---

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 April 2, 2006



| ̈ | 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: 33-91600



---

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 an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x

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 May 16, 2006:

Common Stock, $0.01 par value - 100 shares



---



---

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In
thousands, except share and per share data)



|                                                                                                     |  |               |           |                 |   |           |  
|---------------------------------------------------------------------------------------------------- |  | ------------- | --------- | --------------- | - | --------- | -
|                                                                                                     |  | April 2, 2006 |           | January 1, 2006 |  
|                                                                                                     |  | (Unaudited)   |           |                 |  
|Assets                                                                                               |  |               |           |                 |   |           |  
|Current assets:                                                                                      |  |               |           |                 |   |           |  
|Cash and cash equivalents                                                                            |  | $             | 11,057    |                 | $ | 12,087    |  
|Cash in escrow                                                                                       |  |               | 15,000    |                 |   | 15,000    |  
|Accounts receivable:                                                                                 |  |               |           |                 |   |           |  
|Trade, less allowance for doubtful accounts of $5,681 and $4,812                                     |  |               | 247,623   |                 |   | 252,046   |  
|Other                                                                                                |  |               | 21,774    |                 |   | 24,126    |  
|Inventories                                                                                          |  |               | 418,774   |                 |   | 380,720   |  
|Spare parts                                                                                          |  |               | 37,106    |                 |   | 36,712    |  
|Deferred income taxes                                                                                |  |               | 43,951    |                 |   | 44,056    |  
|Prepaid expenses                                                                                     |  |               | 9,275     |                 |   | 11,577    |  
|Other current assets                                                                                 |  |               | 4,931     |                 |   | 5,875     |  
|                                                                                                     |  |               |           |                 |   |           |  
|Total current assets                                                                                 |  |               | 809,491   |                 |   | 782,199   |  
|                                                                                                     |  |              
|Property, plant and equipment, net                                                                   |  |               | 745,774   |                 |   | 756,185   |  
|Spare parts                                                                                          |  |               | 12,652    |                 |   | 12,389    |  
|Goodwill                                                                                             |  |               | 240,413   |                 |   | 240,030   |  
|Intangible assets, net                                                                               |  |               | 25,764    |                 |   | 28,065    |  
|Deferred financing fees, net                                                                         |  |               | 28,374    |                 |   | 26,790    |  
|Other assets                                                                                         |  |               | 12,108    |                 |   | 12,105    |  
|                                                                                                     |  |               |           |                 |   |           |  
|Total assets                                                                                         |  | $             | 1,874,576 |                 | $ | 1,857,763 |  
|                                                                                                     |  |               |           |                 |   |           |  
|Liabilities and Shareholders Equity                                                                 |  |               |           |                 |   |           |  
|Current liabilities:                                                                                 |  |               |           |                 |   |           |  
|Accounts payable                                                                                     |  | $             | 183,221   |                 | $ | 163,599   |  
|Accrued payroll and related costs                                                                    |  |               | 55,071    |                 |   | 54,371    |  
|Accrued customer allowances                                                                          |  |               | 29,885    |                 |   | 29,289    |  
|Accrued expenses and other current liabilities                                                       |  |               | 31,431    |                 |   | 40,826    |  
|Short-term debt                                                                                      |  |               | 4,574     |                 |   | 5,546     |  
|Current maturities of long-term debt                                                                 |  |               | 8,720     |                 |   | 8,726     |  
|Income taxes payable                                                                                 |  |               | 2,333     |                 |   | 2,667     |  
|                                                                                                     |  |               |           |                 |   |           |  
|Total current liabilities                                                                            |  |               | 315,235   |                 |   | 305,024   |  
|                                                                                                     |  |              
|Long-term debt, net of current maturities                                                            |  |               | 1,073,668 |                 |   | 1,029,009 |  
|Deferred income taxes                                                                                |  |               | 12,327    |                 |   | 28,059    |  
|Pensions and other postretirement benefits                                                           |  |               | 72,995    |                 |   | 74,374    |  
|Other liabilities                                                                                    |  |               | 10,373    |                 |   | 10,008    |  
|                                                                                                     |  |               |           |                 |   |           |  
|Total liabilities                                                                                    |  |               | 1,484,598 |                 |   | 1,446,474 |  
|Shareholders equity:                                                                                |  |               |           |                 |   |           |  
|Common stock - Par value $0.01 per share; 1,000 shares authorized; 100 shares issued and outstanding |  |               |          |                 |   |          |  
|Additional paid-in capital                                                                           |  |               | 258,109   |                 |   | 258,049   |  
|Retained earnings                                                                                    |  |               | 131,215   |                 |   | 153,302   |  
|Accumulated other comprehensive income (loss)                                                        |  |               | 654       |                 |   | (62       | )
|                                                                                                     |  |               |           |                 |   |           |  
|Total shareholders equity                                                                           |  |               | 389,978   |                 |   | 411,289   |  
|                                                                                                     |  |               |           |                 |   |           |  
|Total liabilities and shareholders equity                                                           |  | $             | 1,874,576 |                 | $ | 1,857,763 |  
|                                                                                                     |  |               |           |                 |   |           |  

See accompanying Notes to Consolidated Financial Statements.



