##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the thirteen weeks ended June 29, 2008



| ̈ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number: 333-116843





SOLO CUP COMPANY

(Exact name of
registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 47-0938234                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|1700 Old Deerfield Road, Highland Park, Illinois               |  | 60035                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code: 847/831-4800





Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2
of the Exchange Act (Check one):

Large accelerated filer   ̈    Accelerated
filer   ̈    Non-accelerated filer  x    Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

The number of shares outstanding of the Registrants common stock as of August 12, 2008:

Common
Stock, $0.01 par value  100 shares









---

##### Table of Contents

INDEX



|         |  |                                                                                       |  |     
|-------- |  | ------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                       |  | Page
|PART I.  |  | Financial Information                                                                 |  |     
|         |  |                                                                                      
|Item 1.  |  | Financial Statements                                                                  |  | 3   
|         |  |                                                                                      
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 20  
|         |  |                                                                                      
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 28  
|         |  |                                                                                      
|Item 4T. |  | Controls and Procedures                                                               |  | 28  
|         |  |                                                                                      
|PART II. |  | Other Information                                                                     |  |     
|         |  |                                                                                      
|Item 1.  |  | Legal Proceedings                                                                     |  | 29  
|         |  |                                                                                      
|Item 1A. |  | Risk Factors                                                                          |  | 29  
|         |  |                                                                                      
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 29  
|         |  |                                                                                      
|Item 3.  |  | Defaults Upon Senior Securities                                                       |  | 29  
|         |  |                                                                                      
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 29  
|         |  |                                                                                      
|Item 5.  |  | Other Information                                                                     |  | 29  
|         |  |                                                                                      
|Item 6.  |  | Exhibits                                                                              |  | 29  



---

##### Table of Contents

PART I - FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------

SOLO CUP COMPANY AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



|                                                                                                                                               |  |              |           |   |                  |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                               |  | June 29,2008 |           |   | December 30,2007 |  
|                                                                                                                                               |  | (Unaudited)  |           |   |                  |  
|Assets                                                                                                                                         |  |              |           |   |                  |   |           |  
|Current assets:                                                                                                                                |  |              |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                      |  | $            | 34,677    |   |                  | $ | 33,583    |  
|Accounts receivable:                                                                                                                           |  |              |           |   |                  |   |           |  
|Trade, less allowance for doubtful accounts of $1,596 and $1,348                                                                               |  |              | 157,325   |   |                  |   | 160,067   |  
|Other                                                                                                                                          |  |              | 3,561     |   |                  |   | 9,823     |  
|Inventories                                                                                                                                    |  |              | 333,615   |   |                  |   | 301,037   |  
|Prepaid expenses                                                                                                                               |  |              | 13,019    |   |                  |   | 13,819    |  
|Deferred income taxes                                                                                                                          |  |              | 39,572    |   |                  |   | 41,622    |  
|Assets held for sale                                                                                                                           |  |              | 10,246    |   |                  |   | 11,423    |  
|Other current assets                                                                                                                           |  |              | 20,230    |   |                  |   | 20,502    |  
|                                                                                                                                               |  |              |           |   |                  |   |           |  
|Total current assets                                                                                                                           |  |              | 612,245   |   |                  |   | 591,876   |  
|Property, plant and equipment, less accumulated depreciation and amortization of $657,009 and $628,089                                         |  |              | 508,340   |   |                  |   | 540,429   |  
|Goodwill                                                                                                                                       |  |              | 20,968    |   |                  |   | 20,958    |  
|Intangible assets, less accumulated amortization of $30,218 and $29,302                                                                        |  |              | 620       |   |                  |   | 2,204     |  
|Other assets                                                                                                                                   |  |              | 25,446    |   |                  |   | 27,031    |  
|                                                                                                                                               |  |              |           |   |                  |   |           |  
|Total assets                                                                                                                                   |  | $            | 1,167,619 |   |                  | $ | 1,182,498 |  
|                                                                                                                                               |  |              |           |   |                  |   |           |  
|Liabilities and Shareholders Equity                                                                                                           |  |              |           |   |                  |   |           |  
|Current liabilities:                                                                                                                           |  |              |           |   |                  |   |           |  
|Accounts payable                                                                                                                               |  | $            | 91,902    |   |                  | $ | 86,562    |  
|Accrued payroll and related costs                                                                                                              |  |              | 41,848    |   |                  |   | 50,023    |  
|Accrued customer allowances                                                                                                                    |  |              | 24,587    |   |                  |   | 26,493    |  
|Other current liabilities                                                                                                                      |  |              | 34,983    |   |                  |   | 35,013    |  
|                                                                                                                                               |  |              |           |   |                  |   |           |  
|Total current liabilities                                                                                                                      |  |              | 193,320   |   |                  |   | 198,091   |  
|Long-term debt, net of current maturities                                                                                                      |  |              | 738,283   |   |                  |   | 756,197   |  
|Deferred income taxes                                                                                                                          |  |              | 52,261    |   |                  |   | 54,408    |  
|Pensions and other postretirement benefits                                                                                                     |  |              | 11,781    |   |                  |   | 12,500    |  
|Deferred gain on sale-leaseback                                                                                                                |  |              | 47,498    |   |                  |   | 49,187    |  
|Other liabilities                                                                                                                              |  |              | 28,156    |   |                  |   | 26,052    |  
|                                                                                                                                               |  |              |           |   |                  |   |           |  
|Total liabilities                                                                                                                              |  |              | 1,071,299 |   |                  |   | 1,096,435 |  
|                                                                                                                                               |  |              |           |   |                  |   |           |  
|Shareholders equity:                                                                                                                          |  |              |           |   |                  |   |           |  
|Common stock - Par value $0.01 per share; 1,000 shares authorized; 100 shares issued and outstanding as of June 29, 2008 and
December 30, 2007 |  |              |          |   |                  |   |          |  
|Additional paid-in capital                                                                                                                     |  |              | 254,995   |   |                  |   | 254,995   |  
|Accumulated deficit                                                                                                                            |  |              | (171,050  | ) |                  |   | (181,503  | )
|Accumulated other comprehensive income                                                                                                         |  |              | 12,375    |   |                  |   | 12,571    |  
|                                                                                                                                               |  |              |           |   |                  |   |           |  
|Total shareholders equity                                                                                                                     |  |              | 96,320    |   |                  |   | 86,063    |  
|                                                                                                                                               |  |              |           |   |                  |   |           |  
|Total liabilities and shareholders equity                                                                                                     |  | $            | 1,167,619 |   |                  | $ | 1,182,498 |  
|                                                                                                                                               |  |              |           |   |                  |   |           |  

See accompanying Notes to Consolidated Financial Statements.



3



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands)



|                                                                                                     |  |                                  |         |   |                                 |   |         |                                    |  |   |                                   |   |  |   |           |  
|---------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | - | ------------------------------- | - | ------- | ---------------------------------- |  | - | --------------------------------- | - |  | - | --------- | -
|                                                                                                     |  | Thirteenweeks endedJune 29, 2008 |         |   | Thirteenweeks endedJuly 1, 2007 |   |         | Twenty-sixweeks endedJune 29, 2008 |  |   | Twenty-sixweeks endedJuly 1, 2007 |  
|Net sales                                                                                            |  | $                                | 518,519 |   |                                 | $ | 575,909 |                                    |  | $ | 979,781                           |   |  | $ | 1,058,636 |  
|Cost of goods sold                                                                                   |  |                                  | 442,572 |   |                                 |   | 498,750 |                                    |  |   | 836,475                           |   |  |   | 946,994   |  
|                                                                                                     |  |                                  |         |   |                                 |   |         |                                    |  |   |                                   |   |  |   |           |  
|Gross profit                                                                                         |  |                                  | 75,947  |   |                                 |   | 77,159  |                                    |  |   | 143,306                           |   |  |   | 111,642   |  
|Selling, general and administrative expenses                                                         |  |                                  | 45,397  |   |                                 |   | 55,363  |                                    |  |   | 87,050                            |   |  |   | 104,013   |  
|Loss (gain) on sale of property, plant and equipment                                                 |  |                                  | 1,987   |   |                                 |   | (1,538  | )                                  |  |   | 9,878                             |   |  |   | (1,165    | )
|                                                                                                     |  |                                  |         |   |                                 |   |         |                                    |  |   |                                   |   |  |   |           |  
|Operating income                                                                                     |  |                                  | 28,563  |   |                                 |   | 23,334  |                                    |  |   | 46,378                            |   |  |   | 8,794     |  
|Interest expense, net of interest income of $221, $155, $602 and $1,684                              |  |                                  | 15,217  |   |                                 |   | 22,524  |                                    |  |   | 31,348                            |   |  |   | 43,523    |  
|Prepayment penalty                                                                                   |  |                                  |        |   |                                 |   | 1,300   |                                    |  |   |                                  |   |  |   | 1,300     |  
|Loss on debt extinguishment                                                                          |  |                                  |        |   |                                 |   | 3,962   |                                    |  |   |                                  |   |  |   | 3,962     |  
|Foreign currency exchange gain, net                                                                  |  |                                  | (395    | ) |                                 |   | (1,310  | )                                  |  |   | (1,245                            | ) |  |   | (1,747    | )
|Other expense, net                                                                                   |  |                                  |        |   |                                 |   | 4       |                                    |  |   |                                  |   |  |   | 4         |  
|                                                                                                     |  |                                  |         |   |                                 |   |         |                                    |  |   |                                   |   |  |   |           |  
|Income (loss) from continuing operations before income taxes                                         |  |                                  | 13,741  |   |                                 |   | (3,146  | )                                  |  |   | 16,275                            |   |  |   | (38,248   | )
|Income tax provision (benefit)                                                                       |  |                                  | 5,215   |   |                                 |   | (2,927  | )                                  |  |   | 5,393                             |   |  |   | (2,376    | )
|                                                                                                     |  |                                  |         |   |                                 |   |         |                                    |  |   |                                   |   |  |   |           |  
|Income (loss) from continuing operations                                                             |  |                                  | 8,526   |   |                                 |   | (219    | )                                  |  |   | 10,882                            |   |  |   | (35,872   | )
|(Loss) income from discontinued operations, net of income tax provision of $0, $1,011, $0 and $1,202 |  |                                  | (184    | ) |                                 |   | 3,322   |                                    |  |   | (429                              | ) |  |   | 141       |  
|                                                                                                     |  |                                  |         |   |                                 |   |         |                                    |  |   |                                   |   |  |   |           |  
|Net income (loss)                                                                                    |  | $                                | 8,342   |   |                                 | $ | 3,103   |                                    |  | $ | 10,453                            |   |  | $ | (35,731   | )
|                                                                                                     |  |                                  |         |   |                                 |   |         |                                    |  |   |                                   |   |  |   |           |  

See accompanying Notes to Consolidated Financial Statements.



4



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY

(In thousands)



|                                                                                   |  |             |   |                          |   |                    |  |   |                                            |   |  |                          |        |   |  |   |        |  
|---------------------------------------------------------------------------------- |  | ----------- | - | ------------------------ | - | ------------------ |  | - | ------------------------------------------ | - |  | ------------------------ | ------ | - |  | - | ------ | -
|                                                                                   |  | Commonstock |   | Additionalpaid-incapital |   | Accumulateddeficit |  |   | Accumulatedothercomprehensiveincome (loss) |   |  | Totalshareholdersequity |       
|Balance at December 30, 2007                                                       |  | $           |  |                          | $ | 254,995            |  | $ | (181,503                                   | ) |  | $                        | 12,571 |   |  | $ | 86,063 |  
|Net income (Unaudited)                                                             |  |             |  |                          |   |                   |  |   | 10,453                                     |   |  |                          |       |   |  |   | 10,453 |  
|Foreign currency translation adjustment (Unaudited)                                |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | (551   | ) |  |   | (551   | )
|Pension liability adjustments, net of tax of $0 (Unaudited)                        |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | 48     |   |  |   | 48     |  
|Unrealized investment loss, net of tax of $0 (Unaudited)                           |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | (6     | ) |  |   | (6     | )
|Recognition of realized gain on cash flow hedge, net of tax of $77 (Unaudited)     |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | (54    | ) |  |   | (54    | )
|Unrealized loss on cash flow hedge, net of tax of $0 (Unaudited)                   |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | (1,313 | ) |  |   | (1,313 | )
|Reclassification of realized loss on cash flow hedge, net of tax of $0 (Unaudited) |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | 1,680  |   |  |   | 1,680  |  
|                                                                                   |  |             |   |                          |   |                    |  |   |                                            |   |  |                          |        |   |  |   |        |  
|Balance at June 29, 2008 (Unaudited)                                               |  | $           |  |                          | $ | 254,995            |  | $ | (171,050                                   | ) |  | $                        | 12,375 |   |  | $ | 96,320 |  
|                                                                                   |  |             |   |                          |   |                    |  |   |                                            |   |  |                          |        |   |  |   |        |  

See accompanying Notes to Consolidated Financial Statements.



