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Foamex LP, et al. – ‘10-K405/A’ for 12/28/97

As of: Wednesday, 5/13/98 · For: 12/28/97 · Accession #: 950159-98-121 · File #s: 0-07500, 1-11432, 1-11436, 333-30291-03 · Correction: This Filing was Corrected by the SEC on 8/3/98. `®`

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/13/98  Foamex LP                         10-K405/A® 12/28/97    2:280K                                   Scullin Group, Inc./FA
          General Felt Industries Inc
          Foamex Capital Corp
          Foamex Fibers Inc

Amendment to Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405/A   Amendment to Annual Report -- [x] Reg. S-K Item       94    440K 
                          405                                                    
 2: EX-27       Financial Data Schedule (Pre-XBRL)                     1      7K

10-K405/A — Amendment to Annual Report — [x] Reg. S-K Item 405
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Credit Facility Environmental Matters Financial Statements and Supplementary Data Foamex L.P Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Predecessor Company Properties Refinancing Plan Results of Operations Selected Consolidated Financial Data Submission of Matters to A Vote of Security Holders
1	1st Page - Filing Submission
"	Foamex L.P
11	Item 2. Properties
"	Item 3. Legal Proceedings
"	Environmental Matters
14	Item 4. Submission of Matters to A Vote of Security Holders
15	Item 6. Selected Consolidated Financial Data
16	Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
18	Results of Operations
24	Item 8. Financial Statements and Supplementary Data
"	Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
46	Credit Facility
47	Refinancing Plan
86	Predecessor Company

10-K405/A 1st Page of 94 TOC ↑Top Previous Next ↓Bottom Just 1st
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)

For the fiscal year ended December 28, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

For the transition period from ........... to ................
Commission file numbers: 1-11432; 1-11436

FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
GENERAL FELT INDUSTRIES, INC.
FOAMEX FIBERS, INC.
(Exact Name of registrant as Specified in its Charter)

Delaware 05-0475617
Delaware 22-3182164
Delaware 13-3476119
Delaware 13-3819884
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

1000 Columbia Avenue, Linwood, PA 19061
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (610) 859-3000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether Foamex L.P. (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that Foamex
L.P. was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO

Indicate by check mark whether Foamex Capital Corporation (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods that
Foamex Capital Corporation was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Annual Report on Form 10-K or any
amendment to this Form 10-K. [X]

None of the voting securities of Foamex L.P. or Foamex Capital Corporation
are held by non-affiliates.

As of April 6, 1998, there were 1,000 shares of Foamex Capital
Corporation's common stock outstanding.

Foamex L.P., Foamex Capital Corporation, General Felt Industries, Inc., and
Foamex Fibers, Inc. meets the condition set forth in General Instruction
(J)(1)(a) and (b) of Form 10-K and is therefore filing this form with the
reduced disclosure format.

DOCUMENTS INCORPORATED BY REFERENCE
None

10-K405/A 2nd Page of 94 TOC 1st Previous Next ↓Bottom Just 2nd
FOAMEX L.P.
FOAMEX CAPITAL CORPORATION

INDEX

Page
Part I

Item 1. Business 3
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote
of Security Holders 14
Part II

Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 14
Item 6. Selected Consolidated Financial Data 15
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 16
Item 8. Financial Statements and Supplementary Data 24
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 24

Part III

Item 10. Directors and Executive Officers of the Registrant 24
Item 11. Executive Compensation 24
Item 12. Security Ownership of Certain Beneficial Owners
and Management 24
Item 13. Certain Relationships and Related Transactions 24

Part IV

Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 24

Signatures 31

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

10-K405/A 3rd Page of 94 TOC 1st Previous Next ↓Bottom Just 3rd
PART I
ITEM l. BUSINESS

General

Foamex L.P., a wholly-owned subsidiary of Foamex International Inc.
("Foamex International"), is engaged primarily in the business of manufacturing
and distributing quality flexible polyurethane foam and advanced polymer foam
products. During 1997, 1996 and 1995, Foamex L.P.'s operations were conducted
together with its wholly-owned subsidiaries, General Felt Industries, Inc.
("General Felt"), Foamex Fibers, Inc. ("Foamex Fibers"), Foamex Canada Inc.
("Foamex Canada"), and Foamex Latin America, Inc. ("Foamex Mexico"). As of
December 28, 1997, Foamex L.P.'s partners were FMXI, Inc. ("FMXI") with a 1%
managing general partnership interest, Trace Foam Company, Inc. ("Trace Foam")
with a 1% non-managing general partnership interest, Crain Industries, Inc.
("Crain") with a 1% general partnership interest and Foamex International with a
97% limited partnership interest. FMXI and Crain are both wholly-owned
subsidiaries of Foamex International.

On March 16, 1998, Foamex International announced that its Board of
Directors received an unsolicited buyout proposal from Trace International
Holdings, Inc. ("Trace Holdings"), Foamex International's principal stockholder.
Trace Holdings proposed to acquire all of the outstanding common stock of Foamex
International not currently owned by Trace Holdings and its subsidiaries for a
cash price of $17.00 per share. Also, Trace Holdings informed the Board of
Directors that financing for the buyout transaction would be arranged through
Donaldson, Lufkin & Jenrette Securities Corporation and The Bank of Nova
Scotia/Scotia Capital Markets. As of March 16, 1998, Trace Holdings and its
subsidiaries beneficially owned approximately 11,475,000 shares or approximately
46% of the outstanding common stock of Foamex International. In response to
Trace Holding's offer, Foamex International's Board of Directors has appointed a
special committee to determine the advisability and fairness of the proposed
buyout to Foamex International's stockholders other than Trace Holdings and its
subsidiaries. Trace Holding's proposed buyout is subject to a number of
conditions, including the negotiations of definitive documents (which are
expected to contain customary closing conditions); the filing of a disclosure
statement and other documents with the Securities and Exchange Commission;
regulatory filings; and approval of the transaction by a majority of Foamex
International's stockholders.

On February 27, 1998, Foamex International, Foamex L.P. and certain of its
affiliates completed a series of transactions designed to simplify Foamex
International's structure and to provide future operational flexibility. Prior
to the consummation of these transactions, (i) Foamex L.P. and Foamex L.P.'s
wholly-owned subsidiary, General Felt, entered into a Supply Agreement and an
Administrative Services Agreement, (ii) Foamex L.P. repaid its outstanding
indebtedness to General Felt with $4.8 million in cash and a $34.0 million
principal amount promissory note supported by a $34.5 million letter of credit
under the Foamex L.P. credit facility (the "Foamex/GFI Note") and (iii) Foamex
L.P. defeased the $4.5 million outstanding principal amount of its 9 1/2% senior
secured notes due 2000. The initial transaction resulted in the transfer from
Foamex L.P. to Trace Foam LLC of all of the outstanding common stock of General
Felt, in exchange for (i) the assumption by Trace Foam LLC of $129.0 million of
Foamex L.P.'s indebtedness and (ii) the transfer by Trace Foam 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 ("Senior Subordinated Notes") and 13 1/2% senior subordinated notes due
2005. Upon consummation of the initial transaction, Foamex Carpet Cushion, Inc.,
a newly formed wholly-owned subsidiary of Foamex International ("Foamex
Carpet"), Foamex International, Trace Foam LLC, and General Felt entered into an
Asset Purchase Agreement dated February 27, 1998, in which General Felt sold
substantially all of its assets (other than the Foamex/GFI Note and its
operating facility in Pico Rivera, California) to Foamex Carpet in exchange for
(i) $20.0 million in cash and (ii) a promissory note issued by Foamex Carpet to
Trace Foam LLC in the amount of $70.2 million. The $20.0 million cash payment
was funded with a distribution by Foamex L.P. As part of these transactions,
Foamex Fibers, a wholly-owned subsidiary of General Felt, was merged with and
into General Felt and Foamex LLC, a wholly-owned subsidiary of Foamex L.P., was
merged with and into Foamex L.P. In addition, FMXI and Crain, both wholly-owned
subsidiaries of Foamex International and general partners of Foamex L.P., were
merged and Crain, as the surviving corporation,

10-K405/A 4th Page of 94 TOC 1st Previous Next ↓Bottom Just 4th
subsequently changed its name to FMXI. Upon consummation of these transactions
contemplated by the Asset Purchase Agreement, Foamex Carpet entered into a
credit agreement with the institutions from time to time party thereto as
lenders, the institutions from time to time party thereto, as issuing banks, and
Citicorp USA, Inc. and The Bank of Nova Scotia, as administrative agents, which
provides for up to $20.0 million in revolving credit borrowings. These
transactions will be accounted for as a divestiture and future Foamex L.P.
financial statements will exclude the operations of General Felt. Foamex Carpet
will conduct the carpet cushion business previously conducted by General Felt.
Also, Trace Foam LLC has retained ownership of one of General Felt's operating
facilities which is being leased to Foamex Carpet and the $34.0 million
Foamex/GFI Note.

On December 23, 1997, Foamex L.P. acquired Crain pursuant to a merger
agreement with Crain Holdings Corp. for a purchase price of approximately $213.7
million, including the assumption of debt with a face value of approximately
$98.6 million (and an estimated fair value of approximately $112.3 million) (the
"Crain Acquisition"). In addition, fees and expenses associated with the Crain
Acquisition are approximately $13.2 million. The Crain Acquisition provided a
fully integrated manufacturer, fabricator and distributor of a broad range of
flexible polyurethane foam and foam products which are sold to a diverse
customer base, principally in the furniture, bedding and carpet cushion markets.
In connection with the Crain Acquisition, Foamex L.P. approved a
restructuring/consolidation plan for the two entities. Foamex L.P. recorded
restructuring charges of $21.1 million relating to restructuring Foamex L.P.'s
operations in connection with the Crain Acquisition and related transactions. In
addition, Foamex L.P. recorded approximately $1.5 million of severance and
related costs and $8.5 million for costs associated with the shut down and
consolidation of certain acquired facilities.

On October 6, 1997, Foamex L.P. sold its needlepunch carpeting, tufted
carpeting and artificial grass products business, located in Dalton, Georgia to
Bretlin, Inc., a subsidiary of The Dixie Group, Inc. The sales price was
approximately $41.0 million, net of post-closing adjustments which were
finalized in December 1997. Foamex L.P. used the net proceeds of the sale to
reduce borrowings under the credit facility by approximately $38.8 million.

On June 12, 1997, Foamex International substantially completed a
refinancing plan (the "Refinancing Plan") designed to reduce Foamex
International's interest expense and increase its financing flexibility. The
Refinancing Plan included a tender offer to purchase $373.0 million of Foamex
L.P.'s existing public debt and approximately $116.7 million of aggregate
principal amount of Foamex-JPS Automotive L.P.'s senior secured discount
debentures due 2004 (the "Discount Debentures"). Also, the Refinancing Plan
included the payment of $5.2 million of term loan borrowings under an existing
credit facility, and the payment of related fees and expenses. In addition, the
tender offer included amending the existing indentures to remove substantially
all of the restrictive covenants. Foamex L.P. purchased $342.3 million of its
public debt and the $116.7 million of Discount Debentures under the tender offer
and incurred an extraordinary loss on the early extinguishment of its debt of
approximately $44.5 million. The Refinancing Plan was funded by $347.0 million
of borrowings under a new credit facility (the "Credit Facility") and the net
proceeds from the issuance of $150.0 million principal amount of Senior
Subordinated Notes. As a result of the Refinancing Plan, Foamex L.P.'s long-term
debt increased by $150.1 million. Foamex L.P. expects the Refinancing Plan to
result in increased interest expense as compared to the debt structure prior to
the Refinancing Plan, assuming no material changes in interest rates. Foamex
L.P.'s future interest expense will vary based on a variety of factors including
fluctuations in interest rates in general. As a result of the Refinancing Plan,
variable rate debt comprised a larger percentage of Foamex L.P.'s overall
indebtedness than in the past, and as a result, future fluctuations in interest
rates will have a greater impact on Foamex L.P.'s interest expense than in the
past.

On October 1, 1997, Foamex L.P. redeemed approximately $26.2 million of the
approximately $30.7 million of Foamex L.P.'s outstanding public debt that was
not tendered as part of the Refinancing Plan. These redemptions were funded with
borrowings under the Credit Facility. In connection with these redemptions,
Foamex L.P. incurred an additional extraordinary loss on the early
extinguishment of debt of approximately $2.1 million. The remaining outstanding
public debt of approximately $4.5 million that was not tendered as part of the
Refinancing Plan was defeased in February 1998.

10-K405/A 5th Page of 94 TOC 1st Previous Next ↓Bottom Just 5th
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. In connection with
certain forward-looking statements contained in this Annual Report on Form 10-K
and those that may be made in the future by or on behalf of Foamex L.P. which
are identified as forward-looking, Foamex L.P. notes that there are various
factors that could cause actual results to differ materially from those set
forth in any such forward-looking statements, such as raw material price
increases, general economic conditions, the level of automotive production,
carpet cushion production and housing starts, the implementation of the
restructuring/consolidation plans and changes in environmental legislation and
environmental conditions. The forward-looking statements contained in this
Annual Report on Form 10-K were prepared by management and are qualified by, and
subject to, significant business, economic, competitive, regulatory and other
uncertainties and contingencies, all of which are difficult or impossible to
predict and many of which are beyond the control of Foamex L.P. Accordingly,
there can be no assurance that the forward-looking statements contained in this
Annual Report on Form 10-K will be realized or that actual results will not be
significantly higher or lower. The forward-looking statements have not been
audited by, examined by, compiled by or subjected to agreed-upon procedures by
independent accountants, and no third-party has independently verified or
reviewed such statements. Readers of this Annual Report on Form 10-K should
consider these facts in evaluating the information contained herein. In
addition, the business and operations of Foamex L.P. are subject to substantial
risks which increase the uncertainty inherent in the forward-looking statements
contained in this Annual Report on Form 10-K. The inclusion of the
forward-looking statements contained in this Annual Report on Form 10-K should
not be regarded as a representation by Foamex L.P. or any other person that the
forward-looking statements contained in this Annual Report on Form 10-K will be
achieved. In light of the foregoing, readers of this Annual Report on Form 10-K
are cautioned not to place undue reliance on the forward-looking statements
contained herein.

The principal executive offices of Foamex L.P. are located at 1000 Columbia
Avenue, Linwood, Pennsylvania 19061 and its telephone number is (610) 859-3000.

References in this Annual Report on Form 10-K to Foamex L.P. mean Foamex
L.P. and, where relevant, its subsidiaries.

10-K405/A 6th Page of 94 TOC 1st Previous Next ↓Bottom Just 6th
Flexible Polyurethane Foam Products

Foamex L.P. is a manufacturer and distributor of quality flexible
polyurethane foam and advanced polymer foam products designed to satisfy the
specific needs of customers. Foamex L.P.'s manufacturing and distribution
facilities enable it to source production efficiently and meet the needs of its
customers throughout North America. Such facilities are also important for
satisfying all of the foam requirements of large national customers in a timely
and cost effective manner.

Foamex L.P. operates in the foam products business segment with net sales
being derived from six major product categories: carpet cushion, cushioning
foams, furniture foams, automotive foams, consumer products and specialty and
technical foams. Foamex L.P. added the consumer products category in connection
with the December 23, 1997 Crain Acquisition, therefore, historical operations
will not include the consumer products category. Management's Discussion and
Analysis of Financial Condition and Results of Operations provides net sales by
product category for the past three fiscal years.

The introduction of new products and new applications for existing products
is an integral component of Foamex L.P.'s growth strategy. During the last
several years, Foamex L.P. introduced Reflex(TM) for the bedding, furniture and
other cushioning industries using patented variable pressure foaming technology
("VPF(TM)"). Foamex L.P. also introduced Plushlife(TM) for the carpet cushion
markets and Powerthane(TM) for automotive applications. In addition, Foamex L.P.
developed new automotive foam applications, including thermoformable foam
headliners and energy absorbing foams. Foamex L.P.'s relationships with its
customers allow Foamex L.P. to work with customers during the design phase for
new products and new applications for existing products, thereby increasing the
likelihood that Foamex L.P. will be a principal supplier for these products.

Carpet Cushion

Foamex L.P. is one of the largest manufacturers and distributors of prime,
bonded, sponge rubber and felt carpet cushion in North America. Prime carpet
cushion is made from polyurethane foam buns, whereas bonded carpet cushion is
made from various types of scrap foam which are shredded into small pieces,
processed and then bonded using a chemical adhesive. In February 1997, Foamex
L.P. introduced Plushlife(TM), a proprietary bonded carpet cushion product,
which combines two cushions into a single structure to absorb the energy of foot
traffic and enhance comfort.

Foamex L.P.'s carpet cushion products are marketed through floor covering
retailers such as Sears, Shaw Industries and Home Depot.

Cushioning Foams

Foamex L.P. is one of the largest manufacturers of cushioning foams in
North America. Foamex L.P. manufactures and sells flexible polyurethane foam and
polyester fiber to bedding and other cushioning manufacturers both directly and
indirectly through independent fabrication operations. These foams are used by
the bedding industry in quilts, toppers, cores and border rolls for mattresses.
Cushioning foams are generally sold in large volumes on a regional basis because
of high shipping costs. Due to its size and the strategic location of its
production facilities, Foamex L.P. believes it will continue to have an
advantage over regional producers in supplying large national accounts with all
of their foam requirements.

The development and introduction of value added products continues to be a
priority of Foamex L.P. and has included (i) Relex(TM) discussed below, (ii)
viscoelastic or "memory" foams for the bedding industry, which maintain their
resiliency better than other foams and materials and (iii) Latex Plus(TM), a
urethane-based replacement for latex, a material used in bedding products. One
of Foamex L.P.'s most recent product introductions is Reflex(TM) for the
cushioning and furniture industries which was created using the VPF(TM)
manufacturing process. Reflex(TM) materials, which include cushion wraps and
cushion cores, are advanced polymer cushioning products designed to improve
comfort, quality and durability.

10-K405/A 7th Page of 94 TOC 1st Previous Next ↓Bottom Just 7th
Foamex L.P.'s cushioning foams for bedding products are sold to mattress
customers, such as Sealy, Simmons, Serta, and Spring Air Company, both directly
and indirectly through independent fabrication operations located across the
United States. Foamex L.P. also sells cushioning foam for use in a number of
other markets.

Furniture Foams

Foamex L.P. manufactures and sells flexible polyurethane foam and polyester
fiber to furniture manufacturers both directly and indirectly through
independent fabrication operations. These foams are used by the furniture
industry for seating products. These foams are generally sold in large volumes
on a regional basis because of high shipping costs. Due to its size and the
strategic location of its production facilities, Foamex L.P. believes it will
continue to have an advantage over regional producers in supplying large
national accounts with all of their foam requirements.

The development and introduction of value added products continues to be a
priority of Foamex L.P. and has included Reflex(TM). Reflex(TM) materials, which
include cushion wraps and cushion cores, are advanced polymer cushioning
products designed to improve comfort, quality and durability in upholstered
furniture.

Foamex L.P. supplies cut-to-size seat cushions, back and other pieces to
the furniture industry, including to Berkline, Action, and Schnadig. The use of
these foams also include packaging materials for products such as computer and
electronic components and applications in certain sporting good products and in
recreational vehicles.

Automotive Foams

Foamex L.P. is one of the largest suppliers of foam requirements for the
North American operations of automotive manufacturers. Depending on the
automotive manufacturer and/or the application, foam is supplied by Foamex L.P.
either directly to the manufacturer or indirectly through sub-suppliers.
Automotive foams are used for trim pads, door panel parts, headliners,
acoustical purposes, flame and adhesive laminates and rolls for tri-lamination.
Tri-laminated foam is applied to automotive fabrics to form a foam/fabric
composite that results in cost savings and aesthetic value for the automotive
manufacturer.

The domestic automotive manufacturers have narrowed their supply base
during recent years, increasing the percentage and dollar amount of components
that they purchase from outside suppliers. As a result, a smaller number of
companies are supplying an increasing percentage of these manufacturers' needs.
Foamex L.P. believes it has benefited from this trend, which favors suppliers
with quality facilities and products, cost efficient plants, long-standing
relationships, strong design, technical and product development support and
broad product lines. Also, automotive suppliers are increasingly offering
integrated systems which lower the overall cost and improve quality relative to
previous sourcing methods in which individually sourced components were
assembled and installed.

Foamex L.P. has a strategic alliance with Recticel, s.a. ("Recticel") to
design, manufacture and market polyurethane products for the automotive industry
in order to meet the worldwide requirements of automotive manufacturers and
major tier one suppliers such as Lear Corporation, Johnson Controls, Inc., and
Delphi Interiors and Lighting. Under this alliance, both companies will jointly
supply the automotive suppliers, with products manufactured in North America by
Foamex L.P. and in Europe by Recticel.

Foamex L.P.'s new product development and flexible manufacturing
capabilities allow it to produce quality products to satisfy changing
specifications. Examples of Foamex L.P.'s ability to react to changing industry
requirements include thermoformable headliners, tri-laminates, advanced cutting
technology and energy absorbing foams. For example, Foamex L.P. is one of the
first suppliers to introduce a thermoformable headliner, Customfit(TM), made
from rigid polyurethane foam. Also, Foamex L.P. intends to continue
manufacturing and supplying foam and fabric components, such as tri-laminated
material for automotive seating. The use of tri-laminates has become
increasingly prevalent due to significant cost savings for manufacturers and
improved aesthetics for consumers.

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Automotive manufacturers are increasingly requiring the production
facilities of their suppliers to meet certain high quality standards. For
example, all tier one and tier two automotive supplier facilities worldwide will
eventually be required to meet the QS-9000 quality manufacturing standards set
by the United States automotive manufacturers. In 1996, Foamex L.P. completed
QS-9000 and ISO-9001 certification for its eight domestic facilities which
supply the automotive industry. Foamex L.P. was one of the first polyurethane
manufacturers to be QS-9000 certified which demonstrates its commitment to
producing the highest quality products and meeting the needs of its customers.

Specialty and Technical Foams

Specialty and technical foams consist of reticulated foams and other custom
polyester and polyether foams, which are sometimes combined with other materials
to yield specific properties. Reticulation is the thermal or chemical process
used to remove the membranes from the interconnecting cells within foam. This
leaves a porous, skeletal structure allowing for the free flow of gases and/or
liquids.

Reticulated foams are well suited for filtration, reservoiring, sound
absorption and sound transmission. Industrial applications include carburetors,
computer cabinets, ink pad reservoirs, high speed inkjet printers and speaker
grills. Medical applications include oxygenators for cardiopulmonary surgery,
instrument holders for sterilization, pre-op scrubbers impregnated with
anti-microbial agents and EKG pads containing conductive gels. Other specialty
and technical foams have unique characteristics such as flame retardancy and
fluid absorption. In addition, felting and lamination with other foams or
materials give these composites specific properties. Additional products sold
within this group include foams for refrigerated supermarket produce counters,
mop heads, paint brushes, diapers and cosmetic applications.

Consumer Products

Foamex L.P. sells flexible polyurethane foam and polyester fiber for use in
therapeutic sleep products such as mattress pads and bed pillows, which are
manufactured for the health care and consumer markets. Foamex L.P. also
manufactures and markets a broad line of home furnishing products to retailers
throughout the United States. Foamex L.P.'s home furnishing products include a
broad range of products such as leisure furniture, futon sofas, bean bag chairs,
floor pillows and pet beds.

Marketing and Sales

As of December 28, 1997, Foamex L.P. has a marketing and sales force of
approximately 208 employees. The marketing and sales force are directed by an
executive vice president for each product category. Foamex L.P.'s relationships
with its customers allow Foamex L.P. to work with customers during the design
phase for new products and new applications for existing products, thereby
increasing the likelihood that Foamex L.P. will be a principal supplier for
these products.

Foamex L.P.'s carpet cushion marketing program includes the broad
distribution of products to both the retail and wholesale levels. Furthermore,
promotions, marketing and advertising expenditures are important in positioning
Foamex L.P.'s carpet cushion as a premium, trade branded product.

Cushioning foams and furniture foams are primarily sold directly to
customers and also through third party independent fabricators. Plant locations
are critical in this regionalized line of business where the transportation cost
typically comprises a significant portion of product cost.

Automotive foam products are predominantly sold directly through a bidding
process in which each customer's requirements for a particular time period are
awarded to a foam supplier. Foamex L.P. has consistently been awarded contracts
with manufacturers and major tier one suppliers such as Lear Corporation,
Johnson Controls, Inc., and Delphi Interiors and Lighting.

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Foamex L.P. markets most of its specialty and technical foams through a
network of independent fabrication and distribution companies in North America,
the United Kingdom, and South Korea. Such fabricators or distributors often
further process or finish these products to meet the specific needs of the
end-user. Foamex L.P. utilizes advertising in trade journals and related media
in order to attract customers and, more generally, to create an awareness of its
capabilities for specialty and technical foams. In addition, due to the highly
specialized nature of most specialty and technical foams, Foamex L.P.'s research
staff works with customers to design, develop and manufacture each product to
specification.

Foamex L.P.'s consumer products sales efforts are primarily regionally
based with each salesperson selling to local accounts. Foamex L.P. sells its
consumer products to major retailers throughout the United States including
Wal-Mart.

Customers

During the past three fiscal years, no one customer accounted for more than
10.0% of Foamex L.P.'s net sales.

Raw Materials

Foamex L.P.'s primary raw material manufacturing cost consists of two
principal chemicals (i) toluene diisocyanate ("TDI") and (ii) polyol. Foamex
L.P.'s largest suppliers of these raw materials are The Dow Chemical Company,
Arco Chemical, and BASF. Foamex L.P. generally has alternative chemical
suppliers for each major raw material and Foamex L.P. believes that it could
find alternative sources of supply should it cease doing business with any one
of its major suppliers. The price of TDI and polyol is influenced by demand,
manufacturing capacity and oil and natural gas prices.

Foamex L.P.'s principal suppliers of raw materials used in the
manufacturing of foam increased the price of raw materials several times over
the past several years. In response, Foamex L.P. increases selling prices, where
possible. (See "Management Discussion and Analysis of Financial Condition and
Results of Operations.") Foamex L.P. is unaware of any significant price
increases in the near future; however, there can be no assurance that chemical
suppliers will not increase raw material costs in the future or that Foamex L.P.
will be able to implement selling price increases to offset any such raw
material cost increases.

Manufacturing

Foamex L.P. is committed to the highest quality standards for its products,
a standard maintained in part by continuous improvements to its production
processes and upgrades and investments to its manufacturing equipment. Foamex
L.P. maintains quality assurance and testing equipment to ensure the
manufactured products will consistently meet customer quality requirements.

As of December 28, 1997, Foamex L.P. manufactured and/or fabricated foam
products at 61 locations in North America with a total of approximately 8.4
million square feet of floor space (excluding 16 locations with 2.6 million
square feet of floor space that are planned to close in connection with the
restructuring/consolidation plan). Management believes that Foamex L.P.'s
manufacturing facilities are well suited for their intended purposes and are in
good condition (see "Properties"). The manufacturing facilities are
strategically located to service their major customers since high freight cost
in relation to the cost of the foam product generally results in distribution
being most cost effective within 200 to 300 miles from each facility.

Automotive manufacturers are increasingly requiring the production
facilities of their suppliers to meet certain high quality standards. For
example, all tier one and tier two automotive supplier facilities worldwide will
eventually be required to meet the QS-9000 quality manufacturing standards set
by United States automotive manufacturers. In 1996, Foamex L.P. completed
QS-9000 and ISO-9001 certification for its eight facilities which supply the
automotive industry. Foamex L.P. was one of the first polyurethane manufacturers
to be QS-9000

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certified which demonstrates its commitment to producing the highest quality
products and meeting the needs of its customers.

Foamex L.P. is subject to extensive and changing environmental laws and
regulations. See "Legal Proceedings -- Environmental Matters" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Environmental Matters."

