  was $31.3 million for the year
  to date period ended June 30, 1999 as compared to cash used of $34.0 million for
  the year to date period ended June 28, 1998.  The  improvement  is primarily the
  result of a decrease in the use of cash for the operating assets and liabilities
  during 1999 as compared to 1998.
  
       Cash Flow from Investing Activities
  
       Cash flow used for  investing  activities  was $7.4 million for the year to
  date period  ended June 30,  1999 as compared to cash used of $28.9  million for
  the year to date period ended June 28, 1998.  This decrease was due primarily to
  (i) a  decrease  in capital  expenditures  of $4.8  million  in 1999,  (ii) $9.0
  million used in connection  with the GFI Transaction in 1998 and (iii) cash used
  in 1998 of $3.9 million for certain acquisition payments. Additionally, on March
  31, 1999,  Foamex  International  repaid its $2.5 million  promissory note dated
  December 31, 1998 to Foamex L.P.
  
       During  1999,  Foamex L.P.  spent  approximately  $10.5  million on capital
  improvements  as compared to $15.3 million  during 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.
  
       Cash Flow from Financing Activities
  
       Cash flow used for financing  activities  was $24.0 million for the year to
  date period  ended June 30, 1999  compared  to cash flow  provided by  financing
  activities  of $58.2  million for the year to date period  ended June 28,  1998.
  This decrease was primarily due to 1998  including a series of  transactions  in
  connection with the GFI Transaction during February 1998. 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 June 30,  1999 was $3.5  million.  Although  it is
  possible that new information or future  developments  could require Foamex L.P.
  to  reassess  its  potential  exposure  to all  pending  environmental  matters,
  including  those  described  in the  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.
  
                                         23
  
  <PAGE>
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  Market Risk
  
       Foamex L.P.'s debt securities  with variable  interest rates are subject to
  market risk for changes in interest rates. On June 30, 1999, long-term debt with
  variable  interest rates totaled $449.4 million.  On an annualized basis, if the
  interest rates on these debt instruments increased by 1%, interest expense would
  increase by approximately $4.5 million.
  
  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.
  
  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 June 30, 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.
  
       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
  
                                         24
  
  <PAGE>
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  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.
  
  
  
                                         25
  <PAGE>
  
  ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
       See the "Market  Risk" section under Item 2,  Management's  Discussion  and
  Analysis of Financial Condition and Results of Operations.
  
  
  
  
  
  
  
  
  
  
  
                                         26
  <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  June  30,  1999  (unaudited)  is
            incorporated herein by reference.
  
  Item 6.   Exhibits and Reports on Form 8-K
  
            (a)  Exhibits
  
                 27   Financial  Data  Schedule  for the year to date period ended
                      June 30, 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,  dated as of March 11,  1999  reporting  amendments  to
                 aspects of its credit agreements.
  
                 Form  8-K,  dated as of June 30,  1999  reporting  amendments  to
                 aspects of its credit agreements.
  
                 Form 8-K, dated as of August 5, 1999  reporting  press release on
                 proposed buyout.
  
  
  
                                         27
  <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: August 13, 1999                        By: /s/ George L. Karpinski
                                                   George L. Karpinski
                                                   Vice President
  
  
                                               FOAMEX CAPITAL CORPORATION
  
  
  Date: August 13, 1999                        By: /s/ George L. Karpinski
                                                   George L. Karpinski
                                                   Vice President
  
  
  
  
                                         28
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 110840}]
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": "99689383"}, "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": "99689384"}, "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 June 30, 1999
  
                      Commission file numbers 1-11432; 1-11436
  
                                     FOAMEX L.P.
                             FOAMEX CAPITAL CORPORATION
               (Exact name of registrant as specified in its charter)
  
            Delaware                                     05-0475617
            Delaware                                     22-3182164
  (State or other jurisdiction of                      (I.R.S. Employer
  incorporation or organization)                        Identification Number)
  
  1000 Columbia Avenue
  Linwood, PA                                             19061
  (Address of principal                                   (Zip Code)
  executive offices)
  
  Registrant's telephone number, including area code: (610) 859-3000
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the  preceding 12 months (or for such  shorter  period that the  registrant  was
  required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
  requirements for the past 90 days.
  YES  X   NO
  
  Foamex L.P. and Foamex  Capital  Corporation  meet the  conditions  set forth in
  General  Instruction  H(1)(a) and (b) of Form 10-Q and are therefore filing this
  form with the reduced disclosure format.
  
  The number of shares of Foamex Capital Corporation's common stock outstanding as
  of August 10, 1999 was 1,000.
  
                                    Page 1 of 28
                            Exhibit List on Page 27 of 28
  FOAMEX L.P.
                             FOAMEX CAPITAL CORPORATION
  
                                        INDEX
                                                                              Page
  
  Part I.  Financial Information:
  
           Item 1.  Financial Statements
  
                 Condensed Consolidated Statements of Operations
                   (unaudited) - Quarterly and Year to Date Periods
                   Ended June 30, 1999 and June 28, 1998                        3
  
                 Condensed Consolidated Balance Sheets (unaudited) as of
                   June 30, 1999 and December 31, 1998                          4
  
                 Condensed Consolidated Statements of Cash Flows
                   (unaudited) - Year to Date Periods Ended June 30,
                   1999 and June 28, 1998                                       5
  
                 Notes to Condensed Consolidated Financial Statements
                   (unaudited)                                                  6
  
           Item 2.  Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                        16
  
           Item 3.  Quantitative and Qualitative Disclosure about
                    Market Risk                                                26
  
  Part II. Other Information                                                   27
  
           Item 1.  Legal Proceedings                                          27
  
           Item 6.  Exhibits and Reports on Form 8-K                           27
  
  Signatures                                                                   28
  
                                         2
  PART I.  FINANCIAL INFORMATION
  ITEM 1.  FINANCIAL STATEMENTS
  
                            FOAMEX L.P. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
  Quarterly Periods Ended          Year to Date Periods Ended
                                                         June 30,         June 28,         June 30,           June 28,
                                                           1999             1998             1999               1998
                                                        ---------        ---------         ---------         ---------
                                                                                  (thousands)
  NET SALES                                        $ 292,229        $ 273,708         $ 592,106         $ 571,781
  
       COST OF GOODS SOLD                                 253,819          226,111           516,235           479,276
                                                        ---------        ---------         ---------         ---------
  
       GROSS PROFIT                                        38,410           47,597            75,871            92,505
  
       SELLING, GENERAL AND
          ADMINISTRATIVE EXPENSES                          13,653           17,824            27,986            38,823
  
       RESTRUCTURING AND OTHER CHARGES (CREDITS)            3,617             (700)            6,974              (700)
                                                        ---------        ---------         ---------         ---------
  
       INCOME FROM OPERATIONS                              21,140           30,473            40,911            54,382
  
       INTEREST AND DEBT ISSUANCE EXPENSE                  16,132           15,568            32,271            32,480
  
       OTHER INCOME (EXPENSE), NET                            244             (306)             (195)             (619)
                                                        ---------        ---------         ---------         ---------
  
       INCOME FROM CONTINUING OPERATIONS
          BEFORE PROVISION FOR INCOME TAXES                 5,252           14,599             8,445            21,283
  
       PROVISION FOR INCOME TAXES                             445              808             1,030             1,884
                                                        ---------        ---------         ---------         ---------
  
       INCOME FROM CONTINUING OPERATIONS                    4,807           13,791             7,415            19,399
  
       EXTRAORDINARY LOSS ON EARLY
          EXTINGUISHMENT OF DEBT                               --              (72)               --            (3,195)
                                                        ---------        ---------         ---------         ---------
  
       NET INCOME                                       $   4,807        $  13,719         $   7,415         $  16,204
                                                        =========        =========         =========         =========
  The accompanying notes are an integral part of the
                    condensed consolidated financial statements.
  