5



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)



|                                                                                                                |  |                                    |         |   |                                   |   |         |  
|--------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ------- | - | --------------------------------- | - | ------- | -
|                                                                                                                |  | Twenty-sixweeks endedJune 29, 2008 |         |   | Twenty-sixweeks endedJuly 1, 2007 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                            |  |                                    |         |   |                                   |   |         |  
|Net income (loss)                                                                                               |  | $                                  | 10,453  |   |                                   | $ | (35,731 | )
|Loss (income) from discontinued operations, net of income taxes                                                 |  |                                    | 429     |   |                                   |   | (141    | )
|                                                                                                                |  |                                    |         |   |                                   |   |         |  
|Income (loss) from continuing operations                                                                        |  |                                    | 10,882  |   |                                   |   | (35,872 | )
|                                                                                                                |  |                                   
|Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities: |  |                                    |         |   |                                   |   |         |  
|Depreciation and amortization                                                                                   |  |                                    | 40,722  |   |                                   |   | 45,671  |  
|Deferred financing fee amortization                                                                             |  |                                    | 2,172   |   |                                   |   | 2,623   |  
|Loss (gain) on sale of property, plant and equipment                                                            |  |                                    | 9,878   |   |                                   |   | (1,165  | )
|Asset impairment                                                                                                |  |                                    |        |   |                                   |   | 2,559   |  
|Loss on debt extinguishment                                                                                     |  |                                    |        |   |                                   |   | 3,962   |  
|Deferred income taxes                                                                                           |  |                                    | 2,234   |   |                                   |   | (4,815  | )
|Foreign currency exchange gain, net                                                                             |  |                                    | (1,245  | ) |                                   |   | (1,747  | )
|Changes in operating assets and liabilities:                                                                    |  |                                    |         |   |                                   |   |         |  
|Accounts receivable, net                                                                                        |  |                                    | 9,606   |   |                                   |   | 1,275   |  
|Inventories                                                                                                     |  |                                    | (32,862 | ) |                                   |   | 11,178  |  
|Prepaid expenses and other current assets                                                                       |  |                                    | 766     |   |                                   |   | (4,192  | )
|Other assets                                                                                                    |  |                                    | 331     |   |                                   |   | 674     |  
|Accounts payable                                                                                                |  |                                    | 9,667   |   |                                   |   | 518     |  
|Accrued expenses and other current liabilities                                                                  |  |                                    | (12,807 | ) |                                   |   | 8,228   |  
|Other liabilities                                                                                               |  |                                    | 802     |   |                                   |   | (5,306  | )
|Other, net                                                                                                      |  |                                    | 835     |   |                                   |   | (1,901  | )
|                                                                                                                |  |                                    |         |   |                                   |   |         |  
|Net cash provided by operating activities-continuing operations                                                 |  |                                    | 40,981  |   |                                   |   | 21,690  |  
|Net cash (used in) provided by operating activities-discontinued operations                                     |  |                                    | (264    | ) |                                   |   | 11,841  |  
|                                                                                                                |  |                                    |         |   |                                   |   |         |  
|Net cash provided by operating activities                                                                       |  | $                                  | 40,717  |   |                                   | $ | 33,531  |  
|                                                                                                                |  |                                    |         |   |                                   |   |         |  

(Continued)



6



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited, in
thousands)



|                                                                          |  |                                    |         |   |                                   |   |          |  
|------------------------------------------------------------------------- |  | ---------------------------------- | ------- | - | --------------------------------- | - | -------- | -
|                                                                          |  | Twenty-sixweeks endedJune 29, 2008 |         |   | Twenty-sixweeks endedJuly 1, 2007 |  
|Net cash provided by operating activities                                 |  | $                                  | 40,717  |   |                                   | $ | 33,531   |  
|                                                                          |  |                                    |         |   |                                   |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                      |  |                                    |         |   |                                   |   |          |  
|Purchases of property, plant and equipment                                |  |                                    | (31,400 | ) |                                   |   | (18,345  | )
|Proceeds from sale of property, plant and equipment                       |  |                                    | 10,179  |   |                                   |   | 128,345  |  
|                                                                          |  |                                    |         |   |                                   |   |          |  
|Net cash (used in) provided by investing activities-continuing operations |  |                                    | (21,221 | ) |                                   |   | 110,000  |  
|Net cash provided by investing activities-discontinued operations         |  |                                    |        |   |                                   |   | 94       |  
|                                                                          |  |                                    |         |   |                                   |   |          |  
|Net cash (used in) provided by investing activities                       |  |                                    | (21,221 | ) |                                   |   | 110,094  |  
|                                                                          |  |                                    |         |   |                                   |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                      |  |                                    |         |   |                                   |   |          |  
|Net repayments under revolving credit facilities                          |  |                                    | (9,900  | ) |                                   |   | (59,642  | )
|Borrowings under term notes                                               |  |                                    |        |   |                                   |   | 50,000   |  
|Repayment of capital to parent                                            |  |                                    |        |   |                                   |   | (2,007   | )
|Repayments of term notes                                                  |  |                                    | (7,667  | ) |                                   |   | (133,876 | )
|(Repayments) borrowings of other debt                                     |  |                                    | (528    | ) |                                   |   | 178      |  
|Debt issuance costs                                                       |  |                                    |        |   |                                   |   | (380     | )
|                                                                          |  |                                    |         |   |                                   |   |          |  
|Net cash used in financing activities-continuing operations               |  |                                    | (18,095 | ) |                                   |   | (145,727 | )
|Net cash used in financing activities-discontinued operations             |  |                                    |        |   |                                   |   | (44      | )
|                                                                          |  |                                    |         |   |                                   |   |          |  
|Net cash used in financing activities                                     |  |                                    | (18,095 | ) |                                   |   | (145,771 | )
|                                                                          |  |                                    |         |   |                                   |   |          |  
|Effect of exchange rate changes on cash                                   |  |                                    | (307    | ) |                                   |   | 145      |  
|                                                                          |  |                                    |         |   |                                   |   |          |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                      |  |                                    | 1,094   |   |                                   |   | (2,001   | )
|CASH AND CASH EQUIVALENTS, beginning of period                            |  |                                    | 33,583  |   |                                   |   | 26,391   |  
|                                                                          |  |                                    |         |   |                                   |   |          |  
|CASH AND CASH EQUIVALENTS, end of period                                  |  |                                    | 34,677  |   |                                   |   | 24,390   |  
|Less: Cash and cash equivalents  discontinued operations                 |  |                                    |        |   |                                   |   | 7,881    |  
|                                                                          |  |                                    |         |   |                                   |   |          |  
|Cash and cash equivalents  continuing operations                         |  | $                                  | 34,677  |   |                                   | $ | 16,509   |  
|                                                                          |  |                                    |         |   |                                   |   |          |  
|SUPPLEMENTAL CASH FLOW DISCLOSURES:                                       |  |                                    |         |   |                                   |   |          |  
|Interest paid, net of capitalized interest                                |  | $                                  | 29,889  |   |                                   | $ | 56,279   |  
|                                                                          |  |                                    |         |   |                                   |   |          |  
|Income taxes paid, net of income tax refunds                              |  | $                                  | 3,214   |   |                                   | $ | 2,344    |  
|                                                                          |  |                                    |         |   |                                   |   |          |  

See accompanying Notes to Consolidated Financial Statements.



7



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) BASIS OF PRESENTATION

As used in these notes,
unless the context otherwise requires, the Company shall refer to Solo Cup Company, a Delaware corporation (Solo Delaware) which is the holding company for Solo Cup Operating Corporation, a Delaware corporation
(SCOC). The Company is a wholly owned subsidiary of Solo Cup Investment Corporation, a Delaware corporation (SCIC). SCC Holding Company LLC, a Delaware limited liability company (SCC Holding) and Vestar Capital
Partners (Vestar) own 67.2% and 32.7% of SCIC, respectively. Company management holds the remaining 0.1% of SCIC.

The
information included in the accompanying interim consolidated financial statements of the Company is unaudited but, in the opinion of management, includes all adjustments (consisting only of normal recurring adjustments and accruals unless otherwise
indicated) which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. Results for the interim periods are not necessarily indicative of results expected for
the entire year. These interim consolidated financial statements should be read in conjunction with the Companys consolidated financial statements and notes thereto for the fiscal year ended December 30, 2007, included in its 2007 Annual
Report on Form 10-K.

These interim consolidated financial statements have been prepared in conformity with U.S. generally accepted
accounting principles, using managements best estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the balance
sheet dates and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and judgments.

Immaterial Correction of Errors

In accordance with the guidance of Staff Accounting Bulletin No. 108,
these interim consolidated financial statements reflect the immaterial correction of errors in the Companys prior period financial statements, described in Notes 2, 7, 12 and as follows. For the year ended December 31, 2006 and during the
twenty-six weeks ended July 1, 2007, the Company incorrectly included non-cash activities in its Statements of Cash Flows which related to cash outflows in subsequent periods for fixed asset purchases. In correcting this immaterial error, the
net impact to purchases of property, plant and equipment in the Statement of Cash Flows for the twenty-six weeks ended July 1, 2007, included in this Form 10-Q, was an increase of $4.5 million. This reduction in investing cash flows was offset
by a corresponding $4.5 million increase in operating cash flows, to recognize accounts payable and accrued expense reductions that were not uses of cash.

In the Companys 2007 Form 10-K, the Statements of Changes in Shareholders Equity and Comprehensive Income (Loss) incorrectly stated total comprehensive income for 2007 as $78.2 million; however, the
components of comprehensive income totaled $77.5 million.

During the second fiscal quarter of 2008, the Company identified approximately
$6.0 million and $0.7 million of open accounts receivable credits that relate to annual periods prior to 2008 (primarily 2007) and the second fiscal quarter of 2008, respectively. The Company is currently completing its review of these credits and
to date has determined that a portion of the credits should be reversed, which would increase net sales reported in prior periods. Based on the results of the work performed to date, the Company does not expect the impact to be material to any prior
annual consolidated financial statements or the first fiscal quarter of 2008. The maximum impact to net sales of prior periods would be an aggregate increase of $6.7 million. The $6.7 million of open credits are included as a reduction of accounts
receivable on the Companys Consolidated Balance Sheet as of June 29, 2008. The Company expects to complete its review during the third fiscal quarter of 2008 and be in a position to quantify the impact of resolving the open credits on prior
annual and quarterly periods.

(2) ASSETS HELD FOR SALE

Assets held for sale, included within the Companys North America operating segment, are as follows (in thousands):



|                                       |  |              |        |                  |   |       
|-------------------------------------- |  | ------------ | ------ | ---------------- | - | ------
|                                       |  | June 29,2008 |        | December 30,2007
|Chicago property(1)                    |  | $            | 9,246  |                  | $ | 9,246 
|Leominster, MA and Wheeling, IL(2) (3) |  |              | 1,000  |                  |   | 2,177 
|                                       |  |              |        |                  |   |       
|Assets held for sale                   |  | $            | 10,246 |                  | $ | 11,423
|                                       |  |              |        |                  |   |       



8



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)





|(1) | In March 2007, the Company entered into a purchase and sale agreement (the Agreement) with a third party for
the sale of certain property of the Company located in the City of Chicago. Previously, the Company had entered into agreements with the State of Illinois (State) and the City of Chicago (City) relating to the acquisition and
development of the property. Pursuant to these agreements, the State and the City provided certain grants to the Company, paid certain costs on behalf of the Company and undertook certain obligations relating to the property. Under these agreements,
the Company is required to fulfill certain obligations relating to development of the property and retention of a certain number of employees. If these obligations were not fulfilled, the Company would be required to repay certain amounts granted or
paid by the State or the City, the net impact of which, the Company believes, would not be material to its business, financial condition, results of operations or cash flows. The Agreement with the third party provides that, upon the closing of the
sale, the obligations of the Company to the State and the City will be satisfied or the Company will otherwise be released from such obligations. The Agreement has been extended through October 31, 2008. As of June 29, 2008 and
December 30, 2007, assets held for sale includes $9.2 million representing the carrying value of this property.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Companys Leominster, MA and Wheeling, IL plants ceased operations in December 2007 and February 2008,
respectively. During the twenty-six weeks ended June 29, 2008, equipment at both plants and the Wheeling manufacturing facility were sold.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The Company recognized an impairment loss of $3.0 million during the fourth quarter of 2007 to adjust the carrying value
of certain equipment at these locations to fair value. In the Companys Form 10-K for the fiscal year ended December 30, 2007, the impairment loss was reflected as a reduction in property, plant and equipment; however, it should have been
reflected as a reduction of assets held for sale. The Companys December 30, 2007 Consolidated Balance Sheet in this Form 10-Q reflects the correction of this immaterial error to increase the balance of property, plant and equipment and
decrease the balance of assets held for sale by $3.0 million.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(3) INVENTORIES

The components of inventories are as follows (in thousands):



|                           |  |              |         |                  |   |        
|-------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                           |  | June 29,2008 |         | December 30,2007
|Finished goods             |  | $            | 251,291 |                  | $ | 215,752
|Work in process            |  |              | 15,346  |                  |   | 13,935 
|Raw materials and supplies |  |              | 66,978  |                  |   | 71,350 
|                           |  |              |         |                  |   |        
|Total inventories          |  | $            | 333,615 |                  | $ | 301,037
|                           |  |              |         |                  |   |        

(4) LOSS ON SALE OF PROPERTY, PLANT AND EQUIPMENT

During the twenty-six weeks ended June 29, 2008, the loss on sale of property, plant and equipment of $9.9 million is primarily losses on the
disposal of non-core assets, including the March 2008 sale of the Companys dairy packaging machinery and equipment.

(5) SALE-LEASEBACK
TRANSACTION

In June 2007, the Company entered into a lease agreement in conjunction with the sale of six of its manufacturing
facilities. The sale proceeds of $130.0 million were used to retire the Companys second lien term loan. Upon the sale of the six properties, the Company immediately leased them back pursuant to a 20-year term lease. The lease contains four
five-year renewal term options and is non-cancelable. Annual rent for the six properties is approximately $11.7 million, payable on a quarterly basis. The lease provides for an annual 2% escalation of rent.

Net property, plant and equipment was reduced by the carrying values of the properties sold, which amounted to approximately $73.0 million, of which
$65.5 million was buildings and improvements and $7.5 million was land. The resulting gain of approximately $53.2 million (net of $3.7 million of closing costs) was recorded as a deferred credit in the Companys Consolidated Balance Sheet.
The remaining deferred credit is being amortized to income on a straight-line basis as an offset to rent expense over the 20-year lease term. As of June 29, 2008, the remaining deferred credit balance is $50.1 million, of which $2.6
million is included in other current liabilities. The lease is classified as an operating lease in accordance with Statement of Financial Accounting Standards (SFAS) No. 13, Accounting for Leases.