Employees

As of December 28, 1997, Foamex L.P. employed 6,414 persons, with 5,704 of
such employees involved in manufacturing, 502 in administration and 208 involved
in sales and marketing (including 640 positions that are being eliminated as
part of the restructuring/consolidation plan). Approximately 1,095 of these
employees are located outside the United States. Also, approximately 1,450 of
these employees are covered by collective bargaining agreements with labor
unions, which agreements expire on various dates from 1998 through 2001. Foamex
L.P. considers relations with its employees to be good.

Competition

The flexible polyurethane foam industry is highly competitive. With respect
to flexible polyurethane foam, competition is based primarily on price, quality
of products and service. Foamex L.P.'s larger competitors in the polyurethane
foam industry include E. R. Carpenter Company, Hickory Springs Manufacturing
Company, Vitafoam, Inc., General Foam Corporation, Flexible Foam Products, Inc.,
and Crest Foam Industries, Inc. None of such competitors compete in all of the
product categories in which Foamex L.P. does business.

International and Domestic Operations and Export Sales

Foamex L.P. has manufacturing operations in the United States, Canada, and
Mexico. Net sales to customers in foreign markets in 1997, 1996 and 1995 were
$85.0 million (9.1% of net sales), $76.0 million (8.2% of net sales) and $73.3
million (8.5% of net sales), respectively.

Patents and Trademarks

Foamex L.P. owns various patents and trademarks registered domestically and
in numerous foreign countries. The registered processes and products were
developed through on-going research and development activities to improve
quality, reduce costs and expand markets through the development of new
applications for flexible polyurethane foam products. While Foamex L.P.
considers its patents and trademarks to be a valuable asset, it does not believe
that its competitive position is dependent on patent protection or that its
operations are dependent upon any individual patent, trademark or tradename.

Research and Development

Foamex L.P. believes it has a leading research and development capability
in the flexible polyurethane foam industry. This capability gives Foamex L.P. a
significant advantage in the on-going development of new products and new
applications for existing products. Foamex L.P.'s primary research and
development facility is located in Eddystone, Pennsylvania. Foamex L.P. employs
approximately 35 full-time research and development employees. Expenditures for
research and development amounted to $2.4 million, $2.5 million and $3.2 million
for 1997, 1996 and 1995, respectively, excluding expenditures by Crain for
research and development prior to the Crain Acquisition.

Foamex L.P. and Recticel, have exchanged know-how, trade secrets,
engineering and other data, designs, specifications, chemical formulations,
technical information, market information and drawings which are necessary or
useful for the manufacture, use or sale of foam products and it is anticipated
that they will continue to do so in the future. Foamex L.P., Recticel, and
Beamech Group Limited, an unaffiliated third party

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("Beamech"), have an interest in a Swiss corporation that develops new
manufacturing technology for the production of polyurethane foam including the
VPF(TM) manufacturing process. Foamex L.P., Recticel, and their affiliates have
a royalty-free license to use technology developed by the Swiss corporation.

ITEM 2. PROPERTIES

As of December 28, 1997, Foamex L.P. conducted its operations at 67
manufacturing and distribution facilities which includes 22 facilities that were
acquired on December 23, 1997 in connection with the Crain Acquisition,
excluding 22 facilities that will be closed in connection with the various
restructuring/consolidation plans. As of December 28, 1997, 19 of these
facilities were owned and 48 were leased. Total floor space in use at the owned
manufacturing and distribution facilities is approximately 3.4 million square
feet and total floor space in use at the leased manufacturing and distribution
facilities is approximately 5.1 million square feet. Fifty-nine of these
facilities are located in thirty-nine cities in the United States, five
facilities are located in two cities in Canada and three facilities are located
in three cities in Mexico. The 1998 annual base rental with respect to such
leased facilities is approximately $8.7 million under leases expiring from 1998
to 2007. Foamex L.P. does not anticipate any problem in renewing or replacing
any of such leases expiring in 1998. In addition, Foamex L.P. has approximately
1.0 million square feet of idle space of which approximately 0.2 million is
leased.

Foamex L.P. maintains administrative and sales offices in Linwood,
Pennsylvania; St. Louis, Missouri; Chicago, Illinois; Southfield, Michigan;
Atlanta, Georgia; and New York, New York.

ITEM 3. LEGAL PROCEEDINGS

Environmental Matters

Foamex L.P. is subject to extensive and changing federal, state, local and
foreign environmental laws and regulations, including those relating to the use,
handling, storage, discharge and disposal of hazardous substances and the
remediation of environmental contamination, and as a result, is from time to
time involved in administrative and judicial proceedings and inquiries relating
to environmental matters. During 1997, expenditures in connection with Foamex
L.P.'s compliance with federal, state, local and foreign environmental laws and
regulations did not have a material adverse effect on Foamex L.P.'s operations,
financial position, capital expenditures or competitive position. As of December
28, 1997, Foamex L.P. has environmental accruals of approximately $4.3 million
for environmental matters. In addition, as of December 28, 1997, Foamex L.P. has
receivables of approximately $1.1 million relating to indemnification for
environmental liabilities, net of an allowance of approximately $1.0 million
relating to potential disagreements regarding the scope of the indemnification.
Foamex L.P. believes that realization of the net receivables established for
indemnification is probable.

The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments") provide
for the establishment of federal emission standards for hazardous air pollutants
including methylene chloride, propylene oxide and TDI, materials used in the
manufacturing of foam. On December 27, 1996, the United States Environmental
Protection Agency (the "EPA") proposed regulations under the 1990 CAA Amendments
that will require manufacturers of slab stock polyurethane foam and foam
fabrication plants to reduce emissions of methylene chloride. Because these
regulations are subject to change prior to finalization, Foamex L.P. cannot
accurately predict the actual cost of their implementation. Foamex L.P. does not
believe implementation of the regulations will require it to make material
expenditures at facilities owned prior to December 23, 1997, due to Foamex
L.P.'s use of alternative technologies which does not utilize methylene chloride
and its ability to shift current production to the facilities which use these
alternative technologies; however, material expenditures may be required at the
facilities formerly operated by Crain. The 1990 CAA Amendments also may result
in the imposition of additional standards regulating air emissions from
polyurethane foam manufacturers, but these standards have not yet been proposed
or promulgated.

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In addition to general regulatory requirements, state laws have resulted or
will result in more stringent regulations regarding the use and emission of
methylene chloride. Several former Crain facilities have been required to meet
greater state restrictions regarding emission limits and/or quantities used of
this chemical. For example, in California, methylene chloride usage was phased
out at the end of 1995, while in Kent, Washington, and Easton, Pennsylvania, the
former Crain facilities, pursuant to consent decrees as well as applicable laws,
must over a period of time phase out methylene chloride usage. Through the
development of the Enviro-Cure(R) process, which uses ambient or refrigerated
air to remove the heat of reaction during the foam curing process, Foamex L.P.
anticipates that methylene chloride usage can be reduced by up to 90 percent
and, when used in conjunction with the Vertifoam(R) process, completely. Crain
has installed the Enviro-Cure(R) process at its manufacturing facilities in Ft.
Smith, Arkansas; Compton, California; San Leandro, California; Elkhart, Indiana;
Tupelo, Mississippi; and Conover, North Carolina. Where regulations require the
elimination of methyl-chloroform and methylene chloride, Crain has installed a
CARDIO(R) system, which eliminates the use of methyl-chloroform. During 1996,
Crain installed the CARDIO(R) system at its Compton, California; Easton,
Pennsylvania; and Kent, Washington plants. However, see "Legal Proceedings"
below.

Foamex L.P. has reported to appropriate state authorities that it has found
soil contamination in excess of state standards at facilities in Orlando,
Florida; La Porte, Indiana; Conover, North Carolina; Cornelius, North Carolina;
Fort Wayne, Indiana; Philadelphia, Pennsylvania; and at a former facility in
Dallas, Texas and groundwater contamination in excess of state standards at the
Orlando, Conover, Philadelphia, and Cornelius facilities. Foamex L.P. has begun
remediation and is conducting further investigations into the extent of the
contamination at these facilities and, accordingly, the extent of the
remediation that may ultimately be required. The actual cost and the timetable
of any such remediation cannot be predicted with any degree of certainty at this
time. Foamex L.P., based on estimates of the remaining potential remediation
costs for these facilities and facilities acquired in the Crain Acquisition, has
accruals of $3.7 million for the estimated cost of completing remediation and
established a net receivable of $1.1 million on the basis of indemnifications by
Trace Holdings and Recticel Foam Corporation ("RFC") associated with the
partnership formation of Foamex L.P. Foamex L.P. has completed remediation of
soil contamination at a former Trenton, New Jersey manufacturing facility closed
in October 1993 and is awaiting final closure approvals from the New Jersey
Department of Environmental Protection regarding the remediation of soil
contamination and monitoring of groundwater at the former Trenton facility.
Also, Foamex L.P. has completed remediation at its Mesquite, Texas facility and
is awaiting a certificate of completion under the Texas Voluntary Clean-Up
Program.

Federal regulations require that by the end of 1998 all underground storage
tanks ("USTs") be removed or upgraded in all states to meet applicable
standards. Foamex L.P. has six USTs that will require removal or permanent
in-place closure by the end of 1998. Due to the age of these tanks, leakage may
have occurred resulting in soil and possibly groundwater contamination. Foamex
L.P. has accrued $0.1 million for the estimated removal and remediation costs,
if any, associated with these USTs. However, the full extent of contamination,
and accordingly, the actual cost of such remediation, including at the former
Crain facilities, cannot be predicted with any degree of certainty at this time.
Foamex L.P. believes that its USTs do not pose a significant risk of
environmental liability because of its monitoring practices for USTs and
conditional approval for the permanent in-place closure for certain USTs.
However, there can be no assurances that such USTs will not result in
significant environmental liability in the future.

On April 10, 1997, the Occupational Health and Safety Administration
promulgated new standards governing employee exposure to methylene chloride,
which is used as a blowing agent in some of Foamex L.P.'s manufacturing
processes. Foamex L.P. does not believe that it will be required to make any
material expenditures at facilities owned prior to December 23, 1997 to comply
with these new standards due to its use of alternative technologies which does
not use methylene chloride and its ability to shift production to facilities
which use these technologies; however, material expenditures may be required at
the facilities formerly operated by Crain.

Foamex L.P. has been designated as a Potentially Responsible Party ("PRP")
by the EPA with respect to thirteen sites with an estimated total liability to
Foamex L.P. for the thirteen sites of less than approximately $0.5

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million. Estimates of total clean-up costs and fractional allocations of
liability are generally provided by the EPA or the committee of PRP's with
respect to the specified site. In each case, the participation of Foamex L.P. is
considered to be immaterial.

On May 5, 1997, there was an accidental spill at one of Foamex L.P.'s
manufacturing facilities. The spill was contained on site and cleaned-up for an
approximate cost of $0.6 million. Although it is possible that new information
or future developments could require Foamex L.P. to reassess its potential
exposure relating to all pending environmental matters, including those
described herein, management believes that, based upon all currently available
information, the resolution of such environmental matters will not have a
material adverse effect on Foamex L.P.'s operations, financial position, capital
expenditures or competitive position. The possibility exists, however, that new
environmental legislation and/or environmental regulations may be adopted, or
other environmental conditions may be found to exist, that may require
expenditures not currently anticipated and that may be material.

Legal Proceedings

Although breast implants do not contain foam, certain silicone gel implants
were produced using a polyurethane foam covering fabricated by independent
distributors or fabricators from bulk foam purchased from Foamex L.P. or Trace
Holdings. Neither Foamex L.P. nor Trace Holdings recommended, authorized, or
approved the use of its foam for these purposes. Foamex L.P. is also indemnified
by Trace Holdings for any such liabilities relating to foam manufactured prior
to October 1990. Although Trace Holdings has paid Foamex L.P.'s litigation
expenses to date pursuant to such indemnification and management believes Trace
Holdings likely will be in a position to continue to pay such expenses, there
can be no absolute assurance that Trace Holdings will be able to provide such
indemnification. While it is not feasible to predict or determine the outcome of
these actions, based on management's present assessment of the merits of pending
claims, after consultation with the general counsel of Trace Holdings, and
without taking into account indemnification provided by Trace Holdings, the
coverage provided by Trace Holdings and Foamex L.P.'s liability insurance and
the potential indemnity from the manufacturers of polyurethane covered breast
implants, management believes that the disposition of matters that are pending
or that may reasonably be anticipated to be asserted should not have a material
adverse effect on either Foamex L.P.'s or Trace Holdings' consolidated financial
position or results of operations. If management's assessment of Foamex L.P.'s
liability with respect to these actions is incorrect, such actions could have a
material adverse effect on Foamex L.P.

In November 1997, a complaint was filed in the United States District Court
for the Southern District of Texas alleging that various defendants, including
Crain through the use of the CARDIO(R) process licensed from a third party,
infringed on a patent held by plaintiff. Foamex L.P. is negotiating with the
licensor of the process for the assumption of the defense of the action by the
licensor; however, the action is in the preliminary stages, and there can be no
assurance as to the ultimate outcome of the action.

On or about March 17, 1998, five purported class action lawsuits were filed
in the Delaware Chancery Court, New Castle County, against Foamex International,
directors of Foamex International, Trace Holdings, and individual officers and
directors of Trace Holdings:

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Brickell Partners v. Marshall S. Cogan, et al., No. 16260NC;
Mimona Capital v. Salvatore J. Bonanno, et al., No. 16259NC;
Daniel Cohen v. Foamex International Inc., No. 16263;
Eileen Karisinki v. Foamex International Inc., et al., No. 16261NC and
John E. Funky Trust v. Salvatore J. Bonanno, et al., No. 16267.

A sixth purported class action lawsuit, Barnett Stepak v. Foamex
International Inc., et al., No. 16277, was filed on or about March 23, 1998
against the same defendants. The complaints in the six actions allege, among
other things, that the defendants have violated fiduciary and other common law
duties purportedly owed to Foamex International's stockholders in connection
with the Trace Holdings proposal to acquire all of the shares of Foamex
International's common stock. The complaints seek, among other things, class
certification, a declaration that the defendants have breached their fiduciary
duties to the class, preliminary and permanent injunctions baring implementation
of the proposed transaction, rescission of the transaction if consummated,
unspecified compensatory damages, and costs and attorneys' fees.

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.

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

None

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

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

b) As of December 28, 1997, there were four holders of Foamex L.P.'s
equity securities.

c) During 1997 and 1996, Foamex L.P. made net cash distributions in
accordance with tax sharing agreements of approximately $8.8 million
and $3.5 million, respectively, and has $1.3 million of distribution
receivables in accordance with tax sharing agreements at December 28,
1997 as follows:

Distributions
1997 1996
(thousands)
FMXI, Inc. $ 80 $ (35)
Trace Foam Company, Inc. 80 45
Foamex-JPS Automotive L.P. 306 3,477
Foamex International Inc. 8,371 --
------- -------
$ 8,837 $ 3,487
======= =======

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents selected historical consolidated financial
data of Foamex L.P. and subsidiaries. The results of operations of acquired
businesses (as noted below) are included from the dates of their respective
acquisitions. The financial data should be read in conjunction with the
financial statements and related notes thereto of Foamex L.P. included elsewhere
in this Annual Report on Form 10-K.

[Enlarge/Download Table]

Fiscal Year(1)(2)
1997(3) 1996(4) 1995(5) 1994 1993(6)
(thousands)

Statements of Operations Data:
Net sales $931,095 $926,351 $862,834 $833,660 $684,310
Income (loss) from continuing operations 11,265 53,661 (48,126) 38,011 (7,926)
Net income (loss) (37,294) 9,699 (53,243) 39,241 (17,653)

Balance Sheet Data (at period end):
Total assets $834,068 $586,157 $605,892 $654,176 $575,528
Long-term debt 726,649 392,617 433,956 441,757 414,445
Partners' equity (deficit) (156,302) 12,832 (12,604) 52,548 49,386
<FN>

(1) Foamex L.P. has a 52-53 week fiscal year ending on the Sunday closest to
the end of the calendar year. Each fiscal year presented was comprised of
52 weeks.

(2) Fiscal years 1993 through 1995 were restated for discontinued operations
and fiscal years 1994 and 1995 were restated for the contribution of Foamex
Mexico.

(3) The Statements of Operations Data includes restructuring and other charges
of $21.1 million, (See Note 4 to consolidated financial statements), but
does not include the results of operations of Crain which was acquired
December 23, 1997 since the effect is insignificant. The Balance Sheet Data
includes the estimated fair value of the net assets acquired in the Crain
Acquisition.

(4) Includes restructuring credits of $6.4 million (see Note 4 to consolidated
financial statements).

(5) Includes restructuring and other charges of $39.2 million (see Note 4 to
the consolidated financial statements)

(6) Includes the results of operations of General Felt and Great Western Foam
Products Corporation from March 23, 1993 and May 1, 1993, respectively, and
thus may not be comparable to other periods.
</FN>

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

Foamex L.P. operates in the flexible polyurethane foam and foam products
industry. The following discussion should be read in conjunction with the
consolidated financial statements and related notes thereto of Foamex L.P.
included in this Annual Report on Form 10-K.

Foamex L.P. is the largest manufacturer and distributor of flexible
polyurethane and advanced polymer foam products in North America. During 1997,
1996 and 1995, Foamex L.P.'s products were utilized primarily in five
end-markets; (i) carpet cushion and other carpet products, (ii) cushioning
foams, including bedding products, (iii) furniture products for furniture
manufacturers and distributors, (iv) automotive applications, including trim and
accessories, and (v) specialty and technical applications, including those for
filtration, gasketing and sealing. As a result of the Crain Acquisition, Foamex
L.P. has added a sixth end market: consumer products. Foamex L.P. has recently
refocused its business on the flexible polyurethane and advanced polymer foam
business by the Crain Acquisition in December 1997 and the divesting of non-foam
business segments. Management believes that a focus in the foam business will
allow Foamex L.P. to concentrate management, financial and operational resources
and will position Foamex L.P. to pursue its growth strategy of developing new
products, improving profitability and expanding internationally.

On March 16, 1998, Foamex International announced that its Board of
Directors received an unsolicited buyout proposal from Trace Holdings, Foamex
International's principal stockholder. Trace Holdings proposed to acquire all of
the outstanding common stock of Foamex International not currently owned by
Trace Holdings and its subsidiaries for a cash price of $17.00 per share. Also,
Trace Holdings informed the Board of Directors that financing for the buyout
transaction would be arranged through Donaldson, Lufkin & Jenrette Securities
Corporation and The Bank of Nova Scotia/Scotia Capital Markets. As of March 16,
1998, Trace Holdings and its subsidiaries beneficially owned approximately
11,475,000 shares or approximately 46% of the outstanding common stock of Foamex
International. In response to Trace Holding's offer, Foamex International's
Board of Directors has appointed a special committee to determine the
advisability and fairness of the proposed buyout to Foamex International's
stockholders other than Trace Holdings and its subsidiaries. Trace Holding's
proposed buyout is subject to a number of conditions, including the negotiations
of definitive documents (which are expected to contain customary closing
conditions); the filing of a disclosure statement and other documents with the
Securities and Exchange Commission; regulatory filings; and approval of the
transaction by a majority of Foamex International's stockholders.

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with and into Foamex L.P. In addition, FMXI and Crain, both wholly-owned
subsidiaries of Foamex International and general partners of Foamex L.P., were
merged and Crain, as the surviving corporation, subsequently changed its name to
FMXI. Upon consummation of these transactions contemplated by the Asset Purchase
Agreement, Foamex Carpet entered into a credit agreement with the institutions
from time to time party thereto as lenders, the institutions from time to time
party thereto, as issuing banks, and Citicorp USA, Inc. and The Bank of Nova
Scotia, as administrative agents, which provides for up to $20.0 million in
revolving credit borrowings. These transactions will be accounted for as a
divestiture and future Foamex L.P. financial statements will exclude the
operations of General Felt. Foamex Carpet will conduct the carpet cushion
business previously conducted by General Felt. Also, Trace Foam LLC has retained
ownership of one of General Felt's operating facilities which is being leased to
Foamex Carpet and the $34.0 million Foamex/GFI Note.

On December 23, 1997, Foamex L.P. acquired Crain pursuant to a merger
agreement with Crain Holdings Corp. a purchase price of approximately $213.7
million, including the assumption of debt with a face value of approximately
$98.6 million (and an estimated fair value of approximately $112.3 million). In
addition, fees and expenses associated with the Crain Acquisition are
approximately $13.2 million. The Crain Acquisition provided a fully integrated
manufacturer, fabricator and distributor of a broad range of flexible
polyurethane foam and foam products which are sold to a diverse customer base,
principally in the furniture, bedding and carpet cushion markets. Management
believes that the Crain Acquisition (i) strengthens Foamex L.P.'s market
position as the leading North American producer of foam products, (ii) offers
increased penetration in Foamex L.P.'s existing product lines and adds
complementary product lines such as consumer products, (iii) strengthens Foamex
L.P.'s operations geographically, (iv) provides several proprietary
foam-producing processes which serve to lower overall production costs and are
environmentally friendly, and (v) offers opportunities for significant overhead
cost reductions and purchasing and freight cost efficiencies. In connection with
the Crain Acquisition, Foamex L.P. initiated a restructuring/consolidation plan
for the two entities. Foamex L.P. recorded restructuring charges of $21.1
million relating to the restructuring of Foamex L.P.'s operations in connection
with the Crain Acquisition and related transactions. In addition, Foamex L.P.
recorded approximately $1.5 million of severance and related costs and $8.5
million for costs associated with the shut down and consolidation of certain
acquired facilities in purchase accounting.

On October 6, 1997, Foamex L.P. sold its needlepunch carpeting, tufted
carpeting and artificial grass products business, located in Dalton, Georgia to
Bretlin, Inc., a subsidiary of The Dixie Group, Inc. The sale price was
approximately $41.0 million, net of post-closing adjustments which were
finalized in December 1997. Foamex L.P. used the net proceeds of the sale to
reduce borrowings under the Credit Facility by approximately $38.8 million.
Foamex L.P. incurred an extraordinary loss on the early extinguishment of debt
of approximately $0.9 million.

On June 12, 1997, Foamex International substantially completed the
Refinancing Plan designed to reduce Foamex International's interest expense and
increase its financing flexibility. The Refinancing Plan included a tender offer
to purchase $373.0 million of Foamex L.P.'s existing public debt and
approximately $116.7 million of Discount Debentures. Also, the Refinancing Plan
included the payment of $5.2 million of term loan borrowings under an existing
credit facility, and the payment of related fees and expenses. In addition, the
tender offer included amending the existing indentures to remove substantially
all of the restrictive covenants. Foamex L.P. purchased $342.3 million of its
public debt and the $116.7 million of Discount Debentures under the tender offer
and incurred an extraordinary loss on the early extinguishment of its debt of
approximately $44.5 million. The Refinancing Plan was funded by $347.0 million
of borrowings under the Credit Facility and the net proceeds from the issuance
of $150.0 million principal amount of Senior Subordinated Notes. As a result of
the Refinancing Plan, Foamex L.P.'s long-term debt increased by $150.1 million.
Foamex L.P. expects the Refinancing Plan to result in increased interest expense
as compared to the debt structure prior to the Refinancing Plan, assuming no
material changes in interest rates. Foamex L.P.'s future interest expense will
vary based on a variety of factors, including fluctuations in interest rates in
general. As a result of the Refinancing Plan, variable rate debt comprised a
larger percentage of Foamex L.P.'s overall indebtedness than in the past, and as
a result, future fluctuations in interest rates will have a greater impact on
Foamex L.P.'s interest expense than in the past.

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On October 1, 1997, Foamex L.P. redeemed approximately $26.2 million of the
approximately $30.7 million of Foamex L.P.'s outstanding public debt that was
not tendered as part of the Refinancing Plan. These redemptions were funded with
borrowings under the Credit Facility. In connection with these redemptions,
Foamex L.P. incurred an extraordinary loss on the early extinguishment of debt
of approximately $2.1 million. The remaining outstanding public debt of
approximately $4.5 million that was not tendered as part of the Refinancing Plan
was defeased in February 1998.

During 1996, Foamex L.P. sold Perfect Fit Industries, Inc. ("Perfect Fit")
which comprised the home comfort products business segment of Foamex L.P. The
consolidated financial statements of Foamex L.P. were restated for discontinued
operations and includes a net loss of $41.8 million (net of $1.2 million income
tax benefit) on the disposal of this business segment, which includes provisions
for operating losses during the phase-out period. (See Note 9 to the
consolidated financial statements for further discussion).

Foamex L.P.'s automotive foam customers are predominantly automotive
original equipment manufacturers or other automotive suppliers. As such, the
sales of these product lines are directly related to the overall level of
passenger car and light truck production in North America. Also, Foamex L.P.'s
sales are sensitive to sales of new and existing homes, changes in personal
disposable income and seasonality. Foamex L.P. typically experiences two
seasonally slow periods during each year, in early July and in late December,
due to scheduled plant shutdowns and holidays.

Operating results for 1998 are expected to be influenced by various
internal and external factors. These factors include, among other things, (i)
consolidation of the Crain Acquisition, (ii) continued implementation of the
continuous improvement program to improve Foamex L.P.'s profitability, (iii)
additional raw material cost increases, if any, by Foamex L.P.'s chemical
suppliers, (iv) Foamex L.P.'s success in passing on to its customers selling
price increases to recover such raw material cost increases and (v) fluctuations
in interest rates.

RESULTS OF OPERATIONS

1997 Compared to 1996

Net sales for 1997 were $931.1 million as compared to $926.4 million in
1996, an increase of $4.7 million or 0.5%. Carpet cushion net sales for 1997
decreased 6.0% to $273.9 million from $291.3 million in 1996 primarily due to
(i) the sale in early October 1997 of a facility which manufactured needlepunch,
tufted carpeting, and artificial grass products which had net sales of
approximately $8.3 million in the fourth quarter of 1996, (ii) reduction in
rebond carpet cushion selling prices due to lower trim material costs, and (iii)
a shift in product mix from higher price carpet cushion to lower price carpet
cushion. Cushioning foam net sales for 1997 increased 6.2% to $225.0 million
from $211.9 million in 1996 primarily due to increased net sales volume from
both new and existing customers of bedding related products. Automotive foam net
sales for 1997 increased 1.0% to $234.2 million from $231.9 million in 1996
primarily due to increased volume. Furniture net sales for 1997 were constant at
$121.7 million as compared to $121.0 million for 1996. Specialty and technical
foam net sales for 1997 increased 8.5% to $76.3 million from $70.3 million in
1996 primarily due to increased net sales volume.

Gross profit as a percentage of net sales decreased to 15.4% for 1997 from
16.5% in 1996 primarily due to unfavorable impact of unrecovered raw material
cost increases, product mix change to lower margin products and the sale in
early October 1997 of a facility which manufactured needlepunch, tufted
carpeting and artificial grass products.

Income from operations was $56.3 million for 1997 as compared to $102.9
million in 1996. The decrease was primarily due to a decrease in gross profit
margins as discussed above, 1997 restructuring and other charges of $21.1
million as compared to a restructuring credit of $6.5 million in 1996, and an
increase in selling, general and administrative expenses of $9.1 million for
1997 as compared to 1996. The 1997 restructuring and other charges are related
to the restructuring of Foamex L.P.'s operations in connection with the Crain
Acquisition. The

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increase in selling, general and administrative expenses is the result of
increases in the provision for uncollectible accounts, employee compensation and
incentives, research and development costs, and travel and promotion costs
associated with the launching of new products and international expansion.

Income from continuing operations before provision for income taxes was
$14.2 million for 1997 as compared to $61.4 million in 1996. The decrease is
primarily due to the reasons cited above. Interest and debt issuance expense was
fairly constant at $44.2 million in 1997 as compared to $43.2 million in 1996.

Foamex L.P., as a limited partnership, is not subject to federal and
certain state income taxes. However, the consolidated financial statements
include a provision for income taxes which primarily relates to the federal and
state income taxes of corporate subsidiaries and subsidiaries located in foreign
jurisdictions that file separate income tax returns. See Note 11 to the
consolidated financial statements for further discussion.