2



---

SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands)



|                                                        |  |                                  |         |   |                                 |   |         |  
|------------------------------------------------------- |  | -------------------------------- | ------- | - | ------------------------------- | - | ------- | -
|                                                        |  | Thirteenweeks endedApril 2, 2006 |         |   | Three monthsendedMarch 31, 2005 |  
|Net sales                                               |  | $                                | 563,981 |   |                                 | $ | 546,093 |  
|Cost of goods sold                                      |  |                                  | 512,719 |   |                                 |   | 497,598 |  
|                                                        |  |                                  |         |   |                                 |   |         |  
|Gross profit                                            |  |                                  | 51,262  |   |                                 |   | 48,495  |  
|Selling, general and administrative expenses            |  |                                  | 66,574  |   |                                 |   | 60,036  |  
|Restructuring expense                                   |  |                                  | 1,164   |   |                                 |   | 868     |  
|Loss on sale of property, plant and equipment           |  |                                  | 864     |   |                                 |   | 774     |  
|                                                        |  |                                  |         |   |                                 |   |         |  
|Operating loss                                          |  |                                  | (17,340 | ) |                                 |   | (13,183 | )
|                                                        |  |                                 
|Interest expense, net of interest income of $98 and $89 |  |                                  | 20,379  |   |                                 |   | 17,073  |  
|Foreign currency exchange (gain) loss, net              |  |                                  | (1,034  | ) |                                 |   | 807     |  
|Other (income) expense, net                             |  |                                  | 127     |   |                                 |   | (113    | )
|                                                        |  |                                  |         |   |                                 |   |         |  
|Loss before income taxes and minority interest          |  |                                  | (36,812 | ) |                                 |   | (30,950 | )
|                                                        |  |                                 
|Income tax benefit                                      |  |                                  | (14,725 | ) |                                 |   | (12,380 | )
|Minority interest                                       |  |                                  |        |   |                                 |   | (2      | )
|                                                        |  |                                  |         |   |                                 |   |         |  
|Net loss                                                |  | $                                | (22,087 | ) |                                 | $ | (18,568 | )
|                                                        |  |                                  |         |   |                                 |   |         |  

See accompanying Notes to Consolidated Financial Statements.



3



---

SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY

(In thousands, except
share amounts)



|                                                                  |  |              |  |                          |   |                  |   |         |                                            |   |         |                          |  |   |     |   |  |   |         |  
|----------------------------------------------------------------- |  | ------------ |  | ------------------------ | - | ---------------- | - | ------- | ------------------------------------------ | - | ------- | ------------------------ |  | - | --- | - |  | - | ------- | -
|                                                                  |  | Common stock |  | Additionalpaid-incapital |   | Retainedearnings |   |         | Accumulatedothercomprehensiveincome (loss) |   |         | Totalshareholdersequity | 
|                                                                  |  | Shares       |  | Amount                   |   |                  |   |        
|Balance at January 1, 2006                                        |  | 100          |  | $                        |  |                  | $ | 258,049 |                                            | $ | 153,302 |                          |  | $ | (62 | ) |  | $ | 411,289 |  
|Net loss (Unaudited)                                              |  |             |  |                          |  |                  |   |        |                                            |   | (22,087 | )                        |  |   |    |   |  |   | (22,087 | )
|Compensation expense on CPUs (Unaudited)                          |  |             |  |                          |  |                  |   | 60      |                                            |   |        |                          |  |   |    |   |  |   | 60      |  
|Foreign currency translation adjustment (Unaudited)               |  |             |  |                          |  |                  |   |        |                                            |   |        |                          |  |   | 516 |   |  |   | 516     |  
|Unrealized investment gain, net of tax of $30 (Unaudited)         |  |             |  |                          |  |                  |   |        |                                            |   |        |                          |  |   | 43  |   |  |   | 43      |  
|Unrealized gain on cash flow hedge, net of tax of $98 (Unaudited) |  |             |  |                          |  |                  |   |        |                                            |   |        |                          |  |   | 157 |   |  |   | 157     |  
|                                                                  |  |              |  |                          |   |                  |   |         |                                            |   |         |                          |  |   |     |   |  |   |         |  
|Balance at April 2, 2006 (Unaudited)                              |  | 100          |  | $                        |  |                  | $ | 258,109 |                                            | $ | 131,215 |                          |  | $ | 654 |   |  | $ | 389,978 |  
|                                                                  |  |              |  |                          |   |                  |   |         |                                            |   |         |                          |  |   |     |   |  |   |         |  

See accompanying Notes to Consolidated Financial Statements.



4



---

SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)