9



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(6) DEBT

A summary of long-term debt at June 29, 2008 and December 30, 2007, including amounts payable within one year, is as follows (in thousands):



|                                           |  |              |         |                  |   |        
|------------------------------------------ |  | ------------ | ------- | ---------------- | - | -------
|                                           |  | June 29,2008 |         | December 30,2007
|Long-term debt:                            |  |              |         |                  |   |        
|8.5% Senior Subordinated Notes             |  | $            | 325,000 |                  | $ | 325,000
|First Lien Facility  Term Loan            |  |              | 391,340 |                  |   | 398,650
|First Lien Facility  Revolver             |  |              | 20,200  |                  |   | 30,100 
|Canadian Credit Facility  Term Loan       |  |              | 2,563   |                  |   | 3,391  
|Capital lease obligations                  |  |              | 1,873   |                  |   | 1,852  
|                                           |  |              |         |                  |   |        
|Total long-term debt                       |  |              | 740,976 |                  |   | 758,993
|Less: Current maturities of long-term debt |  |              | 2,693   |                  |   | 2,796  
|                                           |  |              |         |                  |   |        
|Long-term debt, net of current maturities  |  | $            | 738,283 |                  | $ | 756,197
|                                           |  |              |         |                  |   |        

The Company was in compliance with all financial covenants under its First Lien Facility during
the twenty-six weeks ended June 29, 2008.

(7) FAIR VALUE OF FINANCIAL INSTRUMENTS

In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities. SFAS No. 159 permits entities to elect to measure at fair value eligible financial instruments that are not currently measured at fair value. This election, which may be applied on an instrument by instrument
basis, is typically irrevocable once made. The adoption of SFAS No. 159 during the first quarter of 2008 did not have an effect on the Companys consolidated financial statements because the Company did not elect to measure any additional
financial instruments at fair value as a result of this statement.

In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP) and expands disclosure about fair value measurements. In February 2008, the FASB issued
FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No. 157, which provides a one-year deferral of the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities,
except those that are recognized or disclosed in the financial statements at fair value at least annually. In accordance with this interpretation, the Company has adopted the provisions of SFAS No. 157 only with respect to its financial assets
and financial liabilities that are measured at fair value within the financial statements as of June 29, 2008. The Company has deferred the application of the provisions of SFAS No. 157 to its non-financial assets and non-financial
liabilities in accordance with FSP No. FAS 157-2.

The SFAS No. 157 fair value hierarchy consists of three levels: Level 1 fair
values are valuations based on quoted market prices in active markets for identical assets or liabilities that the entity has the ability to access; Level 2 fair values are those valuations based on quoted prices for similar assets or liabilities,
quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities; and Level 3 fair values are valuations based on inputs that are
supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Companys interest rate swaps are measured at fair value on a recurring basis under the provisions of SFAS No. 157 and
are included within Level 2 of the fair value hierarchy. The Company uses an income approach to value the outstanding interest rate swaps, which are further described below. The income approach consists of a discounted cash flow model that takes
into account the present value of future cash flows under the terms of the contracts using current market information as of the reporting date such as prevailing interest rates. Both the counterparty credit risk and the Companys credit risk
were considered in the fair value determination.



10



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



The Companys interest rate swaps are accounted for as cash flow hedges and their fair values
are included in other current liabilities or other liabilities (non-current) depending on their stated expiration dates.



|                                                                   |  |               |  |                |  |                |   |  |                          |       |                                     |   |      |                                         |  |   |      |  
|------------------------------------------------------------------ |  | ------------- |  | -------------- |  | -------------- | - |  | ------------------------ | ----- | ----------------------------------- | - | ---- | --------------------------------------- |  | - | ---- | -
|                                                                   |  | EffectiveDate |  | ExpirationDate |  | Fixed RatePaid |   |  | NotionalAmount(millions) |       | Fair Value atJune 29,2008(millions) |   |      | Fair Value atDecember 30,2007(millions) | 
|Receive-variable (Eurodollar), pay-fixed interest rate swap        |  | 10/02/07      |  | 04/02/09       |  | 4.6475         | % |  | $                        | 50.0  |                                     | $ | (0.7 | )                                       |  | $ | (0.4 | )
|                                                                   |  |               |  |                |  |               
|Three receive-variable (Eurodollar), pay-fixed interest rate swaps |  | 08/28/07      |  | 02/28/11       |  | 5.3765         | % |  |                          | 150.0 |                                     |   | (6.0 | )                                       |  |   | (6.6 | )
|                                                                   |  |               |  |                |  |                |   |  |                          |       |                                     |   |      |                                         |  |   |      |  
|                                                                   |  |               |  |                |  |                |   |  | $                        | 200.0 |                                     | $ | (6.7 | )                                       |  | $ | (7.0 | )
|                                                                   |  |               |  |                |  |                |   |  |                          |       |                                     |   |      |                                         |  |   |      |  

In the Companys Form 10-K for the fiscal year ended December 30, 2007, the total fair
value of these interest rate swap agreements of $(7.0) million was reflected as other current liabilities; however, based on their stated expiration dates, this amount should have been reflected as other liabilities (non-current). The Companys
December 30, 2007 Consolidated Balance Sheet in this Form 10-Q reflects the correction of this immaterial error to increase the balance of other liabilities (non-current) and decrease the balance of other current liabilities by $7.0 million.

In March 2004, June 2005 and March 2006, the Company entered into receive-variable, pay-fixed interest rate swaps with a total
notional amount of $300.0 million. In September 2006, the Company terminated these agreements prior to their stated expirations. Through the termination date, these interest rate swap agreements were accounted for as cash flow hedges. Included in
accumulated other comprehensive income is a deferred gain on the qualified hedged transactions of $0.2 million and $0.3 million as of June 29, 2008 and December 30, 2007, respectively. The deferred gain is being amortized into interest
expense over the remaining term of the underlying debt.

(8) PENSIONS AND OTHER POSTRETIREMENT BENEFITS

Net periodic benefit cost for the Companys pension and other postretirement benefit plans consists of the following (in thousands):



|                                     |  |                                  |        |   |                                 |   |        |                                    |  |   |                                   |   |  |   |        |  
|------------------------------------ |  | -------------------------------- | ------ | - | ------------------------------- | - | ------ | ---------------------------------- |  | - | --------------------------------- | - |  | - | ------ | -
|                                     |  | Thirteenweeks endedJune 29, 2008 |        |   | Thirteenweeks endedJuly 1, 2007 |   |        | Twenty-sixweeks endedJune 29, 2008 |  |   | Twenty-sixweeks endedJuly 1, 2007 |  
|Pension Benefits                     |  |                                  |        |   |                                 |   |        |                                    |  |   |                                   |   |  |   |        |  
|Service cost                         |  | $                                | 319    |   |                                 | $ | 438    |                                    |  | $ | 640                               |   |  | $ | 856    |  
|Interest cost                        |  |                                  | 1,835  |   |                                 |   | 1,709  |                                    |  |   | 3,652                             |   |  |   | 3,395  |  
|Expected return on plan assets       |  |                                  | (2,339 | ) |                                 |   | (1,949 | )                                  |  |   | (4,495                            | ) |  |   | (3,872 | )
|Amortization of prior service cost   |  |                                  | 51     |   |                                 |   | 51     |                                    |  |   | 102                               |   |  |   | 102    |  
|Amortization of net loss             |  |                                  | (50    | ) |                                 |   | 61     |                                    |  |   |                                  |   |  |   | 121    |  
|                                     |  |                                  |        |   |                                 |   |        |                                    |  |   |                                   |   |  |   |        |  
|Net periodic benefit (income) cost   |  | $                                | (184   | ) |                                 | $ | 310    |                                    |  | $ | (101                              | ) |  | $ | 602    |  
|                                     |  |                                  |        |   |                                 |   |        |                                    |  |   |                                   |   |  |   |        |  
|Other Postretirement Benefits        |  |                                  |        |   |                                 |   |        |                                    |  |   |                                   |   |  |   |        |  
|Service cost                         |  | $                                | 14     |   |                                 | $ | 14     |                                    |  | $ | 29                                |   |  | $ | 26     |  
|Interest cost                        |  |                                  | 172    |   |                                 |   | 220    |                                    |  |   | 343                               |   |  |   | 440    |  
|Amortization of prior service credit |  |                                  | (109   | ) |                                 |   | (63    | )                                  |  |   | (217                              | ) |  |   | (126   | )
|Amortization of net loss             |  |                                  | 77     |   |                                 |   | 64     |                                    |  |   | 154                               |   |  |   | 128    |  
|                                     |  |                                  |        |   |                                 |   |        |                                    |  |   |                                   |   |  |   |        |  
|Net periodic benefit cost            |  | $                                | 154    |   |                                 | $ | 235    |                                    |  | $ | 309                               |   |  | $ | 468    |  
|                                     |  |                                  |        |   |                                 |   |        |                                    |  |   |                                   |   |  |   |        |  

During the twenty-six weeks ended June 29, 2008, $2.6 million of contributions had been made
by the Company to its pension and other postretirement benefit plans. The Company presently anticipates contributing an additional $2.7 million to fund its pension and other postretirement benefit plans in 2008 for a total of approximately $5.3
million.



11



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(9) ACCUMULATED OTHER COMPREHENSIVE INCOME

Comprehensive income (loss) consisted of the following (in thousands):



|                                                     |  |                                  |        |   |                                 |   |       |                                    |  |   |                                   |   |  |   |         |  
|---------------------------------------------------- |  | -------------------------------- | ------ | - | ------------------------------- | - | ----- | ---------------------------------- |  | - | --------------------------------- | - |  | - | ------- | -
|                                                     |  | Thirteenweeks endedJune 29, 2008 |        |   | Thirteenweeks endedJuly 1, 2007 |   |       | Twenty-sixweeks endedJune 29, 2008 |  |   | Twenty-sixweeks endedJuly 1, 2007 |  
|Net income (loss)                                    |  | $                                | 8,342  |   |                                 | $ | 3,103 |                                    |  | $ | 10,453                            |   |  | $ | (35,731 | )
|Foreign currency translation adjustment              |  |                                  | 926    |   |                                 |   | 1,593 |                                    |  |   | (551                              | ) |  |   | 2,276   |  
|Pension liability adjustments                        |  |                                  | 24     |   |                                 |   | 170   |                                    |  |   | 48                                |   |  |   | 170     |  
|Unrealized investment loss                           |  |                                  |       |   |                                 |   | (75   | )                                  |  |   | (6                                | ) |  |   | (119    | )
|Recognition of realized gain on cash flow hedge      |  |                                  | (27    | ) |                                 |   | (27   | )                                  |  |   | (54                               | ) |  |   | (611    | )
|Unrealized gain (loss) on cash flow hedge            |  |                                  | 3,894  |   |                                 |   |      |                                    |  |   | (1,313                            | ) |  |   |        |  
|Reclassification of realized loss on cash flow hedge |  |                                  | 1,178  |   |                                 |   |      |                                    |  |   | 1,680                             |   |  |   |        |  
|                                                     |  |                                  |        |   |                                 |   |       |                                    |  |   |                                   |   |  |   |         |  
|Comprehensive income (loss)                          |  | $                                | 14,337 |   |                                 | $ | 4,764 |                                    |  | $ | 10,257                            |   |  | $ | (34,015 | )
|                                                     |  |                                  |        |   |                                 |   |       |                                    |  |   |                                   |   |  |   |         |  

Accumulated other comprehensive income consisted of the following (in thousands):



|                                                                |  |              |        |   |                  |   |        |  
|--------------------------------------------------------------- |  | ------------ | ------ | - | ---------------- | - | ------ | -
|                                                                |  | June 29,2008 |        |   | December 30,2007 |  
|Foreign currency translation adjustments                        |  | $            | 15,726 |   |                  | $ | 16,277 |  
|Pension liability adjustments, net of tax of $3,322 and $3,322  |  |              | 3,152  |   |                  |   | 3,104  |  
|Unrealized investment (loss) gain, net of tax of $0             |  |              | (5     | ) |                  |   | 1      |  
|Unrealized loss on cash flow hedge, net of tax of $291 and $368 |  |              | (6,498 | ) |                  |   | (6,811 | )
|                                                                |  |              |        |   |                  |   |        |  
|Accumulated other comprehensive income                          |  | $            | 12,375 |   |                  | $ | 12,571 |  
|                                                                |  |              |        |   |                  |   |        |  

(10) RELATED PARTY TRANSACTIONS

In 2004, the Company and SCIC entered into a management agreement with SCC Holding providing for, among other items, the payment by SCIC of an annual
advisory fee of $2.5 million to SCC Holding. Pursuant to this management agreement, the Company incurred $0.6 million of advisory fees during each of the thirteen weeks ended June 29, 2008 and July 1, 2007, and $1.3 million of advisory
fees during each of the twenty-six weeks ended June 29, 2008 and July 1, 2007. As of June 29, 2008 and December 30, 2007, amounts included in other current liabilities on the Companys Consolidated Balance Sheets related to
this management agreement were $3.8 million and $2.5 million, respectively.

Also in 2004, the Company and SCIC entered into a management
agreement with Vestar pursuant to which SCIC would pay Vestar an $0.8 million annual advisory fee, in addition to reimbursement of its expenses. The Company incurred $0.2 million of advisory fees during each of the thirteen weeks ended June 29,
2008 and July 1, 2007. The Company incurred $0.5 million of advisory fees and out-of-pocket expenses during each of the twenty-six weeks ended June 29, 2008 and July 1, 2007, respectively. As of June 29, 2008 and
December 30, 2007, $1.2 million and $1.5 million was included in other current liabilities on the Companys Consolidated Balance Sheets for advisory fees and out-of-pocket expenses.

In December 2006, the Companys First Lien Facility was amended to, among other items, provide that beginning in 2007, SCC Holding and Vestar may
not receive payment for management services unless the Company meets certain financial covenants contained in the First Lien Facility. The Company was accruing for any such management fees that were earned but not paid pursuant to the foregoing.
Subsequent to June 29, 2008, the Company began paying such management fees subject to the restrictions set forth in the Companys First Lien Facility.



12



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(11) SEGMENTS

The Company manages and evaluates its operations in two reportable segments: North America and Europe. Both segments produce a broad array of disposable foodservice and consumer products, which are available in paper,
plastic and foam. The operating segments are managed separately based on the products and requirements of the different markets. North America includes all U.S. entities, Canada, Mexico, Corporate and Puerto Rico; Europe includes all U.K. entities;
and Other includes Panama and Australia.