The extraordinary loss on early extinguishment of debt of $48.6 million
primarily relates to the write-off of debt issuance costs and redemption
premiums associated with the early extinguishment of long-term debt in
connection with the 1997 Refinancing Plan.

1996 Compared to 1995

Net sales for 1996 were $926.4 million as compared to $862.8 million in
1995, an increase of $63.6 million or 7.4%. Carpet cushion net sales for 1996
increased 7.5% to $291.3 million from $271.0 million in 1995 primarily due to
increased selling prices initiated during the second quarter of 1996 as well as
increased volume of shipments due to improved carpet sales. Combined cushioning
foam and furniture foam net sales for 1996 increased 7.4% to $332.9 million from
$310.0 million in 1995 primarily due to increased net sales volume from both new
and existing customers of bedding related products, increased selling prices
initiated at the beginning of 1996 and a full year of results for a company
acquired in April 1995 which manufactures cushioning products. Automotive foam
net sales for 1996 increased 5.5% to $231.9 million from $219.8 million in 1995
primarily due to a continued increase in net sales of tri-laminates and
composite headliners and increased selling prices initiated at the beginning of
1996. Specialty and technical foam net sales for 1996 increased 13.4% to $70.3
million from $62.0 million in 1995 primarily due to increased selling prices and
increased net sales volume.

Gross profit as a percentage of net sales increased to 16.5% for 1996 from
11.7% for 1995 primarily due to selling price increases and improved material
and production efficiencies, which includes (i) selling price increases during
1996 to offset the adverse effect of 1995 and 1994 raw material cost increases,
(ii) reductions in customer deductions for pricing disputes, promotional
programs and other matters and (iii) reductions in salaries and other overhead
costs associated with the implementation of the 1995 restructuring plan.

Income (loss) from operations was $102.9 million for 1996 as compared to a
loss from operations of $2.0 million in 1995. The increase was primarily due to
an increase in gross profit margin as discussed above, a decrease in
restructuring and other charges (credits) of $45.7 million and a decrease in
selling, general and administrative expenses of $6.7 million for 1996 as
compared to 1995. The decrease in restructuring and other charges (credits) is
comprised of the $39.2 million charge for restructuring and other charges in
1995 plus the net restructuring credit of $6.4 million in 1996. The 1996 net
restructuring credit is comprised of an $11.3 million credit due to Foamex
L.P.'s decision not to close a facility which was part of the 1995 restructuring
plan (as defined below) and $1.7 million of credits relating primarily to the
favorable termination of lease agreements and other matters relating to the 1995
restructuring plan, offset by $6.6 million of restructuring charges relating to
the 1996 restructuring plan which primarily consist of the closure of two
facilities during 1997. The decrease in selling, general and administrative
expenses is the result of reductions in the provision for uncollectible accounts
of approximately $3.9 million, salaries and employee costs of approximately $3.7
million and a reduction of approximately $2.0 million in environmental accruals
offset by increases in selling expenses associated with the increased net sales
volume and management realignment in connection with a 1995 restructuring plan.

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Income from continuing operations before provision for income taxes was
$61.4 million for 1996 as compared to a loss from continuing operations before
provision for income taxes of $46.7 million in 1995. The increase is primarily
due to the reasons cited above and a decrease in interest and debt issuance
expense of $1.3 million. The decrease in interest and debt issuance expense is
primarily due to a $2.3 million increased benefit from interest rate swap
agreements offset by the amount of interest allocated to discontinued operations
in 1996 as compared to 1995.

The loss from discontinued operations of $42.1 million (net of $2.6 million
income tax benefit) in 1996 relates to the net loss on the sale of the home
comfort products business segment which consisted primarily of the net assets of
Perfect Fit and the operating loss of Perfect Fit through the closing date. See
Note 9 to the consolidated financial statements for further discussion.

Foamex Capital Corporation ("FCC")

FCC is solely a co-issuer of certain indebtedness of Foamex L.P. and FCC
has no other material operations.

Liquidity and Capital Resources

Liquidity

Foamex L.P.'s operating cash requirements consist principally of working
capital requirements, scheduled payments of principal and interest on
outstanding indebtedness and capital expenditures of the operating subsidiaries.
Foamex L.P. believes that cash flow from operating activities, cash on hand and
periodic borrowings under the Credit Facility, if necessary, will be adequate to
meet operating cash requirements. The ability to meet the operating cash
requirements of Foamex L.P. could be impaired if Foamex L.P. was to fail to
comply with any of the covenants contained in the Credit Facility and such
noncompliance was not cured by Foamex L.P. or waived by the lenders. Foamex L.P.
was in compliance with the covenants in the Credit Facility as of December 28,
1997 and expects to be in compliance with the covenants for the foreseeable
future.

Cash and cash equivalents decreased $11.6 million during 1997 to $9.4
million at December 28, 1997 from $21.0 million at December 29, 1996 primarily
due to a decrease in operating results offset by less cash used for the
operating assets and liabilities. Cash and cash equivalents increased $20.4
million during 1996 to $21.0 million at December 29, 1996 from $0.6 million at
December 31, 1995 primarily due to a $18.4 million payment received on a note
from a partner and improved operating results, offset by the increased use of
cash and cash equivalents by the operating assets and liabilities of Foamex
L.P., capital expenditures and scheduled debt repayments. Working capital
decreased $11.0 million during 1997 to $126.1 million at December 28, 1997 from
$137.1 million at December 29, 1996 primarily due to the decrease in cash and
cash equivalent and accrued restructuring/consolidation costs. Net operating
assets and liabilities (comprised of accounts receivable, inventories, accounts
payable and accounts payable from affiliates) increased $19.8 million during
1997 to $162.4 million at December 28, 1997 from $142.6 million at December 29,
1996 primarily due to increases in accounts receivable and inventories offset by
an increase in accounts payable. These increases are primarily associated with
the Crain Acquisition. Working capital increased $65.8 million during 1996 to
$137.1 million at December 29, 1996 from $71.3 million at December 31, 1995
primarily due to (i) improved operating results, (ii) an increase in cash
resulting from the payment received on a note with a partner and (iii) an
increase in net operating assets and liabilities, which was offset by working
capital used for capital expenditures and schedule debt repayments. Net
operating assets and liabilities (comprised of accounts receivable, inventories,
accounts payable and accounts payable from affiliates) increased $18.5 million
during 1996 to $142.6 million at December 29, 1996 from $124.1 million at
December 31, 1995 primarily due to increased accounts receivable and inventories
offset

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by an increase in accounts payable. The increase in accounts receivable and
inventories are primarily associated with the improved operating results of
Foamex L.P. In addition, raw material inventories increased due to increased
year end purchases associated with a potential cost increase that did not occur.
The increase in accounts payable is primarily associated with the year end
purchase of raw material inventories. Foamex L.P.'s restructuring/consolidation
plan includes accruals of approximately $26.9 million cash charges of which
$15.6 million is expected to be paid during 1998.

As of December 28, 1997, there were $54.9 million of revolving credit
borrowings under the Credit Facility with unused availability of approximately
$73.9 million which includes approximately $16.0 million associated with letters
of credit outstanding which are supported by the Credit Facility. Borrowings by
Foamex Canada as of December 28, 1997 were $3.6 million under Foamex Canada's
revolving credit agreement with unused availability of approximately $2.0
million at an interest rate of 6.50%.

Cash Flow from Operating Activities

Cash flow from continuing operations was $22.0 million, $36.7 million and
$36.5 million in 1997, 1996 and 1995, respectively. Cash flow from continuing
operations decreased for 1997 as compared to 1996 primarily as a result of the
use of approximately $24.4 million of cash for payments and costs associated
with the debt extinguishment during 1997 and reduced operating results offset by
a decreased use of cash by the operating assets and liabilities by reduced
operating results. Cash flow from continuing operations remained consistent for
1996 as compared to 1995 primarily as a result of improved operating results
from continuing operations offset by an increased use of cash by the operating
assets and liabilities.

Cash Flow from Investing Activities

From the beginning of 1995 through 1997, Foamex L.P. spent approximately
$75.8 million on capital improvements. The expenditures included: (i)
installation of new variable pressure foaming technology ("VPF(TM)") in the
Orange, California facility; (ii) the construction of a facility in Mexico City,
Mexico to improve manufacturing efficiencies and to meet the growing local
demand for foam products; (iii) the expansion and modernization of a facility in
Orlando, Florida to improve manufacturing efficiencies, and (iv) installation of
more efficient foam production line systems and fabricating equipment in a
number of manufacturing facilities. Foamex L.P. expects to increase capital
expenditures at the current levels for the foreseeable future as a result of the
Crain Acquisition and the installation of the VPF(TM) manufacturing process.

On December 23, 1997, Foamex L.P. acquired Crain pursuant to a merger
agreement with Crain Holdings for a purchase price of approximately $213.7
million, including the assumption of debt with a face value of approximately
$98.6 million (and an estimated fair value of approximately $112.3 million). In
addition, fees and expenses associated with the Crain Acquisition are
approximately $13.2 million. The Crain Acquisition was primarily funded with
$118.0 million of bank borrowings under the Credit Facility.

During 1996, Foamex L.P. received net sale proceeds of approximately $42.7
million in connection with the sale of Perfect Fit which was finalized in 1996.
The net sale proceeds were used to repurchase long-term debt and for the payment
of certain retained liabilities.

During 1996, FJPS, a former limited partner, repaid $18.4 million under a
promissory note and a waiver payment of $0.2 million using a portion of the
proceeds from the sale of its partnership interest in JPS Automotive L.P. in
exchange for certain waivers and amendments of the promissory note.

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During 1995, Foamex L.P. acquired certain assets and assumed certain
liabilities of manufacturers of synthetic fabrics for the carpet and furniture
industries for an aggregate consideration of approximately $8.0 million,
including related fees and expenses of approximately $0.3 million, with an
initial cash payment of $7.2 million.

During 1994, Foamex International acquired Transformacion De Espumas Y
Fieltros, S.A. de C.V. ("TEFSA") which required the purchase price to be paid
over a three year period. During 1996, Foamex International contributed its
interest in Foamex Mexico to Foamex L.P. During 1997, 1996 and 1995, Foamex L.P.
made scheduled cash payments of approximately $0.9 million, $0.8 million and
$0.8 million, respectively, in accordance with the purchase agreement. The final
payment was made in 1997.

Cash Flow from Financing Activities

On June 12, 1997, Foamex International substantially completed the
Refinancing Plan designed to reduce Foamex International's interest expense and
increase its financing flexibility. The Refinancing Plan included a tender offer
to purchase $373.0 million of Foamex L.P.'s existing public debt and
approximately $116.7 million of the Discount Debentures. Also, the Refinancing
Plan included the payment of $5.2 million of term loan borrowings under an
existing credit facility, and the payment of related fees and expenses. In
addition, the tender offer included amending the existing indentures to remove
substantially all of the restrictive covenants. Foamex L.P. purchased $342.3
million of its public debt and the $116.7 million of Discount Debentures under
the tender offer and incurred an extraordinary loss on the early extinguishment
of debt of approximately $44.5 million. The Refinancing Plan was funded by
$347.0 million of borrowings under the Credit Facility and the net proceeds from
the issuance of $150.0 million principal amount of Senior Subordinated Notes. As
a result of the Refinancing Plan, Foamex L.P.'s long-term debt increased by
$150.1 million. Foamex L.P. expects the Refinancing Plan to result in increased
interest expense as compared to the debt structure prior to the Refinancing
Plan, assuming no material changes in interest rates. Foamex L.P.'s future
interest expense will vary based on a variety of factors including fluctuations
in interest rates in general. As a result of the Refinancing Plan, variable rate
debt comprised a larger percentage of Foamex L.P.'s overall indebtedness than in
the past, and as a result, future fluctuations in interest rates will have a
greater impact on Foamex L.P.'s interest expense than in the past.

During 1997, in connection with the Refinancing Plan, Foamex L.P. purchased
all of the Discount Debentures for approximately $105.8 million, including fees
and expenses and subsequently distributed the discount debentures to FJPS.

During 1997, Foamex L.P. made a tax distribution advance of approximately
$13.6 million to Foamex International pursuant to a tax distribution advance
agreement.

On October 1, 1997, Foamex L.P. redeemed approximately $26.2 million of the
approximately $30.7 million of Foamex L.P.'s outstanding public debt that was
not tendered as part of the Refinancing Plan. These redemptions were funded with
borrowings under the Credit Facility. In connection with these redemptions,
Foamex L.P. incurred an extraordinary loss on the early extinguishment of debt
of approximately $2.1 million. The remaining outstanding public debt of
approximately $4.5 million that was not tendered as part of the Refinancing Plan
was defeased in February 1998.

During 1997 and 1996, Foamex L.P. repurchased long-term debt of
approximately $42.4 million with the net proceeds from the sale of Perfect Fit.

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Foamex L.P. made cash distributions to its partners, pursuant to a tax
sharing agreement, of approximately $8.8 million, $3.5 million and $2.4 million
in 1997, 1996 and 1995, respectively. Also, Foamex L.P. made a cash distribution
during 1997 of approximately $1.5 million to a partner in connection with the
Refinancing Plan.

Interest Rate Swap Agreements

Foamex L.P. enters into interest rate swaps to lower funding costs and/or
to manage interest costs and exposure to changing interest rates. Foamex L.P.
does not hold or issue financial instruments for trading purposes.

In connection with the Refinancing Plan, Foamex L.P.'s existing interest
rate swap agreements with a notional amount of $300.0 million were considered to
be effectively terminated since the underlying debt was extinguished. These
interest rate swap agreements had an estimated fair value liability of $8.2
million at the date of the Refinancing Plan which is included in the
extraordinary loss on the early extinguishment of debt. In lieu of a cash
payment for the estimated fair value of the existing interest rate swap
agreements, Foamex L.P. entered into an amendment of the existing interest rate
swap agreements resulting in one interest rate swap agreement with a notional
amount of $150.0 million through June 2007. Accordingly, the $8.2 million fair
value liability has been recorded as a deferred credit which will be amortized
as a reduction in interest and debt issuance expense on a straight-line basis
through June 2007. On January 8, 1998, Foamex L.P. entered into a new amendment
to its interest rate swap agreement. The new amendment provides for an interest
rate swap agreement with a notional amount of $150.0 million through June 2002.
Under the new amendment, Foamex L.P. is obligated to make fixed payments of
5.78% per annum through December 1998 and variable payments based on LIBOR at
the beginning of each six month period for the remainder of the agreement, in
exchange for fixed payments by the swap partner at 6.44% per annum for the life
of the agreement, payable semiannually in arrears. The newly amended interest
rate swap agreement can be terminated by the swap partner at the end of each six
month period commencing December 1999.

Foamex L.P. is exposed to credit loss in the event of a nonperformance by
the swap partner; however, the occurrence of this event is not anticipated. The
effect of interest rate swaps was a favorable adjustment to interest and debt
issuance expense of $2.2 million, $3.7 million and $1.4 million for 1997, 1996
and 1995, respectively.

Environmental Matters

Foamex L.P. is subject to extensive and changing environmental laws and
regulations. Expenditures to date in connection with Foamex L.P.'s compliance
with such laws and regulations did not have a material adverse effect on
operations, financial position, capital expenditures or competitive position.
The amount of liabilities recorded by Foamex L.P. in connection with
environmental matters as of December 28, 1997 was $4.3 million. In addition, as
of December 28, 1997 Foamex L.P. has net receivables of $1.1 million for
indemnification of environmental liabilities from former owners, net of a $1.0
million allowance relating to potential disagreements regarding the scope of the
indemnification. Although it is possible that new information or future
developments could require Foamex L.P. to reassess its potential exposure to all
pending environmental matters, including those described in the footnotes to
Foamex L.P.'s consolidated financial statements, management believes that, based
upon all currently available information, the resolution of all such pending
environmental matters will not have a material adverse effect on Foamex L.P.'s
operations, financial position, capital expenditures or competitive position.

Inflation and Other Matters

There was no significant impact on Foamex L.P.'s operations as a result of
inflation during the prior three year period. See "Results of Operations" for a
discussion of the impact of raw material price increases. 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.

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Foamex L.P. has and will continue to make certain investments in its
software systems and applications to ensure Foamex L. P. is Year 2000 compliant.
Foamex L.P. plans to continue to make modifications to the identified software
during 1998 and test during 1998. The financial impact to Foamex L.P. has not
been and is not anticipated to be material to its financial position or results
of operation in any given year.

New Accounting Standards

Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"),
"Reporting Comprehensive Income," was issued by the Financial Accounting
Standards Board in June 1997. This statement requires all items that must be
recognized under accounting standards as components of comprehensive income to
be reported in a financial statement that is displayed with the same prominence
as other financial statements. Foamex L.P. will adopt SFAS No. 130 for 1998.

Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
"Disclosures about Segments of an Enterprise and Restated Information," was
issued by the Financial Accounting Standards Board in June 1997. This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected financial
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. Foamex L.P. will
adopt SFAS No. 131 for year end 1998 reporting. Management is evaluating the
impact, if any, the standard will have on Foamex L.P.'s present segment
reporting.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

An index to the financial statements and the required financial statement
schedule is set forth in Item 14.

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

Not applicable.

PART III

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

PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

[Enlarge/Download Table]
(a) Financial Statements and Schedules

Foamex L.P. and Subsidiaries:

Report of Independent Accountants F-2
Consolidated Balance Sheets as of December 28, 1997 and December 29, 1996 F-3
Consolidated Statements of Operations for the years ended 1997, 1996 and 1995 F-5
Consolidated Statements of Cash Flows for the years ended 1997, 1996 and 1995 F-6
Consolidated Statements of Partners' Equity (Deficit) for the years ended 1997, 1996 and 1995 F-7
Notes to Consolidated Financial Statements F-8
Foamex Capital Corporation:
Report of Independent Accountants F-33
Balance Sheets as of December 28, 1997 and December 29, 1996 F-34
Notes to Balance Sheets F-35

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General Felt Industries, Inc.:
Report of Independent Accountants F-36
Consolidated Balance Sheets as of December 28, 1997 and December 29, 1996 F-37
Consolidated Statements of Operations for the years ended 1997, 1996 and 1995 F-39
Consolidated Statements of Cash Flows for the years ended 1997, 1996 and 1995 F-40
Consolidated Statements of Stockholder's Equity for the years ended 1997, 1996 and 1995 F-41
Notes to Consolidated Financial Statements F-42
Foamex Fibers, Inc.:
Report of Independent Accountants F-52
Balance Sheets as of December 28, 1997 and December 29, 1996 F-53
Statements of Operations for the years ended 1997, 1996 and for the period from
April 13, 1995 to December 31, 1995 and the period from January 1,
1995 to April 12, 1995 F-54
Statements of Cash Flows for the years ended 1997, 1996 and for the period from
April 13, 1995 to December 31, 1995 and the period from January 1,
1995 to April 12, 1995 F-55
Statements of Stockholder's Equity for the years ended 1997, 1996 and for the period from
April 13, 1995 to December 31, 1995 and the period from January 1, 1995 to April 12, 1995 F-56
Notes to Financial Statements F-57
Foamex L.P. and Subsidiaries Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts S-2

(b) Reports on Form 8-K

Form 8-K, dated October 6, 1997, reporting the sale of Foamex L.P.'s
needlepunch carpeting, tufted carpeting and artificial grass products
business.

Form 8-K, dated December 23, 1997, reporting the acquisition of Crain
Industries, Inc.

Form 8-K/A, dated March 9, 1998, providing pro forma financial
information relating to the acquisition of Crain Industries, Inc.

Form 8-K, dated February 28, 1998, reporting the change in corporate
structure.

3.1(a) - Certificate of Limited Partnership of Foamex L.P. ("Foamex")
3.2.1(a) - Fourth Amended and Restated Agreement of Limited Partnership of
Foamex L.P., dated as of December 14, 1993, by and among FMXI Inc.
("FMXI") and Trace Foam Company, Inc. ("Trace Foam"), as general
partners, and Foamex L.P., as a limited partner (the "Partnership
Agreement").
3.2.2(b) - First Amendment to the Partnership Agreement, dated June 28, 1994.
3.2.3(c) - Second Amendment to the Partnership Agreement, dated June 12,
1997.
3.2.4(v) - Third Amendment to the Partnership Agreement, dated December 23,
1997.
3.2.5(x) - Fourth Amendment to the Partnership Agreement, dated February 27,
1998.
3.3(y) - Certificate of Incorporation of FMXI.
3.4(y) - By-laws of FMXI.
3.5(k) - Certificate of Incorporation of Foamex Capital Corporation
("FCC").
3.6(k) - By-laws of FCC.
4.1.1(d) - Indenture, dated as of June 12, 1997, by and among Foamex L.P.,
FCC, the Subsidiary Guarantors and The Bank of New York, as Trustee,
relating to $150,000,000 principal amount of 9 7/8% Senior
Subordinated Notes due 2007, including the form of Senior
Subordinated Note and Subsidiary Guarantee.

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4.1.2(v) - First Supplemental Indenture, dated as of December 23, 1997,
between Foamex LLC ("FLLC") and The Bank of New York, as trustee,
relating to the 9 7/8% Notes.
4.1.3(x) - Second Supplemental Indenture, dated as of February 27, 1998,
among Foamex L.P. and FCC, as joint and several obligors, General
Felt, Foamex Fibers, and FLLC, as withdrawing guarantors, and The
Bank of New York, as trustee, relating to the 9 7/8% Notes.
4.1.4(d) - Registration Rights Agreement, dated as of June 12, 1997, by and
among Foamex, FCC, General Felt, Foamex Fibers, and all future
direct or indirect domestic subsidiaries of Foamex or FCC, and
Donaldson, Lufkin & Jenrette Securities Corporation, Salomon
Brothers Inc. and Scotia Capital Markets, as Initial Purchasers.
4.2.1(v) - Indenture, dated as of December 23, 1997, by and among Foamex
L.P., FCC, the Subsidiary Guarantors, Crain Holdings Corp., as
Intermediate obligator, and The Bank of New York, as trustee,
relating to $98,000,000 principal amount of 13 1/2% Senior
Subordinated Notes due 2005 (the "13 1/2% Notes"), including the
form of Senior Subordinated Note and Subsidiary Guarantee.
4.2.2(x) - First Supplemental Indenture, dated as of February 27, 1998, among
Foamex L.P. and FCC, as joint and several obligors, General Felt,
Foamex Fibers and FLLC, as withdrawing guarantors, Crain Industries,
Inc., as withdrawing intermediate obligor, and The Bank of New York,
as trustee, relating to the 13 1/2% Notes.
4.3(x) - Discharge of Indenture, dated as of February 27, 1998, by and
among Foamex L.P., General Felt, Foamex International and State
Street Bank and Trust Company, as trustee, relating to the 9 1/2%
Senior Secured Notes due 2000.
4.4.1(x) - Credit Agreement, dated as of June 12, 1997, as amended and
restated as of February 27, 1998, by and among Foamex L.P., and
FMXI, the institutions from time to time party thereto as lenders,
the institutions from time to time party thereto as issuing banks,
and Citicorp USA, Inc. and The Bank of Nova Scotia, as
Administrative Agents.
4.4.2(x) - Second Amended and Restated Foamex International Guaranty, dated
as of February 27, 1998, made by Foamex International in favor of
Citicorp USA, Inc., as Collateral Agent.
4.4.3(x) - Amended and Restated Partnership Guaranty, dated as of February
27, 1998, made by FMXI in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.4(p) - Foamex Guaranty, dated as of June 12, 1997, made by Foamex L.P. in
favor of Citicorp USA, Inc., as Collateral Agent.
4.4.5(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Latin America, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.6(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.7(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by FCC in
favor of Citicorp USA, Inc., as Collateral Agent.
4.4.8(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.9(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Asia, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.10(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.11(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Latin America, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.12(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Asia, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.13(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.14(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.

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4.4.15(p) - Foamex Security Agreement, dated as of June 12, 1997, made by
Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.16(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Latin America, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.17(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.18(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.19(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
Foamex Asia, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.4.20(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made by
FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.21 - Intentionally omitted.
4.4.22(w) - First Amendment to Foamex Pledge Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.23(w) - First Amendment to Foamex Security Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.24(w) - First Amendment to Foamex Patent Agreement, dated as of December
23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.25(w) - First Amendment to Trademark Security Agreement, dated as of
December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.4.26(w) - Acknowledgment of Guaranty by each of the guarantors to a Guaranty
dated June 12, 1997 in favor of Citicorp USA, Inc.
4.4.27(w) - First Amendment to Pledge Agreement, dated as of December 23,
1997, by pledgors in favor of Citicorp USA, Inc.
4.4.28(w) - Crain Industries Guaranty, dated as of December 23, 1997, made by
Crain in favor of Citicorp USA, Inc.
4.4.29 - Partnership Pledge Agreement, dated as of February 27, 1998, made
by Foamex International and FMXI in favor of Citicorp USA, Inc., as
Collateral Agent.
4.6(j) - Commitment letter, dated July 9, 1996, from The Bank of Nova
Scotia to Foamex Canada Inc.
4.7(a) - Subordinated Promissory Note, dated as of May 6, 1993, in the
original principal amount of $7,014,864 executed by Foamex L.P. to
John Rallis ("Rallis").
4.8(a) - Marely Loan Commitment Agreement, dated as of December 14, 1993,
by and between Foamex L.P. and Marely s.a. ("Marely").
4.9(a) - DLJ Loan Commitment Agreement, dated as of December 14, 1993, by
and between Foamex L.P. and DLJ Funding, Inc. ("DLJ Funding").
4.10(p) - Promissory Note, dated June 12, 1997, in the aggregate principal
amount of $5,000,000, executed by Trace Holdings to Foamex.
4.10.1(p) - Promissory Note, dated June 12, 1997, in the aggregate principal
amount of $4,794,828, executed by Trace Holdings to Foamex.
4.11.1(x) - Promissory Note of Foamex L.P. in favor of Trace Foam LLC in the
principal amount of $34 million, dated February 27, 1998.
10.1.1(p) - Amendment to Master Agreement, dated as of June 5, 1997, between
Citibank, N.A. and Foamex.
10.1.2(p) - Amended confirmation, dated as of June 13, 1997, between Citibank,
N.A. and Foamex.
10.2(h) - Reimbursement Agreement, dated as of March 23, 1993, between Trace
Holdings and General Felt.
10.3(h) - Shareholder Agreement, dated December 31, 1992, among Recticel,
s.a. ("Recticel"), Recticel Holding Noord B.V., Foamex L.P., Beamech
Group Limited, LME-Beamech, Inc., James Brian Blackwell, and Prefoam
AG relating to foam technology sharing arrangement.