                                         3
  FOAMEX L.P. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
  June 30,         December 31,
  ASSETS                                                        1999               1998
       CURRENT ASSETS:                                                 (thousands)
  Cash and cash equivalents                                $   3,057         $   3,192
     Accounts receivable, net                                   147,605           143,301
     Accounts receivable from related parties                    14,985            17,533
     Inventories                                                 99,212           127,636
     Other current assets                                        27,028            33,849
                                                              ---------         ---------
         Total current assets                                   291,887           325,511
  
  PROPERTY, PLANT AND EQUIPMENT, NET                            210,968           219,637
  
  COST IN EXCESS OF ASSETS ACQUIRED, NET                        186,026           188,205
  
  DEBT ISSUANCE COSTS, NET                                       16,261            13,946
  
  OTHER ASSETS                                                   22,112            21,229
                                                              ---------         ---------
  
  TOTAL ASSETS                                                $ 727,254         $ 768,528
                                                              =========         =========
  
  LIABILITIES AND PARTNERS' DEFICIT
  CURRENT LIABILITIES:
     Short-term borrowings                                    $   4,700         $   2,957
     Current portion of long-term debt                           13,022           689,478
     Current portion of long-term debt - related party               --            34,000
     Accounts payable                                           108,230           139,726
     Accrued interest                                             9,565             7,396
     Other accrued liabilities                                   45,584            52,944
                                                              ---------         ---------
         Total current liabilities                              181,101           926,501
  
  LONG-TERM DEBT                                                661,449                --
  
  LONG-TERM DEBT - RELATED PARTY                                 34,000                --
  
  OTHER LIABILITIES                                              36,554            38,064
                                                              ---------         ---------
  
         Total liabilities                                      913,104           964,565
                                                              ---------         ---------
  
  COMMITMENTS AND CONTINGENCIES                                      --                --
                                                              ---------         ---------
  
  PARTNERS' DEFICIT:
     General partner                                           (135,114)         (141,426)
     Limited partner                                                 --                --
     Accumulated other comprehensive income (loss)              (25,397)          (26,208)
     Notes and advances receivable from partner                 (16,118)          (18,608)
     Notes receivable from related party                         (9,221)           (9,795)
                                                              ---------         ---------
  
         Total partners' deficit                               (185,850)         (196,037)
                                                              ---------         ---------
  
  TOTAL LIABILITIES AND PARTNERS' DEFICIT                     $ 727,254         $ 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)
  Year to Date Periods Ended
                                                                         June 30,          June 28,
                                                                           1999              1998
                                                                         ---------         ---------
                                                                                    (thousands)
  OPERATING ACTIVITIES:
  Net income                                                         $   7,415         $  16,204
     Adjustments to reconcile net income to net cash provided
       by (used for) operating activities:
       Depreciation and amortization                                       15,082            15,206
       Amortization of debt issuance costs, debt discount,
         debt premium and deferred swap adjustments                           (34)              (33)
       Asset writedown and other charges                                    2,073                --
       Extraordinary loss on early extinguishment of debt                      --             2,857
       Other operating activities                                           6,186             4,164
       Changes in operating assets and liabilities, net                       588           (72,420)
                                                                        ---------         ---------
  
           Net cash provided by (used for) operating activities            31,310           (34,022)
                                                                        ---------         ---------
  
  INVESTING ACTIVITIES:
     Capital expenditures                                                 (10,482)          (15,252)
     Acquisitions, net of cash acquired                                        --            (3,899)
     Sale of subsidiaries                                                      --            (8,971)
     Repayments of (purchase of) note from partner                          2,490                --
     Proceeds from (payments of) note receivable - related party               --              (424)
     Other investing activities                                               574              (382)
                                                                        ---------         ---------
  
           Net cash used for investing activities                          (7,418)          (28,928)
                                                                        ---------         ---------
  
  FINANCING ACTIVITIES:
     Net proceeds from short-term borrowings                                1,743               722
     Net proceeds from (repayments of) revolving loans                     (8,969)           82,426
     Proceeds from long-term debt                                              --           129,000
     Repayment of long-term debt                                           (5,385)         (132,318)
     Debt issuance cost                                                    (3,455)           (1,598)
     Cash overdraft                                                        (7,300)               --
     Distribution to partners                                                  --           (20,074)
     Other financing activities                                              (661)               84
                                                                        ---------         ---------
  
           Net cash provided by (used for) financing activities           (24,027)           58,242
                                                                        ---------         ---------
  
  NET DECREASE IN CASH AND CASH EQUIVALENTS                                  (135)           (4,708)
  
  CASH AND CASH EQUIVALENTS
     AT BEGINNING OF PERIOD                                                 3,192             9,405
                                                                        ---------         ---------
  
  CASH AND CASH EQUIVALENTS
     AT END OF PERIOD                                                   $   3,057         $   4,697
                                                                        =========         =========
  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  June  30,  1999,  the  condensed
  consolidated statements of operations for the quarterly and year to date periods
  ended June 30, 1999 and June 28, 1998 and the condensed consolidated  statements
  of cash flows for the year to date periods ended June 30, 1999 and June 28, 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. As a result, the financial data for the quarterly and year to date periods
  ended  June 28,  1998  represent  thirteen-week  and  twenty-six  week  periods,
  respectively.  The  financial  data for the  quarterly  and year to date periods
  ended June 30, 1999  represent  three and six month periods,  respectively,  and
  include 91 and 181 calendar days, respectively.
  
       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 June 30, 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  and year to date periods  ended June 30,
  1999 and June 28, 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 and
  was not in compliance with certain covenants  contained in agreements  governing
  approximately  $415.4  million  of  principal  amount of  indebtedness.  Had the
  lenders  under  the  credit  facility  (the  "Credit  Facility")  or other  debt
  agreements  accelerated the maturity of their indebtedness as a result of Foamex
  L.P.'s  noncompliance,  such  acceleration  would have  constituted  an event of
  default  under or given the  holders  the right to  require  the  repurchase  of
  substantially all of Foamex L.P.'s long-term debt. As a result of these factors,
  Foamex  L.P.  classified  approximately  $715.8  million  of  long-term  debt at
  December 31, 1998 as current in the accompanying  condensed consolidated balance
  sheet,  which  resulted  in a working  capital  deficit.  These  matters  raised
  substantial  doubt as of  December  31,  1998  about  Foamex  L.P.'s  ability to
  continue as a going concern.
  
       On June 30, 1999,  Foamex L.P.  amended its Credit  Facility  (the "Amended
  Credit Facility") to, among other things, modify financial covenants and provide
  for future  measurement  periods  taking into account  Foamex  L.P.'s  estimated
  future operating results and financial  condition and management's  expectations
  regarding  compliance  with these covenants in future  measurement  periods (see
  Note 3).  For the year to date  period  ended June 30,  1999,  Foamex  L.P.  had
  consolidated  income from  continuing  operations and was in compliance with its
  debt  covenants.  As a result of these  factors  and  management's  expectations
  regarding compliance with these covenants in future measurement periods,  Foamex
  L.P.  classified  approximately  $695.4  million  of  debt as  long-term  in the
  accompanying  condensed  consolidated  balance  sheet  at June 30,  1999,  which
  resulted in positive  working  capital.  Foamex L.P.  continues to be subject to
  certain "change of control"  provisions  under its debt  agreements  which could
  result in an acceleration of the related debt, as discussed below.
  
                                         6
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
  
       Trace International  Holdings,  Inc.  ("Trace"),  a privately held company,
  owns  approximately  46.1% of Foamex  International's  outstanding voting common
  stock. Trace's Chairman also serves as Foamex International's  Chairman.  Foamex
  International's  common  stock owned by Trace is pledged as  collateral  against
  certain  of  Trace's   obligations.   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,  the
  "change of control"  provisions  of the debt  agreements  may be  triggered  and
  substantially all of Foamex L.P.'s indebtedness may be accelerated.  Foamex L.P.
  was informed by Trace that it filed a petition  for relief  under  Chapter 11 of
  the Bankruptcy Code in Federal Court in New York City on July 21, 1999.  Trace's
  bankruptcy  filing does not  automatically  constitute a change of control under
  the  provisions of the debt  agreements.  See "Change of Control  Provisions" in
  Note 3.
  