The accounting policies of the operating segments are the same as those described in Note 2 to
the consolidated financial statements in the Companys 2007 Annual Report on Form 10-K. Segment operating results are measured based on operating income (loss). Intersegment net sales are accounted for on an arms length pricing basis.



|                                             |  |              |           |        |   |        |  |   |               |   |              |   |           |       |   |         |   |  |   |          
|-------------------------------------------- |  | ------------ | --------- | ------ | - | ------ |  | - | ------------- | - | ------------ | - | --------- | ----- | - | ------- | - |  | - | ---------
|(in thousands)                               |  | NorthAmerica |           | Europe |   | Other  |  |   | TotalSegments |   | Eliminations |   |           | Total
|For the thirteen weeks ended June 29, 2008   |  |              |           |        |   |        |  |   |               |   |              |   |           |       |   |         |   |  |   |          
|Net sales                                    |  | $            | 490,876   |        | $ | 30,749 |  | $ | 3,258         |   |              | $ | 524,883   |       | $ | (6,364  | ) |  | $ | 518,519  
|Intersegment net sales                       |  |              | 6,364     |        |   |       |  |   |              |   |              |   | 6,364     |       |   | (6,364  | ) |  |   |         
|Operating income (loss)                      |  |              | 27,146    |        |   | 1,620  |  |   | (248          | ) |              |   | 28,518    |       |   | 45      |   |  |   | 28,563   
|                                             |  |              |           |        |   |       
|For the twenty-six weeks ended June 29, 2008 |  |              |           |        |   |        |  |   |               |   |              |   |           |       |   |         |   |  |   |          
|Net sales                                    |  | $            | 929,372   |        | $ | 55,350 |  | $ | 6,610         |   |              | $ | 991,332   |       | $ | (11,551 | ) |  | $ | 979,781  
|Intersegment net sales                       |  |              | 11,551    |        |   |       |  |   |              |   |              |   | 11,551    |       |   | (11,551 | ) |  |   |         
|Operating income (loss)                      |  |              | 45,023    |        |   | 1,575  |  |   | (301          | ) |              |   | 46,297    |       |   | 81      |   |  |   | 46,378   
|                                             |  |              |           |        |   |       
|For the thirteen weeks ended July 1, 2007    |  |              |           |        |   |        |  |   |               |   |              |   |           |       |   |         |   |  |   |          
|Net sales                                    |  | $            | 553,227   |        | $ | 25,397 |  | $ | 2,964         |   |              | $ | 581,588   |       | $ | (5,679  | ) |  | $ | 575,909  
|Intersegment net sales                       |  |              | 5,679     |        |   |       |  |   |              |   |              |   | 5,679     |       |   | (5,679  | ) |  |   |         
|Operating income                             |  |              | 21,673    |        |   | 1,364  |  |   | 273           |   |              |   | 23,310    |       |   | 24      |   |  |   | 23,334   
|                                             |  |              |           |        |   |       
|For the twenty-six weeks ended July 1, 2007  |  |              |           |        |   |        |  |   |               |   |              |   |           |       |   |         |   |  |   |          
|Net sales                                    |  | $            | 1,013,676 |        | $ | 48,317 |  | $ | 6,374         |   |              | $ | 1,068,367 |       | $ | (9,731  | ) |  | $ | 1,058,636
|Intersegment net sales                       |  |              | 9,731     |        |   |       |  |   |              |   |              |   | 9,731     |       |   | (9,731  | ) |  |   |         
|Operating income                             |  |              | 6,225     |        |   | 1,904  |  |   | 644           |   |              |   | 8,773     |       |   | 21      |   |  |   | 8,794    



|                                                                        |  |                                  |         |   |                                 |   |         |                                    |  |   |                                   |   |  |   |         |  
|----------------------------------------------------------------------- |  | -------------------------------- | ------- | - | ------------------------------- | - | ------- | ---------------------------------- |  | - | --------------------------------- | - |  | - | ------- | -
|(in thousands)                                                          |  | Thirteenweeks endedJune 29, 2008 |         |   | Thirteenweeks endedJuly 1, 2007 |   |         | Twenty-sixweeks endedJune 29, 2008 |  |   | Twenty-sixweeks endedJuly 1, 2007 |  
|Operating income (loss):                                                |  |                                  |         |   |                                 |   |         |                                    |  |   |                                   |   |  |   |         |  
|Total segment operating income                                          |  | $                                | 28,518  |   |                                 | $ | 23,310  |                                    |  | $ | 46,297                            |   |  | $ | 8,773   |  
|Elimination of intersegment operating loss                              |  |                                  | 45      |   |                                 |   | 24      |                                    |  |   | 81                                |   |  |   | 21      |  
|Interest expense, net of interest income of $221, $155, $602 and $1,684 |  |                                  | (15,217 | ) |                                 |   | (22,524 | )                                  |  |   | (31,348                           | ) |  |   | (43,523 | )
|Prepayment penalty                                                      |  |                                  |        |   |                                 |   | (1,300  | )                                  |  |   |                                  |   |  |   | (1,300  | )
|Loss on debt extinguishment                                             |  |                                  |        |   |                                 |   | (3,962  | )                                  |  |   |                                  |   |  |   | (3,962  | )
|Foreign currency exchange gain, net                                     |  |                                  | 395     |   |                                 |   | 1,310   |                                    |  |   | 1,245                             |   |  |   | 1,747   |  
|Other expense, net                                                      |  |                                  |        |   |                                 |   | (4      | )                                  |  |   |                                  |   |  |   | (4      | )
|                                                                        |  |                                  |         |   |                                 |   |         |                                    |  |   |                                   |   |  |   |         |  
|Income (loss) from continuing operations before income taxes            |  | $                                | 13,741  |   |                                 | $ | (3,146  | )                                  |  | $ | 16,275                            |   |  | $ | (38,248 | )
|                                                                        |  |                                  |         |   |                                 |   |         |                                    |  |   |                                   |   |  |   |         |  



13



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(12) GUARANTOR NOTE

On February 27, 2004, with an effective date of February 22, 2004, the Company acquired SF Holdings Group, Inc. The Company partially funded this acquisition through the issuance of 8.5% Senior Subordinated
Notes. The 8.5% Senior Subordinated Notes are fully and unconditionally guaranteed, on a joint and several basis, by certain of the Companys subsidiaries. The consolidated guarantors include: Solo Cup Company (Solo Delaware), P.R.
Solo Cup, Inc., SF Holdings Group, Inc., Solo Cup Operating Corporation, Lily-Canada Holding Corporation, Solo Cup (UK) Limited, Insulpak Holdings Limited and Solo Cup Europe Limited. The following financial information presents the guarantors and
non-guarantors of the 8.5% Senior Subordinated Notes, in accordance with Rule 3-10 of Regulation S-X:



|                                               |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|---------------------------------------------- |  | --------------------------------------------------------------- | ------- | - | --------------- | - | --------- | -------------- |  | ------------ | ------- |  | ------------ | -------- | - |  | - | --------- | -
|                                               |  | Condensed Consolidated Balance SheetJune 29,
2008(In thousands) |        
|                                               |  | SoloDelaware                                                    |         |   | OtherGuarantors |   |           | Non-Guarantors |  | Eliminations |         |  | Consolidated |         
|Assets                                         |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Current assets:                                |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Cash and cash equivalents                      |  | $                                                               | 16,227  |   |                 | $ | 283       |                |  | $            | 18,167  |  | $            |         |   |  | $ | 34,677    |  
|Accounts receivable:                           |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Trade                                          |  |                                                                 |        |   |                 |   | 139,967   |                |  |              | 17,358  |  |              |         |   |  |   | 157,325   |  
|Other                                          |  |                                                                 | 124,735 |   |                 |   | 14,152    |                |  |              | 14      |  |              | (135,340 | ) |  |   | 3,561     |  
|Inventories                                    |  |                                                                 |        |   |                 |   | 310,675   |                |  |              | 25,311  |  |              | (2,371   | ) |  |   | 333,615   |  
|Deferred income taxes                          |  |                                                                 |        |   |                 |   | 38,259    |                |  |              | 868     |  |              | 445      |   |  |   | 39,572    |  
|Prepaid expenses and other current assets      |  |                                                                 |        |   |                 |   | 40,147    |                |  |              | 3,348   |  |              |         |   |  |   | 43,495    |  
|                                               |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total current assets                           |  |                                                                 | 140,962 |   |                 |   | 543,483   |                |  |              | 65,066  |  |              | (137,266 | ) |  |   | 612,245   |  
|Property, plant and equipment, net             |  |                                                                 |        |   |                 |   | 470,271   |                |  |              | 38,069  |  |              |         |   |  |   | 508,340   |  
|Goodwill and intangible assets, net            |  |                                                                 |        |   |                 |   | 21,588    |                |  |              |        |  |              |         |   |  |   | 21,588    |  
|Other assets                                   |  |                                                                 | 71,918  |   |                 |   | 49,981    |                |  |              | 2,854   |  |              | (99,307  | ) |  |   | 25,446    |  
|                                               |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total assets                                   |  | $                                                               | 212,880 |   |                 | $ | 1,085,323 |                |  | $            | 105,989 |  | $            | (236,573 | ) |  | $ | 1,167,619 |  
|                                               |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Liabilities and Shareholders Equity           |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Current liabilities:                           |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Accounts payable                               |  | $                                                               |        |   |                 | $ | 86,173    |                |  | $            | 5,729   |  | $            |         |   |  | $ | 91,902    |  
|Accrued expenses and other current liabilities |  |                                                                 | 13,969  |   |                 |   | 204,359   |                |  |              | 18,429  |  |              | (135,339 | ) |  |   | 101,418   |  
|                                               |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total current liabilities                      |  |                                                                 | 13,969  |   |                 |   | 290,532   |                |  |              | 24,158  |  |              | (135,339 | ) |  |   | 193,320   |  
|Long-term debt, net of current maturities      |  |                                                                 | 140,973 |   |                 |   | 596,176   |                |  |              | 1,134   |  |              |         |   |  |   | 738,283   |  
|Deferred income taxes                          |  |                                                                 |        |   |                 |   | 48,690    |                |  |              | 3,571   |  |              |         |   |  |   | 52,261    |  
|Other liabilities                              |  |                                                                 | 6,016   |   |                 |   | 79,074    |                |  |              | 10,271  |  |              | (7,926   | ) |  |   | 87,435    |  
|                                               |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total liabilities                              |  |                                                                 | 160,958 |   |                 |   | 1,014,472 |                |  |              | 39,134  |  |              | (143,265 | ) |  |   | 1,071,299 |  
|                                               |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Shareholders equity:                          |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Common stock                                   |  |                                                                 |        |   |                 |   |          |                |  |              | 843     |  |              | (843     | ) |  |   |          |  
|Additional paid-in capital                     |  |                                                                 | 45,875  |   |                 |   | 266,504   |                |  |              | 24,158  |  |              | (81,542  | ) |  |   | 254,995   |  
|Retained earnings (accumulated deficit)        |  |                                                                 | 12,545  |   |                 |   | (207,220  | )              |  |              | 34,548  |  |              | (10,923  | ) |  |   | (171,050  | )
|Accumulated other comprehensive (loss) income  |  |                                                                 | (6,498  | ) |                 |   | 11,567    |                |  |              | 7,306   |  |              |         |   |  |   | 12,375    |  
|                                               |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total shareholders equity                     |  |                                                                 | 51,922  |   |                 |   | 70,851    |                |  |              | 66,855  |  |              | (93,308  | ) |  |   | 96,320    |  
|                                               |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total liabilities and shareholders equity     |  | $                                                               | 212,880 |   |                 | $ | 1,085,323 |                |  | $            | 105,989 |  | $            | (236,573 | ) |  | $ | 1,167,619 |  
|                                               |  |                                                                 |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  



14



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(12) GUARANTOR NOTE (Continued)



|                                               |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|---------------------------------------------- |  | ------------------------------------------------------------------- | ------- | - | --------------- | - | --------- | -------------- |  | ------------ | ------- |  | ------------ | -------- | - |  | - | --------- | -
|                                               |  | Condensed Consolidated Balance SheetDecember 30, 2007(In thousands) |        
|                                               |  | SoloDelaware                                                        |         |   | OtherGuarantors |   |           | Non-Guarantors |  | Eliminations |         |  | Consolidated |         
|Assets                                         |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Current assets:                                |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Cash and cash equivalents                      |  | $                                                                   | 10,464  |   |                 | $ | 4,881     |                |  | $            | 18,238  |  | $            |         |   |  | $ | 33,583    |  
|Accounts receivable:                           |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Trade                                          |  |                                                                     |        |   |                 |   | 142,620   |                |  |              | 17,447  |  |              |         |   |  |   | 160,067   |  
|Other                                          |  |                                                                     | 89,968  |   |                 |   | 68,540    |                |  |              | 505     |  |              | (149,190 | ) |  |   | 9,823     |  
|Inventories                                    |  |                                                                     |        |   |                 |   | 280,301   |                |  |              | 22,435  |  |              | (1,699   | ) |  |   | 301,037   |  
|Deferred income taxes                          |  |                                                                     |        |   |                 |   | 40,470    |                |  |              | 707     |  |              | 445      |   |  |   | 41,622    |  
|Prepaid expenses and other current assets      |  |                                                                     | 16      |   |                 |   | 42,150    |                |  |              | 3,578   |  |              |         |   |  |   | 45,744    |  
|                                               |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total current assets                           |  |                                                                     | 100,448 |   |                 |   | 578,962   |                |  |              | 62,910  |  |              | (150,444 | ) |  |   | 591,876   |  
|Property, plant and equipment, net             |  |                                                                     |        |   |                 |   | 501,095   |                |  |              | 39,334  |  |              |         |   |  |   | 540,429   |  
|Goodwill and intangible assets, net            |  |                                                                     |        |   |                 |   | 23,162    |                |  |              |        |  |              |         |   |  |   | 23,162    |  
|Other assets                                   |  |                                                                     | 74,043  |   |                 |   | 49,671    |                |  |              | 2,624   |  |              | (99,307  | ) |  |   | 27,031    |  
|                                               |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total assets                                   |  | $                                                                   | 174,491 |   |                 | $ | 1,152,890 |                |  | $            | 104,868 |  | $            | (249,751 | ) |  | $ | 1,182,498 |  
|                                               |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Liabilities and Shareholders Equity           |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Current liabilities:                           |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Accounts payable                               |  | $                                                                   | 117,155 |   |                 | $ | 101,511   |                |  | $            | 17,085  |  | $            | (149,189 | ) |  | $ | 86,562    |  
|Accrued expenses and other current liabilities |  |                                                                     | 13,513  |   |                 |   | 87,708    |                |  |              | 10,308  |  |              |         |   |  |   | 111,529   |  
|                                               |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total current liabilities                      |  |                                                                     | 130,668 |   |                 |   | 189,219   |                |  |              | 27,393  |  |              | (149,189 | ) |  |   | 198,091   |  
|Long-term debt, net of current maturities      |  |                                                                     |        |   |                 |   | 754,285   |                |  |              | 1,912   |  |              |         |   |  |   | 756,197   |  
|Deferred income taxes                          |  |                                                                     |        |   |                 |   | 50,711    |                |  |              | 3,697   |  |              |         |   |  |   | 54,408    |  
|Other liabilities                              |  |                                                                     | 7,070   |   |                 |   | 78,260    |                |  |              | 10,335  |  |              | (7,926   | ) |  |   | 87,739    |  
|                                               |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total liabilities                              |  |                                                                     | 137,738 |   |                 |   | 1,072,475 |                |  |              | 43,337  |  |              | (157,115 | ) |  |   | 1,096,435 |  
|                                               |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Shareholders equity:                          |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|                                               |  |                                                                     |         |   |                
|Common stock                                   |  |                                                                     |        |   |                 |   |          |                |  |              | 843     |  |              | (843     | ) |  |   |          |  
|Additional paid-in capital                     |  |                                                                     | 45,875  |   |                 |   | 266,504   |                |  |              | 24,158  |  |              | (81,542  | ) |  |   | 254,995   |  
|(Accumulated deficit) retained earnings        |  |                                                                     | (2,311  | ) |                 |   | (197,615  | )              |  |              | 28,674  |  |              | (10,251  | ) |  |   | (181,503  | )
|Accumulated other comprehensive (loss) income  |  |                                                                     | (6,811  | ) |                 |   | 11,526    |                |  |              | 7,856   |  |              |         |   |  |   | 12,571    |  
|                                               |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total shareholders equity                     |  |                                                                     | 36,753  |   |                 |   | 80,415    |                |  |              | 61,531  |  |              | (92,636  | ) |  |   | 86,063    |  
|                                               |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  
|Total liabilities and shareholders equity     |  | $                                                                   | 174,491 |   |                 | $ | 1,152,890 |                |  | $            | 104,868 |  | $            | (249,751 | ) |  | $ | 1,182,498 |  
|                                               |  |                                                                     |         |   |                 |   |           |                |  |              |         |  |              |          |   |  |   |           |  