10-K405/A 28th Page of 94 TOC 1st Previous Next ↓Bottom Just 28th
10.4.1(k) - Asset Transfer Agreement, dated as of October 2, 1990, between
Trace Holdings and Foamex (the "Trace Holdings Asset Transfer
Agreement").
10.4.2(k) - First Amendment, dated as of December 19, 1991, to the Trace
Holdings Asset Transfer Agreement.
10.4.3(k) - Amended and Restated Guaranty, dated as of December 19, 1991, made
by Trace Foam in favor of Foamex L.P.
10.5.1(k) - Asset Transfer Agreement, dated as of October 2, 1990, between RFC
and Foamex L.P. (the "RFC Asset Transfer Agreement").
10.5.2(k) - First Amendment, dated as of December 19, 1991, to the RFC Asset
Transfer Agreement.
10.5.3(k) - Schedule 5.03 to the RFC Asset Transfer Agreement (the "5.03
Protocol").
10.5.4(h) - The 5.03 Protocol Assumption Agreement, dated as of October 13,
1992, between RFC and Foamex L.P.
10.5.5(h) - Letter Agreement between Trace Holdings and Recticel regarding the
Recticel Guaranty, dated as of July 22, 1992.
10.6(l) - Supply Agreement, dated June 28, 1994, between Foamex L.P. and
Foamex International.
10.7.1(l) - First Amended and Restated Tax Sharing Agreement, dated as of
December 14, 1993, among Foamex, Trace Foam, FMXI and Foamex L.P.
10.7.2(d) - First Amendment to Amended and Restated Tax Sharing Agreement of
Foamex, dated as of June 12, 1997, by and among Foamex, Foamex L.P.,
FMXI, Inc. and Trace Foam.
10.7.3(w) - Second Amendment to Amended and Restated Tax Sharing Agreement of
Foamex L.P., dated as of December 23, 1997, by and among Foamex
L.P., Foamex International, FMXI, and Trace Foam.
10.7.4(y) - Third Amendment to Amended and Restated Tax Sharing Agreement of
Foamex L.P., dated as of February 27, 1998, by and between Foamex
L.P., Foamex International and FMXI.
10.8.1(m) - Tax Distribution Advance Agreement, dated as of December 11, 1996,
by and between Foamex and Foamex-JPS Automotive.
10.8.2(d) - Amendment No. 1 to Tax Distribution Advance Agreement, dated as of
June 12, 1997, by and between Foamex L.P. and Foamex.
10.9.1(h) - Trace Foam Management Agreement between Foamex and Trace Foam,
dated as of October 13, 1992.
10.9.2(l) - Affirmation Agreement re: Management Agreement, dated as of
December 14, 1993, between Foamex and Trace Foam.
10.9.3(d) - First Amendment to Management Agreement, dated as of June 12,
1997, by and between Foamex and Trace Foam.
10.10.1(k) - Salaried Incentive Plan of Foamex and Subsidiaries.
10.10.2(k) - Trace Holdings 1987 Nonqualified Stock Option Plan.
10.10.3(k) - Equity Growth Participation Program.
10.10.4(e)(o) - Foamex L.P. Salaried Retirement Plan (formerly known as the
Foamex L.P. Products, Inc. Salaried Employee Retirement Plan), as
amended, effective July 1, 1994.
10.10.5(u) - Foamex L.P. 401(k) Savings Plan effective October 1, 1997.
10.10.6(a) - Foamex L.P.'s 1993 Stock Option Plan.
10.10.7(a) - Foamex L.P.'s Non-Employee Director Compensation Plan.
10.11.1(o) - Employment Agreement, dated as of February 1, 1994, by and between
Foamex L.P. and William H. Bundy.
10.12(a) - Warrant Exchange Agreement, dated as of December 14, 1993, by and
between Foamex L.P. and Marely.
10.13(a) - Warrant Exchange Agreement, dated as of December 14, 1993, by and
between Foamex L.P. and DLJ Funding.
10.14(o) - Stock Purchase Agreement, dated as of December 23, 1993, by and
between Transformacion de
10.15.1(r) - Asset Purchase Agreement, dated as of August 29, 1997, by and
among General Felt, Foamex L.P., Bretlin, Inc. and The Dixie Group.

10-K405/A 29th Page of 94 TOC 1st Previous Next ↓Bottom Just 29th
10.15.2(s) - Addendum to Asset Purchase Agreement, dated as of October 1, 1997,
by and among General Felt, Foamex L.P., Bretlin, Inc. and The Dixie
Group.
10.16.1(x) - Supply Agreement, dated as of February 27, 1998, by and between
Foamex L.P. and General Felt (as assigned to Foamex Carpet).
10.16.2(x) - Administrative Services Agreement, dated as of February 27, 1998,
by and between Foamex L.P. and General Felt (as assigned to Foamex
Carpet).
27 - Financial Data Schedule for the year ended December 28, 1997.

----------------------------
(a) Incorporated herein by reference to the Exhibit to Foamex L.P.'s
Registration Statement on Form S-1, Registration No. 33-69606.

(b) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
for the fiscal year ended January 1, 1995.

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

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

(e) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex and FCC on Form S-4, Registration No. 33-65158.

(f) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
for the quarterly period ended June 30, 1996.

(g) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex, FCC and General Felt on Form S-1, Registration Nos.
33-60888, 33-60888-01, and 33-60888-02.

(h) Incorporated herein by reference to the Exhibit to the Form 10-K Statement
of Foamex and FCC for fiscal 1992.

(i) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for fiscal 1994.

(j) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
for the quarterly period ended September 30, 1996.

(k) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex and FCC on Form S-1, Registration Nos. 33-49976 and
33-49976-01.

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

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

(n) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
for the quarterly period ended July 2, 1995.

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

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

10-K405/A 30th Page of 94 TOC 1st Previous Next ↓Bottom Just 30th
(q) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for the fiscal year ended December 31, 1995.

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

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

(t) Incorporated by reference to the Exhibit to the Form 10-Q of Foamex
International for the quarterly period ended July 3, 1994.

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

(v) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex L.P., Foamex Capital Corporation and Foamex
International reporting an event that occurred December 23, 1997.

(w) Incorporated herein by reference to the Exhibit in the Registration
Statement of Foamex on Form S-4, Registration No. 333-45733.

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

(y) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
International for fiscal 1997.

Certain instruments defining the rights of security holders have been
excluded herefrom in accordance with Item 601(b)(4)(iii) of Regulation S-K. The
registrant hereby agrees to furnish a copy of any such instrument to the
Commission upon request.

(b) Foamex L.P. filed the following Current Reports on Form 8-K:

Form 8-K, dated October 6, 1997, reporting the sale of Foamex L.P.'s
needlepunch carpeting, tufted carpeting and artificial grass products
business.

Form 8-K, dated December 23, 1997, reporting the acquisition of Crain
Industries, Inc.

Form 8-K/A, dated March 9, 1998, providing pro forma financial
information relating to the acquisition of Crain Industries, Inc.

Form 8-K, dated February 28, 1998, reporting the change in corporate
structure.

10-K405/A 31st Page of 94 TOC 1st Previous Next ↓Bottom Just 31st
SIGNATURES

Pursuant to the requirements of Section 15(d) 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 on the 11th day of May,
1998

FOAMEX L.P.
By: FMXI, Inc.
General Partner

By: /s/ Andrea Farace
Andrea Farace
Chairman of the Board and
Chief Executive Officer

FOAMEX CAPITAL CORPORATION

By: /s/ Andrea Farace
Andrea Farace
Chairman of the Board and
President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on its behalf by the
registrant and in the capacities and on the dates indicated:

Signatures Title Date

/s/ Marshall S. Cogan
----------------------- Vice Chairman of the Board May 11, 1998
Marshall S. Cogan and Director of FMXI and
Director of FCC

/s/ Robert J. Hay
----------------------- Chairman Emeritus of May 11, 1998
Robert J. Hay Foamex L.P.

/s/ Kenneth R. Fuette
----------------------- Executive Vice President (Chief May 11, 1998
Kenneth R. Fuette Financial Officer and Chief
Administrative Officer) of Foamex L.P.,
Vice President and Director of FMXI,
and Vice President, Treasurer, Chief
Financial Officer and Chief Accounting
Officer and Director of FCC

10-K405/A 32nd Page of 94 TOC 1st Previous Next ↓Bottom Just 32nd
/s/ Andrea Farace Director of FCC May 11, 1998
------------------------
Andrea Farace

/s/ Robert H. Nelson Director of FCC May 11, 1998
------------------------
Robert H. Nelson

/s/ Barry Zimmerman Director of FCC May 11, 1998
------------------------
Barry Zimmerman

10-K405/A 33rd Page of 94 TOC 1st Previous Next ↓Bottom Just 33rd
FOAMEX L.P. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

[Enlarge/Download Table]

Financial Statements of Registrants:
Foamex L.P.:

Foamex Capital Corporation:
Report of Independent Accountants F-33
Balance Sheets as of December 28, 1997 and December 29, 1996 F-34
Notes to Balance Sheets F-35

Financial Statements of Guarantors:
General Felt Industries, Inc.
Report of Independent Accountants F-36
Consolidated Balance Sheets as of December 28, 1997 and December 29, 1996 F-37
Consolidated Statements of Operations for the years ended 1997, 1996 and 1995 F-39
Consolidated Statements of Cash Flows for the years ended 1997, 1996 and 1995 F-40
Consolidated Statements of Stockholder's Equity for the years ended 1997, 1996 and 1995 F-41
Notes to Consolidated Financial Statements F-42

Foamex Fibers, Inc.
Report of Independent Accountants F-52
Balance Sheets as of December 28, 1997 and December 29, 1996 F-53
Statements of Operations for the years ended 1997, 1996 and for the period from
April 13, 1995 to December 31, 1995 and the period from January 1, 1995 to
April 12, 1995 F-54
Statements of Cash Flows for the years ended 1997, 1996 and for the period from
April 13, 1995 to December 31, 1995 and the period from January 1, 1995 to
April 12, 1995 F-55
Statements of Stockholder's Equity for the years ended 1997, 1996 and for the period from
April 13, 1995 to December 31, 1995 and the period from January 1, 1995 to April 12, 1995 F-56
Notes to Financial Statements F-57

F-1

10-K405/A 34th Page of 94 TOC 1st Previous Next ↓Bottom Just 34th
REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of Foamex L.P.:

We have audited the accompanying consolidated balance sheets of Foamex L.P. and
subsidiaries ("Foamex L.P.") as of December 28, 1997 and December 29, 1996, and
the related consolidated statements of operations, cash flows and partners'
equity (deficit) for each of the three years in the period ended December 28,
1997. Our audits also included the financial statement schedule as of and for
each of the three years in the period ended December 28, 1997. These financial
statements and financial statement schedule are the responsibility of Foamex
L.P.'s management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Foamex L.P. and
subsidiaries as of December 28, 1997 and December 29, 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 28, 1997 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center Philadelphia,
Pennsylvania March 4, 1998, except as to
the information presented in Note 1 and
Note 16, for which the date is March 23,
1998.

F-2

10-K405/A 35th Page of 94 TOC 1st Previous Next ↓Bottom Just 35th
FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 28, December 29,
ASSETS 1997 1996
(thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 9,405 $ 20,968
Restricted cash -- 12,143
Accounts receivable, net of allowance for
doubtful accounts of $8,082 and $6,328 174,959 125,847
Inventories 120,299 101,220
Deferred income taxes 6,850 6,720
Due from related parties 1,680 1,791
Other current assets 39,024 20,231
--------- ---------

Total current assets 352,217 288,920
--------- ---------

PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 9,054 9,674
Buildings and leasehold improvements 79,876 78,082
Machinery, equipment and furnishings 219,164 185,348
Construction in progress 23,331 20,784
--------- ---------

Total 331,425 293,888

Less accumulated depreciation and
amortization (110,151) (111,461)
--------- ---------

Property, plant and equipment, net 221,274 182,427

COST IN EXCESS OF ASSETS ACQUIRED, NET 219,699 83,991

DEBT ISSUANCE COSTS, NET 18,889 14,902

OTHER ASSETS 21,989 15,917
--------- ---------

TOTAL ASSETS $ 834,068 $ 586,157
========= =========

F-3

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

10-K405/A 36th Page of 94 TOC 1st Previous Next ↓Bottom Just 36th
FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

[Download Table]

December 28, December 29,
LIABILITIES AND PARTNERS' EQUITY (DEFICIT) 1997 1996
(thousands)
CURRENT LIABILITIES:

Short-term borrowings $ 6,598 $ 3,692
Current portion of long-term debt 12,161 13,735
Accounts payable 121,147 75,621
Accounts payable to related parties 11,662 8,803
Accrued employee compensation 10,827 7,302
Accrued interest 10,655 8,871
Accrued restructuring and plant consolidation 15,644 6,300
Other accrued liabilities 37,449 27,506
--------- ---------

Total current liabilities 226,143 151,830

LONG-TERM DEBT 726,649 392,617

DEFERRED INCOME TAXES 2,529 4,663

ACCRUED RESTRUCTURING AND
PLANT CONSOLIDATION 11,252 4,043

OTHER LIABILITIES 23,797 20,172
--------- ---------

Total liabilities 990,370 573,325
--------- ---------

COMMITMENTS AND CONTINGENCIES -- --
--------- ---------

PARTNERS' EQUITY (DEFICIT)
General partners (122,304) 632
Limited partners -- 57,654
Notes and advances receivable from partner (16,118) (35,180)
Other (17,880) (10,274)
--------- ---------

Total partners' equity (deficit) (156,302) 12,832
--------- ---------

TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT) $ 834,068 $ 586,157
========= =========

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

F-4

10-K405/A 37th Page of 94 TOC 1st Previous Next ↓Bottom Just 37th
FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended 1997, 1996 and 1995

[Enlarge/Download Table]

December 28, December 29, December 31,
1997 1996 1995
(thousands)

NET SALES $ 931,095 $ 926,351 $ 862,834

COST OF GOODS SOLD 787,756 773,119 762,085
--------- --------- ---------

GROSS PROFIT 143,339 153,232 100,749

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 65,907 56,778 63,466

RESTRUCTURING AND OTHER CHARGES (CREDITS) 21,100 (6,415) 39,249
--------- --------- ---------

INCOME (LOSS) FROM OPERATIONS 56,332 102,869 (1,966)

INTEREST AND DEBT ISSUANCE EXPENSE 44,181 43,211 44,550

OTHER INCOME (EXPENSE), NET 2,009 1,705 (205)
--------- --------- ---------

INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES 14,160 61,363 (46,721)

PROVISION FOR INCOME TAXES 2,895 7,702 1,405
--------- --------- ---------

INCOME (LOSS) FROM CONTINUING OPERATIONS 11,265 53,661 (48,126)
--------- --------- ---------

DISCONTINUED OPERATIONS:

LOSS FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAXES -- (230) (5,117)

LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS,
INCLUDING PROVISION FOR OPERATING LOSSES
DURING THE PHASE-OUT PERIOD, NET OF
INCOME TAXES -- (41,820) --
--------- --------- ---------

LOSS FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAXES -- (42,050) (5,117)
--------- --------- ---------

INCOME (LOSS) BEFORE EXTRAORDINARY
LOSS 11,265 11,611 (53,243)

EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT (48,559) (1,912) --
--------- --------- ---------

NET INCOME (LOSS) $ (37,294) $ 9,699 $ (53,243)
========= ========= =========

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

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FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended 1997, 1996 and 1995

[Enlarge/Download Table]

December 28, December 29, December 31,
1997 1996 1995
OPERATING ACTIVITIES: (thousands)

Net income (loss) $ (37,294) $ 9,699 $ (53,243)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 20,882 21,132 22,905
Amortization of debt issuance costs and debt discount 2,307 2,919 2,729
Net loss on disposal of discontinued operations -- 40,551 --
Net loss from discontinued operations -- 1,499 5,117
Asset writedowns and other charges (credits) 12,041 (7,364) 16,677
Extraordinary loss on early extinguishment of debt 24,182 1,217 --
Provision for uncollectible accounts 2,295 704 4,627
Deferred income taxes (568) 6,010 659
Other, net (5,977) (5,804) (706)
Changes in operating assets and liabilities, net of
acquisitions and discontinued operations:
Accounts receivable (4,038) (13,130) (1,472)
Inventories 12,882 (13,078) 14,146
Accounts payable and accounts payable related parties 14,359 5,035 823
Accrued restructuring charges 5,701 (7,000) 16,834
Other assets and liabilities (24,763) (5,724) 7,415
--------- --------- ---------

Net cash provided by continuing operations 22,009 36,666 36,511
Net cash used for discontinued operations -- (486) (9,175)
--------- --------- ---------
Net cash provided by operating activities 22,009 36,180 27,336
--------- --------- ---------

INVESTING ACTIVITIES:
Capital expenditures (33,117) (23,344) (19,348)
Acquisitions, net of cash acquired (119,065) (841) (7,272)
Proceeds from sale of assets 40,169 -- --
Proceeds from sale of discontinued operations -- 42,650 --
Purchase of note from related party (5,000) -- (2,000)
Repayment of (purchase of) note from partner (2,500) 18,623 --
Decrease (increase) in restricted cash 12,143 (12,143) --
Capital expenditures for discontinued operations -- (919) (4,429)
Other investing activities 112 (1,276) 2,495
--------- --------- ---------

Net cash provided by (used for) investing activities (107,258) 22,750 (30,554)
--------- --------- ---------

FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term borrowings 2,894 1,493 (1,685)
Net proceeds from (repayments of) revolving loans 54,928 -- (3,000)
Proceeds from long-term debt 594,499 1,500 --
Repayments of long-term debt (430,593) (38,116) (9,099)
Purchase of FJPS senior secured discount debentures (105,829) -- --
Tax distribution advances (13,618) -- --
Distributions to partners (10,283) (3,487) (2,379)
Debt issuance costs (18,410) -- --
Other financing activities 98 10 --
--------- --------- ---------

Net cash provided by (used for) financing activities 73,686 (38,600) (16,163)
--------- --------- ---------

Net increase (decrease) in cash and cash equivalents (11,563) 20,330 (19,381)

Cash and cash equivalents at beginning of period 20,968 638 20,019
--------- --------- ---------

Cash and cash equivalents at end of period $ 9,405 $ 20,968 $ 638
========= ========= =========

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

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FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended 1997, 1996 and 1995

[Enlarge/Download Table]

Note
General Limited Receivable
Partners Partners from Partner Other Total
(thousands)

Balances at January 1, 1995 $ 1,448 $ 97,686 $ (38,167) $ (8,419) $ 52,548
Net loss (1,044) (52,199) -- -- (53,243)
Distributions (125) (5,603) -- -- (5,728)
Purchase of note receivable from
Foamex International -- -- (2,000) -- (2,000)
Increase in note receivable from
Trace Holdings -- -- -- (1,373) (1,373)
Accretion of note receivable from partner 125 6,152 (6,277) -- --
Additional pension liability -- -- -- (3,290) (3,290)
Foreign currency translation adjustment -- -- -- 482 482
--------- --------- --------- --------- ---------
Balances at December 31, 1995 404 46,036 (46,444) (12,600) (12,604)

Net income 184 9,515 -- -- 9,699
Distributions (104) (5,108) -- -- (5,212)
Accretion of note receivable from partner 144 7,031 (7,175) -- --
Repayment of note receivable from partner -- -- 18,439 -- 18,439
Repayment premium on note receivable
from partner 4 180 -- -- 184
Additional pension liability -- -- -- 2,372 2,372
Foreign currency translation adjustment -- -- -- (46) (46)
--------- --------- --------- --------- ---------
Balances at December 29, 1996 632 57,654 (35,180) (10,274) 12,832

Net loss (746) (36,548) -- -- (37,294)
Distributions (23) (1,099) -- -- (1,122)
Accretion of note receivable from partner 48 2,339 (2,387) -- --
Distributions associated with the June 1997
Refinancing Plan (2,896) (141,947) 37,567 -- (107,276)
Additional pension liability -- -- -- (1,311) (1,311)
Foreign currency translation adjustment -- -- -- (873) (873)
Increase in note receivable from Trace Holdings -- -- -- (5,422) (5,422)
Purchase of note receivable from Foamex
International -- -- (2,500) -- (2,500)
Tax distribution advance -- -- (13,618) -- (13,618)
Other -- 282 -- -- 282
Deficit balance of Limited Partners assumed
by General Partners (119,319) 119,319 -- -- --
--------- --------- --------- --------- ---------

Balances at December 28, 1997 $(122,304) $ -- $ (16,118) $ (17,880) $(156,302)
========= ========= ========= ========= =========

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

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

1. ORGANIZATION AND BASIS OF PRESENTATION

Foamex L.P. is a manufacturer and distributor of flexible polyurethane foam
and advanced polymer foam products in North America. During 1997, 1996 and 1995,
Foamex L.P.'s products were utilized primarily in five end markets (i) carpet
cushion and other carpet products, (ii) cushioning foams including bedding,
(iii) automotive applications, including trim and accessories, (iv) furniture
products for furniture manufacturers and distributors, and (v) specialty and
technical applications including those for foams for filtration, gasketing and
sealing.

During 1997, 1996 and 1995, Foamex L.P., a Delaware limited partnership,
was an indirect, majority-owned subsidiary of Foamex International Inc. ("Foamex
International"). Effective February 27, 1998, Foamex L.P. became a wholly-owned
subsidiary of Foamex International (See Note 19).

On December 23, 1997, Foamex L.P. acquired Crain Industries, Inc. ("Crain")
pursuant to a merger agreement with Crain Holdings Corp. for a purchase price of
approximately $213.7 million, including the assumption of debt with a face value
of approximately $98.6 million (and an estimated fair value of approximately
$112.3 million) (the "Crain Acquisition"). In addition, fees and expenses
associated with the Crain Acquisition are approximately $13.2 million. The Crain
Acquisition provided a fully integrated manufacturer, fabricator and distributor
of a broad range of flexible polyurethane foam and foam products which are sold
to a diverse customer base, principally in the furniture, bedding and carpet
cushion markets. In connection with the Crain Acquisition, Foamex L.P. approved
a restructuring/consolidation plan for the two entities. Foamex L.P. recorded
restructuring charges of $21.1 million relating to restructuring Foamex L.P.'s
operations in connection with the Crain Acquisition and related transactions. In
addition, Foamex L.P. recorded approximately $1.5 million of severance and
related costs and $8.5 million for costs associated with the shut down and
consolidation of certain acquired facilities.

On March 16, 1998, Foamex International announced that its Board of
Directors received an unsolicited buyout proposal from Trace International
Holdings, Inc. ("Trace Holdings"), Foamex International's principal stockholder.
Trace Holdings proposed to acquire all of the outstanding common stock of Foamex
International not currently owned by Trace Holdings and its subsidiaries for a
cash price of $17.00 per share. Also, Trace Holdings informed the Board of
Directors that financing for the buyout transaction would be arranged through
Donaldson, Lufkin & Jenrette Securities Corporation and The Bank of Nova
Scotia/Scotia Capital Markets. As of March 16, 1998, Trace Holdings and its
subsidiaries beneficially owned approximately 11,475,000 shares or approximately
46% of the outstanding common stock of Foamex International. In response to
Trace Holding's offer, Foamex International's Board of Directors has appointed a
special committee to determine the advisability and fairness of the proposed
buyout to Foamex International's stockholders other than Trace Holdings and its
subsidiaries. Trace's proposed buyout is subject to a number of conditions,
including the negotiations of definitive documents (which are expected to
contain customary closing conditions); the filing of a disclosure statement and
other documents with the Securities and Exchange Commission; regulatory filings;
and approval of the transaction by a majority of Foamex International's
stockholders.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The consolidated financial statements include the accounts of Foamex L.P.
and all subsidiaries that Foamex L.P. directly or indirectly controls, either
through majority ownership or otherwise. Intercompany accounts and transactions
for continuing operations have been eliminated in consolidation.

Fiscal Year

Foamex L.P.'s fiscal year ends on the Sunday closest to the thirty-first
day of December. Fiscal years 1997, 1996 and 1995 were composed of fifty-two
weeks and ended on December 28, 1997, December 29, 1996 and December 31, 1995,
respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates. (See Notes 3, 4, 8, 11, 15, 16 and 17 and Cost in Excess of Net
Assets Acquired below.)

Revenue Recognition

Revenue from sales is recognized when products are shipped at which time
title passes to the customer.

Discounts and Billing Adjustments

A reduction in sales revenue is recognized for sales discounts when product
is invoiced or for other billing adjustments.

Cash and Cash Equivalents

Foamex L.P. considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.

Restricted Cash

As of December 29, 1996, Foamex L.P. had restricted cash of approximately
$12.1 million. This cash was derived from the net sales proceeds relating to the
sale of Perfect Fit (See Note 9) and was restricted by Foamex L.P.'s debt
agreements. During 1997, Foamex L.P. used the restricted cash to repurchase
approximately $11.8 million of outstanding indebtedness.

Inventories

Inventories are stated at the lower of cost or market. The cost of the
inventories is determined on a first-in, first-out basis.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over the estimated useful lives of the assets. The
range of useful lives estimated for buildings is generally twenty to thirty-five
years and the range for machinery, equipment and furnishings is five to twelve
years. Leasehold improvements are amortized over the shorter of the terms of the
respective leases or the estimated useful lives of the leasehold improvements.
Depreciation expense for the years ended 1997, 1996 and 1995 was $17.6 million,
$17.9 million and $18.7 million, respectively. For income tax purposes, Foamex
L.P. uses accelerated depreciation methods.

Cost of maintenance and repairs is charged to expense as incurred. Renewals
and improvements are capitalized. Upon retirement or other disposition of items
of plant and equipment, the cost and related accumulated depreciation are
removed from the accounts and any gain or loss is included in operations.

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Debt Issuance Costs

Debt issuance costs consist of amounts incurred in obtaining long-term
financing. These costs are being amortized over the term of the related debt
using the effective interest method. Accumulated amortization as of December 28,
1997 and December 29, 1996 was approximately $1.4 million and $7.5 million,
respectively.

Cost in Excess of Net Assets Acquired

The excess of the acquisition cost over the fair value of net assets
acquired in business combinations accounted for as purchases is amortized using
the straight-line method over a forty year period. At each balance sheet date
Foamex L.P. evaluates the recoverability of cost in excess of net assets
acquired using certain financial indicators such as historical and future
ability to generate income from operations based on a going concern basis.
Accumulated amortization as of December 28, 1997 and December 29, 1996 was
approximately $12.0 million and $11.6 million, respectively.

Environmental Matters

Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be reasonably
estimated.

Postretirement and Postemployment Benefits

Foamex L.P. accrues postretirement benefits throughout the employees'
active service periods until they attain full eligibility for those benefits.
Also, Foamex L.P. accrues postemployment benefits when it becomes probable that
such benefits will be paid and when sufficient information exists to make
reasonable estimates of the amounts to be paid.

Foreign Currency Accounting

The financial statements of foreign subsidiaries, except in countries
treated as highly inflationary, have been translated into U.S. dollars by using
the year end exchange rates for assets and liabilities and average exchange
rates for the statements of operations. Currency translation adjustments are
included in other partners' equity (deficit) until the entity is substantially
sold or liquidated. For operations in countries treated as highly inflationary,
certain financial statement amounts are translated at historical exchange rates,
with all other assets and liabilities translated at year end exchange rates.
These translation adjustments are reflected in the results of operations and are
insignificant for all periods presented. Also, foreign currency transaction
gains and losses are insignificant for all periods presented. The effect of
foreign currency exchange rates on cash flows is not material.

Interest Rate Swap Agreement

The differential to be paid or received under an interest rate swap
agreement is recognized as an adjustment to interest and debt issuance expense
in the current period as interest rates change.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

Income taxes are accounted for under the asset and liability method, in
which deferred income taxes are provided for temporary differences between the
financial reporting and income tax basis of assets and liabilities using the
income tax rates, under existing legislation, expected to be in effect at the
date such temporary differences are expected to reverse.

Foamex L.P., as a limited partnership, is not subject to federal income
taxes; therefore no current or deferred provision has been provided for such
taxes. However, Foamex L.P. has provided for the income taxes of certain states
in which it is subject to taxes and for certain subsidiaries which are subject
to federal and state income taxes. The partners will provide for their
respective shares of income or loss in their federal or applicable state income
tax returns. Foamex L.P. has a tax sharing agreement that provides for the
payment of distributions to the partners for amounts that would be required to
be paid if Foamex L.P. was a corporation filing separate tax returns. The
ability of Foamex L.P. to make such distributions is limited by the terms of its
credit agreements and indentures. (See Note 7).

Reclassifications

Certain amounts in the 1996 and 1995 consolidated financial statements have
been reclassified to conform with the current year's presentation.

New Accounting Standards

Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
"Disclosures about Segments of an Enterprise and Restated Information," was
issued by the Financial Accounting Standards Board in June 1997. This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected financial
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. Foamex L.P. will
adopt SFAS No. 131 for year ended 1998 reporting. Management is evaluating the
impact, if any, the standard will have on the Company's present segment
reporting.