|                                                                            |  |                                   |         |   |                                   |   |         |  
|--------------------------------------------------------------------------- |  | --------------------------------- | ------- | - | --------------------------------- | - | ------- | -
|                                                                            |  | Thirteen weeks endedApril 2, 2006 |         |   | Three months ended March 31, 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                        |  |                                   |         |   |                                   |   |         |  
|Net loss                                                                    |  | $                                 | (22,087 | ) |                                   | $ | (18,568 | )
|                                                                            |  |                                  
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                   |         |   |                                   |   |         |  
|Depreciation and amortization                                               |  |                                   | 25,710  |   |                                   |   | 25,587  |  
|Deferred finance fee amortization                                           |  |                                   | 1,132   |   |                                   |   | 1,226   |  
|Loss on sale of property, plant and equipment                               |  |                                   | 864     |   |                                   |   | 774     |  
|Asset impairment                                                            |  |                                   | 125     |   |                                   |   |        |  
|Minority interest                                                           |  |                                   |        |   |                                   |   | (2      | )
|Deferred income taxes                                                       |  |                                   | (15,810 | ) |                                   |   | (12,669 | )
|Foreign currency (gain) loss                                                |  |                                   | (1,034  | ) |                                   |   | 807     |  
|Changes in operating assets and liabilities (net of business acquisitions): |  |                                   |         |   |                                   |   |         |  
|Accounts receivable                                                         |  |                                   | 7,263   |   |                                   |   | (15,806 | )
|Inventories                                                                 |  |                                   | (37,905 | ) |                                   |   | (25,019 | )
|Prepaid expenses and other current assets                                   |  |                                   | 1,524   |   |                                   |   | 1,645   |  
|Other assets                                                                |  |                                   | (8      | ) |                                   |   | 4,267   |  
|Accounts payable                                                            |  |                                   | 19,659  |   |                                   |   | 29,038  |  
|Accrued expenses and other current liabilities                              |  |                                   | (5,742  | ) |                                   |   | (22,766 | )
|Other liabilities                                                           |  |                                   | (3,825  | ) |                                   |   | (2,573  | )
|Other, net                                                                  |  |                                   | 275     |   |                                   |   | 135     |  
|                                                                            |  |                                   |         |   |                                   |   |         |  
|Net cash used in operating activities                                       |  |                                   | (29,859 | ) |                                   |   | (33,924 | )
|                                                                            |  |                                  
|CASH FLOWS FROM INVESTING ACTIVITIES                                        |  |                                   |         |   |                                   |   |         |  
|Purchase of property, plant and equipment                                   |  |                                   | (13,516 | ) |                                   |   | (16,283 | )
|Proceeds from sale of property, plant and equipment                         |  |                                   | 1,334   |   |                                   |   | 5,614   |  
|                                                                            |  |                                   |         |   |                                   |   |         |  
|Net cash used in investing activities                                       |  |                                   | (12,182 | ) |                                   |   | (10,669 | )
|CASH FLOWS FROM FINANCING ACTIVITIES                                        |  |                                   |         |   |                                   |   |         |  
|                                                                            |  |                                  
|Net borrowings (repayments) under revolving credit facilities               |  |                                   | (33,114 | ) |                                   |   | 49,429  |  
|Borrowings under term notes                                                 |  |                                   | 80,000  |   |                                   |   |        |  
|Contribution of capital from parent                                         |  |                                   |        |   |                                   |   | 100     |  
|Repayments of term notes                                                    |  |                                   | (2,042  | ) |                                   |   | (2,406  | )
|Repayments of other debt                                                    |  |                                   | (1,155  | ) |                                   |   | (2,233  | )
|Debt issuance costs                                                         |  |                                   | (2,716  | ) |                                   |   | (1,046  | )
|Increase in restricted cash                                                 |  |                                   |        |   |                                   |   | 1,905   |  
|                                                                            |  |                                   |         |   |                                   |   |         |  
|Net cash provided by financing activities                                   |  |                                   | 40,973  |   |                                   |   | 45,749  |  
|Effect of exchange rate changes on cash                                     |  |                                   | 38      |   |                                   |   | (36     | )
|                                                                            |  |                                   |         |   |                                   |   |         |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        |  |                                   | (1,030  | ) |                                   |   | 1,120   |  
|CASH AND CASH EQUIVALENTS, beginning of period                              |  |                                   | 12,087  |   |                                   |   | 15,855  |  
|                                                                            |  |                                   |         |   |                                   |   |         |  
|CASH AND CASH EQUIVALENTS, end of period                                    |  | $                                 | 11,057  |   |                                   | $ | 16,975  |  
|                                                                            |  |                                   |         |   |                                   |   |         |  
|SUPPLEMENTAL CASH FLOW DISCLOSURES:                                         |  |                                   |         |   |                                   |   |         |  
|Interest paid                                                               |  | $                                 | 26,499  |   |                                   | $ | 24,633  |  
|                                                                            |  |                                   |         |   |                                   |   |         |  
|Income taxes paid                                                           |  | $                                 | 1,412   |   |                                   | $ | 2,989   |  
|                                                                            |  |                                   |         |   |                                   |   |         |  

See accompanying Notes to Consolidated Financial Statements.



5



---

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.

On
June 21, 2005, the Companys Board of Directors approved a change in the Companys fiscal year from the year ended December 31 to the 52- or 53-week period ending on the last Sunday in December. The fiscal quarters for 2006 are
the thirteen weeks ending April 2, 2006, July 2, 2006, October 1, 2006 and December 31, 2006.

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) which the
Company considers necessary for a fair presentation of the financial position, operating results and cash flows for these periods. Results for the interim periods are not necessarily indicative of results expected for the entire year. These
consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Company for the year ended January 1, 2006 included in its 2005 annual report on Form 10-K filed with the
Securities and Exchange Commission on March 30, 2006.

Certain prior period amounts have been reclassified to conform to the current
periods presentation. These reclassifications had no effect on previously reported net income (loss).

(2) ACQUISITIONS

On February 27, 2004, with an effective date of February 22, 2004, the Company consummated the purchase of 100.0% of the issued and outstanding
capital stock of SF Holdings (the SF Holdings Acquisition). SF Holdings was one of the largest converters and marketers of plastic and paper disposable foodservice and food packaging products in North America.

The aggregate purchase price was $917.2 million of which $15.0 million is being held in an escrow account pending the final working capital adjustment
and resolution of claims for indemnification. The $15.0 million held in escrow is not included in the allocation of the cost of the assets acquired and liabilities assumed as it represents contingent consideration for which the contingency has not
been resolved. See Note 15 with regard to a subsequent event in connection with the $15.0 million held in escrow. The consideration was applied to the purchase of all common stock and common stock equivalents of SF Holdings, as well as the repayment
of all outstanding debt of SF Holdings and the repurchase and cancellation of its preferred stock. In addition, the Company purchased from a lessor certain leased manufacturing equipment and other assets that SF Holdings uses in its operations for
an aggregate purchase price of $209.1 million, plus $8.0 million of accrued rent on the leases and the payment of documentation expenses. These amounts are included in the $917.2 million of aggregate consideration paid.

The funding of the SF Holdings Acquisition was made through bank financing, bonds and private investment. The SF Holdings Acquisition resulted in
goodwill of $144.6 million that is not tax deductible and $45.0 million of acquired intangible assets with a weighted average useful life of approximately five years. These intangible assets consisted of trademarks and trade names of $22.2 million
with an estimated useful life of five years, Trophy manufacturing technology valued at $21.1 million with an estimated useful life of five years, and $1.7 million of other intangible assets with an estimated useful life of three years.