The prior period condensed financial statements presented, including the above December 30, 2007 Consolidated
Balance Sheet, and the following Consolidated Statements of Operations for the thirteen and twenty-six weeks ended July 1, 2007, reflect the immaterial correction of an error related to interest (income) expense, net, between the guarantor
columns: Solo Delaware and Other Guarantors. The Company determined that the calculation of interest on intercompany loans from Solo Delaware to certain Other Guarantors was not in accordance with the respective agreements. Therefore, the interest
income for Solo Delaware and interest expense for Other Guarantors has been adjusted by $2.4 million for the thirteen weeks ended July 1, 2007 and $5.2 million for the twenty-six weeks ended July 1, 2007, to reflect the appropriate amount
for each period, with a decrease to Solo Delaware interest income and a corresponding decrease to Other Guarantors interest expense. These adjustments were equal and offsetting such that total interest (income) expense for the combined guarantors
was not changed. The cumulative effect to the December 30, 2007 Consolidated Balance Sheet was a $22.0 million decrease to Solo Delawares accumulated deficit and an increase of $22.0 million to Other Guarantors accumulated deficit.



15



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(12) GUARANTOR NOTE (Continued)



|                                                      |  |                                                                                      |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|----------------------------------------------------- |  | ------------------------------------------------------------------------------------ | ------ | - | --------------- | - | ------- | -------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                      |  | Consolidated Statement of OperationsThirteen weeks ended
June 29, 2008(In thousands) |       
|                                                      |  | SoloDelaware                                                                         |        |   | OtherGuarantors |   |         | Non-Guarantors |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                             |  | $                                                                                    |       |   |                 | $ | 488,438 |                |  | $ | 57,523       |   |  | $            | (27,442 | ) |  | $ | 518,519 |  
|Cost of goods sold                                    |  |                                                                                      |       |   |                 |   | 419,291 |                |  |   | 50,935       |   |  |              | (27,654 | ) |  |   | 442,572 |  
|                                                      |  |                                                                                      |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                          |  |                                                                                      |       |   |                 |   | 69,147  |                |  |   | 6,588        |   |  |              | 212     |   |  |   | 75,947  |  
|Selling, general and administrative expenses          |  |                                                                                      |       |   |                 |   | 42,673  |                |  |   | 2,724        |   |  |              |        |   |  |   | 45,397  |  
|Loss on sale of property, plant and equipment         |  |                                                                                      |       |   |                 |   | 1,967   |                |  |   | 20           |   |  |              |        |   |  |   | 1,987   |  
|                                                      |  |                                                                                      |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income                                      |  |                                                                                      |       |   |                 |   | 24,507  |                |  |   | 3,844        |   |  |              | 212     |   |  |   | 28,563  |  
|Interest (income) expense, net                        |  |                                                                                      | (5,147 | ) |                 |   | 20,333  |                |  |   | 31           |   |  |              |        |   |  |   | 15,217  |  
|Foreign currency exchange loss (gain), net            |  |                                                                                      |       |   |                 |   | 150     |                |  |   | (545         | ) |  |              |        |   |  |   | (395    | )
|                                                      |  |                                                                                      |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Income from continuing operations before income taxes |  |                                                                                      | 5,147  |   |                 |   | 4,024   |                |  |   | 4,358        |   |  |              | 212     |   |  |   | 13,741  |  
|Income tax provision                                  |  |                                                                                      | 39     |   |                 |   | 3,610   |                |  |   | 1,566        |   |  |              |        |   |  |   | 5,215   |  
|                                                      |  |                                                                                      |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Income from continuing operations                     |  |                                                                                      | 5,108  |   |                 |   | 414     |                |  |   | 2,792        |   |  |              | 212     |   |  |   | 8,526   |  
|Loss from discontinued operations                     |  |                                                                                      |       |   |                 |   | (184    | )              |  |   |             |   |  |              |        |   |  |   | (184    | )
|                                                      |  |                                                                                      |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                            |  | $                                                                                    | 5,108  |   |                 | $ | 230     |                |  | $ | 2,792        |   |  | $            | 212     |   |  | $ | 8,342   |  
|                                                      |  |                                                                                      |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  



|                                                                |  |                                                                                     |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|--------------------------------------------------------------- |  | ----------------------------------------------------------------------------------- | ------ | - | --------------- | - | ------- | -------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                                |  | Consolidated Statement of OperationsThirteen weeks ended
July 1, 2007(In thousands) |       
|                                                                |  | SoloDelaware                                                                        |        |   | OtherGuarantors |   |         | Non-Guarantors |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                                       |  | $                                                                                   |       |   |                 | $ | 548,640 |                |  | $ | 54,230       |   |  | $            | (26,961 | ) |  | $ | 575,909 |  
|Cost of goods sold                                              |  |                                                                                     |       |   |                 |   | 477,456 |                |  |   | 48,152       |   |  |              | (26,858 | ) |  |   | 498,750 |  
|                                                                |  |                                                                                     |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                                    |  |                                                                                     |       |   |                 |   | 71,184  |                |  |   | 6,078        |   |  |              | (103    | ) |  |   | 77,159  |  
|Selling, general and administrative expenses                    |  |                                                                                     | 38     |   |                 |   | 52,980  |                |  |   | 2,407        |   |  |              | (62     | ) |  |   | 55,363  |  
|(Gain) loss on sale of property, plant and equipment            |  |                                                                                     |       |   |                 |   | (1,545  | )              |  |   | 7            |   |  |              |        |   |  |   | (1,538  | )
|                                                                |  |                                                                                     |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Operating (loss) income                                         |  |                                                                                     | (38    | ) |                 |   | 19,749  |                |  |   | 3,664        |   |  |              | (41     | ) |  |   | 23,334  |  
|Interest expense, net                                           |  |                                                                                     | 2,740  |   |                 |   | 19,677  |                |  |   | 107          |   |  |              |        |   |  |   | 22,524  |  
|Prepayment penalty                                              |  |                                                                                     | 1,300  |   |                 |   |        |                |  |   |             |   |  |              |        |   |  |   | 1,300   |  
|Loss on debt extinguishment                                     |  |                                                                                     | 3,962  |   |                 |   |        |                |  |   |             |   |  |              |        |   |  |   | 3,962   |  
|Foreign currency exchange gain, net                             |  |                                                                                     |       |   |                 |   | (824    | )              |  |   | (486         | ) |  |              |        |   |  |   | (1,310  | )
|Other expense (income), net                                     |  |                                                                                     |       |   |                 |   | 5       |                |  |   | (1           | ) |  |              |        |   |  |   | 4       |  
|                                                                |  |                                                                                     |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|(Loss) income from continuing operations before income taxes    |  |                                                                                     | (8,040 | ) |                 |   | 891     |                |  |   | 4,044        |   |  |              | (41     | ) |  |   | (3,146  | )
|Income tax (benefit) provision                                  |  |                                                                                     | (11    | ) |                 |   | (4,159  | )              |  |   | 1,243        |   |  |              |        |   |  |   | (2,927  | )
|                                                                |  |                                                                                     |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|(Loss) income from continuing operations                        |  |                                                                                     | (8,029 | ) |                 |   | 5,050   |                |  |   | 2,801        |   |  |              | (41     | ) |  |   | (219    | )
|Income (loss) from discontinued operations, net of income taxes |  |                                                                                     |       |   |                 |   | 3,613   |                |  |   | (291         | ) |  |              |        |   |  |   | 3,322   |  
|                                                                |  |                                                                                     |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Net (loss) income                                               |  | $                                                                                   | (8,029 | ) |                 | $ | 8,663   |                |  | $ | 2,510        |   |  | $            | (41     | ) |  | $ | 3,103   |  
|                                                                |  |                                                                                     |        |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  

(Continued)



16



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(12) GUARANTOR NOTE (Continued)



|                                                             |  |                                                                                        |         |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|------------------------------------------------------------ |  | -------------------------------------------------------------------------------------- | ------- | - | --------------- | - | ------- | -------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                             |  | Consolidated Statement of OperationsTwenty-six weeks ended
June 29, 2008(In thousands) |        
|                                                             |  | SoloDelaware                                                                           |         |   | OtherGuarantors |   |         | Non-Guarantors |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                                    |  | $                                                                                      |        |   |                 | $ | 923,949 |                |  | $ | 108,445      |   |  | $            | (52,613 | ) |  | $ | 979,781 |  
|Cost of goods sold                                           |  |                                                                                        |        |   |                 |   | 792,976 |                |  |   | 95,440       |   |  |              | (51,941 | ) |  |   | 836,475 |  
|                                                             |  |                                                                                        |         |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                                 |  |                                                                                        |        |   |                 |   | 130,973 |                |  |   | 13,005       |   |  |              | (672    | ) |  |   | 143,306 |  
|Selling, general and administrative expenses                 |  |                                                                                        | 17      |   |                 |   | 81,852  |                |  |   | 5,181        |   |  |              |        |   |  |   | 87,050  |  
|Loss on sale of property, plant and equipment                |  |                                                                                        |        |   |                 |   | 9,832   |                |  |   | 46           |   |  |              |        |   |  |   | 9,878   |  
|                                                             |  |                                                                                        |         |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Operating (loss) income                                      |  |                                                                                        | (17     | ) |                 |   | 39,289  |                |  |   | 7,778        |   |  |              | (672    | ) |  |   | 46,378  |  
|Interest (income) expense, net                               |  |                                                                                        | (14,950 | ) |                 |   | 46,260  |                |  |   | 38           |   |  |              |        |   |  |   | 31,348  |  
|Foreign currency exchange gain, net                          |  |                                                                                        |        |   |                 |   | (549    | )              |  |   | (696         | ) |  |              |        |   |  |   | (1,245  | )
|                                                             |  |                                                                                        |         |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Income (loss) from continuing operations before income taxes |  |                                                                                        | 14,933  |   |                 |   | (6,422  | )              |  |   | 8,436        |   |  |              | (672    | ) |  |   | 16,275  |  
|Income tax provision                                         |  |                                                                                        | 77      |   |                 |   | 2,754   |                |  |   | 2,562        |   |  |              |        |   |  |   | 5,393   |  
|                                                             |  |                                                                                        |         |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Income (loss) from continuing operations                     |  |                                                                                        | 14,856  |   |                 |   | (9,176  | )              |  |   | 5,874        |   |  |              | (672    | ) |  |   | 10,882  |  
|Loss from discontinued operations                            |  |                                                                                        |        |   |                 |   | (429    | )              |  |   |             |   |  |              |        |   |  |   | (429    | )
|                                                             |  |                                                                                        |         |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Net income (loss)                                            |  | $                                                                                      | 14,856  |   |                 | $ | (9,605  | )              |  | $ | 5,874        |   |  | $            | (672    | ) |  | $ | 10,453  |  
|                                                             |  |                                                                                        |         |   |                 |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  