3. ACQUISITIONS

On December 23, 1997, Foamex L.P. acquired Crain pursuant to a merger
agreement with Crain Holdings Corp. for a purchase price of approximately $213.7
million, including the assumption of debt with a face value of approximately
$98.6 million (with an estimated fair value of approximately $112.3 million). In
addition, fees and expenses associated with the Crain Acquisition are
approximately $13.2 million. The Crain Acquisition provided a fully integrated
manufacturer, fabricator and distributor of a broad range of flexible
polyurethane foam and foam products which are sold to a diverse customer base,
principally in the furniture, bedding and carpet cushion markets. The
acquisition was funded by $118.0 million in bank borrowings by Foamex L.P. under
the Credit Facility. The excess of the purchase price over the estimated fair
value of the net assets acquired was approximately $152.5 million. In connection
with the Crain Acquisition, Foamex L.P. approved a plan to close certain
acquired facilities. As of the acquisition date, Foamex L.P. established
accruals of approximately $1.5 million of severance and related costs and $8.5
million for costs associated with the shut down and consolidation of certain
acquired facilities.

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

3. ACQUISITIONS (continued)

In April 1995, Foamex L.P. acquired certain assets and assumed certain
liabilities of manufacturers of synthetic fabrics for the carpet and furniture
industries for aggregate consideration of approximately $8.0 million, including
related fees and expenses of approximately $0.3 million, with an initial cash
payment of $7.2 million. The excess of the purchase price over the estimated
fair value of the net assets acquired was approximately $3.9 million.

During 1994, Foamex L.P. acquired Transformacion De Espumas Y Fieltros S.A.
de C.V. ("TEFSA") for an aggregate purchase price of approximately $4.5 million
to be paid over a three-year period with an initial cash payment of $1.7
million. During 1997, 1996 and 1995, Foamex L.P. made scheduled cash payments of
$0.9 million, $0.8 million and $0.8 million, respectively, in accordance with
the purchase agreement.

The acquisitions were accounted for as purchases and the operations of the
acquired companies are included in the consolidated statements of operations and
cash flows from their respective dates of acquisition. However, Crain's
operations for the period from December 24, 1997 to December 28, 1997 have not
been included in the consolidated statements of operations or cash flows since
the affect would be insignificant. The cost of each acquisition has been
allocated on the basis of the fair value of the assets acquired and the
liabilities assumed. The excess of the purchase price over the estimated fair
value of the net assets acquired is being amortized using the straight-line
method over forty years. The allocation of the purchase price for the Crain
Acquisition is based upon preliminary estimates and assumptions and is subject
to revision once appraisals, valuations and other studies of the fair value of
the acquired assets and liabilities have been completed. The pro forma results
listed below are unaudited and assume that the Crain

Acquisition occurred at the beginning of each year presented.

1997 1996
(thousands)
Net sales $1,256,712 $1,271,315
========== ==========

Income (loss) from continuing operations $ 2,904 $ 45,881
========== ==========

The pro forma results are not necessarily indicative of what would have
occurred if the Crain Acquisition had been in effect for the entire periods
presented nor are they necessarily indicative of future consolidated results.

4. RESTRUCTURING AND OTHER CHARGES (CREDITS)

In 1995, Foamex L.P. approved a restructuring plan (the "1995 restructuring
plan") to consolidate thirteen foam production, fabrication or branch locations
to concentrate resources as a result of industry conditions and to better
position itself to achieve its strategic growth objectives. Foamex L.P. recorded
restructuring and other charges of $39.2 million which was comprised of $35.6
million associated with the consolidation of the foam production, fabrication or
branch locations, $2.2 million associated with the completion of a 1993
restructuring plan and $1.4 million associated with merger and acquisition
activities of Foamex L.P. The components of the $35.6 million restructuring
charge include: $16.7 million for fixed asset writedowns (net of estimated sale
proceeds), $15.1 million for plant closure and operating lease obligations and
$3.8 million for personnel reductions. The $3.8 million cost for personnel
reductions primarily represents severance and employee benefit costs associated
with the elimination of manufacturing and administrative personnel.

In 1996, Foamex L.P. determined to continue to operate one of the
facilities originally identified for closure in the 1995 restructuring plan
because of improved economics and the lack of synergy to be achieved from
relocating the manufacturing process. In addition, Foamex L.P. approved a plan
to close two facilities that were

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. RESTRUCTURING AND OTHER CHARGES (CREDITS) (continued)

not originally identified in the 1995 restructuring plan. As a result of these
changes to the 1995 restructuring plan and the favorable termination of certain
lease agreements and other matters, Foamex L.P. recorded a $6.4 million net
restructuring credit which included a restructuring credit of $11.3 million
associated with Foamex L.P.'s decision not to close the facility identified as
part of the 1995 restructuring plan and $1.7 million of restructuring credits
relating primarily to the favorable termination of certain lease agreements and
other matters relating to the 1995 restructuring plan, offset by $6.6 million of
restructuring charges relating to the closure of the two facilities during 1997
(the "1996 restructuring plan").

During December 1997, Foamex L.P. approved a restructuring plan (the "1997
restructuring plan") to consolidate nine of Foamex L.P.'s foam production,
fabrication or branch locations in connection with the Crain Acquisition. (See
Note 3.) Foamex L.P. recorded restructuring and other charges of $21.1 million
which was comprised of $23.0 million associated with the consolidation of the
foam production, fabrication or branch locations, offset by $1.9 million of
restructuring credits due primarily to the favorable termination of certain
lease agreements and other matters associated with the 1996 and 1995
restructuring plans. The components of the $23.0 million restructuring charge
include: $12.1 million for fixed assets writedowns (net of estimated sale
proceeds), $9.8 million for plant closure and operating lease obligations and
$1.1 million for personnel reductions.

In addition, Foamex L.P. approved a consolidation plan to integrate the
acquired Crain facilities into Foamex L.P.'s existing facilities. Foamex L.P.
recorded approximately $1.5 million of severance and related costs and $8.5
million for costs associated with the shut down of certain acquired facilities.

As discussed above, the 1996 and 1995 restructuring plans have been
generally implemented as originally contemplated. The following table sets forth
the components of Foamex L.P.'s restructuring and other charges:

[Enlarge/Download Table]

Plant
Asset Closure Personnel
Total Writedowns and Leases Reductions Other
(millions)

1995 restructuring charge $ 39.2 $ 16.7 $ 15.1 $ 3.8 $ 3.6
Asset writeoff/writedowns (23.3) (20.9) -- -- (2.4)
Cash spending (0.4) -- (0.3) (0.1) --
------- ------- ------- ------ ------

Balances at December 31, 1995 15.5 (4.2) 14.8 3.7 1.2
Cash spending (9.7) -- (6.6) (2.0) (1.1)
Cash proceeds 1.0 1.0 -- -- --
1996 restructuring charge 6.6 2.4 4.1 0.1 --
Restructuring credits (13.0) (9.7) (2.8) (0.4) (0.1)
Asset adjustment for restructuring
credits 8.1 8.7 (0.6) -- --
------- ------- ------- ------ ------

Balances at December 29, 1996 8.5 (1.8) 8.9 1.4 --
Cash spending (2.3) -- (1.4) (0.9) --
1997 restructuring charge 23.0 12.1 9.8 1.1 --
Restructuring credits (1.9) 0.1 (2.3) 0.3 --
Asset write-off/writedowns (16.1) (16.1) -- -- --
Plant consolidation costs 10.0 -- 8.5 1.5 --
------- ------- ------- ------ ------

Balance at December 28, 1997 $ 21.2 $ (5.7) $ 23.5 $ 3.4 $ --
======= ======= ======= ====== ======

As indicated in the table above, the accrued restructuring and plant
consolidation balance at December 28, 1997 will be used for payments relating to
plant closure and leases for the closed facilities. The $5.7 million of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. RESTRUCTURING AND OTHER CHARGES (CREDITS) (continued)

asset writedowns relates to estimated proceeds and is included in noncurrent
assets. Foamex L.P. expects to incur approximately $15.6 million of charges
during 1998 with the remaining $11.3 million to be incurred through 2004. As of
December 28, 1997, Foamex L.P. has terminated all 270 employees associated with
the 1996 and 1995 restructuring plans and notified approximately 640 employees
in the manufacturing and administrative areas of their impending termination in
connection with the 1997 restructuring and plant consolidation plans.

5. INVENTORIES

Inventories consists of:

December 28, 1997 December 29, 1996
(thousands)
Raw materials and supplies $ 75,487 $ 60,169
Work-in process 15,620 13,453
Finished goods 29,192 27,598
-------- --------
Total $120,299 $101,220
======== ========

6. SHORT-TERM BORROWINGS

Short-term borrowings include borrowings outstanding under a line of credit
facility for Foamex Canada Inc. ("Foamex Canada") bearing interest at the bank's
prime rate (6.0% at December 28, 1997) plus 1/2%. The weighted average interest
rates on Foamex Canada's short-term borrowings outstanding for 1997, 1996 and
1995 were 5.4%, 5.9% and 8.0%, respectively. Borrowings under Foamex Canada's
credit facility are due on demand and are collateralized by accounts receivable,
property and inventories of Foamex Canada having an approximate net carrying
value of $20.0 million as of December 28, 1997. The unused amount under this
line of credit totaled $2.0 million as of December 28, 1997.

7. LONG-TERM DEBT AND EXTRAORDINARY LOSS

Long-term debt consists of:

[Enlarge/Download Table]

December 28, December 29,
1997 1996

Credit Facility: (thousands)
Term Loan A (1) $ 76,700 $ -
Term Loan B (1) 109,725 -
Term Loan C (1) 99,750 -
Term Loan D (1) 110,000 -
Revolving credit facility (2) 54,928 -
9 7/8% Senior subordinated notes due 2007 (3) 150,000 -
13 1/2% Senior subordinated notes due 2005 (includes
$13,720 of unamortized debt premiums) (3) 111,720 -
9 1/2% Senior secured notes due 2000 (4) 4,523 106,793
11 1/4% Senior notes due 2002 (4) - 141,400
11 7/8% Senior subordinated debentures due 2004 (net of
unamortized debt discount of $769) - 125,056
11 7/8% Senior subordinated debentures due 2004, Series B (5) - 7,000
Industrial revenue bonds (6) 7,000 7,000
Foamex L.P. term loan (8.54% interest rate as of
December 29, 1996) (6) - 11,000

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

7. LONG-TERM DEBT AND EXTRAORDINARY LOSS (continued)

December 28, December 29,
1997 1996
(thousands)
Subordinated note payable (net of unamortized
debt discount of $886 and $1,198) (5) 6,129 5,817
Other 8,335 2,286
--------- ---------
738,810 406,352

Less current portion 12,161 13,735
--------- ---------

Long-term debt-unrelated parties $726,649 $392,617
======== ========
<FN>
(1) Debt of Foamex L.P., guaranteed by Foamex International, General Felt and
Foamex Fibers.
(2) Debt of Foamex L.P. and General Felt, guaranteed by Foamex International
and Foamex Fibers.
(3) Debt of Foamex L.P. and Foamex Capital Corporation, guaranteed by General
Felt and Foamex Fibers.
(4) Debt of Foamex L.P. and Foamex Capital Corporation ("FCC"), guaranteed by
Foamex International and General Felt.
(5) Debt of Foamex L.P. and Foamex Capital Corporation and guaranteed by
General Felt.
(6) Debt of Foamex L.P.
(7) Debt of Foamex L.P. and Foamex Capital Corporation and guaranteed by Foamex
International.
</FN>

Refinancing Plan

On June 12, 1997, Foamex International substantially completed a
refinancing plan (the "Refinancing Plan") that included the refinancing of
certain long-term indebtedness to reduce Foamex International's interest expense
and improve financing flexibility. In connection with the Refinancing Plan,
Foamex L.P. purchased approximately $342.3 million of aggregate principal amount
of its public debt and approximately $116.7 million of aggregate principal
amount of FJPS's senior secured discount debentures due 2004 (the "Discount
Debentures") and repaid $5.2 million of term loan borrowings under an existing
credit facility. Foamex L.P. incurred an extraordinary loss on the early
extinguishment of debt associated with the Refinancing Plan of approximately
$44.5 million. The Refinancing Plan was funded by $347.0 million of borrowings
under a new $480.0 million credit facility (the "Credit Facility") and the net
proceeds from the issuance of $150.0 million of 9 7/8% senior subordinated notes
due 2007.

In addition, on October 1, 1997, Foamex L.P. redeemed all of the
outstanding: (i) 11 1/4% senior notes due 2002, (ii) 11 7/8% senior subordinated
debentures due 2004 and (iii) the 11 7/8% senior subordinated debentures due
2004, Series B, constituting approximately $26.2 million of the approximately
$30.7 million of its outstanding public debt that was not tendered as part of
the Refinancing Plan. The redemption was funded from borrowings under the Credit
Facility. In connection with this redemption, Foamex L.P. incurred an
extraordinary loss on the early extinguishment of debt of approximately $2.1
million.

Credit Facility

On June 12, 1997, Foamex L.P. entered into the Credit Facility with a group
of banks that provides for term loans of up to $440.0 million which expire from
June 2003 to June 2006 and borrowings of up to $150.0 million under a revolving
line of credit which expires in June 2003. The term loans are comprised of a (i)
term A loan ("Term A") which provides up to $120.0 million of borrowings, (ii)
term B loan ("Term B") of $110.0 million, (iii) term C loan ("Term C") of $100.0
million and (iv) term D loan ("Term D") of $110.0 million.

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

7. LONG-TERM DEBT AND EXTRAORDINARY LOSS (continued)

Borrowings under the Credit Facility are collateralized by substantially
all of the assets of Foamex L.P., General Felt and Foamex Fibers on a pari passu
basis with the 9 1/2% senior secured notes due 2000 and the industrial revenue
bonds (collectively, the "Notes"); however, the rights of the holders of the
applicable issue of Notes to receive payment upon the disposition of the
collateral securing such issue of Notes has been preserved.

Pursuant to the terms of the Credit Facility, borrowed funds will bear
interest at a floating rate equal to an applicable margin, as defined, plus the
higher of (i) the base rate of The Bank of Nova Scotia, in effect from time to
time, or (ii) a rate that is equal to 0.5% per annum plus the federal funds rate
in effect from time to time. The applicable margin is determined based on the
total net debt to EBDAIT ratio, as defined, and can range from no margin up to
1.125% per annum for Term A and revolving loans, from 0.875% per annum to 1.375%
per annum for Term B, from 1.125% per annum to 1.625% per annum for Term C and
from 1.250% per annum to 1.750% per annum for Term D. At the option of Foamex
L.P., portions of the outstanding loans under the Credit Facility are
convertible into LIBOR based loans which bear interest at a floating rate equal
to an applicable margin for LIBOR based loans, as defined, plus the average
LIBOR, as defined. The applicable margin for LIBOR based loans is a rate that
will generally equal the applicable margin (discussed above) plus 1.0% per
annum.

Foamex L.P. had a credit agreement (the "Foamex L.P. Credit Facility") with
a group of banks that provide for loans of up to $85.0 million of which up to
$40.0 million was available as a term loan payable in twenty equal quarterly
installments commencing October 1994 and up to $45.0 million is available under
a revolving line of credit which was to expire in June 1999. In 1994, Foamex
L.P. and General Felt entered into a $40.0 million term loan under the Foamex
L.P. Credit Facility. During 1997 and 1996, Foamex L.P. and General Felt used
$3.8 million and $12.0 million, respectively, of net proceeds from the Perfect
Fit sale to repay term loan borrowings. The term loan was repaid in connection
with the Refinancing Plan.

9 7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")

The Senior Subordinated Notes were issued by Foamex L.P. and FCC in
connection with the Refinancing Plan. The Senior Subordinated Notes bear
interest at the rate of 9 7/8% per annum payable semiannually on each June 15
and December 15, commencing December 15, 1997. The Senior Subordinated Notes
mature on June 15, 2007. The Senior Subordinated Notes may be redeemed at the
option of Foamex L.P., in whole or in part, at any time on or after June 15,
2002, initially at 104.938% of their principal amount, plus accrued interest and
liquidated damages, as defined, if any, thereon to the date of redemption and
declining to 100.0% on or after June 15, 2005. In addition, at any time prior to
June 15, 2000, Foamex L.P. may on one or more occasions redeem up to 35.0% of
the initially outstanding principal amount of the Senior Subordinated Notes at a
redemption price equal to 109.875% of the principal amount, plus accrued
interest and liquidated damages, if any, thereon to the date of redemption with
the cash proceeds of one or more Public Equity Offerings, as defined. Upon the
occurrence of a change of control, as defined, each holder of Senior
Subordinated Notes will have the right to require Foamex L.P. to repurchase the
Senior Subordinated Notes at a price equal to 101.0% of the principal amount,
plus accrued interest and liquidated damages, if any, to the date of repurchase.
The Senior Subordinated Notes are subordinated in right of payment to all senior
indebtedness and are pari passu in right of payment to the subordinated note.

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

The 13 1/2% Senior Subordinated Notes were issued by Foamex L.P. and FCC in
a private placement under the Securities Act of 1933, as amended, on December
23, 1997 in connection with the Crain Acquisition. The 13 1/2% Senior
Subordinated Notes represent unsecured general obligations of Foamex L.P. and
are subordinated to all Senior Debt (as defined in the Indenture).

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

7. LONG-TERM DEBT AND EXTRAORDINARY LOSS (continued)

The 13 1/2% Senior Subordinated Notes mature on August 15, 2005. Interest
on the 13 1/2% Senior Subordinated Notes is payable semiannually on each
February 15 and August 15. The 13 1/2% Senior Subordinated Notes bear interest
at the rate of 13 1/2% per annum. The 13 1/2% Senior Subordinated Notes may be
redeemed prior to August 15, 2002, except in the event of a Change of Control
(as defined) or Foamex L.P. may, subject to certain requirements (as defined),
on or prior to August 15, 1998 redeem up to 33 1/3% of the aggregate original
principal amount with proceeds from an Equity Offering (as defined).

Foamex L.P. has filed a registration statement relating to an exchange
offer in which Foamex L.P. will offer to exchange the 13 1/2% Senior
Subordinated Notes issued in the private placement for new notes. The terms of
the new notes will be substantially identical in all respects (including
principal amount, interest rate, maturity and ranking) to the terms of the 13
1/2% Senior Subordinated Notes, except that the new notes will be transferable
by holders thereof without further registration under the Securities Act of
1933, as amended (except in the case of 13 1/2% Senior Subordinated Notes held
by affiliates of Foamex L.P. and for certain other holders), and are not subject
to any covenant regarding registration under the Securities Act of 1933, as
amended.

9 1/2% Senior Secured Notes due 2000 ("Senior Secured Notes")

The Senior Secured Notes were issued on June 3, 1993 with interest at the
rate of 9 1/2% payable semiannually on each June 1 and December 1. The Senior
Secured Notes had a maturity date of June 1, 2000. The Senior Secured Notes were
collateralized by a first-priority lien on substantially all of the assets of
Foamex L.P. except for receivables, real estate and fixtures. The Senior Secured
Notes were defeased in February 1998.

11 1/4% Senior Notes due 2002 ("Senior Notes")

The Senior Notes had an interest rate of 11 1/4% payable semiannually on
each April 1 and October 1. The Senior Notes had a maturity date of October 1,
2002.

11 7/8% Senior Subordinated Debentures due 2004 ("Subordinated Debentures")

The Subordinated Debentures had an interest rate of 11 7/8% payable
semiannually on each April 1 and October 1. The Subordinated Debentures had a
maturity date of October 1, 2004.

11 7/8% Senior Subordinated Debentures, Series B ("Series B Debentures")

The Series B Debentures were issued July 30, 1993, by Foamex L.P. in an
exchange offer to holders of senior subordinated debentures issued in connection
with the acquisition of General Felt on March 23, 1993. The Series B Debentures
had terms substantially similar to the Subordinated Debentures.

Industrial Revenue Bonds ("IRBs")

Two bond issues in the principal amount of $1.0 million and $6.0 million,
maturing in 2005 and 2013, respectively, are collateralized by certain
properties which have an approximate net carrying value of $11.4 million at
December 28, 1997 and letters of credit approximating $7.3 million. The IRBs
bear interest at a variable rate with options available to Foamex L.P. to
convert to a fixed rate. The interest rates on the IRBs were 4.15% and 3.85% at
December 28, 1997 for the $6.0 million and $1.0 million bond issues,
respectively. The interest rate on the $6.0 million bond issue varies weekly
based on an interest rate that is indicative of current bidside yields on high
quality short-term, tax-exempt obligations, or if such interest rate is not
available, 70.0% of the interest rate for thirteen week United States Treasury
Bills. The maximum interest rate for either of the IRBs is 15.0% per annum. At
the time of a conversion to a fixed interest rate and upon appropriate notice,
the IRBs are redeemable at the option of the bondholders.

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

7. LONG-TERM DEBT AND EXTRAORDINARY LOSS (continued)

Subordinated Note Payable

This note payable was issued to John Rallis ("Rallis"), the former Chief
Operating Officer of Foamex International, on May 6, 1993 by Foamex L.P. in
connection with the acquisition of Great Western Foam Products Corporation and
certain related entities and assets (collectively, "Great Western"). The note
bears interest at a maximum rate of 6% per annum and the principal amount is
payable in three equal annual installments beginning May 6, 1999.

Other

As of December 28, 1997, other debt is comprised primarily of capital lease
obligations and borrowings by Foamex Mexico.

Early Extinguishment of Debt - Refinancing Plan

In connection with the Refinancing Plan, Foamex L.P. incurred an
extraordinary loss on the early extinguishment of debt of approximately $44.5
million. The extraordinary loss is comprised of approximately $20.2 million for
premium and consent fee payments, approximately $12.6 million for the write-off
of debt issuance costs and debt discount, approximately $8.2 million for the
loss associated with the effective termination and amendment of the interest
rate swap agreements and approximately $3.5 million of professional fees and
other costs. In connection with the Refinancing Plan, Foamex L.P. repaid $5.2
million in term loan borrowings under the Foamex L.P. Credit Facility and
purchased approximately $459.0 million of aggregate principal amount of public
debt comprised of:

o $99.8 million of aggregate principal amount of its 9 1/2% senior
secured notes due 2000 for an aggregate consideration of 104.193% of
principal plus accrued interest, comprised of a tender price of
102.193% and a consent fee of 2.0%;

o $130.1 million of aggregate principal amount of its 11 1/4% senior
notes due 2002 for an aggregate consideration of 105.709% of principal
plus accrued interest, comprised of a tender price of 103.709% and a
consent fee of 2.0%;

o $105.5 million of aggregate principal amount of its 11 7/8% senior
subordinated debentures due 2004 for an aggregate consideration of
107.586% of principal plus accrued interest, comprised of a tender
price of 105.586% and a consent fee of 2.0%;

o $6.9 million of aggregate principal amount of its 11 7/8% senior
subordinated debentures, series B due 2004 for an aggregate
consideration of 107.586% of principal plus accrued interest,
comprised of a tender price of 105.586% and a consent fee of 2.0%; and

o $116.7 million of aggregate principal amount of the Discount
Debentures for an aggregate consideration of 90.0% of principal
amount, which represents approximately 121.9% of the accreted book
value as of June 12, 1997, comprised of a tender price of 88.0% of
principal amount and a consent fee of 2.0%.

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

7. LONG-TERM DEBT AND EXTRAORDINARY LOSS (continued)

Early Extinguishment of Debt - Other

In addition, during 1997 Foamex L.P. incurred extraordinary losses of
approximately $1.0 million associated with the early extinguishment of
approximately $11.8 million of long-term debt funded with approximately $12.1
million of the remaining net proceeds from the sale of Perfect Fit. The
extraordinary loss is comprised of approximately $0.4 million of premium
payments and approximately $0.6 million for the write-off of debt issuance
costs. The long-term debt was comprised of:

o $2.5 million of aggregate principal amount of its 9 1/2% senior
secured notes due 2000.

o $5.5 million of aggregate principal amount of its 11 1/4% senior notes
due 2002.

o Bank term loan borrowings of $3.8 million under Foamex L.P.'s old
credit facility.

During 1996, Foamex L.P. used $31.3 million of the net proceeds from the
sale of Perfect Fit to extinguish debt of $30.6 million and redemption premiums
of $0.6 million. Foamex L.P. wrote off $1.2 million of debt issuance costs
associated with the early extinguishment of debt and incurred transaction costs
of $0.1 million. The early extinguishment of debt resulted in an extraordinary
loss of $1.9 million.

Interest Rate Swap Agreements

Foamex L.P. is exposed to credit loss in the event of a nonperformance by
the swap partner; however, the occurrence of this event is not anticipated. The
effect of the interest rate swaps was a favorable adjustment to interest and
debt issuance expense of $2.2 million, $3.7 million and $1.4 million for 1997,
1996 and 1995, respectively.

Debt Restrictions and Covenants

The indentures, credit facility and other indebtedness agreements contain
certain covenants that limit, among other things, the ability of Foamex L.P. (i)
to pay distributions or redeem partnership interests, (ii) to

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

7. LONG-TERM DEBT AND EXTRAORDINARY LOSS (continued)

make certain restrictive payments or investments, (iii) to incur additional
indebtedness or issue Preferred Equity Interest, as defined, (iv) to merge,
consolidate or sell all or substantially all of its assets, or (v) to enter into
certain transactions with affiliates or related persons. In addition, certain
agreements contain a provision that, in the event of a defined change of
control, 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 is the
maintenance of net worth and interest coverage ratios, as defined. Under the
most restrictive of the distribution restrictions, Foamex L.P. can make
distributions to Foamex International only to the extent to enable Foamex
International to meet its operating and debt obligations.

As of December 28, 1997, Foamex L.P. was in compliance with the covenants
of the indentures, credit agreements and other indebtedness agreements and
expects to be in compliance with these covenants for the foreseeable future.

Future Obligations on Long-Term Debt

Scheduled maturities of long-term debt are shown below:

Year Ended Long-Term Debt
(thousands)
1998 $ 12,161
1999 17,902
2000 26,168
2001 19,171
2002 23,248
Thereafter 627,326
--------
725,976
Unamortized debt premium, net 12,834
--------

Total $738,810
========

8. EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plans

Foamex L.P. maintains noncontributory defined benefit pension plans for
salaried and certain hourly employees. The salaried plan provides benefits that
are based principally on years of credited service and level of compensation.
The hourly plans provide benefits that are based principally on stated amounts
for each year of credited service.

Net periodic pension cost included the following components:

[Download Table]

1997 1996 1995
(thousands)

Service cost $ 2,229 $ 2,471 $ 2,087
Interest cost 4,273 3,997 3,742
Actual return on plan assets (6,308) (8,841) (5,682)
Net amortization and deferral 703 4,643 1,807
------- ------- -------
Total $ 897 $ 2,270 $ 1,954
======= ======= =======

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

8. EMPLOYEE BENEFIT PLANS (continued)

Foamex L.P.'s funding policy is to contribute annually an amount that both
satisfies the minimum funding requirements of the Employee Retirement Income
Security Act of 1974 and does not exceed the full funding limitations of the
Internal Revenue Code of 1986, as amended (the "Code"). Plan investments consist
primarily of corporate equity and debt securities, mutual life insurance funds
and cash equivalents. During 1997, the discount rate was adjusted to 7.0%. The
following table sets forth the funded status of Foamex L.P.'s underfunded plans
and the amounts recognized in the accompanying consolidated balance sheets as of
December 28, 1997 and December 29, 1996:

[Enlarge/Download Table]

December 28, December 29,
1997 1996
(thousands)
Actuarial present value of accumulated benefit obligations:

Vested benefits $ 61,188 $ 55,336
Nonvested benefits 3,112 2,137
-------- --------
Accumulated benefit obligations $ 64,300 $ 57,473
======== ========

Total projected benefit obligations $ 65,948 $ 58,775
Fair value of plan assets 58,952 53,734
-------- --------
Projected benefit obligations in excess of plan assets (6,996) (5,041)
Unrecognized net loss from past experience difference
from that assumed and effect of changes in assumptions 4,704 1,099
Additional minimum liability (3,982) (2,694)
-------- --------
Accrued pension cost $ (6,274) $ (6,636)
======== ========

Significant assumptions used in determining the plans' funded status are as
follows:

[Enlarge/Download Table]

December 28, December 29,
1997 1996

Expected long-term rates of return on plan assets 10.00% 9.50%
Discount rates on projected benefit obligations 7.00% 7.50%
Rates of increase in compensation levels (where applicable) 4.00% 4.00%

Defined Contribution Plan

Foamex L.P. maintains a defined contribution plan which is qualified under
Section 401(k) of the Code and is available for eligible employees who elect to
participate in the plan. Employee contributions are voluntary and subject to
certain limitations as imposed by the Code. Foamex L.P. provides contributions
amounting to a 25% match of employees' contributions up to 4% of eligible
compensation. Foamex L.P. also provides an additional 25% match of employees'
contributions up to 4% of eligible compensation made to a fund which invests in
Foamex International common stock. In addition, Foamex L.P. may make
discretionary contributions amounting to a 25% match of employees' contributions
up to 4% of eligible compensation. The expense for these contributions for 1997,
1996 and 1995 was approximately $0.9 million, $0.8 million and $0.7 million,
respectively.