6



---

The following are the amounts assigned to the acquired assets and liabilities (in millions):



|                                                              |  |   |         |  
|------------------------------------------------------------- |  | - | ------- | -
|Purchase price                                                |  | $ | 917.2   |  
|Less cash in escrow                                           |  |   | (15.0   | )
|                                                              |  |   |         |  
|Adjusted purchase price                                       |  | $ | 902.2   |  
|                                                              |  |   |         |  
|Cash                                                          |  | $ | 30.4    |  
|Accounts receivable                                           |  |   | 131.2   |  
|Inventories                                                   |  |   | 211.6   |  
|Other current assets                                          |  |   | 51.0    |  
|Property, plant and equipment                                 |  |   | 570.3   |  
|Intangible assets                                             |  |   | 45.0    |  
|Other long-term assets                                        |  |   | 18.6    |  
|                                                              |  |   |         |  
|Total assets                                                  |  | $ | 1,058.1 |  
|                                                              |  |   |         |  
|Current liabilities                                           |  | $ | 204.5   |  
|Other long-term liabilities                                   |  |   | 96.0    |  
|                                                              |  |   |         |  
|Total liabilities                                             |  | $ | 300.5   |  
|                                                              |  |   |         |  
|Excess of purchase price over assets and liabilities acquired |  | $ | 144.6   |  
|                                                              |  |   |         |  

The finalization of the purchase price is pending adjustments to working capital and resolution of
claims for indemnification. See Note 15.

(3) ASSETS HELD FOR SALE

In the fourth quarter of 2005, management approved a plan to find a buyer for a plant located in Shreveport, Louisiana, which was closed in connection with the integration of SF Holdings. The net book value of
approximately $2.5 million is classified in other current assets in the Companys Consolidated Balance Sheets as of April 2, 2006 and January 1, 2006.

In the first half of 2005, management approved a plan to find a buyer for three plants closed in connection with the integration of SF Holdings. One of these plants, which was located in Chicago, Illinois
(96thStreet), was sold and leased back in September 2005. The lease expired prior to January 1,
2006. In the fourth quarter of 2005 and the first quarter of 2006, the Company recognized impairment losses of $1.3 million and $0.1 million, respectively, to adjust the carrying value of the second plant, located in Williamsburg, Pennsylvania.
Impairment losses on assets held for sale are included in other (income) expense, net in the Companys Consolidated Statements of Operations. The total carrying value of the Williamsburg plant and the third plant, located in Chicago, Illinois
(East End), of approximately $1.5 million is classified in other current assets in the Companys Consolidated Balance Sheet as of April 2, 2006.

In the third quarter of 2004, management approved a plan to sell the property for a plant located in Augusta, Georgia, which was closed in connection with the integration of SF Holdings. The carrying value of
approximately $1.4 million is classified in other current assets in the Companys Consolidated Balance Sheet as of January 1, 2006. The property was sold in March 2006.

(4) INVENTORIES

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



|                           |  |               |         |                 |   |        
|-------------------------- |  | ------------- | ------- | --------------- | - | -------
|                           |  | April 2, 2006 |         | January 1, 2006
|Finished goods             |  | $             | 318,579 |                 | $ | 276,456
|Work in process            |  |               | 17,342  |                 |   | 15,490 
|Raw materials and supplies |  |               | 82,853  |                 |   | 88,774 
|                           |  |               |         |                 |   |        
|Total inventories          |  | $             | 418,774 |                 | $ | 380,720
|                           |  |               |         |                 |   |        



7



---

(5) PROPERTY, PLANT AND EQUIPMENT, NET

The Companys major classes of property, plant and equipment are as follows (in thousands):



|                                    |  |               |           |   |                 |   |           |  
|----------------------------------- |  | ------------- | --------- | - | --------------- | - | --------- | -
|                                    |  | April 2, 2006 |           |   | January 1, 2006 |  
|Land                                |  | $             | 49,343    |   |                 | $ | 49,306    |  
|Buildings and improvements          |  |               | 299,208   |   |                 |   | 296,903   |  
|Machinery and equipment             |  |               | 930,662   |   |                 |   | 918,724   |  
|Construction in progress            |  |               | 16,719    |   |                 |   | 20,810    |  
|                                    |  |               |           |   |                 |   |           |  
|Total property, plant and equipment |  |               | 1,295,932 |   |                 |   | 1,285,743 |  
|Less accumulated depreciation       |  |               | (550,158  | ) |                 |   | (529,558  | )
|                                    |  |               |           |   |                 |   |           |  
|Property, plant and equipment, net  |  | $             | 745,774   |   |                 | $ | 756,185   |  
|                                    |  |               |           |   |                 |   |           |  

Depreciation of property, plant and equipment was $23.4 million and $23.3 million for the thirteen
weeks ended April 2, 2006 and the three months ended March 31, 2005, respectively. Capitalized interest was $0.3 million and $0.1 million for the thirteen weeks ended April 2, 2006 and the three months ended March 31, 2005,
respectively.

(6) GOODWILL AND INTANGIBLE ASSETS

The following are the carrying values of goodwill by business segment (in thousands):



|                           |  |              |         |   |        |   |               |  |       |     |  |   |         |  
|-------------------------- |  | ------------ | ------- | - | ------ | - | ------------- |  | ----- | --- |  | - | ------- | -
|                           |  | NorthAmerica |         |   | Europe |   | Asia Pacific |  | Total |    
|Balance at January 1, 2006 |  | $            | 202,911 |   |        | $ | 36,922        |  | $     | 197 |  | $ | 240,030 |  
|SF Holdings Acquisition    |  |              | (59     | ) |        |   |              |  |       |    |  |   | (59     | )
|Translation adjustment     |  |              | 2       |   |        |   | 440           |  |       |    |  |   | 442     |  
|                           |  |              |         |   |        |   |               |  |       |     |  |   |         |  
|Balance at April 2, 2006   |  | $            | 202,854 |   |        | $ | 37,362        |  | $     | 197 |  | $ | 240,413 |  
|                           |  |              |         |   |        |   |               |  |       |     |  |   |         |  