|                                                                |  |                                                                                       |        |   |                 |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|--------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- | ------ | - | --------------- | - | --------- | -------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | --------- | -
|                                                                |  | Consolidated Statement of OperationsTwenty-six weeks ended
July 1, 2007(In thousands) |       
|                                                                |  | SoloDelaware                                                                          |        |   | OtherGuarantors |   |           | Non-Guarantors |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                                       |  | $                                                                                     |       |   |                 | $ | 1,007,121 |                |  | $ | 100,011      |   |  | $            | (48,496 | ) |  | $ | 1,058,636 |  
|Cost of goods sold                                              |  |                                                                                       |       |   |                 |   | 906,281   |                |  |   | 88,636       |   |  |              | (47,923 | ) |  |   | 946,994   |  
|                                                                |  |                                                                                       |        |   |                 |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|Gross profit                                                    |  |                                                                                       |       |   |                 |   | 100,840   |                |  |   | 11,375       |   |  |              | (573    | ) |  |   | 111,642   |  
|Selling, general and administrative expenses                    |  |                                                                                       | (539   | ) |                 |   | 99,730    |                |  |   | 4,908        |   |  |              | (86     | ) |  |   | 104,013   |  
|Gain on sale of property, plant and equipment                   |  |                                                                                       |       |   |                 |   | (1,165    | )              |  |   |             |   |  |              |        |   |  |   | (1,165    | )
|                                                                |  |                                                                                       |        |   |                 |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|Operating income                                                |  |                                                                                       | 539    |   |                 |   | 2,275     |                |  |   | 6,467        |   |  |              | (487    | ) |  |   | 8,794     |  
|Interest expense, net                                           |  |                                                                                       | 4,677  |   |                 |   | 38,596    |                |  |   | 250          |   |  |              |        |   |  |   | 43,523    |  
|Prepayment penalty                                              |  |                                                                                       | 1,300  |   |                 |   |          |                |  |   |             |   |  |              |        |   |  |   | 1,300     |  
|Loss on debt extinguishment                                     |  |                                                                                       | 3,962  |   |                 |   |          |                |  |   |             |   |  |              |        |   |  |   | 3,962     |  
|Foreign currency exchange gain, net                             |  |                                                                                       |       |   |                 |   | (1,127    | )              |  |   | (620         | ) |  |              |        |   |  |   | (1,747    | )
|Other expense (income), net                                     |  |                                                                                       |       |   |                 |   | 5         |                |  |   | (1           | ) |  |              |         |   |  |   | 4         |  
|                                                                |  |                                                                                       |        |   |                 |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|(Loss) income from continuing operations before income taxes    |  |                                                                                       | (9,400 | ) |                 |   | (35,199   | )              |  |   | 6,838        |   |  |              | (487    | ) |  |   | (38,248   | )
|Income tax (benefit) provision                                  |  |                                                                                       | (508   | ) |                 |   | (4,163    | )              |  |   | 2,295        |   |  |              |        |   |  |   | (2,376    | )
|                                                                |  |                                                                                       |        |   |                 |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|(Loss) income from continuing operations                        |  |                                                                                       | (8,892 | ) |                 |   | (31,036   | )              |  |   | 4,543        |   |  |              | (487    | ) |  |   | (35,872   | )
|Income (loss) from discontinued operations, net of income taxes |  |                                                                                       |       |   |                 |   | 1,074     |                |  |   | (933         | ) |  |              |        |   |  |   | 141       |  
|                                                                |  |                                                                                       |        |   |                 |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|Net (loss) income                                               |  | $                                                                                     | (8,892 | ) |                 | $ | (29,962   | )              |  | $ | 3,610        |   |  | $            | (487    | ) |  | $ | (35,731   | )
|                                                                |  |                                                                                       |        |   |                 |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  

(Continued)



17



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(12) GUARANTOR NOTE (Continued)



|                                                                  |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|----------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------ | ------- | - | --------------- | - | ------- | -------------- |  | - | ------------ | - |  | - | ------- | -
|                                                                  |  | Condensed Consolidated Statement of Cash FlowsTwenty-six weeks ended June 29, 2008(In thousands) |        
|                                                                  |  | SoloDelaware                                                                                     |         |   | OtherGuarantors |   |         | Non-Guarantors |  |   | Consolidated |  
|CASH FLOWS FROM OPERATING ACTIVITIES                              |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|Net cash provided by operating activities  continuing operations |  | $                                                                                                | 22,973  |   |                 | $ | 15,883  |                |  | $ | 2,125        |   |  | $ | 40,981  |  
|Net cash used in operating activities  discontinued operations   |  |                                                                                                  |        |   |                 |   | (264    | )              |  |   |             |   |  |   | (264    | )
|                                                                  |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|Net cash provided by operating activities                         |  |                                                                                                  | 22,973  |   |                 |   | 15,619  |                |  |   | 2,125        |   |  |   | 40,717  |  
|                                                                  |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                              |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|Purchases of property, plant and equipment                        |  |                                                                                                  |        |   |                 |   | (30,183 | )              |  |   | (1,217       | ) |  |   | (31,400 | )
|Proceeds from sale of property, plant and equipment               |  |                                                                                                  |        |   |                 |   | 10,148  |                |  |   | 31           |   |  |   | 10,179  |  
|                                                                  |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|Net cash used in investing activities                             |  |                                                                                                  |        |   |                 |   | (20,035 | )              |  |   | (1,186       | ) |  |   | (21,221 | )
|                                                                  |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                              |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|Net repayments under revolving credit facilities                  |  |                                                                                                  | (9,900  | ) |                 |   |        |                |  |   |             |   |  |   | (9,900  | )
|Repayments of term notes                                          |  |                                                                                                  | (7,310  | ) |                 |   |        |                |  |   | (357         | ) |  |   | (7,667  | )
|Repayments of other debt                                          |  |                                                                                                  |        |   |                 |   | (170    | )              |  |   | (358         | ) |  |   | (528    | )
|                                                                  |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|Net cash used in financing activities                             |  |                                                                                                  | (17,210 | ) |                 |   | (170    | )              |  |   | (715         | ) |  |   | (18,095 | )
|                                                                  |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|Effect of exchange rate changes on cash                           |  |                                                                                                  |        |   |                 |   | (12     | )              |  |   | (295         | ) |  |   | (307    | )
|                                                                  |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents              |  |                                                                                                  | 5,763   |   |                 |   | (4,598  | )              |  |   | (71          | ) |  |   | 1,094   |  
|Cash and cash equivalents, beginning of period                    |  |                                                                                                  | 10,464  |   |                 |   | 4,881   |                |  |   | 18,238       |   |  |   | 33,583  |  
|                                                                  |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  
|Cash and cash equivalents, end of period                          |  | $                                                                                                | 16,227  |   |                 | $ | 283     |                |  | $ | 18,167       |   |  | $ | 34,677  |  
|                                                                  |  |                                                                                                  |         |   |                 |   |         |                |  |   |              |   |  |   |         |  

(Continued)



18



---

##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(12) GUARANTOR NOTE (Continued)



|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|----------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- | -------- | - | --------------- | - | -------- | -------------- |  | - | ------------ | - |  | - | -------- | -
|                                                                              |  | Condensed Consolidated Statement of Cash FlowsTwenty-six weeks ended July 1, 2007(In thousands) |         
|                                                                              |  | SoloDelaware                                                                                    |          |   | OtherGuarantors |   |          | Non-Guarantors |  |   | Consolidated |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                          |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|Net cash provided by (used in) operating activities  continuing operations   |  | $                                                                                               | 149,154  |   |                 | $ | (129,227 | )              |  | $ | 1,763        |   |  | $ | 21,690   |  
|Net cash provided by (used in) operating activities  discontinued operations |  |                                                                                                 |         |   |                 |   | 12,492   |                |  |   | (651         | ) |  |   | 11,841   |  
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|Net cash provided by (used in) operating activities                           |  |                                                                                                 | 149,154  |   |                 |   | (116,735 | )              |  |   | 1,112        |   |  |   | 33,531   |  
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                          |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|Purchases of property, plant and equipment                                    |  |                                                                                                 |         |   |                 |   | (17,624  | )              |  |   | (721         | ) |  |   | (18,345  | )
|Proceeds from sale of property, plant and equipment                           |  |                                                                                                 |         |   |                 |   | 128,339  |                |  |   | 6            |   |  |   | 128,345  |  
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|Net cash provided by (used in) investing activities  continuing operations   |  |                                                                                                 |         |   |                 |   | 110,715  |                |  |   | (715         | ) |  |   | 110,000  |  
|Net cash (used in) provided by investing activities  discontinued operations |  |                                                                                                 |         |   |                 |   | (944     | )              |  |   | 1,038        |   |  |   | 94       |  
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|Net cash provided by investing activities                                     |  |                                                                                                 |         |   |                 |   | 109,771  |                |  |   | 323          |   |  |   | 110,094  |  
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                          |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|Net (repayments) borrowings under revolving credit facilities                 |  |                                                                                                 | (62,800  | ) |                 |   |         |                |  |   | 3,158        |   |  |   | (59,642  | )
|Borrowings under term notes                                                   |  |                                                                                                 | 50,000   |   |                 |   |         |                |  |   |             |   |  |   | 50,000   |  
|Repayment of capital to parent                                                |  |                                                                                                 | (2,007   | ) |                 |   |         |                |  |   |             |   |  |   | (2,007   | )
|Repayments of term notes                                                      |  |                                                                                                 | (133,250 | ) |                 |   |         |                |  |   | (626         | ) |  |   | (133,876 | )
|Borrowings of other debt                                                      |  |                                                                                                 |         |   |                 |   | 178      |                |  |   |             |   |  |   | 178      |  
|Debt issuance costs                                                           |  |                                                                                                 | (380     | ) |                 |   |         |                |  |   |             |   |  |   | (380     | )
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|Net cash (used in) provided by financing activities  continuing operations   |  |                                                                                                 | (148,437 | ) |                 |   | 178      |                |  |   | 2,532        |   |  |   | (145,727 | )
|Net cash used in financing activities  discontinued operations               |  |                                                                                                 |         |   |                 |   |         |                |  |   | (44          | ) |  |   | (44      | )
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|Net cash (used in) provided by financing activities                           |  |                                                                                                 | (148,437 | ) |                 |   | 178      |                |  |   | 2,488        |   |  |   | (145,771 | )
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|Effect of exchange rate changes on cash                                       |  |                                                                                                 |         |   |                 |   | 20       |                |  |   | 125          |   |  |   | 145      |  
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          |  |                                                                                                 | 717      |   |                 |   | (6,766   | )              |  |   | 4,048        |   |  |   | (2,001   | )
|Cash and cash equivalents, beginning of period                                |  |                                                                                                 | 1,232    |   |                 |   | 10,815   |                |  |   | 14,344       |   |  |   | 26,391   |  
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|Cash and cash equivalents, end of period                                      |  |                                                                                                 | 1,949    |   |                 |   | 4,049    |                |  |   | 18,392       |   |  |   | 24,390   |  
|Less: Cash and cash equivalents  discontinued operations                     |  |                                                                                                 |         |   |                 |   | 1,575    |                |  |   | 6,306        |   |  |   | 7,881    |  
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  
|Cash and cash equivalents  continuing operations                             |  | $                                                                                               | 1,949    |   |                 | $ | 2,474    |                |  | $ | 12,086       |   |  | $ | 16,509   |  
|                                                                              |  |                                                                                                 |          |   |                 |   |          |                |  |   |              |   |  |   |          |  



19



---

##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report,
as well as consolidated financial statements and notes thereto and related management discussion and analysis of financial condition and results of operations included in our 2007 Annual Report on Form 10-K.

General

We are a leading producer and marketer of single-use products used to serve food and beverages and have served our industry for over 70 years. We manufacture one of the broadest product lines of cups, lids, food
containers, plates, bowls, portion cups and food packaging containers in the industry, with products available in plastic, paper and foam. We serve two primary customer groups, foodservice and consumer. Our products are known for their quality,
reliability and consistency and are marketed primarily under the Solo® and Sweetheart® brands, as well as Jack Frost and
Trophy®. We are one of the leading suppliers of branded disposable cups and plastic plates and bowls to retail customers in the United States. We also provide a line of products to our
customers under private label. We operate manufacturing facilities and distribution centers in North America, the United Kingdom and Panama, and we sell our products worldwide.

Thirteen weeks ended June 29, 2008 compared to the thirteen weeks ended July 1, 2007



|                                                                                |  |                                  |       |   |                                 |   |       |                         |  |   |       |   |  |       |   
|------------------------------------------------------------------------------- |  | -------------------------------- | ----- | - | ------------------------------- | - | ----- | ----------------------- |  | - | ----- | - |  | ----- | --
|(in millions)                                                                   |  | Thirteenweeks endedJune 29, 2008 |       |   | Thirteenweeks endedJuly 1, 2007 |   |       | Favorable (Unfavorable) | 
|Net sales                                                                       |  | $                                | 518.5 |   |                                 | $ | 575.9 |                         |  | $ | (57.4 | ) |  | (10.0 | )%
|Cost of goods sold                                                              |  |                                  | 442.6 |   |                                 |   | 498.8 |                         |  |   | 56.2  |   |  | 11.3  |   
|                                                                                |  |                                  |       |   |                                 |   |       |                         |  |   |       |   |  |       |   
|Gross profit                                                                    |  |                                  | 75.9  |   |                                 |   | 77.1  |                         |  |   | (1.2  | ) |  | (1.6  | ) 
|Selling, general and administrative expenses                                    |  |                                  | 45.4  |   |                                 |   | 55.4  |                         |  |   | 10.0  |   |  | 18.1  |   
|Loss (gain) on sale of property, plant and equipment                            |  |                                  | 2.0   |   |                                 |   | (1.7  | )                       |  |   | (3.7  | ) |  | *     |   
|                                                                                |  |                                  |       |   |                                 |   |       |                         |  |   |       |   |  |       |   
|Operating income                                                                |  |                                  | 28.5  |   |                                 |   | 23.4  |                         |  |   | 5.1   |   |  | 21.8  |   
|Interest expense, net                                                           |  |                                  | 15.2  |   |                                 |   | 22.5  |                         |  |   | 7.3   |   |  | 32.4  |   
|Prepayment penalty                                                              |  |                                  |      |   |                                 |   | 1.3   |                         |  |   | 1.3   |   |  | *     |   
|Loss on debt extinguishment                                                     |  |                                  |      |   |                                 |   | 4.0   |                         |  |   | 4.0   |   |  | *     |   
|Foreign currency exchange gain, net                                             |  |                                  | (0.4  | ) |                                 |   | (1.3  | )                       |  |   | (0.9  | ) |  | (69.2 | ) 
|                                                                                |  |                                  |       |   |                                 |   |       |                         |  |   |       |   |  |       |   
|Income (loss) from continuing operations before income taxes                    |  |                                  | 13.7  |   |                                 |   | (3.1  | )                       |  |   | 16.8  |   |  | *     |   
|Income tax provision (benefit)                                                  |  |                                  | 5.2   |   |                                 |   | (2.9  | )                       |  |   | (8.1  | ) |  | *     |   
|                                                                                |  |                                  |       |   |                                 |   |       |                         |  |   |       |   |  |       |   
|Income (loss) from continuing operations                                        |  |                                  | 8.5   |   |                                 |   | (0.2  | )                       |  |   | 8.7   |   |  | *     |   
|(Loss) income from discontinued operations, net of tax provision of $0 and $1.0 |  |                                  | (0.2  | ) |                                 |   | 3.3   |                         |  |   | (3.5  | ) |  | *     |   
|                                                                                |  |                                  |       |   |                                 |   |       |                         |  |   |       |   |  |       |   
|Net income                                                                      |  | $                                | 8.3   |   |                                 | $ | 3.1   |                         |  | $ | 5.2   |   |  | 167.7 |   
|                                                                                |  |                                  |       |   |                                 |   |       |                         |  |   |       |   |  |       |   



|* | Not meaningful
|- | --------------

Net sales decreased $57.4 million, or
10.0%, for the thirteen weeks ended June 29, 2008 compared to the prior year period. The decrease in net sales reflects a 21.4% decrease in sales volume partially offset by an 11.4% increase in average realized sales price as compared to the
thirteen weeks ended July 1, 2007.