Postretirement Benefits

In addition to providing pension benefits, Foamex L.P. provides
postretirement health care and life insurance for eligible employees. During
1996, certain employees accepted an early retirement program resulting in a
special termination loss of $0.6 million. During 1995, changes were made to
postretirement benefits offered

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. EMPLOYEE BENEFIT PLANS (continued)

to certain employees which resulted in a curtailment loss of $0.6 million. These
plans are unfunded and Foamex L.P. retains the right, subject to existing
agreements, to modify or eliminate these benefits.

The components of 1997, 1996 and 1995 expense for postretirement benefits
are as follows:

[Download Table]

1997 1996 1995
(thousands)

Service costs for benefits earned $ 9 $ 12 $ 24
Interest cost on liability 71 67 83
Net amortization and deferral (56) (53) (13)
Special termination/curtailment loss 74 576 619
----- ----- -----

Net periodic postretirement benefit cost $ 98 $ 602 $ 713
===== ===== =====

The accumulated postretirement benefit obligation at December 28, 1997 and
December 29, 1996 resulted in an unfunded obligation of $2.0 million and $2.1
million, respectively.

An 8% and 9% annual rate of increase in the per capita costs of covered
health care benefits was assumed for each of 1997 and 1996, respectively. This
rate was assumed to gradually decrease to 5% by the year 2000. Increasing the
weighted average assumed health care cost trend rates by one percentage point
would have an insignificant impact on the accumulated postretirement benefit
obligation and service and interest cost. The discount rate used was 7.00% and
7.50% as of December 28, 1997 and December 29, 1996, respectively.

Postemployment Benefits

Foamex L.P. provides certain postemployment benefits to former or inactive
employees and their dependents during the time period following employment but
before retirement. At December 28, 1997 and December 29, 1996, Foamex L.P.'s
liability for postemployment benefits was insignificant for each period.

9. DISCONTINUED OPERATIONS

During 1996, Foamex L.P. finalized the sale of the outstanding common stock
of Perfect Fit, a wholly-owned subsidiary, for an adjusted sale price of
approximately $44.2 million. The sale included all of the net assets of Foamex
L.P.'s home comfort products segment. Actual and estimated transaction expenses
related to the sale totaled approximately $1.5 million. Foamex L.P. recorded a
net loss on the sale of Perfect Fit of approximately $41.8 million, which
includes the loss on disposal and a net loss of $1.3 million (net of $1.2
million income tax benefit) relating to operating losses during the phase-out
period. Interest and debt issuance expense was allocated to discontinued
operations based on the estimated debt to be retired from the net proceeds of
the sale.

10. SALE OF ASSETS

On October 6, 1997, Foamex L.P. sold substantially all of the net assets of
its needlepunch carpeting, tufted carpeting and artificial grass products
business located at its facilities in Dalton, Georgia to Bretlin, Inc. for an
aggregate sale price of approximately $41.0 million. Foamex L.P. realized an
insignificant gain on the sale in 1997. Foamex L.P. used $38.8 million of the
net sale proceeds to repay outstanding term loan borrowings under the Credit
Facility. In connection with this repayment, Foamex L.P. incurred an
extraordinary loss on the early extinguishment of debt of approximately $0.9
million during 1997.

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

11. INCOME TAXES

Income (loss) from continuing operations before provision for income
taxes consists of the following:

[Download Table]

1997 1996 1995
(thousands)

United States $ 15,076 $ 58,277 $(45,738)
Foreign (916) 3,086 (983)
-------- -------- --------
Income (loss) from continuing operations
before provision (benefit) for income taxes $ 14,160 $ 61,363 $(46,721)
======== ======== ========

The components of the total consolidated provision (benefit) for income
taxes are summarized as follows:

[Download Table]

1997 1996 1995
(thousands)

Continuing operations $ 2,895 $ 7,702 $ 1,405
Discontinued operations -- (2,606) (2,640)
------- ------- -------
Total consolidated provision (benefit)
for income taxes $ 2,895 $ 5,096 $(1,235)
======= ======= =======

The total consolidated provision (benefit) for income taxes is summarized
as follows:

[Enlarge/Download Table]

1997 1996 1995
Current: (thousands)

Federal $ 1,958 $ 220 $ --
State 1,007 686 266
Foreign 498 786 480
------- ------- -------
Total current 3,463 1,692 746
------- ------- -------

Deferred:
Federal (247) 1,665 (1,424)
State (87) 1,248 (268)
Foreign (234) 491 (289)
------- ------- -------
Total deferred (568) 3,404 (1,981)
------- ------- -------

Total consolidated provision (benefit) for income taxes $ 2,895 $ 5,096 $(1,235)
======= ======= =======

The tax effect of the temporary differences that give rise to significant
deferred tax assets and liabilities are:

[Download Table]

December 28, December 29,
1997 1996
Deferred tax assets: (thousands)

Inventory basis differences $ 422 $ 415
Employee benefit accruals 860 714
Allowances and contingent liabilities 2,968 2,548
Restructuring and plant closing accruals 2,514 3,632
Other 373 221
Net operating loss carryforwards -- 5,154
Capital loss carryforwards 9,097 14,193
Valuation allowance for deferred tax assets (9,097) (15,988)
-------- --------

Deferred tax assets 7,137 10,889
-------- --------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. INCOME TAXES (continued)

[Download Table]

December 28, December 29,
1997 1996
Deferred tax liabilities: (thousands)

Basis difference in property, plant and equipment 2,623 7,644
Other 193 1,188
------ ------

Deferred tax liabilities 2,816 8,832
------ ------

Net deferred tax assets (liabilities) $4,321 $2,057
====== ======

Foamex L.P. has determined that taxable capital gains in the foreseeable
future for a subsidiary that files a separate federal income tax return will
likely not be sufficient to recognize the deferred tax asset associated with the
capital loss carryforward of that subsidiary. Accordingly, a valuation allowance
has been provided for the deferred tax asset associated with the capital loss
carryforward. During 1997, the valuation allowance for deferred tax assets
decreased by $6.9 million which included $5.0 million for the utilization of the
capital loss carryforward in connection with the sale of a facility and $1.9
million decrease due to reversal of General Felt preacquisition temporary
differences. The $1.9 million reversal of preacquisition temporary differences
was used to reduce cost in excess of assets acquired. At December 28, 1997,
General Felt has $26.0 million of capital loss carryforwards that expire in
2001.

A reconciliation of the statutory federal income tax rate to the effective
income tax rate on continuing operations is as follows:

[Download Table]

1997 1996 1995
thousands)

Statutory income taxes $ 4,956 $ 21,477 $(16,352)
State income taxes, net of federal 785 1,288 266
Permanent difference on partnership income (2,119) (11,714) 12,233
Limitation on the utilization of tax benefits -- -- 4,929
Write-off of excess cost 4,305 -- --
Valuation allowance (5,028) (4,823) --
Cost in excess of assets acquired 419 551 554
Other (423) 923 (225)
-------- -------- --------

Total $ 2,895 $ 7,702 $ 1,405
======== ======== ========

12. COMMITMENTS AND CONTINGENCIES

Operating Leases

Foamex L.P. is obligated under various noncancelable lease agreements for
rental of facilities, vehicles and other equipment. Many of the leases contain
renewal options with varying terms and escalation clauses that provide for
increased rentals based upon increases in the Consumer Price Index, real estate
taxes and lessors' operating expenses. Total minimum rental commitments
(excluding commitments accrued as part of the 1997 restructuring and plant
consolidation plans and 1996 and 1995 restructuring plans) required under
operating leases at December 28, 1997 are:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. COMMITMENTS AND CONTINGENCIES (continued)

Operating
Leases
(thousands)
1998 $11,098
1999 9,970
2000 8,338
2001 6,483
2002 6,524
Thereafter 17,322
-------

Total $59,735
=======

Rental expense charged to operations under operating leases approximated
$10.1 million, $9.6 million and $10.1 million for 1997, 1996 and 1995,
respectively. Substantially all such rental expense represented the minimum
rental payments under operating leases. In addition, Foamex L.P. incurred rental
expense of approximately $1.7 million and $3.5 million for 1996 and 1995,
respectively, under leases with related parties.

13. RELATED PARTY TRANSACTIONS AND BALANCES

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

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

In connection with the Refinancing Plan, Foamex L.P. purchased
approximately $116.7 million of aggregate principal amount of Discount
Debentures for approximately $105.8 million including transaction costs of
approximately $0.8 million. Foamex L.P. subsequently distributed the Discount
Debentures to FJPS and FMXI.

Also on June 12, 1997, Foamex L.P. distributed its $56.2 million aggregate
principal amount note, as amended, due 2006 (the "FJPS Note") from FJPS with an
accreted value as of June 12, 1997 of $35.6 million to FJPS and FMXI. The
accretion of the original issue discount of $2.4 million for the period from
December 30, 1996 to June 12, 1997 was reflected as a direct increase in the
FJPS Note and partners' capital account, and thereby excluded from the
consolidated statements of operations.

In connection with the Refinancing Plan, Foamex L.P. made a cash
distribution of approximately $1.5 million to Trace Foam as a result of Foamex
L.P.'s distribution to FJPS and FMXI of the Discount Debentures, the FJPS Note
and the $2.0 million aggregate principal amount promissory note due from Foamex
International.

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13. RELATED PARTY TRANSACTIONS AND BALANCES (continued)

Foamex L.P. has a supply agreement (the "Supply Agreement") with Foamex
International pursuant to which, at the option of Foamex L.P., Foamex
International will purchase certain raw materials, which are necessary for the
manufacture of Foamex L.P.'s products, and resell such materials to Foamex L.P.
at a price equal to net cost plus reasonable out of pocket expenses. Management
believes that the terms of the Supply Agreement are no less favorable than those
which Foamex L.P. could have obtained from an unaffiliated third party. During
1997, 1996 and 1995, Foamex L.P. purchased approximately $138.6 million, $129.7
million and $105.1 million, respectively, of raw materials under the Supply
Agreement. As of December 28, 1997 and December 29, 1996, Foamex L.P. had
accounts payable to Foamex International of approximately $11.7 million and $8.8
million, respectively, associated with the Supply Agreement.

Foamex L.P. chartered an aircraft (which is owned by a wholly-owned
subsidiary of Foamex International) through a third party and incurred costs of
approximately $1.2 million and $1.4 million in 1997 and 1996, respectively.

On December 26, 1997, Foamex L.P. entered into a $2.5 million promissory
note with Foamex International. The note bears interest at the rate of LIBOR
plus 2 3/8%. The note and interest are payable on demand, or if no demand is
made, then on December 31, 2001.

During April 1996, Foamex International contributed the foam products
operations of Foamex Mexico to Foamex L.P. The contribution was accounted for in
a manner similar to a pooling of interests since the entities were under common
control. Accordingly, all prior periods presented were restated to reflect the
results of operations and financial position of Foamex Mexico. The restatement
of prior periods was insignificant to the consolidated financial statements.

In December 1995, Foamex L.P. entered into a $2.0 million promissory note
with Foamex International. The note bears interest at a rate per annum equal to
six months LIBOR plus 4.0% and is payable semiannually in June and December. The
note was distributed to FJPS and FMXI on June 12, 1997.

In connection with the acquisition of Great Western, Foamex L.P. issued a
promissory note to Rallis (see Note 7) and entered into lease agreements (see
Note 12) with Rallis and an affiliate of Rallis, for the rental of former Great
Western manufacturing facilities located in Orange, Ontario and Hayward,
California and a warehouse facility in Tigard, Oregon. Foamex L.P. has the
option to purchase each of these properties from Rallis or such affiliate.

Foamex L.P. was party to a lease agreement for an airplane with Trace
Aviation Corp. ("Trace Aviation"), a subsidiary of Trace Holdings. During 1995,
Foamex L.P. paid Trace Aviation $1.6 million, pursuant to the lease agreement.
The lease agreement also provided for the use of the airplane by Trace Holdings
with remuneration to Foamex L.P. based on actual usage of the plane. During
1995, Trace Holdings paid to Foamex L.P. $0.6 million, pursuant to the
agreement. During August 1995, Foamex Aviation Inc. ("Aviation"), a wholly-owned
subsidiary of Foamex International, acquired the aircraft from Trace Holdings
for $3.0 million in cash and the assumption of $11.7 million of related debt. In
connection with the acquisition of the aircraft, the Foamex L.P. lease and other
agreements were terminated.

Foamex L.P. has a management service agreement with Trace Foam Company,
Inc. ("Trace Foam"), a wholly-owned subsidiary of Trace Holdings, pursuant to
which Trace Foam provides general managerial services of a financial, technical,
legal, commercial, administrative and/or advisory nature to Foamex L.P. During
June 1997, Foamex L.P. and Trace Foam amended their management services
agreement to increase the annual fee from $1.75 million to $3.0 million, plus
reimbursement of expenses incurred. Trace Holdings rents approximately 5,900
square feet of general, executive, and administrative office space in New York,
New York from Foamex L.P. on substantially the same terms as Foamex L.P. leases
such space from a third party lessor.

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13. RELATED PARTY TRANSACTIONS AND BALANCES (continued)

During 1997 and 1995, Foamex L.P. purchased approximately $1.9 million and
$2.5 million, respectively, of scrap material from Recticel Foam Corporation
("RFC"), a former partner of Foamex L.P. and whose chairman is a director of
Foamex International, under various agreements, the latest of which expired in
March 1998.

Foamex L.P. made charitable contributions to the Trace International
Holding, Inc. Foundation of approximately $0.2 million in each of 1997, 1996 and
1995.

On December 11, 1996, Foamex L.P. entered into a Tax Distribution Advance
Agreement, pursuant to which its partners are entitled to obtain advances, in
the aggregate not to exceed $17.0 million, against future distributions under
Foamex L.P.'s tax distribution agreement. As of December 28, 1997, there were
$13.6 million of advances to Foamex International under this agreement.

14. PARTNERS' EQUITY (DEFICIT)

Foamex L.P. was formed as a Delaware limited partnership on September 5,
1990, and initially capitalized on October 2, 1990, in accordance with a limited
partnership agreement as amended through December 1997. As of December 28, 1997,
the partnership interests of Foamex L.P. are held by FMXI, Inc. ("FMXI"), 1%
managing general partnership interest, Trace Foam a 1% general partnership
interest, Crain a 1% general partnership interest and Foamex International a 97%
limited partnership interest. (See Note 19 for subsequent event.)

Cash distributions in connection with a tax sharing agreement for 1997,
1996 and 1995 were paid (received) as follows:

[Download Table]

1997 1996 1995
(thousands)

FMXI $ 80 $ (35) $ 12
Trace Foam 80 45 --
Foamex International 8,371 -- --
FJPS 306 3,477 2,367
------- ------- -------

Total $ 8,837 $ 3,487 $ 2,379
======= ======= =======

Other

The other component of partners' equity (deficit) consists of the
following:

[Download Table]

December 28, December 29, December 31,
1997 1996 1995
(thousands)

Foreign currency translation adjustment $ 4,367 $ 3,494 $ 3,448
Additional pension liability 3,718 2,407 4,779
Note receivable from Trace Holdings 9,795 4,373 4,373
------- ------- -------

$17,880 $10,274 $12,600
======= ======= =======

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15. ENVIRONMENTAL MATTERS

Foamex L.P. is subject to extensive and changing federal, state, local and
foreign environmental laws and regulations, including those relating to the use,
handling, storage, discharge and disposal of hazardous substances and the
remediation of environmental contamination, and as a result, is from time to
time involved in administrative and judicial proceedings and inquiries relating
to environmental matters. During 1997, expenditures in connection with Foamex
L.P.'s compliance with federal, state, local and foreign environmental laws and
regulations did not have a material adverse effect on Foamex L.P.'s operations,
financial position, capital expenditures or competitive position. As of December
28, 1997, Foamex L.P. has environmental accruals of approximately $4.3 million
for environmental matters. In addition, as of December 28, 1997 Foamex L.P. has
net receivables of approximately $1.1 million relating to indemnification for
environmental liabilities, net of an allowance of approximately $1.0 million
relating to potential disagreements regarding the scope of the indemnification.
Foamex L.P. believes that realization of the net receivables established for
indemnification is probable.

The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments") provide
for the establishment of federal emission standards for hazardous air pollutants
including methylene chloride, propylene oxide and TDI, materials used in the
manufacturing of foam. On December 27, 1996, the United States Environmental
Protection Agency (the "EPA") proposed regulations under the 1990 CAA Amendments
that will require manufacturers of slab stock polyurethane foam and foam
fabrication plants to reduce emissions of methylene chloride. Because these
regulations are subject to change prior to finalization, Foamex L.P. cannot
accurately predict the actual cost of their implementation. Foamex L.P. does not
believe implementation of the regulations will require it to make material
expenditures at facilities owned prior to December 23, 1997, due to Foamex
L.P.'s use of alternative technologies which do not utilize methylene chloride
and its ability to shift current production to the facilities which use these
alternative technologies; however, material expenditures may be required at the
facilities formerly operated by Crain. The 1990 CAA Amendments also may result
in the imposition of additional standards regulating air emissions from
polyurethane foam manufacturers, but these standards have not yet been proposed
or promulgated.

Foamex L.P. has reported to appropriate state authorities that it has found
soil and groundwater contamination in excess of state standards at four
facilities and soil contamination in excess of state standards at three other
facilities. Foamex L.P. has begun remediation and is conducting further
investigations into the extent of the contamination at these facilities and,
accordingly, the extent of the remediation that may ultimately be required. The
actual cost and the timetable of any such remediation cannot be predicted with
any degree of certainty at this time. As of December 28, 1997, Foamex L.P. has
environmental accruals of approximately $3.7 million for the remaining potential
remediation costs for these facilities based on engineering estimates.

Federal regulations require that by the end of 1998 all underground storage
tanks ("USTs") be removed or upgraded in all states to meet applicable
standards. Foamex L.P. has six USTs that will require removal or permanent
in-place closure by the end of 1998. Due to the age of these tanks, leakage may
have occurred resulting in soil and possibly groundwater contamination. Foamex
L.P. has accrued $0.1 million for the estimated removal and remediation, if any,
associated with these USTs. However, the full extent of contamination and,
accordingly, the actual cost of such remediation cannot be predicted with any
degree of certainty at this time. Foamex L.P. believes that its USTs do not pose
a significant risk of environmental liability because of Foamex L.P.'s
monitoring practices for USTs and conditional approval for the permanent
in-place closure for certain USTs. However, there can be no assurance that such
USTs will not result in significant environmental liability in the future.

Foamex L.P. has been designated as a Potentially Responsible Party ("PRP")
by the EPA with respect to thirteen sites, with an estimated total liability to
Foamex L.P. for the thirteen sites of less than approximately $0.5 million.
Estimates of total clean-up costs and fractional allocations of liability are
generally provided by the EPA or the committee of PRP's with respect to the
specified site. In each case, the participation of Foamex L.P. is considered to
be immaterial.

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15. ENVIRONMENTAL MATTERS (continued)

16. LITIGATION

As of March 4, 1998, Foamex L.P. and Trace Holdings were two of multiple
defendants in actions filed on behalf of approximately 5,000 recipients of
breast implants in various United States federal and state courts and one
Canadian provincial court, some of which allege substantial damages, but most of
which allege unspecified damages for personal injuries of various types. Three
of these cases seek to allege claims on behalf of all breast implant recipients
or other allegedly affected parties, but no class has been approved or certified
by the court. In addition, three cases have been filed alleging claims on behalf
of approximately 700 residents of Australia, New Zealand, England, and Ireland.
During 1995, Foamex L.P. and Trace Holdings were granted summary judgments and
dismissed as defendants from all cases in the federal courts of the United
States and the state courts of California. Appeals for these decisions were
withdrawn and the decisions are final. In addition, two of the cases filed on
behalf of 903 foreign plaintiffs were dismissed on the grounds that the cases
could not be brought in the United States courts. This decision is subject to
appeal. Foamex L.P. believes that the number of suits and claimants may
increase. Although breast implants do not contain foam, certain silicone gel
implants were produced using a polyurethane foam covering fabricated by
independent distributors or fabricators from bulk foam purchased from Foamex
L.P. or Trace Holdings. Neither Foamex L.P. nor Trace Holdings recommended,
authorized or approved the use of its foam for these purposes. While it is not
feasible to predict or determine the outcome of these actions, based on
management's present assessment of the merits of pending claims, after
consultation with the general counsel of Trace Holdings, and without taking into
account potential indemnity from the manufacturers of polyurethane covered
breast implants, management believes that the disposition of matters that are
pending or that may reasonably be anticipated to be asserted should not have a
material adverse effect on either Foamex L.P.'s or Trace Holdings' consolidated
financial position or results of operations. In addition, Foamex L.P. is also
indemnified by Trace Holdings for any such liabilities relating to foam
manufactured prior to October 1990. Although Trace Holdings has paid Foamex
L.P.'s litigation expenses to date pursuant to such indemnification and
management believes Trace Holdings likely will be in a position to continue to
pay such expenses, there can be no absolute assurance that Trace Holdings will
be able to provide such indemnification. Based on information available at this
time with respect to the potential liability, and without taking into account
the indemnification provided by Trace Holdings and the coverage provided by
Trace Holdings' and Foamex L.P.'s liability insurance, Foamex L.P. believes that
the proceedings should not ultimately result in any liability that would have a
material adverse effect on the financial position or results of operations of
Foamex L.P. If management's assessment of Foamex L.P.'s liability with respect
to these actions is incorrect, such actions could have a material adverse effect
on Foamex L.P.

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16. LITIGATION (continued)

Brickell Partners v. Marshall S. Cogan, et al., No. 16260NC;
Mimona Capital v. Salvatore J. Bonanno, et al., No. 16259NC;
Daniel Cohen v. Foamex International Inc., No. 16263;
Eileen Karisinki v. Foamex International Inc., et al., No. 16261NC and
John E. Funky Trust v. Salvatore J. Bonanno, et al., No. 16267.

A sixth purported class action lawsuit, Barnett Stepak v. Foamex
International Inc., et al., No. 16277, was filed on or about March 23, 1998
against the same defendants. The complaints in the six actions allege, among
other things, that the defendants have violated fiduciary and other common law
duties purportedly owed to Foamex International's stockholders in connection
with Trace Holdings proposal to acquire all of the shares of Foamex
International's common stock. The complaints seek, among other things, class
certification, a declaration that the defendants have breached their fiduciary
duties to the class, preliminary and permanent injunctions baring implementation
of the proposed transaction, rescission of the transaction if consummated,
unspecified compensatory damages, and costs and attorneys' fees.

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.

17. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

Interest Rate Swap Agreements

Foamex L.P. has an interest rate swap agreement involving the exchange of
fixed and floating interest payment obligations without the exchange of the
underlying principal amounts. At December 28, 1997, the total notional principal
amount of the interest rate swap agreement was $150.0 million. The counterparty
to the agreement is a large international financial institution. The interest
rate swap agreement subjects Foamex L.P. to financial risk that will vary during
the life of the agreement in relation to market interest rates.

Concentration of Credit Risk

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

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

Disclosure about Fair Value of Financial Instruments

The following disclosures of the estimated fair value amounts have been
determined based on Foamex L.P.'s assessment of available market information and
appropriate valuation methodologies.

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17. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK (continued)

The estimated fair values of Foamex L.P.'s financial instruments as of
December 28, 1997 are as follows:

Carrying Amount Fair Value
(thousands)

Liabilities:
Long-term debt $ 738,810 $741,298
============= ========

Interest rate swaps $ -- $ 1,015
============= ========

Carrying amounts reported in the consolidated balance sheet for cash and
cash equivalents, accounts receivable, accounts payable, accrued liabilities and
short-term borrowings approximates fair value due to the short- term nature of
these instruments.

The fair value of long-term debt is estimated using quoted market prices,
where available, or discounted cash flows.

The fair value of the interest rate swap is based on the amount at which
Foamex L.P. would pay if the swap was settled, as determined by an estimate
obtained from dealers.

Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instruments. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.

18. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

[Enlarge/Download Table]

1997 1996 1995
(thousands)

Cash paid for interest $ 45,330 $ 43,378 $ 47,282
======== ============ ========

Cash paid for income taxes $ 4,504 $ 1,533 $ 634
======== ============ ========

Non-cash capital expenditures $ 167 $ 165 $ 378
======== ============ ========

Non-cash distribution of FJPS note $ 35,567 $ -- $ --
======== ============ ========

Non-cash distribution of Foamex International note $ 2,000 $ -- $ --
======== ============ ========

Non-cash distribution of investment in FJPS senior
subordinated discount debentures $105,829 $ -- $ --
======== ============ ========

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19. SUBSEQUENT EVENT

On February 27, 1998, Foamex International, Foamex L.P. and certain of its
affiliates completed a series of transactions designed to simplify Foamex
International's structure and to provide future operational flexibility. Prior
to the consummation of these transactions, (i) Foamex L.P. and Foamex L.P.'s
wholly-owned subsidiary, General Felt, entered into a Supply Agreement and an
Administrative Services Agreement, (ii) Foamex L.P. repaid its outstanding
indebtedness to General Felt with $4.8 million in cash and a $34.0 million
two-year promissory note and (iii) 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 with $4.8 million in cash
and a $34.0 million principal amount promissory note supported by a $34.5
million letter of credit under the Credit Facility (the "Foamex/GFI Note"). The
initial transaction resulted in the transfer from Foamex L.P. to Trace Foam LLC
of all of the outstanding common stock of General Felt, in exchange for (i) the
assumption by Trace Foam LLC of $129.0 million of Foamex L.P.'s indebtedness and
(ii) the transfer by Trace Foam 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
International, Trace Foam LLC, and General Felt entered into an Asset Purchase
Agreement dated February 27, 1998, in which General Felt sold substantially all
of its assets (other than the Foamex/GFI Note and its operating facility in Pico
Rivera, California) to Foamex Carpet in exchange for (i) $20.0 million in cash
and (ii) a promissory note issued by Foamex Carpet to Trace Foam LLC in the
amount of $70.2 million. The $20.0 million cash payment was funded with a
distribution by Foamex L.P. As part of these transactions, Foamex Fibers, a
wholly-owned subsidiary of General Felt, was merged with and into General Felt
and Foamex LLC, a wholly-owned subsidiary of Foamex L.P., was merged with and
into Foamex L.P. In addition, FMXI and Crain, both wholly-owned subsidiaries of
Foamex International and general partners of Foamex L.P., were merged and Crain,
as the surviving corporation, subsequently changed its name to FMXI, Inc. Upon
consummation of these transactions contemplated by the Asset Purchase Agreement,
Foamex Carpet entered into a Credit Agreement with the institutions from time to
time party thereto as lenders, the institutions from time to time party thereto,
as issuing banks, and Citicorp USA, Inc. and The Bank of Nova Scotia, as
administrative agents, which provides for up to $20.0 million in revolving
credit borrowings. These transactions will be accounted for as a distribution,
in a manner similar to a pooling of interests since the entities were under
common control. Therefore, future Foamex L.P. financial statements will exclude
the operations of General Felt. Foamex Carpet will conduct the carpet cushion
business previously conducted by General Felt. Also, Trace Foam LLC has retained
ownership of one of General Felt's operating facilities which is being leased to
Foamex Carpet and the $34.0 million Foamex/GFI Note.