  2.   INVENTORIES
  
       Inventories consist of:
  
                                         June 30,        December 31,
                                           1999             1998
                                                (thousands)
  
       Raw materials and supplies        $ 66,623        $ 93,241
       Work-in-process                     12,731          12,087
       Finished goods                      19,858          22,308
                                         --------        --------
  
       Total                             $ 99,212        $127,636
                                         ========        ========
  
  3.   LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY
  
       Foamex L.P.  classified  approximately  $715.8 million of long-term debt as
  current in the accompanying condensed consolidated balance sheet at December 31,
  1998 as a result of various  factors,  including  the fact that it had  received
  waivers for noncompliance  with certain debt covenants,  which were only granted
  through June 30, 1999.  The Amended Credit  Facility,  which was signed June 30,
  1999,  modify  financial  covenants  as of June 30, 1999 and provides for future
  measurement periods taking into account Foamex L.P.'s estimated future operating
  results and financial  condition and management's  expectations  regarding these
  future  measurement  periods.  For the year to date period  ended June 30, 1999,
  Foamex L.P. had income from continuing operations and was in compliance with its
  debt  covenants.  As a result of these  factors  and  management's  expectations
  regarding compliance with these covenants in future measurement periods,  Foamex
  L.P. has  classified  approximately  $695.4  million of debt as long-term in the
  accompanying  condensed consolidated balance sheet at June 30, 1999. Foamex L.P.
  continues  to be  subject  to  "change  of  control"  provisions  under its debt
  agreements  which could result in an acceleration of the related debt. See "Debt
  Restrictions and Covenants" and "Change of Control Provisions" below.
  
                                         7
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  3.   LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY (continued)
  
         Long-term debt consists of:
  June 30,      December 31,
                                                                     1999            1998
                                                                   --------        --------
       Amended Credit Facility:                                           (thousands)
  Term Loan B                                               $ 82,294        $ 82,714
         Term Loan C                                                 74,812          75,194
         Term Loan D                                                108,350         108,900
         Revolving credit facility                                  130,384         139,438
       9 7/8% Senior subordinated notes due 2007                    150,000         150,000
       13 1/2% Senior subordinated notes due 2005 (includes
         $10,997 and $11,893 of unamortized debt premium)           108,997         109,893
       Industrial revenue bonds                                       7,000           7,000
       Subordinated note payable (net of unamortized
         debt discount of $356 and $523)                              4,320           6,491
       Other                                                          8,314           9,848
                                                                   --------        --------
                                                                    674,471         689,478
  
       Less current portion                                          13,022         689,478
                                                                   --------        --------
  
       Long-term debt-unrelated parties                            $661,449        $     --
                                                                   ========        ========
  
       Long-term debt - related party consists of:
  
       Foamex/GFI Note                                             $ 34,000        $ 34,000
  
       Less current portion                                              --          34,000
                                                                   --------        --------
  
       Long-term debt - related party                              $ 34,000        $     --
                                                                   ========        ========
  During the quarterly  periods ended June 30, 1999 and June 28, 1998, Foamex
  L.P. paid  approximately  $0.5 million and $0.6 million,  respectively,  to Foam
  Funding LLC for interest on the Foamex/GFI Note. During the year to date periods
  ended June 30, 1999 and June 28,  1998,  Foamex  L.P.  paid  approximately  $1.0
  million and $0.6 million, respectively, for interest on the Foamex/GFI Note.
  
       Debt Restrictions and Covenants
  
       The  indentures  for the senior  subordinated  notes,  the  Amended  Credit
  Facility 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  (see "Change of
  Control  Provisions"  below) or the occurrence of an undefined  material adverse
  change  in  the  ability  of  the  obligor  to  perform  its  obligations,   the
  indebtedness  must be repaid,  in certain  cases,  at the option of the  holder.
  Also,  Foamex L.P. is required  under  certain of these  agreements  to maintain
  specified  financial ratios of which the most restrictive are the maintenance of
  net worth and interest, fixed charge and leverage coverage ratios, as defined.
  
       The Amended Credit Facility  modified the required limits for the net worth
  and interest,  fixed charge and leverage  coverage ratios through  December 2006
  and added an earnings before  interest,  taxes,  depreciation  and  amortization
  ("EBITDA")  covenant  requirement  through  September 30, 1999. Also,  effective
  March 31, 2000,  the interest rate on outstanding  borrowings  under the Amended
  Credit Facility will increase by 25 basis points each
  
                                         8
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  3.   LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY (continued)
  
  quarter  that  Foamex  L.P.'s  leverage  ratio  exceeds  5.00 to 1.00.  Once the
  leverage  ratio is reduced  below this level,  the  cumulative  amount of any 25
  basis point  adjustments to the interest rate on borrowings would be eliminated.
  The weighted average interest rate on such borrowings was approximately  8.6% at
  June 30, 1999. The Amended Credit Facility was also modified to no longer permit
  Foamex L.P. to make certain cash  payments,  including  the payment of an annual
  management fee to a subsidiary of Trace (which  aggregated  $3.0 million for the
  year ended December 31, 1998) and  distributions to Foamex L.P.'s partners,  and
  to limit future  investments  in foreign  subsidiaries  and joint  ventures.  In
  addition,   the  Amended  Credit  Facility  modified  the  "change  of  control"
  definition under the agreement (see "Change of Control Provisions" below).
  
       Prior to signing  the Amended  Credit  Facility,  Foamex  L.P.  amended the
  Credit Facility on March 11, 1999. This 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's  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 to this agreement.
  
       Certain of Foamex L.P.'s Mexican  subsidiaries  are in default of financial
  covenant  provisions  contained  in  loan  agreements  with a  Mexican  bank  as
  negotiations  continue to finalize amendments to the loan agreements to cure the
  defaults.  The defaults under the Mexican loan  agreements do not have any cross
  default consequences for Foamex L.P.'s domestic subsidiaries' debt agreements.
  
       Change of Control Provisions
  
       Trace is a privately held company which owns approximately  46.1% of Foamex
  International's  outstanding  voting common stock and whose Chairman also serves
  as the Chairman of Foamex  International.  Foamex  International's  common stock
  owned by Trace is pledged as collateral against certain of Trace's  obligations.
  Certain credit agreements and promissory notes of Foamex L.P., pursuant to which
  approximately  $429.8  million of debt was issued as of June 30,  1999,  contain
  provisions that would result in the  acceleration of such  indebtedness if Trace
  were to cease to beneficially own at least 25% of the outstanding  voting common
  stock of Foamex  International and other persons or groups were to own a greater
  percentage  of such  voting  common  stock  than  Trace.  Additionally,  certain
  indentures  of Foamex L.P.  and Foamex  Capital  Corporation  relating to senior
  subordinated  notes of  approximately  $248.0 million  contain  provisions  that
  provide  the  holders of such notes  with the right to  require  the  issuers to
  repurchase  such  notes  at a price  in  cash  equal  to  101% of the  aggregate
  principal  amount thereof,  plus accrued and unpaid interest  thereon,  if Trace
  were to cease to beneficially own at least 25% of the outstanding  voting common
  stock of Foamex  International and other persons or groups were to own a greater
  percentage of such voting common stock than Trace.
  
       Foamex L.P. was informed by Trace that it filed a petition for relief under
  Chapter 11 of the Bankruptcy  Code in Federal Court in New York City on July 21,
  1999.  Trace's  bankruptcy  filing does not constitute a change of control under
  the provisions of the debt agreements unless the bankruptcy court allows Trace's
  creditors to foreclose on and take  ownership of Foamex  International's  common
  stock  owned by Trace,  or  otherwise  authorizes  a sale or  transfer  of these
  shares,  and Trace, its affiliates and subsidiaries cease to own at least 25% of
  Foamex  International's  outstanding  voting  common stock and other  persons or
  groups own a greater percentage of voting common stock than Trace.
  
       Foamex  L.P.  will seek to resolve the issues that may arise if the "change
  of control"  provisions are triggered in the future,  including  waivers of such
  provisions and/or refinancing  certain debt, if necessary.  Although  management
  believes that Foamex L.P.'s debt obligations  could be refinanced if accelerated
  as a result of the "change of control" provisions under related debt agreements,
  there can be no assurance  that Foamex L.P. will be able to do so or that Foamex
  L.P.  will be able to  obtain  waivers  of  such  provisions.  The  accompanying
  condensed
  
                                         9
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  3.   LONG-TERM DEBT AND LONG-TERM DEBT - RELATED PARTY (continued)
  
  consolidated  financial  statements  do not include any  adjustments  that might
  result from the outcome of these uncertainties.
  
  4.   LITIGATION
  
       During 1999, Foamex International received several communications addressed
  to its Board of Directors  from certain of Foamex  International's  stockholders
  regarding  aspects of the relationship  between Trace and Foamex  International.
  Such stockholders  questioned the propriety of certain relationships and related
  transactions between Trace and Foamex  International,  which previously had been
  disclosed in Foamex  International's  periodic filings. On June 14, 1999, Foamex
  International  received a draft  complaint from counsel to certain  stockholders
  naming Foamex  International  and certain  current and former  directors,  which
  include allegations similar to those in the Second Amended Complaint, as defined
  below.  Foamex  International  has  been  advised  by  such  counsel  that  such
  stockholders intend to file an action shortly.  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.
  