Lower sales volumes are the result of various strategic initiatives and external factors. The
decrease in sales volume reflects our de-emphasis of certain product categories, such as straws, stirrers and selected cutlery items, which are high volume commodity products. In addition, sales volume was impacted by the divestiture of non-core
assets, including our uncoated white paper plate product line sold in September 2007, also a high volume product, and to a lesser extent, our dairy packaging product line sold in March 2008. The decrease in sales volume also reflects our effort to
improve commercial arrangements as well as to exit certain unfavorable relationships. Finally, sales volume was impacted by a competitive marketplace and the softening U.S. economy.

The increase in average realized sales price reflects the impact of pricing increases we implemented during the last year in response to higher raw
material and energy costs, as well as a shift in product mix.



20



---

##### Table of Contents

Gross margin, which is gross profit as a percentage of net sales, was 14.6% in the second quarter of 2008
versus 13.4% in the second quarter of 2007, primarily attributable to the factors that drove the decrease in sales volume, described above. For the thirteen weeks ended June 29, 2008, gross profit was essentially flat compared to the prior year
period. The favorable impact of (1) an increase in average realized sales price, (2) efficiency improvements resulting from ongoing productivity initiatives and (3) lower professional fees, which in 2007 related to our performance
improvement plan, was more than offset by significantly higher raw material costs, lower sales volumes, rising diesel fuel costs and the impact of lower production volumes on our fixed cost absorption.

Selling, general and administrative expenses decreased $10.0 million for the thirteen weeks ended June 29, 2008 compared to the thirteen weeks ended
July 1, 2007. The decrease primarily reflects (1) $3.6 million of costs incurred during the 2007 period for the implementation of our new order management system and professional fees incurred in connection with our performance improvement
program, (2) an asset impairment charge of $2.5 million taken in the second quarter of 2007, (3) lower incentive based compensation costs when compared with the prior year period and (4) lower intangible asset amortization expense. As
a percentage of net sales, selling, general and administrative expenses were 8.8% in the second quarter of 2008 versus 9.6% in the second quarter of 2007.

For the thirteen weeks ended June 29, 2008, interest expense, net, decreased $7.3 million compared to the prior year period. Lower interest expense is primarily attributable to lower outstanding term debt, mainly
due to the June 2007 retirement of the $130.0 million second lien credit facility (the Second Lien) from the net proceeds of the sale-leaseback transaction. To a lesser extent, lower interest expense is a result of decreased utilization
of the revolving credit facility under the first lien credit facility (the First Lien), due to improved operating cash flow, and lower average interest rates compared to the prior year period.

For the thirteen weeks ended July 1, 2007, a prepayment penalty of $1.3 million and a loss on debt extinguishment of $4.0 million were the result of
our early extinguishment of the Second Lien. The loss on debt extinguishment represents the write off of unamortized deferred financing fees related to the Second Lien.

During the thirteen weeks ended June 29, 2008, the income tax provision of $5.2 million is primarily related to foreign jurisdictions. During the thirteen weeks ended July 1, 2007, the income tax
benefit of $2.9 million represents the partial reversal of our valuation allowance, related to deferred tax assets, resulting from the sale and leaseback of six properties during the period partially offset by an income tax provision primarily
related to our foreign jurisdictions. For our domestic operations, the tax expense generated from the income incurred during the period was largely offset by a corresponding decrease in the valuation allowance; therefore, a minimal net domestic tax
expense was recognized.

Twenty-six weeks ended June 29, 2008 compared to the twenty-six weeks ended July 1, 2007



|                                                                                |  |                                    |       |   |                                   |   |         |                         |  |   |       |   |  |       |   
|------------------------------------------------------------------------------- |  | ---------------------------------- | ----- | - | --------------------------------- | - | ------- | ----------------------- |  | - | ----- | - |  | ----- | --
|(in millions)                                                                   |  | Twenty-sixweeks endedJune 29, 2008 |       |   | Twenty-sixweeks endedJuly 1, 2007 |   |         | Favorable (Unfavorable) | 
|Net sales                                                                       |  | $                                  | 979.8 |   |                                   | $ | 1,058.6 |                         |  | $ | (78.8 | ) |  | (7.4  | )%
|Cost of goods sold                                                              |  |                                    | 836.5 |   |                                   |   | 947.0   |                         |  |   | 110.5 |   |  | 11.7  |   
|                                                                                |  |                                    |       |   |                                   |   |         |                         |  |   |       |   |  |       |   
|Gross profit                                                                    |  |                                    | 143.3 |   |                                   |   | 111.6   |                         |  |   | 31.7  |   |  | 28.4  |   
|Selling, general and administrative expenses                                    |  |                                    | 87.0  |   |                                   |   | 104.0   |                         |  |   | 17.0  |   |  | 16.3  |   
|Loss (gain) on sale of property, plant and equipment                            |  |                                    | 9.9   |   |                                   |   | (1.2    | )                       |  |   | (11.1 | ) |  | *     |   
|                                                                                |  |                                    |       |   |                                   |   |         |                         |  |   |       |   |  |       |   
|Operating income                                                                |  |                                    | 46.4  |   |                                   |   | 8.8     |                         |  |   | 37.6  |   |  | 427.3 |   
|Interest expense, net                                                           |  |                                    | 31.3  |   |                                   |   | 43.5    |                         |  |   | 12.2  |   |  | 28.0  |   
|Prepayment penalty                                                              |  |                                    |      |   |                                   |   | 1.3     |                         |  |   | 1.3   |   |  | *     |   
|Loss on debt extinguishment                                                     |  |                                    |      |   |                                   |   | 4.0     |                         |  |   | 4.0   |   |  | *     |   
|Foreign currency exchange gain, net                                             |  |                                    | (1.2  | ) |                                   |   | (1.8    | )                       |  |   | (0.6  | ) |  | (33.3 | ) 
|                                                                                |  |                                    |       |   |                                   |   |         |                         |  |   |       |   |  |       |   
|Income (loss) from continuing operations before income taxes                    |  |                                    | 16.3  |   |                                   |   | (38.2   | )                       |  |   | 54.5  |   |  | *     |   
|Income tax provision (benefit)                                                  |  |                                    | 5.4   |   |                                   |   | (2.3    | )                       |  |   | (7.7  | ) |  | *     |   
|                                                                                |  |                                    |       |   |                                   |   |         |                         |  |   |       |   |  |       |   
|Income (loss) from continuing operations                                        |  |                                    | 10.9  |   |                                   |   | (35.9   | )                       |  |   | 46.8  |   |  | *     |   
|(Loss) income from discontinued operations, net of tax provision of $0 and $1.2 |  |                                    | (0.4  | ) |                                   |   | 0.2     |                         |  |   | (0.6  | ) |  | *     |   
|                                                                                |  |                                    |       |   |                                   |   |         |                         |  |   |       |   |  |       |   
|Net income (loss)                                                               |  | $                                  | 10.5  |   |                                   | $ | (35.7   | )                       |  | $ | 46.2  |   |  | *     |   
|                                                                                |  |                                    |       |   |                                   |   |         |                         |  |   |       |   |  |       |   



|* | Not meaningful
|- | --------------



21



---

##### Table of Contents

Net sales decreased $78.8 million, or 7.4%, for the twenty-six weeks ended June 29, 2008 compared to
the prior year period. The decrease in net sales reflects a 19.8% decrease in sales volume partially offset by a 12.4% increase in average realized sales price as compared to the thirteen weeks ended July 1, 2007.

Lower sales volumes are the result of various strategic initiatives and external factors. The decrease in sales volume reflects our de-emphasis of
certain product categories, such as straws, stirrers and selected cutlery items, which are high volume commodity products. Sales volume was impacted by the divestiture of non-core assets, including our uncoated white paper plate product line sold in
September 2007, which was also a high volume product. The decrease in sales volume also reflects our effort to improve commercial arrangements as well as to exit certain unfavorable relationships. Finally, sales volume was impacted by a competitive
marketplace and the softening U.S. economy.

The increase in average realized sales price reflects the impact of pricing increases we
implemented during 2007 in response to higher raw material and energy costs, as well as a shift in product mix.

For the twenty-six weeks
ended June 29, 2008, gross profit increased by $31.7 million over the prior year period. The increase in gross profit was primarily driven by (1) an increase in average realized sales price, (2) efficiency improvements resulting from
ongoing productivity initiatives and (3) lower professional fees, which in 2007 related to our performance improvement plan. These improvements were partially offset by (1) higher raw material costs, (2) lower sales volumes,
(3) rising diesel fuel costs and (4) the impact of lower production volumes on our fixed cost absorption. Gross margin was 14.6% in the first half of 2008 versus 10.5% in the comparable period of 2007.

Selling, general and administrative expenses decreased $17.0 million for the twenty-six weeks ended June 29, 2008 compared to the twenty-six weeks
ended July 1, 2007. The decrease primarily reflects (1) $9.4 million of costs incurred during the 2007 period for the implementation of our new order management system and professional fees incurred in connection with our performance
improvement program, (2) an asset impairment charge of $2.5 million taken in the second quarter of 2007 and (3) lower intangible asset amortization expense. As a percentage of net sales, selling, general and administrative expenses were
8.9% in the twenty-six weeks of 2008 versus 9.8% in the comparable period of 2007.

Loss on sale of property, plant and equipment for the
twenty-six weeks ended June 29, 2008 was $9.9 million compared to a gain on sale of property, plant and equipment of $1.2 million during the twenty-six weeks ended July 1, 2007. The loss during the current period primarily reflects the
disposal of non-core assets including the sale of our dairy packaging machinery and equipment in March 2008.

For the twenty-six weeks
ended June 29, 2008, interest expense, net, decreased $12.2 million compared to the prior year period. Lower interest expense is primarily attributable to lower outstanding term debt, mainly due to the June 2007 retirement of the $130.0 million
Second Lien from the net proceeds of the sale-leaseback transaction. To a lesser extent, lower interest expense is a result of decreased utilization of the revolving credit facility under the First Lien, due to improved operating cash flow and
non-core asset sales, and lower average interest rates compared to the prior year period.

Income tax expense of $5.4 million for the
twenty-six weeks ended June 29, 2008 is primarily related to foreign jurisdictions. For our domestic operations, the tax expense generated from the taxable income was largely offset by a corresponding decrease in the valuation allowance;
therefore, a minimal net domestic tax benefit was recognized. During the twenty-six weeks ended July 1, 2007, the income tax benefit of $2.3 million represents the partial reversal of our valuation allowance, related to deferred tax assets,
resulting from the sale and leaseback of six properties during the period partially offset by an income tax provision primarily related to our foreign jurisdictions.



22



---

##### Table of Contents

Liquidity and Capital Resources

Historically, the Company has relied on cash flows from operations and revolving credit borrowings to finance its working capital requirements and capital expenditures. Net cash provided by operating activities for
continuing operations during the twenty-six weeks ended June 29, 2008 was $41.0 million compared to $21.7 million during the twenty-six weeks ended July 1, 2007. The increased cash flow from operations is a result of improved operating
results driven by gross margin improvement, partially offset by investments in working capital.

Working capital increased $25.1 million to
$418.9 million at June 29, 2008, from $393.8 million at December 30, 2007. The increase in working capital mostly reflects higher inventory balances, a decrease in accrued payroll and related costs, partially offset by lower accounts
receivable. The higher inventory at June 29, 2008, compared to December 30, 2007, reflects escalating raw material costs and the need for increased inventory levels to accommodate higher seasonal sales. The decrease in accrued payroll and
related costs was primarily driven by the payment of annual incentive compensation during the second quarter of 2008. The decrease in accounts receivable was driven by lower sales and the receipt of vendor rebate payments during the first quarter of
2008.

Net cash used in investing activities for continuing operations during the twenty-six weeks ended June 29, 2008 was $21.2
million compared to net cash provided by investing activities of $110.0 million during the twenty-six weeks ended July 1, 2007. Capital expenditures during the twenty-six weeks ended June 29, 2008 were $31.4 million compared to $18.3
million during the twenty-six weeks ended July 1, 2007. Capital expenditures were funded by cash provided by operating activities. The sale of property, plant and equipment provided investing cash flows of $10.2 million during the twenty-six
weeks ended June 29, 2008 and was primarily related to the sale of dairy packaging machinery and equipment and the sale of a manufacturing facility which was closed during the first quarter of 2008. Net cash provided by investing activities of
$110.0 million during the prior year period was driven by the proceeds of the sale and leaseback of six properties in June 2007.

Net cash
used in financing activities for continuing operations during the twenty-six weeks ended June 29, 2008, was $18.1 million compared to $145.7 million during the twenty-six weeks ended July 1, 2007. The current period reflects mandatory
prepayments of the term loan under our First Lien as well as a decrease in borrowings under the revolving credit facility under our First Lien. Net cash used in financing activities during the prior year period was driven by the repayment of our
$130.0 million Second Lien.