As of December 28, 1997 and December 29, 1996 and for the years then ended,
General Felt's consolidated financial information included in Foamex L.P. was as
follows:

1997 1996
Balance Sheet:
Current assets $ 59,278 $ 92,201
Total assets 110,766 177,681
Current liabilities 39,358 61,772
Total liabilities 46,445 80,662
Equity 64,321 97,019

Statement of Operations:
Net sales $286,261 $302,648
Income from continuing operations 6,102 18,465
Net income (loss) 6,102 (27,261)

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REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
Foamex Capital Corporation
Wilmington, Delaware

We have audited the accompanying balance sheets of Foamex Capital Corporation
("FCC") (a wholly-owned subsidiary of Foamex L.P.) as of December 28, 1997 and
December 29, 1996. These balance sheets are the responsibility of FCC's
management. Our responsibility is to express an opinion on these balance sheets
based on our audits.

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

In our opinion, the balance sheets referred to above present fairly, in all
material respects, the financial position of FCC at December 28, 1997 and
December 29, 1996, in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 4, 1998

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

[Download Table]

December 28, December 29,
1997 1996

CASH $1,000 $1,000
====== ======

COMMITMENTS AND CONTINGENCIES $ -- $ --
------ ------

STOCKHOLDER'S EQUITY:
Common stock, par value $.01 per share;
1,000 shares authorized, issued and outstanding 10 10
Additional paid-in capital 990 990
------ ------
Total Stockholder's Equity $1,000 $1,000
====== ======

The accompanying notes are an integral part of the
balance sheets.

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

1. ORGANIZATION

Foamex Capital Corporation ("FCC"), a wholly-owned subsidiary of Foamex
L.P., was formed on July 20, 1992 and initially capitalized on July 23, 1992 for
the purpose of obtaining financing from external sources.

2. COMMITMENTS AND CONTINGENCIES

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

9 7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")

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

The 13 1/2% Senior Subordinated Notes were issued by Foamex L.P. and FCC in
a private placement under Rule 144A of the Securities Act of 1933, as amended,
on December 23, 1997 in connection with the Crain Acquisition. The 13 1/2%
Senior Subordinated Notes represent unsecured general obligations of Foamex L.P.
and are subordinated to all Senior Debt (as defined in the Indenture).

The 13 1/2% Senior Subordinated Notes mature on August 15, 2005. Interest
on the 13 1/2% Senior Subordinated Notes is payable semiannually on each
February 15 and August 15. The 13 1/2% Senior Subordinated Notes bear interest
at the rate of 13 1/2% per annum. The 13 1/2% Senior Subordinated Notes may not
be redeemed prior to August 15, 2002, except in the event of a Change of Control
(as defined) or Foamex L.P. may, subject to certain requirements (as defined),
on or prior to August 15, 1998 redeem up to 33 1/3% of the aggregate original
principal amount with proceeds from an Equity Offering (as defined).

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10-K405/A 68th Page of 94 TOC 1st Previous Next ↓Bottom Just 68th
REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholder of
General Felt Industries, Inc.:

We have audited the accompanying consolidated balance sheets of General Felt
Industries, Inc. and subsidiaries ("General Felt") as of December 28, 1997 and
December 29, 1996, and the related consolidated statements of operations, cash
flows and stockholder's equity for each of the three years in the period ended
December 28, 1997. These financial statements are the responsibility of General
Felt's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of General Felt as of
December 28, 1997 and December 29, 1996, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 28, 1997, in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 4, 1998

F-36

10-K405/A 69th Page of 94 TOC 1st Previous Next ↓Bottom Just 69th
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

[Download Table]

December 28, December 29,
ASSETS 1997 1996
(thousands)
CURRENT ASSETS:

Cash $ 423 $ 336
Restricted cash -- 12,143
Accounts receivable, net of allowance for
doubtful accounts of $3,773 and $4,453 36,388 44,973
Inventories 8,205 25,314
Deferred income taxes 6,850 6,342
Other current assets 7,412 3,093
--------- ---------

Total current assets 59,278 92,201
--------- ---------

PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 2,891 3,491
Buildings and leasehold improvements 1,465 5,896
Machinery, equipment and furnishings 17,189 29,354
Construction in progress 96 1,957
--------- ---------

Total 21,641 40,698

Less accumulated depreciation
and amortization (6,072) (8,950)
--------- ---------

Property, plant and equipment, net 15,569 31,748

COST IN EXCESS OF ASSETS ACQUIRED, NET 35,176 50,574

OTHER ASSETS 743 3,158
--------- ---------

TOTAL ASSETS $ 110,766 $ 177,681
========= =========

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

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GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

[Enlarge/Download Table]

December 28, December 29,
LIABILITIES & STOCKHOLDER'S EQUITY 1997 1996
(thousands)
CURRENT LIABILITIES:

Current portion of long-term debt - related party $ -- $ 12,143
Accounts payable 10,943 13,719
Accounts payable to related party 11,614 17,987
Accrued employee compensation 538 1,434
Accrued restructuring charges 827 2,279
Other accrued liabilities 15,436 14,210
--------- ---------

Total current liabilities 39,358 61,772

LONG-TERM DEBT - RELATED PARTY 585 9,260

DEFERRED INCOME TAXES 1,473 3,273

ACCRUED RESTRUCTURING - NONCURRENT 2,440 2,308

OTHER LIABILITIES 2,589 4,049
--------- ---------

Total liabilities 46,445 80,662
--------- ---------

COMMITMENTS AND CONTINGENCIES -- --
--------- ---------

STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; authorized,
issued and outstanding 1,000 shares -- --
Additional paid-in capital 143,965 143,965
Retained earnings (accumulated deficit) (40,844) (46,946)
Note receivable from Foamex L.P. (38,800) --
--------- ---------
Total stockholder's equity 64,321 97,019
--------- ---------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 110,766 $ 177,681
========= =========

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

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GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended 1997, 1996 and 1995

[Download Table]

December 28, December 29, December 31,
1997 1996 1995
(thousands)

NET SALES $ 286,261 $ 302,648 $ 279,123

COST OF GOODS SOLD 260,239 263,316 252,591
--------- --------- ---------

GROSS PROFIT 26,022 39,332 26,532

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 18,445 18,819 22,312

RESTRUCTURING CHARGES (CREDITS) (1,004) (5,460) 14,156
--------- --------- ---------

INCOME (LOSS) FROM OPERATIONS 8,581 25,973 (9,936)

INTEREST EXPENSE 899 2,179 1,164

OTHER INCOME, NET 1,339 1,015 52
--------- --------- ---------

INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE PROVISION
FOR INCOME TAXES 9,021 24,809 (11,048)

PROVISION FOR INCOME TAXES 2,919 6,344 962
--------- --------- ---------

INCOME (LOSS) FROM CONTINUING OPERATIONS 6,102 18,465 (12,010)
--------- --------- ---------

DISCONTINUED OPERATIONS:

OPERATING LOSS FROM DISCONTINUED
OPERATIONS, NET OF INCOME TAXES -- (3,389) (11,040)

LOSS ON DISPOSAL OF DISCONTINUED
OPERATIONS INCLUDING PROVISION FOR
OPERATING LOSSES DURING THE PHASE-
OUT PERIOD, NET OF INCOME TAXES -- (42,337) --
--------- --------- ---------

LOSS FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAXES -- (45,726) (11,040)
--------- --------- ---------

NET INCOME (LOSS) $ 6,102 $ (27,261) $ (23,050)
========= ========= =========

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

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GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended 1997, 1996 and 1995

[Enlarge/Download Table]

December 28, December 29, December 31,
1997 1996 1995
OPERATING ACTIVITIES: (thousands)

Net income (loss) $ 6,102 $(27,261) $(23,050)
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation and amortization 4,112 4,564 4,476
Net loss on disposal of discontinued operations -- 40,551 --
Net loss from discontinued operations -- 5,175 11,040
Asset writedowns and other charges (credits) (107) (6,769) 8,505
Provision for uncollectible accounts 1,405 967 2,992
Deferred income taxes (46) 5,519 962
Other operating activities, net (967) -- --
Changes in operating assets and liabilities,
net of acquisitions and discontinued operations:
Accounts receivable 5,883 (10,358) 721
Inventories 9,431 (6,829) 157
Accounts payable and accounts payable to
related party (9,314) 8,009 (6,309)
Accrued restructuring charges (1,318) 280 3,424
Other assets and liabilities (6,652) (1,813) (2,328)
-------- -------- --------

Net cash provided by continued operations 8,529 12,035 590
Net cash used for discontinued operations -- (524) (12,617)
-------- -------- --------
Net cash provided by (used for) operating activities 8,529 11,511 (12,027)
-------- -------- --------

INVESTING ACTIVITIES:
Capital expenditures (1,258) (2,442) (1,604)
Proceeds from sale of assets 40,169 -- --
Proceeds from sale of subsidiary -- 42,650 --
Purchase of note receivable from Foamex L.P. (38,800) -- --
Acquisition, net of cash acquired -- -- (7,272)
Increase in restricted cash 12,143 (12,143) --
Capital expenditures for discontinued operations -- (919) (4,429)
Other investing activities 122 (2,149) 10
-------- -------- --------

Net cash provided by (used for) investing activities 12,376 24,997 (13,295)
-------- -------- --------

FINANCING ACTIVITIES:
Net proceeds from (repayments of) revolving loans -- -- (3,000)
Net proceeds from (repayments of) Foamex L.P.
notes payable (20,818) (26,903) 14,742
Payments on long-term debt - unrelated party -- (11,250) (3,000)
Net financing activities of discontinued operations -- 1,443 17,046
-------- -------- --------

Net cash (used for) provided by financing activities (20,818) (36,710) 25,788
-------- -------- --------

NET INCREASE (DECREASE) IN CASH 87 (202) 466

CASH AT BEGINNING OF PERIOD 336 538 72
-------- -------- --------

CASH AT END OF PERIOD $ 423 $ 336 $ 538
======== ======== ========

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

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GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

[Enlarge/Download Table]

Retained Note
Additional Earnings Receivable
Common Stock Paid-In (Accumulated From
Shares Amount Capital Deficit) Foamex L.P.
(thousands)

Balances at January 1, 1995 1 - $ 67,036 $ 3,365 $ --

Assumption of pension liability
by Foamex L.P. -- - 2,158 -- --

Net loss -- - -- (23,050) --
-------- --- -------- -------- --------

Balances at December 31, 1995 1 - 69,194 (19,685) --

Net loss -- - -- (27,261) --

Contribution by Foamex L.P. of
intercompany notes in connection
with sale of Perfect Fit -- - 74,771 -- --
-------- --- -------- -------- --------

Balances at December 29, 1996 1 - 143,965 (46,946) --

Purchase of note receivable
from Foamex L.P. -- - -- -- (38,800)

Net income -- - -- 6,102 --
-------- --- -------- -------- --------

Balances at December 28, 1997 1 - $143,965 $(40,844) $(38,800)
======== === ======== ======== ========

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

F-41

10-K405/A 74th Page of 94 TOC 1st Previous Next ↓Bottom Just 74th
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

General Felt Industries, Inc. and subsidiaries ("General Felt") is one of
the largest distributors and manufacturers of carpet cushion in North America.
In addition, Foamex Fibers, Inc. ("Foamex Fibers"), a wholly-owned subsidiary,
manufactures various nonwoven textile fiber products used primarily for carpet
padding and in the furniture industry.

General Felt is a wholly-owned subsidiary of Foamex L.P. which in turn is a
wholly-owned subsidiary of Foamex International Inc. ("Foamex International").

During 1996, General Felt sold Perfect Fit Industries, Inc. ("Perfect Fit")
which comprised the home comfort products segment of General Felt. The
consolidated financial statements of General Felt have been restated for
discontinued operations and includes a net loss of $42.3 million, which includes
the loss on disposal and a net loss of $1.8 million (net of $1.2 million income
tax benefit) relating to operating losses during the phase-out period.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The consolidated financial statements include the accounts of General Felt,
other than the home comfort products segment, which is accounted for as
discontinued operations. Intercompany accounts and transactions for continuing
operations have been eliminated in consolidation.

Fiscal Year

General Felt's fiscal year ends on the Sunday closest to the thirty-first
day of December. Fiscal years 1997, 1996 and 1995 were composed of fifty-two
weeks and ended on December 28, 1997, December 29, 1996, and December 31, 1995,
respectively.

Accounting Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
(See Notes 4, 9, 10, 11 and 14 and Cost in Excess of Net Assets Acquired below).

Revenue Recognition

Revenue from sales is recognized when products are shipped at which time
title passes to the customer.

Discounts and Billing Adjustments

A reduction in sales revenue is recognized for sales discounts when product
is invoiced or for other billing adjustments.

Restricted Cash

As of December 29, 1996, General Felt had restricted cash of approximately
$12.1 million. This cash was derived from the net sales proceeds relating to the
sale of Perfect Fit and was restricted by Foamex L.P.'s debt agreements. This
restricted cash was used to reduce long-term debt - related party with Foamex
L.P. during

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10-K405/A 75th Page of 94 TOC 1st Previous Next ↓Bottom Just 75th
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

1997; accordingly, a corresponding amount of long-term debt - related party as
of December 29, 1996 was classified as current in the accompanying consolidated
balance sheets.

Inventories

Inventories are stated at the lower of cost or market. The cost of
inventories is determined on a first-in, first-out basis.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over the estimated useful lives of the assets. The
range of useful lives estimated for buildings and building improvements is
generally ten to forty years and the range for machinery, equipment and
furnishings is five to twelve years. Leasehold improvements are amortized over
the shorter of the terms of the respective lease or the estimated useful life of
the improvement, whichever is shorter. Depreciation expense for the years ended
1997, 1996 and 1995 was $2.6 million, $3.0 million and $2.8 million,
respectively. For income tax purposes, General Felt uses accelerated
depreciation methods.

Cost in Excess of Net Assets Acquired

The excess of the acquisition cost over the fair value of net assets
acquired in business combinations accounted for by the purchase method is
amortized using the straight-line method over a forty year period. At each
balance sheet date General Felt evaluates the recoverability of cost in excess
of net assets acquired using certain financial indicators such as historical and
future ability to generate income from operations based on a going concern
basis. Accumulated amortization as of December 28, 1997 and December 29, 1996
was approximately $5.6 million and $5.9 million, respectively.

Environmental Matters

Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the cost can be reasonably
estimated.

Income Taxes

Income taxes are accounted for under the asset and liability method in
which deferred income taxes are provided for temporary differences between the
financial reporting and income tax basis of assets and liabilities using the
income tax rates, under existing legislation, expected to be in effect at the
date such temporary differences are expected to reverse.

3. DISCONTINUED OPERATIONS

During 1996, General Felt finalized the sale of the outstanding common
stock of Perfect Fit, a wholly-owned subsidiary, for an adjusted sale price of
approximately $44.2 million. The sale included all of the net assets of the home
comfort products segment with an adjusted net book value of approximately $84.5
million after

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10-K405/A 76th Page of 94 TOC 1st Previous Next ↓Bottom Just 76th
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. DISCONTINUED OPERATIONS (continued)

Foamex L.P. contributed Perfect Fit's intercompany notes receivable and accrued
interest thereon with Foamex L.P. toGeneral Felt. Actual transaction expenses
related to the sale totaled approximately $1.5 million. General Felt recorded a
net loss for discontinued operations of approximately $42.3 million, which
includes the loss on disposal and a net loss of $1.8 million (net of $1.2
million income tax benefit) relating to operating losses during the phase-out
period.

4. RESTRUCTURING CHARGES

In 1995, General Felt approved a restructuring plan (the "1995
restructuring plan") to consolidate two foam production, fabrication or branch
locations to concentrate resources as a result of industry conditions and better
position itself to achieve its strategic growth objectives. General Felt
recorded restructuring charges of $14.2 million which was comprised of $13.1
million charge associated with the consolidation of the two foam production,
fabrication or branch locations and a $1.1 million charge associated with the
completion of a 1993 restructuring plan. The components of the $13.1 million
restructuring charge include: $8.5 million for fixed asset writedowns (net of
estimated sale proceeds), $3.8 million for plant closure and operating lease
obligations and $0.8 million for personnel reductions. The $0.8 million cost for
personnel reductions primarily represents severance and employee benefit costs
associated with the elimination of manufacturing and administrative personnel.

In 1996, General Felt determined to continue to operate one of the
facilities originally identified for closure in the 1995 restructuring plan
because of improved economics and the lack of synergy to be achieved from
relocating the manufacturing process. In addition, General Felt has approved a
plan to close a facility that was not originally identified in the 1995
restructuring plan. As a result of these changes to the 1995 restructuring plan,
General Felt recorded a $5.5 million net restructuring credit which included a
restructuring credit of $11.3 million associated with General Felt's decision
not to close the facility identified as part of the 1995 restructuring plan
offset by $5.8 million of restructuring charges relating to the closure of a
facility during 1997 (the "1996 restructuring plan"). During 1997, General Felt
recorded a net restructuring credit of approximately $1.0 million primarily due
to plant closure savings.

Generally, the 1996 and 1995 restructuring plans have been implemented as
originally contemplated. The following table sets forth the components of
General Felt's restructuring and other charges:

[Enlarge/Download Table]

Asset Plant Closure Personnel
Total Writedowns and Leases Reductions Other
(millions)

1995 restructuring charge $ 14.2 $ 8.5 $ 3.8 $ 0.8 $ 1.1
Asset write-off/writedowns (11.3) (9.9) (0.3) -- (1.1)
------- ------ ------ ------ ------
Balances at December 31, 1995 2.9 (1.4) 3.5 0.8 --

Cash spending (1.0) -- (0.5) (0.5) --
1996 restructuring charge 5.8 1.6 3.9 0.3 --
Restructuring credits (11.3) (8.4) (2.7) (0.2) --
Asset adjustments for restructuring
credits 8.2 8.2 -- -- --
------- ------ ------ ------ ------
Balances at December 29, 1996 4.6 -- 4.2 0.4 --

Cash spending (0.3) 0.1 (0.1) (0.3) --
1997 restructuring credit (1.0) (0.1) (0.9) -- --
------- ------ ------ ------ ------

Balances at December 28, 1997 $ 3.3 $ -- $ 3.2 $ 0.1 $ --
======= ====== ====== ====== ======

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10-K405/A 77th Page of 94 TOC 1st Previous Next ↓Bottom Just 77th
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. RESTRUCTURING CHARGES (continued)

As indicated in the table above, the accrued restructuring balance at
December 28, 1997, will be used for payments relating to plant closure and
leases including rundown costs at the facilities. General Felt expects to incur
approximately $0.8 million of charges during 1998 with the remaining $2.5
million to be incurred through 2001. As of December 28, 1997, General Felt has
terminated 61 employees in the manufacturing and administrative areas.

5. ACQUISITIONS

In April 1995, Foamex Fibers acquired certain assets and assumed certain
liabilities of GS Industries, Inc. and Pontotoc Fibers, Inc., manufacturers of
various nonwoven textile fiber products used primarily for carpet padding and in
the furniture industry for aggregate consideration of approximately $8.0
million, including related fees and expenses of approximately $0.3 million, with
an initial cash payment of $7.2 million. The excess of the purchase price over
the estimated fair value of the net assets acquired was approximately $3.9
million. The acquisition was accounted for as a purchase and the operations of
the acquired companies are included in the consolidated statements of operations
and cash flows from the date of acquisition. The cost of the acquisition has
been allocated on the basis of the fair value of the assets acquired and the
liabilities assumed. The excess of the purchase price over the estimated fair
value of the net assets acquired is being amortized using the straight-line
method over forty years.

6. INVENTORIES

Inventories consist of:

December 28, 1997 December 29, 1996
(thousands)
Raw material and supplies $ 5,416 $12,795
Work in process 214 1,120
Finished goods 2,575 11,399
------- -------
Total $8,205 $25,314
======= =======

7. SALE OF ASSETS

On October 6, 1997, General Felt sold substantially all of the net assets
of its needlepunch carpeting, tufted carpeting and artificial grass products
business located at its facilities in Dalton, Georgia to Bretlin, Inc. for an
aggregate sale price of approximately $41.0 million. General Felt realized an
insignificant gain on the sale (net of income taxes) in the fourth quarter of
1997. General Felt used net sale proceeds of $38.8 million to purchase a note
receivable from Foamex L.P. which has been classified as a reduction of
stockholder's equity.

8. LONG-TERM DEBT - RELATED PARTY

General Felt has two revolving promissory notes with Foamex L.P. to borrow
up to a maximum of $64.0 million. During 1997 and 1996, General Felt used
approximately $12.1 million and $22.5 million, respectively, of the net proceeds
from the sale of Perfect Fit to reduce these promissory notes with Foamex L.P.
The notes are due on demand, however, the remaining net proceeds of $12.1
million from the sale of Perfect Fit was used to paydown the notes with Foamex
L.P. during 1997 and was classified as a current liability as of December 29,
1996. Interest is payable quarterly at 8.5% as of December 28, 1997. General
Felt's cash receipts reduce the outstanding balance and the cash requirements
increase the outstanding balance on a daily basis. On February 27, 1998, Foamex
L.P. contributed the outstanding loan balance of $1.0 million to General Felt.
(See Note 16).

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GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. LONG-TERM DEBT - RELATED PARTY (continued)

Term and Revolving Loans

Foamex L.P. and General Felt had a credit agreement (the "Foamex L.P.
Credit Facility") with a group of banks that provide for loans of up to $85.0
million of which up to $40.0 million was available as a term loan payable in
twenty equal quarterly installments commencing October 1994 and up to $45.0
million is available under a revolving line of credit which was to expire in
June 1999. In 1994, Foamex L.P. and General Felt entered into a $40.0 million
term loan under the Foamex L.P. Credit Facility. During 1997 and 1996, Foamex
L.P. and General Felt used $3.8 million and $12.0 million, respectively, of net
proceeds from the Perfect Fit sale to repay term loan borrowings. The term loan
was repaid in connection with the Refinancing Plan.

As of December 28, 1997, Foamex L.P. and General Felt were in compliance
with the covenants of the Foamex L.P. Credit Facility and expects to be in
compliance with the covenants for the foreseeable future.

9. EMPLOYEE BENEFIT PLANS

Prior to December 31, 1996, General Felt had noncontributory defined
benefit pension plans (the "Plans") for eligible salaried employees (the
"Salaried Plan") and certain hourly employees at the Trenton and Pico Rivera
manufacturing facilities (the "Trenton Plan" and the "Pico Plan"). The Plans
provided benefits based principally on years of credited service and the highest
level of compensation earned during a specified period before retirement for the
Salaried Plan and stated amounts for each year of credited service for the
Trenton Plan and the Pico Plan. General Felt accounted for such pension plans
pursuant to SFAS No. 87, "Employer's Accounting for Pensions".

General Felt's funding policy was to make no less than the minimum annual
contributions required based upon actuarial methods allowable by applicable
governmental regulations. Effective January 1, 1995, General Felt merged the
Salaried Plan and the Trenton Plan with the defined benefit salaried pension
plan of Foamex L.P. During 1995, General Felt merged the Pico Plan with the
defined benefit hourly pension plan of Foamex L.P. Consequently, the aggregate
pension liability of approximately $2.2 million as of December 31, 1995 relating
to these plans has been included in additional paid-in capital since Foamex L.P.
has assumed all future obligations under the plans. General Felt will incur
pension expense for future periods to the extent it provides funding to the
plans. During 1997 and 1996, General Felt funded approximately $0.4 million and
$0.1 million, respectively to the plans.

In addition certain employees of General Felt are covered by
union-sponsored collectively bargained, multi-employer pension plans. General
Felt contributed and charged to expense $0.1 million related to these plans for
each of the years 1997, 1996 and 1995.

During 1995, General Felt merged its defined contribution plan with Foamex
L.P. Foamex L.P. is the plan sponsor, however, General Felt incurs a
contribution expense for its employees. The plan is qualified under Section
401(k) of the Internal Revenue Code (the "Code") and covers eligible employees
who elect to participate in the plan. Employee contributions are voluntary and
subject to certain limitations as imposed by the Code. During 1995, General Felt
provided contributions amounting to a 25% match of employees' contributions up
to 4% of eligible compensation. General Felt also provides an additional 25%
match of employees' contributions up to 4% of eligible compensation made to a
fund which invests in Foamex International common stock. In addition, General
Felt may make discretionary contributions amounting to a 25% match of employees'
contributions up to 4% of eligible compensation. The expense for these
contributions was $0.2 million for 1997 and $0.1 million for each of the years
1996 and 1995.

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GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. INCOME TAXES

The components of the total consolidated provision (benefit) for income
taxes are summarized as follows:

[Download Table]

1997 1996 1995
(thousands)

Continuing operations $ 2,919 $ 6,344 $ 962
Discontinued operations -- (2,558) (2,654)
------- ------- -------
Total consolidated provision (benefit)
for income taxes $ 2,919 $ 3,786 $(1,692)
======= ======= =======

The components of the total consolidated provision (benefit) for income
taxes are summarized as follows:

[Download Table]

1997 1996 1995
Current: (thousands)

Federal $ 1,958 $ 220 $ --
State 1,007 605 --
------- ------- -------
Total current 2,965 825 --
------- ------- -------

Deferred:
Federal (247) 1,666 (1,424)
State 201 1,295 (268)
------- ------- -------
Total deferred (46) 2,961 (1,692)
------- ------- -------

Total consolidated provision (benefit)
for income taxes $ 2,919 $ 3,786 $(1,692)
======= ======= =======

The components of the temporary differences that give use to significant
deferred tax assets and liabilities are:

[Download Table]

December 28, December 29,
1997 1996
(thousands)
Deferred tax assets:

Inventory basis differences $ 422 $ 415
Employee benefit accruals 860 714
Allowances and contingent liabilities 2,968 2,548
Restructuring and plant closing accruals 2,514 3,632
Other 373 139
Net operating loss carryforward -- 5,154
Capital loss carryforwards 9,097 14,193
Valuation allowance (9,097) (15,988)
-------- --------

Deferred tax assets 7,137 10,807
-------- --------

Deferred tax liabilities:
Difference between book and tax depreciation 1,567 6,722
Other 193 1,016
-------- --------

Deferred tax liabilities 1,760 7,738
-------- --------

Net deferred tax asset (liabilities) $ 5,377 $ 3,069
======== ========

F-47

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GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. INCOME TAXES (continued)

General Felt has determined that taxable capital gains in the foreseeable
future will likely not be sufficient to recognize the deferred tax asset
associated with the capital loss carryforward. Accordingly, a valuation
allowance has been provided for the deferred tax asset associated with the
capital loss carryforward. During 1997, the valuation allowance for deferred tax
assets decreased by $6.9 million which included a $5.0 million decrease for the
utilization of the capital loss carryforward in connection with the sale of a
facility (see Note 7) and a $1.9 million decrease due to the reversal of
preacquisition net operating loss carryforwards. The $1.9 million reversal of
preacquisition temporary differences was used to reduce cost in excess of assets
acquired. At December 28, 1997, General Felt has $26.0 million of capital loss
carryforwards that expire in 2001.

A reconciliation of the statutory federal income tax rate to the effective
income tax rate on continuing operations is as follows:

[Download Table]

1997 1996 1995
(thousands)

Statutory income taxes $ 3,157 $ 8,683 $(3,867)
State income taxes,
net of federal 785 1,235 (648)
Limitation on utilization of
tax benefits -- -- 4,929
Amortization of excess cost 419 517 554
Write-off of excess cost 4,305 -- --
Valuation allowance (5,028) (4,823) --
Other (719) 732 (6)
------- ------- -------
Tax provision $ 2,919 $ 6,344 $ 962
======= ======= =======

11. ENVIRONMENTAL MATTERS

During 1997, expenditures in connection with General Felt's compliance with
federal, state, and local environmental laws and regulations did not have a
material adverse effect on General Felt's operations, financial position,
capital expenditures or competitive position. As of December 28, 1997, General
Felt has environmental accruals of approximately $1.2 million for environmental
matters.