       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 complaint seeks class certification,  a declaration that defendants violated
  the  federal  securities  laws,  an  award  of  money  damages,  and  costs  and
  attorneys',  accountants' and experts' fees. The defendants intend to vigorously
  defend the action. On May 18, 1999, a similar action entitled Thomas W. Riley v.
  Foamex  International  Inc.,  et al.,  99 Civ.  3653  (DC) was filed in the same
  court.  The two  actions  have been  consolidated.  To date,  no response to the
  complaint has been made and no discovery or other  proceedings  has taken place.
  Foamex L.P. is not a party to such suit.
  
       Beginning  on or about  March  17,  1998,  six  actions  (collectively  the
  "Shareholder  Litigation")  were filed in the Court of  Chancery of the State of
  Delaware,   New  Castle  County  (the  "Court"),   by   stockholders  of  Foamex
  International. The Shareholder Litigation,  purportedly brought as class actions
  on  behalf  of  all   stockholders   of  Foamex   International,   named  Foamex
  International,  certain of its  directors,  certain of its  officers,  Trace and
  Trace Merger Sub,  Inc.  ("Merger  Sub") as  defendants  alleging  that they had
  breached their  fiduciary  duties to the plaintiffs  and other  stockholders  of
  Foamex  International  unaffiliated  with Trace in connection  with the original
  proposal of Trace to acquire the  publicly  traded  outstanding  common stock of
  Foamex  International for $17.00 per share. 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 Shareholder Litigation.
  
       The parties to the  Shareholder  Litigation  entered into a  Memorandum  of
  Understanding,  dated June 25,  1998 (the  "Memorandum  of  Understanding"),  to
  settle the  Shareholder  Litigation,  subject  to,  inter alia,  execution  of a
  definitive  Stipulation  of  Settlement  between the parties and approval by the
  Court  following  notice  to  the  class  and  a  hearing.   The  Memorandum  of
  Understanding  provided that as a result of, among other things, the Shareholder
  Litigation and  negotiations  among counsel for the parties to the Memorandum of
  Understanding,  a special meeting of stockholders would be held to vote upon and
  approve the Agreement and Plan of Merger (the "First  Merger  Agreement")  which
  provided,  among other things, for all of the Foamex  International  outstanding
  common stock not
  
                                         10
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  4.   LITIGATION (continued)
  
  owned by Trace and its  subsidiaries  (the "Public Shares") to be converted into
  the right to receive $18.75 in cash, without interest.
  
       The Memorandum of Understanding also provided for certification of a class,
  for  settlement  purposes  only,  consisting  of  the  Public  Shares  owned  by
  stockholders   of  Foamex   International   unaffiliated   with  Trace  and  its
  subsidiaries  (the "Public  Shareholders"),  the  dismissal  of the  Shareholder
  Litigation  with  prejudice and the release by the plaintiffs and all members of
  the  class of all  claims  and  causes of  action  that were or could  have been
  asserted against Trace,  Foamex  International and the individual  defendants in
  the  Shareholders  Litigation  or  that  arise  out of the  matters  alleged  by
  plaintiffs.  Following the completion of the  confirmatory  discovery  which was
  provided for in the  Memorandum  of  Understanding,  on  September 9, 1998,  the
  parties entered into a definitive  Stipulation of Settlement and the Court set a
  hearing  for October 27,  1998 to  consider  whether  the  settlement  should be
  approved (the "Settlement Hearing"). In connection with the proposed settlement,
  the plaintiffs  intended to apply for an award of attorney's fees and litigation
  expenses in an amount not to exceed $925,000,  and the defendants  agreed not to
  oppose this application.  Additionally,  Foamex  International agreed to pay the
  cost, if any, of sending notice of the settlement to the Public Shareholders. On
  September 24, 1998, a Notice of Pendency of Class Action, Proposed Settlement of
  Class Action and Settlement  Hearing was mailed to the members of the settlement
  class. On October 20, 1998, the parties to the Shareholder  Litigation requested
  that the Court cancel the Settlement  Hearing in light of the announcement  made
  by Trace on October 16,  1998,  that it had been unable to obtain the  necessary
  financing for the  contemplated  acquisition by Trace of Foamex  International's
  common stock at a price of $18.75 per share which was the subject  matter of the
  proposed settlement. This request was approved by the Court on October 21, 1998,
  and Foamex International issued a press release on October 21, 1998,  announcing
  that the Court had cancelled the Settlement Hearing.
  
       On  November  10,  1998,  counsel  for  certain  of the  defendants  in the
  Shareholder  Litigation  gave notice  pursuant to the  Stipulation of Settlement
  that such  defendants  were  withdrawing  from the  Stipulation of Settlement in
  light of the  notice  given by Trace to  Foamex  International  and the  special
  committee of the Board of Directors on November 5, 1998 whereby Trace terminated
  the First Merger  Agreement on the grounds that the  financing  condition in the
  First Merger Agreement was incapable of being satisfied.
  
       On November 12, 1998, the plaintiffs in the Shareholder Litigation filed an
  Amended Class Action Complaint (the "Amended Complaint").  The Amended Complaint
  named Foamex International, Trace, Merger Sub, Mr. Marshall S. Cogan, Mr. Andrea
  Farace,  Dr.  Stuart  Hershon,  Mr. John  Tunney,  and Mr.  Etienne  Davignon as
  defendants, alleging that they breached their fiduciary duties to plaintiffs and
  the other Public  Shareholders in connection with a second agreement and plan of
  merger (the "Second Merger Agreement"),  that the proposal to acquire the Public
  Shares  for  $12.00  per  share  lacked  entire  fairness,  that the  individual
  defendants  violated  8  Del.  Code  ss.  251 in  approving  the  Second  Merger
  Agreement, and that Trace and Merger Sub breached the Stipulation of Settlement.
  On December 2, 1998,  plaintiffs  served a motion for a preliminary  injunction,
  seeking an Order to  preliminarily  enjoin the defendants from proceeding  with,
  consummating or otherwise effecting the merger contemplated by the Second Merger
  Agreement.
  
       On June 9, 1999, the  plaintiffs in the  Shareholder  Litigation  moved for
  leave to file a Second  Amended and  Supplemental  Class  Action and  Derivative
  Complaint (the "Second  Amended  Complaint").  The Second Amended  Complaint was
  filed on July 14, 1999, and named Foamex  International,  Trace, Merger Sub, Mr.
  Marshall S. Cogan, Mr. Andrea Farace,  Dr. Stuart Hershon,  Mr. John Tunney, and
  Mr. Etienne Davignon as defendants, alleging that the named individuals breached
  their fiduciary  duties by causing Foamex  International  to waste assets in its
  transactions with Trace and by failing to enforce Foamex  International's rights
  under the First Merger Agreement,  seeking  appointment of a receiver for Foamex
  International,  and alleging that Trace and Merger Sub breached the  Stipulation
  of Settlement.
  
                                         11
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  4.   LITIGATION (continued)
  
       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  Shareholder
  Litigation. If the Shareholder 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 Foamex  International
  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 was  granted  during
  August 1999. Neither Foamex International, Foamex L.P. nor any of the individual
  directors of Foamex International are named as defendants in this litigation.
  
       As of August 9, 1999, Foamex L.P. and Trace were two of multiple defendants
  in actions filed on behalf of approximately  4,209 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,  in light of  Trace's  recent  filing  under  Chapter 11 of the
  Bankruptcy  Code,  there can be no assurance that Trace will be able to continue
  to  provide  such  indemnification.  While  it is not  feasible  to  predict  or
  determine the outcome of these actions, based on management's present assessment
  of the merits of pending claims,  after consultation with the general counsel of
  Trace,  and without taking into account  indemnification  provided by Trace, the
  coverage  provided by Trace and Foamex L.P.'s liability  insurance and potential
  indemnity  from the  manufacturers  of  polyurethane  covered  breast  implants,
  management believes that the disposition of matters that are pending or that may
  reasonably  be  anticipated  to be asserted  should not have a material  adverse
  effect  on  Foamex  L.P.'s   consolidated   financial  position  or  results  of
  operations.  If management's  assessment of Foamex L.P.'s liability with respect
  to these actions is incorrect, such actions could have a material adverse effect
  on the financial position, results of operations and cash flows of Foamex L.P.
  