The gross carrying amount of nonamortizable intangible assets in the Asia-Pacific business segment
as of April 2, 2006 and January 1, 2006 was $0.1 million. The following are the carrying values of amortizable intangible assets (in thousands):



|                            |  |                     |        |                         |   |                     |  |                         |        |  |   |       
|--------------------------- |  | ------------------- | ------ | ----------------------- | - | ------------------- |  | ----------------------- | ------ |  | - | ------
|                            |  | April 2, 2006       |        | January 1, 2006        
|                            |  | GrossCarryingAmount |        | AccumulatedAmortization |   | GrossCarryingAmount |  | AccumulatedAmortization
|Trademarks and trade names  |  | $                   | 22,200 |                         | $ | 9,265               |  | $                       | 22,200 |  | $ | 8,155 
|Manufacturing technology    |  |                     | 21,100 |                         |   | 8,792               |  |                         | 21,100 |  |   | 7,737 
|Patents, licenses and other |  |                     | 1,771  |                         |   | 1,329               |  |                         | 1,771  |  |   | 1,193 
|                            |  |                     |        |                         |   |                     |  |                         |        |  |   |       
|                            |  | $                   | 45,071 |                         | $ | 19,386              |  | $                       | 45,071 |  | $ | 17,085
|                            |  |                     |        |                         |   |                     |  |                         |        |  |   |       

Amortization expense related to intangible assets was $2.3 million during both the thirteen weeks
ended April 2, 2006 and the three months ended March 31, 2005. The estimated annual amortization expense of intangibles presently owned by the Company is approximately $6.8 million for the remainder of 2006, $8.7 million for 2007, $8.7
million in 2008 and $1.5 million in 2009.



8



---

(7) DEBT

Short-term debt and long-term debt, including amounts payable within one year, are as follows (in thousands):



|                                            |  |               |           |                 |   |          
|------------------------------------------- |  | ------------- | --------- | --------------- | - | ---------
|                                            |  | April 2, 2006 |           | January 1, 2006
|Short-term debt:                            |  |               |           |                 |   |          
|Yen-denominated short-term bank borrowings  |  | $             | 4,574     |                 | $ | 5,546    
|                                            |  |               |           |                 |   |          
|Long-term debt:                             |  |               |           |                 |   |          
|8.5% Senior Subordinated Notes              |  | $             | 325,000   |                 | $ | 325,000  
|First Lien Facility  Term Loan             |  |               | 637,000   |                 |   | 638,625  
|First Lien Facility  Revolver              |  |               | 23,800    |                 |   | 61,700   
|Second Lien Facility                        |  |               | 80,000    |                 |   |         
|Canadian Credit Facility  Term Loan        |  |               | 9,089     |                 |   | 9,514    
|Canadian Credit Facility  Revolver         |  |               | 5,187     |                 |   | 449      
|Capital lease obligations                   |  |               | 2,312     |                 |   | 2,447    
|                                            |  |               |           |                 |   |          
|Total long-term debt                        |  |               | 1,082,388 |                 |   | 1,037,735
|Less - Current maturities of long-term debt |  |               | 8,720     |                 |   | 8,726    
|                                            |  |               |           |                 |   |          
|Long-term debt, net of current maturities   |  | $             | 1,073,668 |                 | $ | 1,029,009
|                                            |  |               |           |                 |   |          

Second Lien Facility

On March 31, 2006, the Company and SCIC entered into a second lien credit agreement (Second Lien Facility). The Second Lien Facility
provided a secured term loan facility in the amount of $80 million (Second Term Loan). The Second Term Loan bears interest, at the option of the Company, at a rate equal to LIBOR plus 4.50% per annum; or 3.50% per annum plus
the higher of (a) the Bank of America prime rate or (b) the Federal Funds rate plus 1/2of one
percentage point. The principal amount will be due upon maturity in February 2012. The proceeds of the Second Term Loan were used to reduce amounts outstanding under the Companys domestic revolving credit facility under its First Lien
Facility, described below. As of April 2, 2006, the interest rate on the Second Lien Facility was 11.25%.

First Lien
Facility

Effective March 27, 2006, the Company and SCIC entered into an agreement (Amendment No. 3) to amend its
Credit Agreement dated February 27, 2004, as amended by Amendment No. 1, dated as of March 31, 2005, and by Amendment No. 2, dated as of October 14, 2005, collectively, the First Lien Facility. Amendment
No. 3 was necessary to permit the Company to enter into the Second Lien Facility. Amendment No. 3 also revised the ratios of the financial covenants that the Company is required to maintain by allowing lower ratios in certain quarters of
Consolidated EBITDA to Consolidated Cash Interest Expense, and by allowing higher ratios in certain quarters of Average Total Debt to Consolidated EBITDA.

As of April 2, 2006, the weighted average annual interest rate applicable to Eurodollar rate loans was 6.60% and the weighted average annual interest rate applicable to base rate loans was 9.20%. During the
thirteen weeks ended April 2, 2006, the weighted average annual interest rate for the First Lien Facility was 6.71%. As of April 2, 2006, the interest rate on the term loan facility was 6.83% and the interest rate on the revolving credit
facility was 9.50%. As of April 2, 2006, $107.8 million was available under the First Lien Facility.

Canadian Credit Facility

Borrowings under the revolving credit facility bear interest at the Canadian prime rate plus 0.50% or Canadian bankers acceptance rate
plus 1.75%, at the Companys option. Term loan borrowings bear interest at the Canadian prime rate plus 0.75% or Canadian bankers acceptance rate plus 2.00%, at the Companys option. As of April 2, 2006, borrowings under the revolving
credit facility and the term loan carried effective interest rates of 5.62% and 5.87%, respectively. As of April 2, 2006, CAD $7.3 million (approximately $6.2 million) was available under the Canadian revolving credit facility.