General Felt has reported to appropriate state authorities that it has
found soil and groundwater contamination in excess of state standards at a
facility located in Philadelphia. General Felt has begun remediation and is
conducting further investigations into the extent of the contamination at this
facility and, accordingly, the extent of the remediation that may ultimately be
required. The actual cost and the timetable of any such remediation cannot be
predicted with any degree of certainty at this time. As of December 28, 1997,
General Felt has environmental accruals of approximately $1.1 million for the
remaining potential remediation costs for these facilities based on engineering
estimates.

Federal regulations require that by the end of 1998 all underground storage
tanks ("USTs") be removed or upgraded in all states to meet applicable
standards. General Felt has six USTs that will require removal or permanent
in-place closure by the end of 1998. Due to the age of these tanks, leakage may
have occurred resulting in soil and possibly groundwater contamination. General
Felt has accrued $0.1 million for the estimated removal and remediation, if any,
associated with these USTs. However, the full extent of contamination and,
accordingly, the actual cost of such remediation cannot be predicted with any
degree of certainty at this time. General Felt believes that its USTs do not
pose a significant risk of environmental liability because of General Felt's
monitoring practices for USTs and conditional approval for the permanent
in-place closure for certain USTs. However, there can be no assurance that such
USTs will not result in significant environmental liability in the future.

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GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. ENVIRONMENTAL MATTERS (continued)

Although it is possible that new information or future developments could
require General Felt to reassess its potential exposure relating to all pending
environmental matters, including those described herein, management believes
that, based upon all currently available information, the resolution of such
environmental matters will not have a material adverse effect on General Felt's
operations, financial position, capital expenditures or competitive position.
The possibility exists, however, that new environmental legislation and/or
environmental regulations may be adopted, or other environmental conditions may
be found to exist, that may require expenditures not currently anticipated and
that may be material.

12. COMMITMENTS AND CONTINGENCIES

Operating Leases

General Felt is obligated, under various noncancellable lease agreements,
for rental of facilities and machinery and equipment. Many of the leases contain
renewal options with varying terms and escalation clauses that provide for
increased rentals based upon increases in the Consumer Price Index, real estate
taxes and the lessors' operating expenses. Total minimum rental commitment
(excluding commitments accrued as part of the 1996 restructuring plan) required
under operating leases at December 28, 1997 was:

1998 $ 409
1999 475
2000 461
2001 438
2002 420
Thereafter 1,023
------
Total minimum lease payments $3,226
======

Total rent expense for all operating leases for the years ended 1997, 1996
and 1995 were approximately $1.9 million, $2.1 million and $2.8 million,
respectively.

Guarantor

General Felt has pledged their stock as collateral for certain debt of
Foamex L.P. and is a co-guarantor of the borrowings outstanding under the Foamex
L.P. Credit Facility and Foamex L.P. bond indentures, which as of December 28,
1997, had principal amounts outstanding of approximately $451.1 million and
$248.0 million, respectively.

13. RELATED PARTY TRANSACTIONS AND BALANCES

General Felt purchased $146.3 million, $154.0 million and $141.2 million of
carpet cushion foam from Foamex L.P. during 1997, 1996 and 1995, respectively.

In connection with the consolidation of General Felt's administrative
functions with those of Foamex L.P., General Felt paid approximately $2.1
million and $1.4 million to Foamex L.P. in 1997 and 1996, respectively, for
direct costs incurred by Foamex L.P. on General Felt's behalf and for an
allocation of shared services and facilities.

F-49

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GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

Concentration of Credit Risk

General Felt's financial instruments subject to credit risk are primarily
trade accounts receivable. Accounts receivable are concentrated with large
retail customers. General Felt performs ongoing credit evaluations of its
customers financial conditions and, generally, requires no collateral. General
Felt maintains allowance accounts for potential credit losses and such losses
have been within management's expectations. During the past three years, no one
customer accounted for more than 10% of General Felt's net sales.

Disclosure about Fair Value of Financial Instruments

The following disclosures of the estimated fair value amounts have been
determined based on General Felt's assessment of available market information
and appropriate valuation methodologies.

Carrying amounts reported in the consolidated balance sheet for cash and
cash equivalents, accounts receivable, accounts payable, accrued liabilities and
short term borrowings approximates fair value due to the short term nature of
these instruments.

The carrying value of long-term debt approximates fair value based on the
borrowing rate available to General Felt for bank loans with similar terms and
maturities.

15. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information:

1997 1996 1995
(thousands)

Interest paid $ 899 $4,434 $5,300
====== ====== ======

Income taxes paid, net $3,286 $ 596 $ 183
====== ====== ======

16. SUBSEQUENT EVENT

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GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. SUBSEQUENT EVENT (continued)

General Felt ceased being a subsidiary of Foamex L.P. and was relieved from all
obligations under Foamex L.P.'s 9 7/8% Senior Subordinated Notes due 2007 and 13
1/2% Senior Subordinated Notes due 2005. Upon consummation of the initial
transaction, Foamex Carpet Cushion, Inc., a newly formed wholly-owned subsidiary
of Foamex International ("Foamex Carpet"), Foamex International, Trace Foam LLC,
and General Felt entered into an Asset Purchase Agreement dated February 27,
1998, in which General Felt sold substantially all of its assets (other than the
Foamex/GFI Note and its operating facility in Pico Rivera, California) to Foamex
Carpet in exchange for (i) $20.0 million in cash and (ii) a promissory note
issued by Foamex Carpet to Trace Foam LLC in the amount of $70.2 million. The
$20.0 million cash payment was funded with a distribution by Foamex L.P. As part
of these transactions, Foamex Fibers, a wholly-owned subsidiary of General Felt,
was merged with and into General Felt and Foamex LLC, a wholly-owned subsidiary
of Foamex L.P., was merged with and into Foamex L.P. In addition, FMXI, Inc. and
Crain Industries Inc. ("Crain"), both wholly-owned subsidiaries of Foamex
International and general partners of Foamex L.P., were merged and Crain, as the
surviving corporation, subsequently changed its name to FMXI, Inc. Upon
consummation of the transactions contemplated by the Asset Purchase Agreement,
Foamex Carpet entered into a Credit Agreement with the institutions from time to
time party thereto as lenders, the institutions from time to time party thereto
as issuing banks and Citicorp USA, Inc. and The Bank of Nova Scotia, as
administrative agents, which provides for up to $20.0 million in revolving
credit borrowings. Foamex Carpet will conduct the carpet cushion business
previously conducted by General Felt. Also, Trace Foam LLC has retained
ownership of one of General Felt's operating facilities which is being leased to
Foamex Carpet and the $34.0 million Foamex/GFI Note.

F-51

10-K405/A 84th Page of 94 TOC 1st Previous Next ↓Bottom Just 84th
REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholder of
Foamex Fibers, Inc.:

We have audited the accompanying balance sheets of Foamex Fibers, Inc. ("Foamex
Fibers") (successor to GS Industries, Inc. and Pontotoc Fibers, Inc.
(collectively, the "Predecessor Company")) as of December 28, 1997 and December
29, 1996, and the related statements of operations, cash flows and stockholder's
equity for the years ended December 28, 1997 and December 29, 1996, the period
from April 13, 1995 to December 31, 1995 and the period from January 1, 1995 to
April 12, 1995 (Predecessor Company), the combined statements of operations,
cash flows and stockholder's equity. These financial statements are the
responsibility of Foamex Fibers' management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Foamex Fibers as of December
28, 1997 and December 29, 1996, and the results of its operations and its cash
flows for the years ended December 28, 1997 and December 29, 1996 and the period
from April 13, 1995 to December 31, 1995 and the period from January 1, 1995 to
April 12, 1995 (Predecessor Company), in conformity with generally accepted
accounting principles.

As discussed in Note 8, on February 27, 1998, Foamex Fibers was merged into
General Felt and following several related transactions, General Felt
substantially became Foamex Carpet Cushion, Inc.

COOPERS & LYBRAND L.L.P.

Charlotte, North Carolina
March 4, 1998

F-52

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FOAMEX FIBERS, INC.
BALANCE SHEETS
(thousands)

[Enlarge/Download Table]

December 28, December 29,
1997 1996
ASSETS (thousands)

CURRENT ASSETS:

Cash $ 129 $ 156
Accounts receivable, net of allowance for doubtful
accounts of $27 and $39, respectively 843 707
Inventories 925 972
Other current assets 283 181
-------- --------
Total current assets 2,180 2,016
-------- --------

PLANT AND EQUIPMENT:

Machinery, equipment and furnishings 3,471 2,666
Less accumulated depreciation and amortization (607) (340)
-------- --------
Plant and equipment, net 2,864 2,326

ACCOUNTS RECEIVABLE FROM GENERAL FELT 8,035 5,092

COST IN EXCESS OF ASSETS ACQUIRED, NET 3,779 3,880
-------- --------

TOTAL ASSETS $ 16,858 $ 13,314
======== ========

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Accounts payable $ 1,352 $ 1,236
Other accrued liabilities 459 466
-------- --------
Total current liabilities 1,811 1,702

INCOME TAXES DUE TO GENERAL FELT 2,727 1,566
-------- --------

Total liabilities 4,538 3,268
-------- --------

COMMITMENTS AND CONTINGENCIES -- --
-------- --------

STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; authorized, issued and
outstanding 1,000 shares -- --
Additional paid-in capital 7,272 7,272
Retained earnings 5,048 2,774
-------- --------
Total stockholder's equity 12,320 10,046
-------- --------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 16,858 $ 13,314
======== ========

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

F-53

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FOAMEX FIBERS, INC.
STATEMENTS OF OPERATIONS
for the year ended December 28, 1997, for the year ended
December 29, 1996, for the period from April 13, 1995 to
December 31, 1995 and for the period
from January 1, 1995 to April 12, 1995 (Predecessor Company)

[Enlarge/Download Table]

Predecessor Company
December 28, December 29, April 13 1995 to January 1, 1995
1997 1996 December 1995 to April 12, 1995
(thousands)

NET SALES $23,201 $21,410 $14,112 $ 5,577

COST OF GOODS SOLD 18,656 16,843 11,948 4,580
------- ------- ------- -------

GROSS PROFIT 4,545 4,567 2,164 997

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 936 1,257 980 336
------- ------- ------- -------

INCOME FROM OPERATIONS 3,609 3,310 1,184 661

OTHER EXPENSE, NET 5 7 12 6
------- ------- ------- -------

INCOME BEFORE PROVISION
FOR INCOME TAXES 3,604 3,303 1,172 655

PROVISION FOR INCOME TAXES 1,330 1,232 469 --
------- ------- ------- -------

NET INCOME $ 2,274 $ 2,071 $ 703 $ 655
======= ======= ======= =======

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

F-54

10-K405/A 87th Page of 94 TOC 1st Previous Next ↓Bottom Just 87th
FOAMEX FIBERS, INC.
STATEMENTS OF CASH FLOWS
for the year ended December 28, 1997, for the year ended
December 29,1996, for the period from April 13, 1995 to
December 31, 1995 and for the period
from January 1, 1995 to April 12, 1995 (Predecessor Company)

[Enlarge/Download Table]

Predecessor
Company
Year Ended Year Ended January 1, 1995
December 28, December 29, April 13, 1995 to to
1997 1996 December 31, 1995 April 12, 1995
(thousands)
OPERATING ACTIVITIES:

Net income $ 2,274 $ 2,071 $ 703 $ 655
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 380 314 195 143
Income taxes due to General Felt 1,161 1,156 410 --
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable (136) 178 573 (210)
Accounts receivable from General Felt (2,943) (3,703) (837) --
Inventories 47 310 (117) 106
Other assets and liabilities 7 30 (267) 278
------- ------- ------- -------

Net cash provided by operating activities 790 356 660 972
------- ------- ------- -------

INVESTING ACTIVITIES:
Capital expenditures (817) (669) (191) (587)
Acquisition, net of cash acquired -- -- (7,272) --
------- ------- ------- -------

Net cash used for investing activities (817) (669) (7,463) (587)
------- ------- ------- -------

FINANCING ACTIVITIES:
Proceeds from long-term debt -- -- -- 1,000
Repayment of advances from former stockholders -- -- -- (102)
Repayment of long-term debt -- -- -- (531)
Distribution to former stockholders -- -- -- (150)
Cash retained by former owners -- -- -- (1,622)
Capital contributions -- -- 7,272 --
------- ------- ------- -------

Net cash provided by (used for)
financing activities -- -- 7,272 (1,405)
------- ------- ------- -------

Net increase (decrease) in cash (27) (313) 469 (1,020)

Cash at beginning of period 156 469 -- 1,020
------- ------- ------- -------

Cash at end of period $ 129 $ 156 $ 469 $ --
======= ======= ======= =======

Supplemental disclosure of cash flow information:

Cash paid for state income taxes $ 150 $ 10 $ 60
======= ======= =======

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

F-55

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FOAMEX FIBERS, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
for the year ended December 28, 1997, for the year ended
December 29, 1996, for the period from April 13, 1995
to December 31, 1995 and for the period
from January 1, 1995 to April 12, 1995 (Predecessor Company)

[Enlarge/Download Table]

Common Stock Paid-In Retained
Shares Amount Capital Earnings
(thousands)

Balances at December 31, 1994 110 $ 200 $ -- $ 764

Net income for the period from January 1, 1995 to
April 12, 1995 -- -- -- 655

Distributions to former stockholders -- -- -- (150)

Acquisition adjustment (110) (200) -- (1,269)
------- ------- ------- -------

Balances at April 12, 1995 -- -- -- --

Capital Contribution by General Felt 1 -- 7,272 --

Net income for the period from April 13, 1995
to December 31, 1995 -- -- -- 703
------- ------- ------- -------

Balances at December 31, 1995 1 -- 7,272 703

Net income -- -- -- 2,071
------- ------- ------- -------

Balances at December 29, 1996 1 -- 7,272 2,774

Net income -- -- -- 2,274
------- ------- ------- -------

Balances at December 28, 1997 1 -- $ 7,272 $ 5,048
======= ======= ======= =======

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

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10-K405/A 89th Page of 94 TOC 1st Previous Next ↓Bottom Just 89th
FOAMEX FIBERS, INC.
NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

Foamex Fibers, Inc. ("Foamex Fibers") manufactures various nonwoven textile
fiber products used primarily for carpet padding and in the furniture industry.

Foamex Fibers was formed on March 29, 1995 for the purpose of acquiring
certain assets and assuming certain liabilities of GS Industries, Inc. and
Pontotoc Fibers, Inc. On April 13, 1995, Foamex Fibers acquired such assets and
assumed such liabilities for an aggregate purchase price of approximately $8.0
million. (See Note 3 for further discussion.)

Foamex Fibers is a wholly-owned subsidiary of General Felt Industries, Inc.
("General Felt") which in turn is a wholly-owned subsidiary of Foamex L.P.
Foamex L.P. is a wholly-owned subsidiary of Foamex International Inc. ("Foamex
International").

The balance sheets as of December 28, 1997 and December 29, 1996 and the
statements of operations, cash flows and stockholder's equity for the year ended
December 28, 1997 and December 29, 1996 and for the period from April 13, 1995
to December 31, 1995 pertain to Foamex Fibers.

The accompanying combined statements of operations, cash flows and
stockholder's equity for the period from January 1, 1995 to April 12, 1995
include the combined individual operations of GS Industries, Inc. and Pontotoc
Fibers, Inc. (collectively, the "Predecessor Company").

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year

Foamex Fibers' fiscal year ends on the Sunday closest to the thirty-first
day of December. Fiscal years 1997 and 1996 were composed of fifty-two weeks and
ended on December 28, 1997 and December 29, 1996. The Predecessor Company's year
end was the thirty-first day of December.

Accounting Estimates

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

Revenue Recognition

Revenue from sales is recognized when products are shipped at which time
title passes to the customer.

Discounts and Billing Adjustments

A reduction in sales revenue is recognized for sales discounts when product
is invoiced or for other billing adjustments.

Inventories

Inventories are stated at the lower of cost or market. The cost of
inventories is determined on a first-in, first-out basis.

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FOAMEX FIBERS, INC.
NOTES TO FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Plant and Equipment

Plant and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets. The range of
useful lives estimated for machinery, equipment and furnishings is five to
twelve years. Leasehold improvements are amortized over the shorter of the terms
of the respective lease or the estimated useful life of the improvement,
whichever is shorter. Depreciation expense for the years ended December 28, 1997
and December 29, 1996, the period from April 13, 1995 to December 31, 1995 and
for the period from January 1, 1995 to April 12, 1995 was $0.3 million, $0.2
million, $0.1 million and $0.1 million, respectively. For income tax purposes,
Foamex Fibers uses accelerated depreciation methods.

Cost in Excess of Net Assets Acquired

The excess of the acquisition cost over the fair value of net assets
acquired in business combinations accounted for by the purchase method is
amortized using the straight-line method over a forty year period. At each
balance sheet date Foamex Fibers evaluates the recoverability of cost in excess
of net assets acquired using certain financial indicators such as historical and
future ability to generate income from operations based on a going concern
basis. Accumulated amortization as of December 28, 1997 and December 29, 1996
was approximately $0.3 million and $0.2 million, respectively.

Environmental Matters

Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the cost can be reasonably
estimated.

Income Taxes

Foamex Fibers joins with General Felt in the filing of a consolidated U.S.
Federal income tax return. Foamex Fiber's policy is to provide for Federal and
state income taxes on a separate return basis. As of December 28, 1997, Foamex
Fibers does not have a tax sharing agreement with General Felt. Therefore
current and deferred Federal income taxes payable are classified as noncurrent
and are included in Income Taxes Due to General Felt. Net deferred Federal
income tax liabilities amounting to approximately $0.4 million and $0.3 million
at December 28, 1997 and December 29, 1996 are included in Income Taxes Due to
General Felt and consist primarily of accelerated depreciation for plant and
equipment and accelerated amortization for costs in excess of assets acquired
for income tax purposes offset by deferred tax assets relating to allowance
accounts and accrued liabilities not deductible for income tax purposes.

The stockholders of the Predecessor Company had elected S Corporation
status under the provision of the Internal Revenue Code, which provided that, in
lieu of corporate income taxes, the stockholders were taxed on the Predecessor
Company's taxable income.

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FOAMEX FIBERS, INC.
NOTES TO FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reclassifications

Certain amounts in the 1996 financial statements have been reclassified to
conform with the present years presentation.

3. ACQUISITIONS

On April 13, 1995, Foamex Fibers acquired certain assets and assumed
certain liabilities of GS Industries, Inc. and Pontotoc Fibers, Inc. for
aggregate consideration of approximately $8.0 million, including related fees
and expenses of approximately $0.3 million, with an initial cash payment of $7.2
million. The purchase price was funded by General Felt in the form of a capital
contribution. The excess of the purchase price over the estimated fair value of
the net assets acquired was approximately $3.9 million. The acquisition was
accounted for as a purchase. The cost of the acquisition has been allocated on
the basis of the fair value of the assets acquired and the liabilities assumed.
The excess of the purchase price over the estimated fair value of the net assets
acquired is being amortized using the straight-line method over forty years.

4. INVENTORIES

Inventories consist of:

December 28, December 29,
1997 1996
(thousands)

Raw material and supplies $700 $700
Finished goods 225 272
---- ----
Total $925 $972
==== ====

5. INCOME TAXES

The components of the provision for income taxes are summarized as
follows:

[Download Table]

Period from
Year Ended Year Ended April 13, 1995 to
December 28, December 29, December 31,
1997 1996 1995
(thousands)

Federal $1,161 $1,156 $ 410
State 169 76 59
------ ------ ------
Provision for income taxes $1,330 $1,232 $ 469
====== ====== ======

A reconciliation of the statutory federal income tax rate to the effective
income tax rate is as follows:

[Download Table]

Period from
Year Ended Year Ended April 13, 1995 to
December 28, December 29, December 31,
1997 1996 1995
(thousands)

Statutory income taxes $1,261 $1,156 $ 410
State income taxes, net of federal 169 76 59
Other (100) - -
------- --------- ---------
Provision for income taxes $1,330 $1,232 $ 469
====== ====== ======

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FOAMEX FIBERS, INC.
NOTES TO FINANCIAL STATEMENTS

6. COMMITMENTS AND CONTINGENCIES

Guarantee of Foamex L.P. Indebtedness

Foamex Fibers is a joint obligor on $248.0 million principal amount of
Foamex L.P.'s public debt and approximately $451.1 million of outstanding bank
borrowings under Foamex L.P.'s credit facility.

Operating Leases

Foamex Fibers is obligated, under various noncancelable lease agreements,
for rental of facilities and machinery and equipment. Many of the leases contain
renewal options with varying terms and escalation clauses that provide for
increased rentals based upon increases in the Consumer Price Index, real estate
taxes and the lessors' operating expenses. Total minimum rental commitments
required under operating leases at December 28, 1997 (thousands) was:

1998 $ 328
1999 318
2000 318
2001 318
2002 318
Thereafter 732
-------
Total minimum lease payments $ 2,332
=======

Total rent expense for all operating leases for the years ended December
28, 1997 and December 29, 1996, for the period from April 13, 1995 to December
31, 1995 and for the period from January 1, 1995 to April 12, 1995 was
approximately $0.5 million, $0.3 million, $0.2 million and $0.1 million,
respectively,

7. RELATED PARTY TRANSACTIONS AND BALANCES

General Felt purchased $10.9 million, $10.1 million, $6.4 million and $0.8
million of carpet cushion from Foamex Fibers for the years ended December 28,
1997 and December 29, 1996, the period from April 13, 1995 to December 31, 1995
and for the period from January 1, 1995 to April 12, 1995, respectively. As of
December 28, 1997 and December 29, 1996, Foamex Fibers had accounts receivable
from General Felt of approximately $8.0 million and $5.1 million, respectively.
During 1997, Foamex L.P. paid approximately $0.2 million for consulting and
travel expenses on behalf of Foamex Fibers.

8. SUBSEQUENT EVENT

On February 27, 1998, Foamex Fibers was merged into General Felt and
following several related transactions, General Felt substantially sold all of
its assets to Foamex Carpet Cushion, Inc.

F-60

10-K405/A 93rd Page of 94 TOC 1st Previous Next ↓Bottom Just 93rd
FOAMEX L.P. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULE

Index to Financial Statement Schedule

Schedule II - Valuation and Qualifying Accounts

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

S-1

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

[Enlarge/Download Table]

Balance at Charged to Charged to Balance at
Beginning of Costs and other End of
Period Expenses Accounts(1) Deductions Period

YEAR ENDED DECEMBER 28, 1997

Allowance for Uncollectible Accounts $ 3,060 $ 2,295 $ 2,898 $ 1,409 $ 6,844
======== =========== ======== ============= ========

Reserve for Discounts $ 3,268 $ -- $ 10,182 $ 12,212 $ 1,238
======== =========== ======== ============= ========

Deferred Tax Asset Valuation Allowance $ 15,988 $ (5,028) $ (1,863) (3) $ -- $ 9,097
======== =========== ======== ============= ========

YEAR ENDED DECEMBER 29, 1996
Allowance for Uncollectible Accounts $ 4,839 $ 704 $ 292 $ 2,775 $ 3,060
======== =========== ======== ============= ========

Reserve for Discounts $ 4,299 $ -- $ 12,190 $ 13,221 $ 3,268
======== =========== ======== ============= ========

Deferred Tax Asset Valuation Allowance $ 13,473 $ 9,370 $ (6,855) (3) $ -- $ 15,988
======== =========== ======== ============= ========

YEAR ENDED DECEMBER 31, 1995(2)
Allowance for Uncollectible Accounts $ 2,324 $ 4,627 $ 324 $ 2,436 $ 4,839
======== =========== ======== ============= ========

Reserve for Discounts $ 1,382 $ -- $ 15,056 $ 12,139 $ 4,299
======== =========== ======== ============= ========

Deferred Tax Asset Valuation Allowance $ 12,432 $ 4,929 $ (3,888) (3) $ -- $ 13,473
======== =========== ======== ============= ========

<FN>
(1) Discounts and billing adjustments reflect a reduction in net sales.

(2) Fiscal years 1995 and 1994 were restated for discontinued operations.

(3) Represents an adjustment to cost in excess of net assets relating to the
utilization of preacquisition deferred tax assets of General Felt.
</FN>

S-2

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-K405/A’ Filing	Date	First	Last	Other Filings

	6/15/07	48	67
	8/15/05	49	67	8-K, NT 10-Q
	6/15/05	48	67
	10/1/04	49
	10/1/02	49
	8/15/02	49	67
	6/15/02	48	67
	12/31/01	58		10-K405
	7/7/01	57
	6/15/00	48	67
	6/1/00	49
	5/6/99	50
	8/15/98	49	67
Corrected on:	8/3/98
Filed on:	5/13/98			8-K/A
	5/11/98	31	32	S-4/A
	4/6/98	1
	3/23/98	14	62
	3/17/98	13	62	15-12G, 15-15D
	3/16/98	3	40
	3/9/98	25	30	8-K/A
	3/4/98	13	84
	2/28/98	25	30
	2/27/98	3	92	8-K, 8-K/A
	1/8/98	23	51
For Period End:	12/28/97	1	94	NT 10-K
	12/26/97	58
	12/24/97	44
	12/23/97	4	67	8-K, 8-K/A
	12/15/97	48	67
	10/6/97	4	77	8-K
	10/1/97	4	57
	9/28/97	30		10-Q
	8/29/97	28	30	8-K
	7/1/97	57
	6/13/97	27
	6/12/97	4	58
	6/5/97	27
	5/28/97	29
	5/5/97	13	61
	4/10/97	12
	12/31/96	78
	12/30/96	57
	12/29/96	20	94	10-K405, NT 10-K
	12/27/96	11	60
	12/11/96	28	59
	9/30/96	29
	7/9/96	27
	6/30/96	29		10-Q, 10-Q/A
	12/31/95	20	94
	7/2/95	29
	4/13/95	25	92
	4/12/95	25	92
	3/29/95	89
	1/1/95	25	92
	7/3/94	30
	7/1/94	28
	6/28/94	25	28
	2/1/94	28
	12/23/93	28
	12/14/93	25	28
	7/30/93	49
	6/3/93	49
	5/6/93	27	50
	5/1/93	15
	3/23/93	15	49
	12/31/92	27
	10/13/92	28
	7/23/92	67
	7/22/92	28
	7/20/92	67
				List all Filings

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Filing Submission 0000950159-98-000121 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Foamex LP, et al. – ‘10-K405/A’ for 12/28/97

As of: Wednesday, 5/13/98 · For: 12/28/97 · Accession #: 950159-98-121 · File #s: 0-07500, 1-11432, 1-11436, 333-30291-03 · Correction: This Filing was Corrected by the SEC on 8/3/98. ®

Previous ‘10-K405’: ‘10-K405’ on 4/14/98 for 12/31/97 · Next: ‘10-K405’ on 5/7/99 for 12/31/98 · Latest: ‘10-K405’ on 4/1/02 for 12/31/01

Amendment to Annual Report — [x] Reg. S-K Item 405 — Form 10-KFiling Table of Contents

10-K405/A — Amendment to Annual Report — [x] Reg. S-K Item 405Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

As of: Wednesday, 5/13/98 · For: 12/28/97 · Accession #: 950159-98-121 · File #s: 0-07500, 1-11432, 1-11436, 333-30291-03 · Correction: This Filing was Corrected by the SEC on 8/3/98. `®`

Amendment to Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents

10-K405/A — Amendment to Annual Report — [x] Reg. S-K Item 405
Document Table of Contents