       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 the 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.
  
                                         12
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  4.   LITIGATION (continued)
  
       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  periods  noted  below is  comprised  of the
  following:
  Quarterly Periods Ended     Year to Date Periods Ended
                                                       June 30,       June 28,      June 30,         June 28,
                                                         1999           1998          1999            1998
                                                                           (thousands)
  Net income                                      $ 4,807        $13,719        $ 7,415        $16,204
       Foreign currency translation adjustments            399              3            811            230
                                                       -------        -------        -------        -------
       Total comprehensive income                      $ 5,206        $13,722        $ 8,226        $16,434
                                                       =======        =======        =======        =======
  6.   RESTRUCTURING AND OTHER CHARGES
  
       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 and other 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.  During the second quarter
  of 1999, Foamex L.P.  recorded  restructuring and other charges of approximately
  $3.6 million.  The $3.6 million of restructuring  and other charges is comprised
  of $1.2 million of severance  costs in  connection  with  additional  work force
  reductions of approximately 60 employees,  $2.3 million of costs associated with
  the closure of two additional  manufacturing  operations and facilities and $0.1
  million of other charges. Approximately $2.5 million of severance costs incurred
  in 1999 have been paid as of June 30,  1999.  Approximately  $1.5 million of the
  total 1999  severance  costs  primarily  relate to contractual  severance  costs
  payable to the former Chairman and Chief Executive  Officer,  which will be paid
  through March 2001. Foamex L.P. may record additional  restructuring  charges in
  the future as it finalizes implementation of 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,  furniture and retail
  industries.  The carpet cushion  products  segment sells prime,  rebond,  sponge
  rubber and felt  carpet  cushion  principally  to Foamex  Carpet  Cushion,  Inc.
  ("Foamex  Carpet"),  a wholly  owned  subsidiary  of Foamex  International.  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.
  
                                         13
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  7.   OPERATING SEGMENT AND RELATED DATA (continued)
  
       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" in Note 2 to Foamex L.P.'s
  consolidated financial statements in its 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 June 30, 1999:
  Net sales                                    $ 124,909     $  46,687      $  90,810     $  23,028     $   6,795      $ 292,229
  Income (loss) from operations                   12,948           (65)         6,033         6,203        (3,979)        21,140
  Depreciation and amortization                    4,094         1,266          1,235           636           182          7,413
  
  Quarterly period ended June 28, 1998:
  Net sales                                    $ 133,422     $  55,176      $  61,923     $  20,156     $   3,031      $ 273,708
  Income (loss) from operations                   22,913           247          5,821         4,051        (2,559)        30,473
  Depreciation and amortization                    4,369         1,114          1,264           655           553          7,955
  
  Year to date period ended June 30, 1999:
  Net sales                                    $ 264,288     $  89,990      $ 179,581     $  45,276     $  12,971      $ 592,106
  Income (loss) from operations                   25,869          (436)        12,825        11,239        (8,586)        40,911
  Depreciation and amortization                    8,242         2,436          2,469         1,273           662         15,082
  
  Year to date period ended June 28, 1998:
  Net sales                                    $ 281,715     $ 111,340      $ 127,604     $  41,272     $   9,850      $ 571,781
  Income (loss) from operations                   35,027         1,751         13,236         8,588        (4,220)        54,382
  Depreciation and amortization                    8,175         2,185          2,441         1,285         1,120         15,206
  8.   RELATED PARTY TRANSACTIONS
  
       Effective  June 30, 1999,  the Amended  Credit  Facility no longer  permits
  Foamex L.P. or its  subsidiaries to pay management fees to a subsidiary of Trace
  in  connection  with a  management  agreement  with the  Trace  subsidiary  (the
  "Management Agreement"). Such management fee was $3.0 million for the year ended
  December  31,  1998.  On July 29,  1999,  Foamex  L.P.  submitted  to the  Trace
  subsidiary formal notice of the termination of the Management  Agreement,  which
  Foamex L.P. believes took place by informal action on June 29, 1999.
  
       Foamex L.P.  subleases  certain  space in its New York office to Trace (the
  "New York  Sublease").  Foamex  L.P.  gave notice on June 30, 1999 that if prior
  unpaid rent under the New York  Sublease was not paid,  Foamex L.P.  intended to
  give  notice  pursuant  to Article 7 of the New York Real  Property  Actions and
  Proceedings  Law (the "Notice") that the space be vacated by September 30, 1999.
  However,  as a result of Trace's  bankruptcy  filing and the  imposition  of the
  automatic  stay under  Section 362 of the  Bankruptcy  Code,  Foamex L.P. is not
  permitted  to give Notice or  otherwise  pursue state law remedies for breach of
  the New  York  Sublease  without  relief  from the  automatic  stay.  Under  the
  Bankruptcy  Code,  Trace has 60 days (which period may be extended for cause) to
  determine whether to assume or reject the New York Sublease.  Pending assumption
  or rejection,  Trace is required under the Bankruptcy Code to timely perform its
  post-bankruptcy obligations under the New York Sublease.
  
                                         14
  FOAMEX L.P. AND SUBSIDIARIES
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
  
  8.   RELATED PARTY TRANSACTIONS (continued)
  
       Foamex  L.P.  sold   approximately   $46.7   million  and  $55.2   million,
  respectively,  of carpet cushion  products to Foamex Carpet during the quarterly
  period  ended  June 30,  1999 and June 28,  1998 and $90.0  million  and  $111.3
  million, respectively, for the year to date periods ended June 30, 1999 and June
  28, 1998.  In addition,  Foamex L.P.  provided and invoiced  approximately  $0.7
  million and $0.5 million of administrative  services to Foamex Carpet during the
  quarterly periods ended June 30, 1999 and June 28, 1998, respectively,  and $1.3
  million and $0.6  million for the year to date  periods  ended June 30, 1999 and
  June 28, 1998, respectively.
  
       Also,  Foamex L.P.  chartered an aircraft which was owned by a wholly owned
  subsidiary of Foamex  International  and incurred  costs of  approximately  $0.3
  million  during the  quarterly  period  ended June 28, 1998 and $0.1 million and
  $0.5 million  during the year to date  periods  ended June 30, 1999 and June 28,
  1998, respectively. Foamex International sold this aircraft on March 31, 1999.
  
  9.   SUBSEQUENT EVENT
  
       On  August  5,  1999,  Foamex  International  announced  that its  Board of
  Directors signed a letter of intent with Sorgenti Chemical  Industries,  LLC and
  Liberty  Partners  Holdings  20,  LLC  (collectively,  the  "Purchasers")  for a
  business  combination   providing  for  $11.50  per  share  for  all  of  Foamex
  International's   outstanding  common  stock,  subject  to  due  diligence,  the
  execution of definitive agreements and other conditions.  Under the terms of the
  letter of intent,  if Foamex  International  enters into a business  combination
  with another party,  the  Purchasers  will be entitled to a break-up fee of $6.0
  million plus reimbursement of certain expenses. The buyout offer is subject to a
  number of conditions,  including the negotiation of definitive documents,  which
  will  contain  certain  conditions  relating to the bank credit  facilities  and
  public debt of Foamex  International's  subsidiaries,  including Foamex L.P., as
  well as certain other conditions relating to minimum shareholder  acceptance and
  change of board membership, and other provisions providing for a higher break-up
  fee and expense  reimbursement  if Foamex  International  enters into a business
  combination  providing  a more  favorable  transaction.  The  definitive  buyout
  agreement  will require  appropriate  filings with the  Securities  and Exchange
  Commission and regulatory agencies.
  
       Following  the  execution  of the letter of  intent,  the  Purchasers  will
  commence their due diligence investigation of Foamex International.  The parties
  are discussing the process by which waivers and/or  consents from the holders of
  the bank and public  indebtedness of Foamex  International and subsidiaries will
  be sought in  connection  with the  buyout and will seek such to  negotiate  the
  terms of a definitive buyout agreement prior to October 31, 1999.
  
                                         15
  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 June 30, 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.  See Note 1 to
  the accompanying  condensed consolidated financial statements and "Liquidity and
  Capital Resources" below.
  