9



---

(8) LEASES

The Company leases certain transportation vehicles, warehouse and office facilities, and machinery and equipment under both cancelable and non-cancelable operating leases, most of which expire within eighteen years and may be renewed by the
Company. The full amount of lease rental payments is charged to expense using the straight-line method over the term of the lease. Future minimum rental commitments under non-cancelable operating leases in effect at April 2, 2006 are as follows
(in thousands):



|                             |  |   |        
|---------------------------- |  | - | -------
|Remainder of 2006            |  | $ | 23,988 
|2007                         |  |   | 27,143 
|2008                         |  |   | 23,211 
|2009                         |  |   | 21,701 
|2010                         |  |   | 19,752 
|Thereafter                   |  |   | 185,328
|                             |  |   |        
|Total minimum lease payments |  | $ | 301,123
|                             |  |   |        

(9) DERIVATIVES AND HEDGING ACTIVITIES

The First Lien Facility requires the Company to fix the interest rate for a portion of the borrowings. Accordingly, on March 10, 2004, to limit the
variability of a portion of the interest payments under the First Lien Facility, the Company entered into receive-variable, pay-fixed interest rate swaps with a total notional amount of $180.0 million. Under these interest rate swaps, the Company
receives variable interest rate payments and makes fixed interest rate payments; thereby fixing the rate on a portion of the outstanding debt. The variable rate of interest received is the Eurodollar rate. The fixed rate of interest paid is 2.375%
to 2.376%. The swap agreements extend through March 31, 2007. The fair value of these swap agreements was $4.9 million and $5.2 million as of April 2, 2006 and January 1, 2006, respectively. They are accounted for as cash flow hedges
and their fair value is included in other assets in the Companys Consolidated Balance Sheets.

On March 31, 2005, the Company
entered into an interest rate cap agreement with a notional amount of $35.0 million. Under this agreement, the Company receives variable interest rate payments when the three-month Eurodollar rate rises above 5.0%. This interest rate cap agreement
expired on March 31, 2006.

On June 23, 2005, the Company entered into a forward-starting receive-variable, pay-fixed interest
rate swap with a notional amount of $50.0 million. The variable rate of interest received is the Eurodollar rate. The fixed rate of interest paid is 4.25%. The swap agreement is effective from March 31, 2007 through March 31, 2010. As of
April 2, 2006 and January 1, 2006, the fair value of this swap agreement was approximately $1.2 million and $0.7 million, respectively. It is accounted for as a cash flow hedge and its fair value is included in other assets in the
Companys Consolidated Balance Sheets.

On March 31, 2006, the Company entered into two receive-variable, pay-fixed interest rate
swaps with identical terms and a combined notional amount of $70.0 million. The swap agreements are effective from March 31, 2006 through March 31, 2009. The notional amount varies throughout the term of the agreements. The combined
notional amount decreases to $35.0 million on September 29, 2006, increases to $150.0 million on March 30, 2007, and decreases to $75.0 million on December 31, 2007 through maturity. The variable rate of interest received is the
Eurodollar rate. The fixed rate of interest paid is 5.15%. As of April 2, 2006, the fair values of these swap agreements were less than $10,000. They are accounted for as cash flow hedges and their fair values are included in other assets in
the Companys Consolidated Balance Sheet.



10



---

(10) 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):



|                                   |  |                                   |        |   |                                   |   |        |  
|---------------------------------- |  | --------------------------------- | ------ | - | --------------------------------- | - | ------ | -
|                                   |  | Thirteen weeksended April 2, 2006 |        |   | Three months ended March 31, 2005 |  
|Pension Benefits                   |  |                                   |        |   |                                   |   |        |  
|Service cost                       |  | $                                 | 532    |   |                                   | $ | 427    |  
|Interest cost                      |  |                                   | 1,485  |   |                                   |   | 1,461  |  
|Expected return on plan assets     |  |                                   | (1,635 | ) |                                   |   | (1,421 | )
|Amortization of prior service cost |  |                                   |       |   |                                   |   | 22     |  
|Amortization of net loss           |  |                                   | 17     |   |                                   |   |       |  
|                                   |  |                                   |        |   |                                   |   |        |  
|Net periodic benefit cost          |  | $                                 | 399    |   |                                   | $ | 489    |  
|                                   |  |                                   |        |   |                                   |   |        |  
|Other Postretirement Benefits      |  |                                   |        |   |                                   |   |        |  
|Service cost                       |  | $                                 | 181    |   |                                   | $ | 205    |  
|Interest cost                      |  |                                   | 473    |   |                                   |   | 533    |  
|Amortization of prior service cost |  |                                   | (1,032 | ) |                                   |   | (1,032 | )
|Amortization of net loss           |  |                                   | 207    |   |                                   |   | 226    |  
|                                   |  |                                   |        |   |                                   |   |        |  
|Net periodic benefit cost (income) |  | $                                 | (171   | ) |                                   | $ | (68    | )
|                                   |  |                                   |        |   |                                   |   |        |  

As of April 2, 2006, $2.7 million of contributions had been made to the Companys
pension and other postretirement benefit plans. The Company presently anticipates contributing an additional $11.3 million to fund its pension and other postretirement benefit plans in 2006 for a total of $14.0 million.