Long-term debt

The following is a summary of our long-term debt at June 29, 2008 (in thousands):



|                                            |  |               |        
|------------------------------------------- |  | ------------- | -------
|                                            |  | June 29, 2008
|Long-term debt:                             |  |               |        
|8.5% Senior Subordinated Notes              |  | $             | 325,000
|First Lien Facility  Term Loan             |  |               | 391,340
|First Lien Facility  Revolver              |  |               | 20,200 
|Canadian Credit Facility  Term Loan        |  |               | 2,563  
|Capital lease obligations                   |  |               | 1,873  
|                                            |  |               |        
|Total long-term debt                        |  |               | 740,976
|Less - Current maturities of long-term debt |  |               | 2,693  
|                                            |  |               |        
|Long -term debt, net of current maturities  |  | $             | 738,283
|                                            |  |               |        



23



---

##### Table of Contents

The following is a summary of our committed revolving credit facilities at June 29, 2008 (in
thousands):



|                                               |  |                  |         |                    |   |                      |  |                |        |  |   |        
|---------------------------------------------- |  | ---------------- | ------- | ------------------ | - | -------------------- |  | -------------- | ------ |  | - | -------
|                                               |  | CommitmentAmount |         | AmountsOutstanding |   | Letters ofCredit (1) |  | UnusedCapacity
|First Lien Facility-revolving facility         |  | $                | 150,000 |                    | $ | 20,200               |  | $              | 30,567 |  | $ | 99,233 
|Canadian Credit Facility-revolving facility(2) |  |                  | 14,852  |                    |   |                     |  |                |       |  |   | 11,982 
|                                               |  |                  |         |                    |   |                      |  |                |        |  |   |        
|                                               |  | $                | 164,852 |                    | $ | 20,200               |  | $              | 30,567 |  | $ | 111,215
|                                               |  |                  |         |                    |   |                      |  |                |        |  |   |        



|(1) | Availability of the credit facilities is reduced by letters of credit issued under the facilities.
|--- | --------------------------------------------------------------------------------------------------

|(2) | The commitment amount for the Canadian revolving credit facility is CAD $15.0 million (approximately $14.9 million);
however, unused capacity is CAD $12.1 million (approximately $12.0 million) due to borrowing base limitations.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

First
Lien Facility

On February 27, 2004, the Company entered into credit facilities comprised of a $150.0 million revolving credit
facility maturing in 2010 and a $650.0 million term loan facility maturing on February 27, 2011 (collectively, the First Lien). The revolving credit facility is principally used for working capital purposes, and the term loan
facility was used to finance our 2004 acquisition of SF Holdings and related transactions. The First Lien was subsequently amended by Amendment No. 1 dated as of March 31, 2005, Amendment No. 2 dated as of October 14, 2005,
Amendment No. 3 and waiver dated as of March 27, 2006, Amendment No. 4 and waiver dated as of October 13, 2006 and Amendment No. 5 dated as of December 22, 2006.

In March 2008, we made a $2.0 million mandatory term loan prepayment under the First Lien, which was made from the net proceeds of the sale of dairy
packaging assets. In May 2008, we made a $5.3 million mandatory term loan prepayment under the First Lien, which was made from the net proceeds from the sale of a manufacturing plant which was closed during the first quarter of 2008. Based on the
revised amortization schedule, the scheduled principal repayments of approximately $1.0 million are due on May 27, 2009 and quarterly thereafter through November 27, 2010, with a balloon payment of approximately $384.1 million due on
February 27, 2011.

All mandatory quarterly payments have been made to date. We were in compliance with all financial covenants under
the First Lien during the twenty-six weeks ended June 29, 2008.

Other Contingencies

We entered into agreements with the State of Illinois (State) and the City of Chicago (City) relating to the acquisition and
development of certain property of the Company located in the City. Pursuant to these agreements, the State and the City provided certain grants to us, paid certain costs on our behalf and undertook certain obligations relating to the property.
Under these agreements, we are required to fulfill certain obligations relating to development of the property and retention of a certain number of employees. If these obligations were not fulfilled, we may be required to repay certain amounts
granted or paid by the State or the City, the net impact of which, we believe, would not be material to our business, financial condition, results of operations or cash flows. During the thirteen weeks ended April 1, 2007, the Company entered
into a purchase and sale agreement to sell the property. The purchase and sale agreement provides that, upon the closing of the sale, the obligations of the Company to the State and the City will be satisfied or the Company will otherwise be
released from such obligations. During the first quarter of 2008, the agreement was extended through October 31, 2008.



24



---

##### Table of Contents

Outlook

Management believes that cash generated by operations and amounts available under our credit facilities should be sufficient to meet our expected operating needs, planned capital expenditures, payments in conjunction
with our lease commitments and debt service requirements for the remainder of 2008. We expect that our total 2008 capital expenditures will be in the range of $70 million to $80 million and contributions to our defined benefit plans will be
approximately $5 million.

In recent years and continuing into 2008, our industry has experienced volatility in raw material and energy
pricing. The principal raw materials used in our plastic operations are resins, some of which include polystyrene, polypropylene and APET. Resin prices are influenced by other input prices such as oil, natural gas, benzene and ethylene, as well as
availability of supply and changes in demand. Benzene prices have remained elevated and volatile.

The principal raw material used in our
paper operations is solid bleached sulfate paperboard. Paper prices are driven by global supply and demand as well as input costs for energy, fiber, chemicals, polyethylene and transportation.

Global energy prices increased throughout the first half of 2008. These increases impact our transportation and production costs. Historically, we have
been able to partially mitigate the effect of higher energy-related costs with productivity, utilization of equipment and efficiency improvements.

For the remainder of 2008, we expect that raw material and energy costs will continue to be uncertain and additional increases are possible. We continue to closely monitor changing conditions and will respond as quickly as possible to
minimize any potential impact to our results of operations.

Net Operating Loss Carryforwards

As of June 29, 2008, we had approximately $157.9 million of U.S. federal tax net operating loss carryforwards that expire between 2024 and 2026, and
there are no carryforwards that are subject to the provisions of Internal Revenue Code Section 382. We established a valuation allowance for deferred tax assets, including our net operating loss carryforwards, when the amount of expected future
taxable income is not likely to support the use of the deduction or credit. During the twenty-six weeks ended June 29, 2008, our valuation allowance increased by $1.7 million, to $89.4 million. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Critical Accounting
Estimates

Our critical accounting estimates are described in our 2007 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 11, 2008. There have been no changes to the critical accounting estimates since that filing.

Impact of Recently Issued
Accounting Standards

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157,
Fair Value Measurements (SFAS 157), which clarifies the definition of fair value whenever another standard requires or permits assets or liabilities to be measured at fair value. Specifically, the standard clarifies
that fair value should be based on the assumptions market participants would use when pricing the asset or liability, and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS 157 does not
expand the use of fair value to any new circumstances, and must be applied on a prospective basis except in certain cases.

In February
2008, FASB Staff Position (FSP) FAS No. 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), was issued. FSP 157-2 defers the effective date of SFAS 157 to fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years, for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least
annually). Examples of items within the scope of FSP 157-2 are nonfinancial assets and nonfinancial liabilities initially measured at fair value in a business combination (but not measured at fair value in subsequent periods), and long-lived
assets, such as property, plant and equipment and intangible assets measured at fair value for an impairment assessment under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.



25



---

##### Table of Contents

The partial adoption of SFAS 157 in the first quarter of 2008 with respect to financial assets and
financial liabilities recognized or disclosed at fair value in the financial statements on a recurring basis did not have a material impact on our consolidated financial statements, but resulted in additional disclosures contained in Note 6 to the
accompanying consolidated financial statements. We are in the process of analyzing the potential impact of SFAS 157 relating to our planned adoption of the remainder of the standard in the first quarter of 2009.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an
amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to elect to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair
value. Unrealized gains and losses on items for which the fair value option has been elected would be recognized in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We
adopted SFAS 159 in the first quarter of 2008 and elected not to apply the fair value option to any of our financial instruments.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007) (SFAS 141R), a revision of SFAS 141, Business Combinations. SFAS 141R establishes requirements for the recognition and measurement of
acquired assets, liabilities, goodwill, and non-controlling interests. SFAS 141R also provides disclosure requirements related to business combinations. SFAS 141R is effective for fiscal years beginning after December 15, 2008.
SFAS 141R will be applied prospectively to business combinations with an acquisition date on or after the effective date.

In December
2007, the FASB issued SFAS No. 160, Non-Controlling Interests in Consolidated Financial Statements an amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes new standards for the accounting for and
reporting of non-controlling interests (formerly minority interests) and for the loss of control of partially owned and consolidated subsidiaries. SFAS 160 does not change the criteria for consolidating a partially owned entity. SFAS 160
is effective for fiscal years beginning after December 15, 2008. We do not expect the adoption of SFAS 160 will have a material impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities  an amendment of FASB
Statement No. 133. SFAS No. 161 requires enhanced disclosure regarding derivative instruments and hedging activities, enabling better understanding of their effects on an entitys financial position, financial performance and
cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.



26



---

##### Table of Contents

Forward-Looking Statements

This report contains forward-looking statements. The words anticipate, intend, plan, estimate, believe, expect, predict,
potential, project, could, will, should, may, would and similar expressions are intended to identify forward-looking statements, although not all forward-looking
statements contain such identifying words. All statements in this report other than statements of historical fact, including statements regarding our business strategy, future operations, financial position, estimated net sales, projected costs,
projected cost savings, projected synergies, prospects, plans and objectives, as well as information concerning industry trends and expected actions of third parties, are forward-looking statements. All forward-looking statements speak only as of
the date on which they are made. They rely on a number of assumptions concerning future events and are subject to a number of risks and uncertainties, many of which are outside our control, that could cause actual results to differ materially from
such statements.

A description of the risk factors associated with our business is contained in Item 1A, Risk Factors, of
our 2007 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 11, 2008 and incorporated herein by reference and in our other filings made from time to time with the SEC. Except as required by
applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events
or otherwise to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. These cautionary statements are to be used as a reference in connection with any forward-looking statements. These risks and
uncertainties include, but are not limited to:



| |  |  | the impact of our indebtedness on our cash flow and operating flexibility;
| | - |  | --------------------------------------------------------------------------



| |  |  | the impact of economic, financial, industry conditions and our continued realization of cost savings on our ability to drive capital growth to service our debt;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the impact of any downgrades in our corporate ratings on the credit terms offered to us by our vendors and the interest rates offered to us if we require additional
capital or financing;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | availability of and increases in raw material pricing, energy and fuel;
| | - |  | -----------------------------------------------------------------------



| |  |  | effect of increased regulation of certain raw materials used in our products and changing federal, state, foreign and local environmental and occupational health
and safety laws and regulations;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | impact of competitive products and pricing and fluctuations in demand for our products;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | ineffective or incomplete remediation of prior material weaknesses in our internal controls over financial reporting;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | risks associated with conducting business in multiple foreign jurisdictions, including foreign currency exchange rate fluctuations;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to improve existing products and develop new products;
| | - |  | ------------------------------------------------------------------



| |  |  | loss of key management and personnel;
| | - |  | -------------------------------------



| |  |  | event of catastrophic loss of one of our key manufacturing facilities;
| | - |  | ----------------------------------------------------------------------



| |  |  | potential conflicts of interest between our note holders and the stockholders of SCIC;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | loss of one or more of our principal customers;
| | - |  | -----------------------------------------------



| |  |  | impact of any prolonged work stoppage;
| | - |  | --------------------------------------



| |  |  | diversion of management attention from other business activities in the event we pursue additional acquisitions or undertake divestitures in the future; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to enforce our intellectual property and other proprietary rights.
| | - |  | ------------------------------------------------------------------------------



27



---

##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures About Market Risk.
|------- | -----------------------------------------------------------

We do not believe there have been any significant changes to our market risk as previously disclosed in our Annual Report on Form 10-K for the year ended December 30, 2007 filed with the Securities and Exchange Commission on
March 11, 2008.



|Item 4T. | Controls and Procedures.
|-------- | ------------------------



|(a) | Disclosure Controls and Procedures. The Companys management, with the participation of the Companys chief executive officer and chief financial officer, has evaluated
the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the
period covered by this report. Based on such evaluation, the Companys chief executive officer and chief financial officer have concluded that, as of the end of such period, the Companys disclosure controls and procedures are
effective in recording, processing, summarizing and reporting on a timely basis, information required to be disclosed by the Company in the reports that it files under the Exchange Act.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Changes in Internal Control over Financial Reporting. There have been no changes in the Companys internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) during the thirteen weeks ended June 29, 2008, that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



28



---

##### Table of Contents

PART II - OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

We are involved in various
claims and legal actions arising from time to time in the ordinary course of business. While the outcome of these claims and actions cannot be predicted with certainty, management believes that we are not a party to any pending legal proceedings,
the ultimate disposition of which would have a material adverse effect on the Companys business, consolidated financial position, results of operations, or liquidity.



|Item 1A. | Risk Factors.
|-------- | -------------

We do not believe there have been
any material changes in our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 30, 2007 filed with the Securities and Exchange Commission on March 11, 2008.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------

Not applicable.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

Not applicable.



|Item 4. | Submission of Matters to a Vote of Security Holders.
|------- | ----------------------------------------------------

Not applicable.



|Item 5. | Other Information.
|------- | ------------------

Not applicable.



|Item 6. | Exhibits.
|------- | ---------



|     |  |                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|32.1 |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



29



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                      |  |                  |  |                                                                         
|--------------------- |  | ---------------- |  | ------------------------------------------------------------------------
|                      |  | SOLO CUP COMPANY
|                      |  |                 
|Date: August 12, 2008 |  | By:              |  | /s/ Robert D. Koney, Jr.                                                
|                      |  |                  |  | Robert D. Koney, Jr.                                                    
|                      |  |                  |  | Executive Vice President and Chief Financial Officer                    
|                      |  |                  |  | (Principal Financial and Accounting Officer and Duly Authorized Officer)



30



---

##### Table of Contents

INDEX OF EXHIBITS FILED WITH OR

INCORPORATED BY REFERENCE INTO

FORM 10-Q OF SOLO CUP COMPANY

FOR THE THIRTEEN WEEKS ENDED JUNE 29, 2008



|     |  |                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|32.1 |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



31