       On March 16, 1999,  Foamex  International  announced  that it 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. On May 26, 1999,  Foamex  International  announced
  major   executive   changes  in  connection   with  its  ongoing   restructuring
  initiatives, which included the appointment of John Televantos, an ARCO Chemical
  Company veteran, as President of the Foam Business Group.
  
       On  August  5,  1999,  Foamex  International  announced  that its  Board of
  Directors  signed  a  letter  of  intent  with  the  Purchasers  for a  business
  combination  providing  for $11.50  per share for all of Foamex  International's
  outstanding common stock, subject to due diligence,  the execution of definitive
  agreements  and other  conditions.  Under the terms of the letter of intent,  if
  Foamex  International enters into a business combination with another party, the
  Purchasers will be entitled to a break-up fee of $6.0 million plus reimbursement
  of  certain  expenses.  The buyout  offer is subject to a number of  conditions,
  including the  negotiation of definitive  documents,  which will contain certain
  conditions  relating  to the bank  credit  facilities  and public debt of Foamex
  International's  subsidiaries,  including  Foamex L.P., as well as certain other
  conditions  relating  to  minimum  shareholder  acceptance  and  change of board
  membership, and other provisions providing for a higher break-up fee and expense
  reimbursement  if  Foamex  International  enters  into  a  business  combination
  providing a more favorable  transaction.  The definitive  buyout  agreement will
  require  appropriate  filings with the  Securities  and Exchange  Commission and
  regulatory agencies.
  
       Following  the  execution  of the letter of  intent,  the  Purchasers  will
  commence their due diligence investigation of Foamex International.  The parties
  are discussing the process by which waivers and/or  consents from the holders of
  the bank and public  indebtedness of Foamex  International and subsidiaries will
  be sought in  connection  with the  buyout and will seek such to  negotiate  the
  terms of a definitive buyout agreement prior to October 31, 1999.
  
       Restructuring Plan
  
       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 and other 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.  During the second quarter
  of 1999, Foamex L.P.  recorded  restructuring and other charges of approximately
  $3.6 million.  The $3.6 million of restructuring  and other charges is comprised
  of $1.2 million of severance  costs in  connection  with  additional  work force
  reductions of approximately 60 employees,  $2.3 million of costs associated with
  the closure of two additional  manufacturing  operations and facilities and $0.1
  million of other charges. Approximately $2.5 million of severance costs incurred
  in 1999 have been paid as of June 30,  1999.  Approximately  $1.5 million of the
  total 1999  severance  costs  primarily  relate to contractual  severance  costs
  payable to the former Chairman and Chief Executive  Officer,  which will be paid
  through March 2001. Foamex L.P. may record additional  restructuring  charges in
  the future as it finalizes implementation of its restructuring plan.
  
                                         16
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
       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
  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. to Foamex
  International.  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.
  
       Foamex L.P. is subject to various internal and external factors which could
  significantly  impact its business,  including,  among other things,  (a) Foamex
  L.P.'s debt and capital structures, (b) the Crain Consolidation,  (c) additional
  raw material cost increases,  if any, by Foamex L.P.'s chemical  suppliers,  (d)
  Foamex L.P.'s success in passing on to its customers  selling price increases to
  recover such raw material cost  increases,  (e)  fluctuations in interest rates,
  and (f) Trace's financial  condition,  including the potential of triggering the
  "change of control" provisions of Foamex L.P.'s debt agreements,  and other such
  factors  which may be beyond Foamex  L.P.'s  control.  Refer to page 4 of Foamex
  L.P.'s  Annual  Report on Form 10-K for the year ended  December  31, 1998 for a
  discussion of these and additional factors which management  believes may impact
  Foamex L.P. These factors could cause future results to differ  materially  from
  historical trends and management's  current expectations and could impact Foamex
  L.P.'s ability to continue as a going concern.  Although Foamex L.P. believes it
  can meet the debt covenant  requirements under its financing  agreements,  there
  can be no assurance such covenants will be met and the related indebtedness will
  continue to be classified as long-term. Although management believes that Foamex
  L.P.'s debt  obligations  could be refinanced if  accelerated as a result of the
  "change in control"  provisions under its related debt agreements,  there can be
  no assurance that Foamex L.P. or its subsidiaries  will be able to do so or that
  Foamex L.P.  will be able to obtain  waivers of such  provisions.  Additionally,
  although Foamex L.P. believes that cash flow from its operating activities, cash
  on hand and periodic borrowings under the Amended Credit Facility, if necessary,
  
                                         17
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  will be adequate to meet Foamex L.P.'s liquidity  requirements,  there can be no
  assurance  that  Foamex  L.P.'s  internally  generated  funds and funds from any
  borrowings  will prove to be  sufficient to fund Foamex  L.P.'s  operations  and
  permit it to continue as a going concern.
  
  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,  furniture and retail
  industries.  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.
  Carpet
                                                  Foam        Cushion      Automotive     Technical
                                                Products      Products      Products      Products       Other           Total
  Quarterly period ended June 30, 1999:
  Net sales                                    $ 124,909     $  46,687      $  90,810     $  23,028     $   6,795      $ 292,229
  Income (loss) from operations                   12,948           (65)         6,033         6,203        (3,979)        21,140
  Depreciation and amortization                    4,094         1,266          1,235           636           182          7,413
  
  Quarterly period ended June 28, 1998:
  Net sales                                    $ 133,422     $  55,176      $  61,923     $  20,156     $   3,031      $ 273,708
  Income (loss) from operations                   22,913           247          5,821         4,051        (2,559)        30,473
  Depreciation and amortization                    4,369         1,114          1,264           655           553          7,955
  
  Year to date period ended June 30, 1999:
  Net sales                                    $ 264,288     $  89,990      $ 179,581     $  45,276     $  12,971      $ 592,106
  Income (loss) from operations                   25,869          (436)        12,825        11,239        (8,586)        40,911
  Depreciation and amortization                    8,242         2,436          2,469         1,273           662         15,082
  
  Year to date period ended June 28, 1998:
  Net sales                                    $ 281,715     $ 111,340      $ 127,604     $  41,272     $   9,850      $ 571,781
  Income (loss) from operations                   35,027         1,751         13,236         8,588        (4,220)        54,382
  Depreciation and amortization                    8,175         2,185          2,441         1,285         1,120         15,206
  Quarterly Period Ended June 30, 1999 Compared to Quarterly Period Ended June 28,
  1998
  
       Net sales for the second quarter of 1999 were $292.2 million as compared to
  $273.7  million in the second  quarter of 1998,  an increase of $18.5 million or
  6.8%.  The increase in net sales was  primarily  associated  with an increase in
  automotive  lamination products,  which was offset by decreased sales due to the
  closure of several  plants in connection  with the Crain  Consolidation.  Income
  from operations  decreased $9.3 million or 30.6% to $21.1 million for the second
  quarter of 1999 from $30.5 million in the second  quarter of 1998.  The decrease
  in income from operations  resulted  primarily from (a)  restructuring  costs of
  $3.6 million  recorded  during the second  quarter of 1999 and (b) a decrease in
  gross profit of $9.2 million  resulting  primarily  from  increased raw material
  costs and a shift in product mix  resulting  from a decrease  in carpet  cushion
  units  sold and lower  sales of foam  products  offset by an  increase  in lower
  margin  automotive  lamination  sales,  offset in part by a decrease in selling,
  general
  
                                         18
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  and administrative  expenses of $4.2 million.  The decrease in selling,  general
  and  administrative  costs was primarily due to the  elimination  of duplicative
  costs from the Crain  Consolidation and cost reductions  implemented  during the
  first and second quarters of 1999.
  
       Foam Products
  
       Foam products net sales for the second  quarter of 1999  decreased  6.4% to
  $124.9  million from $133.4  million in the second quarter of 1998. The decrease
  in net sales was primarily associated with the closure of several plants as part
  of the Crain  Consolidation.  Income from  operations  decreased  43.5% to $12.9
  million  (10.4% of net sales) for the second  quarter of 1999 from $22.9 million
  (17.2% of net sales) in the second  quarter of 1998. The decrease in income from
  operations  was  primarily  the result of increased  raw material  costs and the
  decrease in net sales,  offset in part by improved  operating  efficiencies  and
  cost reductions as part of the Crain Consolidation.
  