(11) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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



|                                                        |  |                                   |         |   |                                 |   |         |  
|------------------------------------------------------- |  | --------------------------------- | ------- | - | ------------------------------- | - | ------- | -
|                                                        |  | Thirteen weeksended April 2, 2006 |         |   | Three monthsendedMarch 31, 2005 |  
|Net loss                                                |  | $                                 | (22,087 | ) |                                 | $ | (18,568 | )
|Foreign currency translation adjustment                 |  |                                   | 516     |   |                                 |   | (1,723  | )
|Unrealized investment gain, net of income taxes         |  |                                   | 43      |   |                                 |   | 100     |  
|Unrealized gain on cash flow hedge, net of income taxes |  |                                   | 157     |   |                                 |   | 1,192   |  
|                                                        |  |                                   |         |   |                                 |   |         |  
|Comprehensive loss                                      |  | $                                 | (21,371 | ) |                                 | $ | (18,999 | )
|                                                        |  |                                   |         |   |                                 |   |         |  

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



|                                                           |  |               |        |   |                 |   |        |  
|---------------------------------------------------------- |  | ------------- | ------ | - | --------------- | - | ------ | -
|                                                           |  | April 2, 2006 |        |   | January 1, 2006 |  
|Foreign currency translation adjustments                   |  | $             | 5,002  |   |                 | $ | 4,486  |  
|Minimum pension liability adjustments, net of income taxes |  |               | (8,867 | ) |                 |   | (8,867 | )
|Unrealized investment gain, net of income taxes            |  |               | 721    |   |                 |   | 678    |  
|Unrealized gain on cash flow hedge, net of income taxes    |  |               | 3,798  |   |                 |   | 3,641  |  
|                                                           |  |               |        |   |                 |   |        |  
|Accumulated other comprehensive income (loss)              |  | $             | 654    |   |                 | $ | (62    | )
|                                                           |  |               |        |   |                 |   |        |  



11



---

(12) SHARE-BASED PAYMENT

SCIC, the Companys parent, has a management investment and incentive compensation plan for certain key employees of the Company. Under this plan, SCIC has reserved 1,450,000 shares of SCIC common stock, and
5,000 shares of convertible participating preferred stock (CPPS) for issuance. The accounting impact of this plan is recorded in the consolidated financial statements of the Company as the plan relates to employees of the Company.

During the second quarter of 2004, SCIC issued 3,283 Convertible Preferred Units (CPUs) to certain Company employees in
settlement of $3.3 million of deferred compensation liabilities. The fair value of the CPUs granted by SCIC was linked to the fair market value of one share of CPPS. For CPUs, compensation expense is recognized periodically based on changes in the
fair value of the CPU relative to the grant-date fair value of the CPU. During the thirteen weeks ended April 2, 2006 and the three months ended March 31, 2005, the Company recorded compensation expense and additional paid-in capital of
$60 thousand and $89 thousand, respectively, reflecting dividends declared by SCIC on those instruments. CPUs do not have voting rights and are in certain circumstances convertible to SCIC common stock or CPPS. The issuance of CPUs by SCIC in
settlement of deferred compensation liabilities of the Company totaling $3.3 million was recorded as additional paid-in capital in 2004. In the second quarter of 2005, as the result of an employees separation from the company, 1,267 of CPUs
were canceled.

During 2004, SCIC granted to employees 1,249,257 options to purchase shares of SCIC common stock with an exercise price
equal to the fair market value of the common stock at the date of grant of $47.32. Included in these grants were 499,698 options that are conditional upon the Company achieving certain defined performance targets. The time-based options vest over a
period of four years and the performance-based options vest over a period of five years. All options expire 10 years after the grant date. During 2005, SCIC granted to employees of the Company 157,060 options to purchase shares of SCIC common stock
with an exercise price of $47.32. These options have the same terms and conditions as the options granted in 2004. No options have been exercised to date. As of April 2, 2006, 226,988 time-based options were exercisable and none of the
performance-based options were exercisable.

The following shows stock option activity for the two years ended April 2, 2006:



|                                                                            |  |                               |   |  |                                      |   |  |                          |  
|--------------------------------------------------------------------------- |  | ----------------------------- | - |  | ------------------------------------ | - |  | ------------------------ | -
|                                                                            |  | Shares under optionTime-based |   |  | Shares under optionPerformance-based |   |  | Total sharesunder option |  
|December 31, 2004                                                           |  | 749,558                       |   |  | 499,699                              |   |  | 1,249,257                |  
|Granted with exercise price less than or equal to the grant date fair value |  | 94,240                        |   |  | 62,820                               |   |  | 157,060                  |  
|Forfeited                                                                   |  | (48,931                       | ) |  | (32,620                              | ) |  | (81,551                  | )
|                                                                            |  |                               |   |  |                                      |   |  |                          |  
|January 1, 2006                                                             |  | 794,867                       |   |  | 529,899                              |   |  | 1,324,766                |  
|Forfeited                                                                   |  | (113,086                      | ) |  | (75,390                              | ) |  | (188,476                 | )
|                                                                            |  |                               |   |  |                                      |   |  |                          |  
|April 2, 2006                                                               |  | 681,781                       |   |  | 454,509                              |   |  | 1,136,290                |  
|                                                                            |  |                               |   |  |                                      |   |  |                          |  

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 123 (Revised 2004), Share-Based Payment (SFAS 123R). SFAS 123R is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and
supersedes Accounting Principles Board Opinion No. 25 APB 25. The Company adopted SFAS 123R on January 2, 2006 under the prospective method. Under the provisions of SFAS 123, the Company calculated its pro forma
disclosure using the minimum value method, which excludes any effect of volatility on value; therefore, the prospective method of adopting SFAS 123R is required. Under the prospective method, compensation cost is recognized in the
financial statements beginning with the effective date, based on the requirements of SFAS 123R for all share-based payments granted, modified, repurchased or cancelled after that date. Since the adoption of SFAS 123R, the Company has not granted,
modified, repurchased or cancelled any options; therefore, no expense was recognized for stock options in the Companys Statement of Operations during the thirteen weeks ended April 2, 2006.



12



---

(13) RELATED PARTY TRANSACTIONS

Robert L. Hulseman, who is John F. Hulsemans brother and the husband of Sheila M. Hulseman, and who is the Chairman and Chief Executive Officer of the Company, received salary and benefits of $276,400 and
$276,184 for the thirteen weeks ended April 2, 2006 and the three months ended March 31, 2005, respectively. John F. Hulseman, who is Robert L. Hulsemans brother and the husband of Georgia S. Hulseman, and who is the Vice Chairman of
the Company, received salary and benefits of $276,400 and $276,184 for the thirteen weeks ended April 2, 2006 and the three months ended March 31, 2005, respectively. Robert L. and John F. Hulseman each hold 50.0% of the voting membership
interests of SCC Holding, which owns 67.2% of the voting stock of SCIC. In addition, Robert L., Sheila M., John F., and Georgia S. Hulseman and Robert M. Korzenski, the Companys President and Chief Operating Officer, are directors of the
Company. The Company does not pay any directors fees.