       Carpet Cushion Products
  
       Carpet cushion  products net sales for the second quarter of 1999 decreased
  15.4%  to $46.7  million  from  $55.2  million  in the  second  quarter  of 1998
  primarily due to decreased units sold.  Income from operations  decreased 126.3%
  to a loss of $0.1  million  (0.1% of net sales)  for the second  quarter of 1999
  from income of $0.2 million  (0.4% of net sales) in the second  quarter of 1998.
  This decrease was primarily due to the decrease in net sales.
  
       Automotive Products
  
       Automotive  products  net sales for the second  quarter  of 1999  increased
  46.6% to $90.8  million from $61.9  million in the second  quarter of 1998.  The
  increase  in net sales  was  associated  with  increased  volume  of  lamination
  products.  Income from  operations  increased  3.6% to $6.0 million (6.6% of net
  sales) for the second  quarter of 1999 from $5.8 million  (9.4% of net sales) in
  the second quarter of 1998. This increase was primarily a result of the increase
  in net sales  offset in part by  contract  price  reductions  and the  change in
  product  mix to more  laminated  products  which have lower  margins  than other
  automotive products.
  
       Technical Products
  
       Technical products net sales for the second quarter of 1999 increased 14.2%
  to $23.0 million from $20.2 million in the second  quarter of 1998.  Income from
  operations  increased  53.1% to $6.2 million (26.9% of net sales) for the second
  quarter of 1999 from $4.1 million  (20.1% of net sales) in the second 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 increase in net sales associated with this
  segment  primarily  resulted  from an increase  in net sales from Foamex  L.P.'s
  Mexican operations.  The decrease in income (loss) from operations was primarily
  associated with the $3.6 million of restructuring  and other charges recorded in
  the second quarter of 1999 discussed previously.
  
       Income Before Provision for Income Taxes
  
       Income before  provision for income taxes decreased to $5.3 million for the
  second  quarter of 1999 as  compared to $14.6  million in the second  quarter of
  1998.  This decrease is primarily due to the decrease in income from  operations
  of $9.3 million discussed above.
  
       Income Taxes
  
       The second  quarter of 1999  provision  for  income  taxes of $0.4  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.
  
                                         19
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  Year to Date Period  Ended June 30, 1999  Compared to Year to Date Period  Ended
  June 28, 1998
  
       Net sales  for the year to date  period  ended  June 30,  1999 were  $592.1
  million as compared to $571.8  million in the year to date period ended June 28,
  1998,  an  increase  of $20.3  million or 3.6%.  The  increase  in net sales was
  primarily associated with the increase in automotive 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  $13.5  million or 24.8% to $40.9  million for the year to date period
  ended June 30, 1999 from $54.4 million in the year to date period ended June 28,
  1998.  The  decrease  in income  from  operations  resulted  primarily  from (a)
  restructuring  costs recorded during the year to date period ended June 30, 1999
  of $7.0  million and (b) a decrease in gross profit of $16.6  million  resulting
  primarily from increased raw material costs and a shift in product mix resulting
  from a decrease in carpet  cushion  units sold and lower sales of foam  products
  offset by an increase in lower margin  automotive  lamination  sales,  offset in
  part by a decrease in  selling,  general  and  administrative  expenses of $10.8
  million. The decrease in selling, general and administrative costs was primarily
  due to the  elimination of duplicative  costs from the Crain  Consolidation  and
  cost reductions implemented during the year to date period ended June 30, 1999.
  
       Foam Products
  
       Foam  products  net sales for the year to date  period  ended June 30, 1999
  decreased  6.2% to $264.3 million from $281.7 million in the year to date period
  ended June 28, 1998. The decrease in net sales was primarily associated with the
  closure  of  several  plants as part of the  Crain  Consolidation.  Income  from
  operations  decreased 26.1% to $25.9 million (9.8% of net sales) for the year to
  date period ended June 30, 1999 from $35.0  million  (12.4% of net sales) in the
  year to date period ended June 28, 1998. The decrease in income from  operations
  was primarily the result of increased raw material costs and the decrease in net
  sales,  offset in part by improved  operating  efficiencies  resulting  from the
  Crain Consolidation.
  
       Carpet Cushion Products
  
       Carpet  cushion  products  net sales for the year to date period ended June
  30, 1999  decreased  19.2% to $90.0  million from $111.3  million in the year to
  date  period  ended  June 28,  1998  primarily  due to the GFI  Transaction  and
  decreased units sold. Income from operations  decreased 124.9% to a loss of $0.4
  million (0.5% of net sales) for the year to date period ended June 30, 1999 from
  income of $1.8 million (1.6% of net sales) in the year to date period ended June
  28, 1998. This decrease was primarily due to the decrease in net sales.
  
       Automotive Products
  
       Automotive  products  net sales for the year to date period  ended June 30,
  1999  increased  40.7% to $179.6 million from $127.6 million in the year to date
  period  ended June 28,  1998.  The  increase  in net sales was  associated  with
  increased volume of lamination  products.  Income from operations decreased 3.1%
  to $12.8  million (7.1% of net sales) for the year to date period ended June 30,
  1999 from $13.2  million  (10.4% of net sales) in the year to date period  ended
  June 28, 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.
  
       Technical Products
  
       Technical  products  net sales for the year to date  period  ended June 30,
  1999  increased  9.7% to $45.3  million  from $41.3  million in the year to date
  period  ended June 28, 1998.  Income from  operations  increased  30.9% to $11.2
  million  (24.8% of net sales) for the year to date  period  ended June 30,  1999
  from $8.6 million (20.8% of net sales) in the year to date period ended June 28,
  1998.  The  increase  in net sales and  income  from  operations  was  primarily
  associated with increased sales of foam for ink jet printers.
  
                                         20
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
       Other
  
       Other  primarily  consists  of certain  foreign  manufacturing  operations,
  corporate   expenses  not  allocated  to  the  other   operating   segments  and
  restructuring and other charges.  The increase in net sales associated with this
  segment  primarily  resulted  from an increase  in net sales from Foamex  L.P.'s
  Mexican operations.  The decrease in income (loss) from operations was primarily
  associated with the $7.0 million of restructuring  and other charges recorded in
  the year to date period ended June 30, 1999 discussed previously.
  
       Income Before Provision for Income Taxes
  
       Income before  provision for income taxes decreased to $8.4 million for the
  year to date period ended June 30, 1999 as compared to $21.3 million in the year
  to date  period  ended June 28,  1998.  This  decrease is  primarily  due to the
  decrease in income from operations of $13.5 million discussed above.
  
       Income Taxes
  
       The year to date period ended June 30, 1999  provision  for income taxes of
  $1.0 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 $3.2
  million was primarily  associated  with the write-off of debt issuance  costs in
  connection with the GFI Transaction.
  
  Liquidity and Capital Resources
  
       Foamex L.P.'s operating cash  requirements  consist  principally of working
  capital   requirements,   scheduled   payments  of  principal  and  interest  on
  outstanding  indebtedness and capital  expenditures.  Foamex L.P.  believes that
  cash flow from Foamex  L.P.'s  operating  activities,  cash on hand and periodic
  borrowings under the Amended Credit Facility, if necessary,  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
  covenants  contained in the Amended Credit Facility and such  noncompliance  was
  not cured by Foamex L.P. or waived by the lenders.  Foamex L.P. obtained various
  waivers and amendments under the Credit Facility in March, May and June 1999 and
  was in compliance  with the covenants  under the Amended  Credit  Facility as of
  June 30, 1999. See Note 3 to the accompanying  condensed  consolidated financial
  statements.  Foamex L.P. incurred aggregate financing fees of approximately $3.5
  million in connection with the March and June 1999  amendments.  These financing
  fees will be  amortized  along  with  previously  paid  financing  fees  through
  December 2006, the remaining term of the Amended Credit Facility.
  
       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 and
  was not in compliance with certain covenants  contained in agreements  governing
  approximately  $415.4 million principal amount of indebtedness.  Had the lenders
  under the Credit Facility or other debt  agreements  accelerated the maturity of
  their indebtedness as a result of Foamex L.P.'s noncompliance, such acceleration
  would have  constituted an event of default under or given the holders the right
  to require the repurchase of substantially  all of Foamex L.P.'s long-term debt.
  As a result  of these  factors,  Foamex  L.P.  classified  approximately  $715.8
  million of long-term  debt at December  31, 1998 as current in the  accompanying
  condensed  consolidated  balance  sheet,  which  resulted  in a working  capital
  deficit.  These matters raised  substantial  doubt as of December 31, 1998 about
  Foamex L.P.'s ability to continue as a going concern.
  
       The Amended  Credit  Facility,  which was signed on June 30,  1999,  modify
  financial  covenants as of June 30, 1999,  among other things,  and provided for
  future  measurement  periods taking into account Foamex L.P.'s  estimated future
  operating  results  and  financial   condition  and  management's   expectations
  regarding  these  future  measurement  periods.  See Note 3 to the  accompanying
  condensed consolidated  financial statements.  For the year to date period ended
  June 30, 1999,  Foamex L.P.  had income from  continuing  operations  and was in
  compliance  with  its  debt
  
                                         21
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  covenants. As a result of these factors and management's  expectations regarding
  compliance with these covenants in future measurement  periods,  Foamex L.P. has
  classified approximately $695.4 million of debt as long-term in the accompanying
  condensed  consolidated  balance  sheet at June 30,  1999,  which  resulted in a
  positive working capital. Foamex L.P. continues to be subject to certain "change
  of  control"  provisions  under its debt  agreements  which  could  result in an
  acceleration of the related debt.
  
       Certain of Foamex L.P.'s Mexican  subsidiaries  are in default of financial
  covenant  provisions  contained  in  loan  agreements  with a  Mexican  bank  as
  negotiations  continue to finalize amendments to the loan agreements to cure the
  defaults.  The defaults under the Mexican loan  agreements do not have any cross
  default consequences for Foamex L.P.'s domestic subsidiaries' debt agreements.
  
       Trace is a privately held company which owns approximately  46.1% of Foamex
  International's  outstanding  voting common stock and whose Chairman also serves
  as the Chairman of Foamex  International.  Foamex  International's  common stock
  owned by Trace  is  pledged  as  collateral  against  certain  of  Trace's  debt
  obligations.  Certain credit  agreements  and  promissory  notes of Foamex L.P.,
  pursuant to which approximately $429.8 million of debt was issued as of June 30,
  1999,  contain  provisions  that  would  result  in  the  acceleration  of  such
  indebtedness  if Trace  were to cease to  beneficially  own at least  25% of the
  outstanding  voting  common stock of Foamex  International  and other persons or
  groups were to own a greater  percentage of such voting common stock than Trace.
  Additionally,  certain  indentures  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  were to  cease  to  beneficially  own at  least  25% of the
  outstanding  voting  common stock of Foamex  International  and other persons or
  groups were to own a greater percentage of such voting common stock than Trace.
  
       Foamex L.P. was informed by Trace that it filed a petition for relief under
  Chapter 11 of the Bankruptcy  Code in Federal Court in New York City on July 21,
  1999.  Trace's  bankruptcy  filing does not constitute a change of control under
  the provisions of the debt agreements unless the bankruptcy court allows Trace's
  creditors to foreclose on and take  ownership of Foamex  International's  common
  stock  owned by Trace,  or  otherwise  authorizes  a sale or  transfer  of these
  shares,  and Trace, its affiliates and subsidiaries cease to own at least 25% of
  Foamex  International's  outstanding  voting  common stock and other  persons or
  groups own a greater percentage of voting common stock than Trace.
  
       Foamex  L.P.  will seek to resolve the issues that may arise if the "change
  of control"  provisions are triggered in the future,  including  waivers of such
  provisions and/or refinancing  certain debt, if necessary.  Although  management
  believes that Foamex L.P.'s debt obligations  could be refinanced if accelerated
  as a result of the "change of control" provisions under related debt agreements,
  there can be no assurance  that Foamex L.P. will be able to do so or that Foamex
  L.P.  will be able to  obtain  waivers  of  such  provisions.  The  accompanying
  condensed  consolidated financial statements do not include any adjustments that
  might result from the outcome of these uncertainties.
  
       As of June  30,  1999,  there  were  $130.4  million  of  revolving  credit
  borrowings,  at an average  interest  rate of 8.34%,  under the  Amended  Credit
  Facility with $12.0 million available for additional borrowing and approximately
  $47.6  million of  letters  of credit  outstanding  which are  supported  by the
  Amended  Credit  Facility.  Borrowings by Foamex Canada Inc. as of June 30, 1999
  were  approximately  $4.7 million,  at an interest  rate of 6.75%,  under Foamex
  Canada  Inc.'s   revolving   credit   agreement  with  unused   availability  of
  approximately $0.7 million.
  
       Cash and cash  equivalents  decreased to $3.1 million at June 30, 1999 from
  $3.2 million at December  31,  1998.  Excluding  the  reclassification  of other
  long-term debt to current at December 31, 1998,  working capital  decreased $4.0
  million to $110.8  million at June 30, 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  $4.9 million to $153.6 million at June 30, 1999 as compared to $148.7
  million at
  
                                         22
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  December 31, 1998.  The increase was  primarily due to an aggregate net increase
  in accounts  receivable  and accounts  receivable  from related  parties of $1.8
  million and a decrease in accounts payable of $31.5 million offset by a decrease
  in  inventories of $28.4  million.  The net increase in accounts  receivable and
  accounts receivable related parties was primarily associated with an increase in
  sales  during June 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 June 30, 1999.
  
       Cash Flow from Operating Activities
  
       Cash flow provided by operating  activities  was $31.3 million for the year
  to date period ended June 30, 1999 as compared to cash used of $34.0 million for
  the year to date period ended June 28, 1998.  The  improvement  is primarily the
  result of a decrease in the use of cash for the operating assets and liabilities
  during 1999 as compared to 1998.
  
       Cash Flow from Investing Activities
  
       Cash flow used for  investing  activities  was $7.4 million for the year to
  date period  ended June 30,  1999 as compared to cash used of $28.9  million for
  the year to date period ended June 28, 1998.  This decrease was due primarily to
  (i) a  decrease  in capital  expenditures  of $4.8  million  in 1999,  (ii) $9.0
  million used in connection  with the GFI Transaction in 1998 and (iii) cash used
  in 1998 of $3.9 million for certain acquisition payments. Additionally, on March
  31, 1999,  Foamex  International  repaid its $2.5 million  promissory note dated
  December 31, 1998 to Foamex L.P.
  
       During  1999,  Foamex L.P.  spent  approximately  $10.5  million on capital
  improvements  as compared to $15.3 million  during 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.
  
       Cash Flow from Financing Activities
  
       Cash flow used for financing  activities  was $24.0 million for the year to
  date period  ended June 30, 1999  compared  to cash flow  provided by  financing
  activities  of $58.2  million for the year to date period  ended June 28,  1998.
  This decrease was primarily due to 1998  including a series of  transactions  in
  connection with the GFI Transaction during February 1998. 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 June 30,  1999 was $3.5  million.  Although  it is
  possible that new information or future  developments  could require Foamex L.P.
  to  reassess  its  potential  exposure  to all  pending  environmental  matters,
  including  those  described  in the  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.
  
                                         23
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  Market Risk
  
       Foamex L.P.'s debt securities  with variable  interest rates are subject to
  market risk for changes in interest rates. On June 30, 1999, long-term debt with
  variable  interest rates totaled $449.4 million.  On an annualized basis, if the
  interest rates on these debt instruments increased by 1%, interest expense would
  increase by approximately $4.5 million.
  
  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.
  
  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 June 30, 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.
  
       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
  
                                         24
  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS
  
  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.
  
                                         25
  ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
       See the "Market  Risk" section under Item 2,  Management's  Discussion  and
  Analysis of Financial Condition and Results of Operations.
  
                                         26
  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  June  30,  1999  (unaudited)  is
            incorporated herein by reference.
  
  Item 6.   Exhibits and Reports on Form 8-K
  
            (a)  Exhibits
  
                 27   Financial  Data  Schedule  for the year to date period ended
                      June 30, 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,  dated as of March 11,  1999  reporting  amendments  to
                 aspects of its credit agreements.
  
                 Form  8-K,  dated as of June 30,  1999  reporting  amendments  to
                 aspects of its credit agreements.
  
                 Form 8-K, dated as of August 5, 1999  reporting  press release on
                 proposed buyout.
  
                                         27
  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: August 13, 1999                        By: /s/ George L. Karpinski
                                                   George L. Karpinski
                                                   Vice President
  
                                               FOAMEX CAPITAL CORPORATION
  
  Date: August 13, 1999                        By: /s/ George L. Karpinski
                                                   George L. Karpinski
                                                   Vice President
  
                                         28