Pursuant to the Stockholders Agreement dated February 27, 2004 by and among the
Company, SCIC, Vestar Capital Partners (Vestar) and other parties (see exhibit 10.18 to the Companys Registration Statement on Form S-4, File No. 333-116843), Vestar may designate two directors of the Company. In 2004, Daniel
S. OConnell and Norman W. Alpert were elected to the board. John R. Woodard replaced Norman W. Alpert in February 2006. Mr. OConnell and Mr. Woodard are both employees and equity owners of Vestar Capital Partners
(Vestar). Vestar owns CPPS representing 32.7% of the voting stock of SCIC.

In the first quarter of 2004, the Company and SCIC
entered into a management agreement with SCC Holding providing for, among other things, the payment by SCIC of an annual advisory fee of $2.5 million. At the same time, SCIC entered into a management agreement with Vestar pursuant to which SCIC
will pay Vestar an $800,000 annual advisory fee, plus reimbursement of its expenses. Pursuant to these management agreements, the Company incurred $0.8 million of advisory fees to SCIC for the thirteen weeks ended April 2, 2006 and the three
months ended March 31, 2005, respectively.



13



---

(14) SEGMENTS

The Company manages and evaluates its operations in three reportable segments: North America, Europe and Asia-Pacific. All of these segments produce a broad array of disposable food service 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
Asia-Pacific includes all Japanese entities and Australia; Other includes Panama.

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 2005 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.

No individual customer accounted for greater than 10% of consolidated net sales in fiscal years
2005 or 2004. It is not practical for the Company to report revenues from external customers for each product and service or each group of similar products.



|                                           |  |              |           |   |        |   |        |              |  |   |        |   |               |   |       |               |   |           |       |  |   |         |   |  |   |           |  
|------------------------------------------ |  | ------------ | --------- | - | ------ | - | ------ | ------------ |  | - | ------ | - | ------------- | - | ----- | ------------- | - | --------- | ----- |  | - | ------- | - |  | - | --------- | -
|(in thousands)                             |  | NorthAmerica |           |   | Europe |   |        | Asia-Pacific |  |   | Other  |   | TotalSegments |   |       | Elimina-tions |   |           | Total | 
|For the thirteen weeks ended April 2, 2006 |  |              |           |   |        |   |        |              |  |   |        |   |               |   |       |               |   |           |       | 
|Net sales from external customers          |  | $            | 524,687   |   |        | $ | 19,275 |              |  | $ | 20,970 |   |               | $ | 3,116 |               | $ | 568,048   |       |  | $ | (4,067  | ) |  | $ | 563,981   |  
|Intersegment net sales                     |  |              | 4,039     |   |        |   |       |              |  |   | 28     |   |               |   |      |               |   | 4,067     |       |  |   | (4,067  | ) |  |   |          |  
|Operating income (loss)                    |  |              | (16,185   | ) |        |   | (9     | )            |  |   | (1,197 | ) |               |   | 280   |               |   | (17,111   | )     |  |   | (229    | ) |  |   | (17,340   | )
|Depreciation and amortization              |  |              | 24,793    |   |        |   | 824    |              |  |   | 1,067  |   |               |   | 158   |               |   | 26,842    |       |  |   |        |   |  |   | 26,842    |  
|Capital expenditures                       |  |              | 13,069    |   |        |   | 145    |              |  |   | 255    |   |               |   | 47    |               |   | 13,516    |       |  |   |        |   |  |   | 13,516    |  
|                                           |  |              |           |   |        |   |       
|For the three months ended March 31, 2005  |  |              |           |   |        |   |        |              |  |   |        |   |               |   |       |               |   |           |       | 
|Net sales from external customers          |  | $            | 506,199   |   |        | $ | 19,922 |              |  | $ | 22,759 |   |               | $ | 2,825 |               | $ | 551,705   |       |  | $ | (5,612  | ) |  | $ | 546,093   |  
|Intersegment net sales                     |  |              | 5,298     |   |        |   |       |              |  |   |       |   |               |   | 314   |               |   | 5,612     |       |  |   | (5,612  | ) |  |   |          |  
|Operating income (loss)                    |  |              | (13,420   | ) |        |   | 891    |              |  |   | (940   | ) |               |   | 240   |               |   | (13,229   | )     |  |   | 46      |   |  |   | (13,183   | )
|Depreciation and amortization              |  |              | 24,401    |   |        |   | 947    |              |  |   | 1,307  |   |               |   | 158   |               |   | 26,813    |       |  |   |        |   |  |   | 26,813    |  
|Capital expenditures                       |  |              | 14,750    |   |        |   | 386    |              |  |   | 931    |   |               |   | 216   |               |   | 16,283    |       |  |   |        |   |  |   | 16,283    |  
|                                           |  |              |           |   |        |   |       
|At April 2, 2006                           |  |              |           |   |        |   |        |              |  |   |        |   |               |   |       |               |   |           |       | 
|Total assets                               |  | $            | 1,771,913 |   |        | $ | 81,207 |              |  | $ | 57,892 |   |               | $ | 8,508 |               | $ | 1,919,520 |       |  | $ | (44,944 | ) |  | $ | 1,874,576 |  
|                                           |  |              |           |   |        |   |       
|At January 1, 2006                         |  |              |           |   |        |   |        |              |  |   |        |   |               |   |       |               |   |           |       | 
|Total assets                               |  | $            | 1,750,501 |   |        | $ | 81,072 |              |  | $ | 61,980 |   |               | $ | 8,925 |               | $ | 1,902,478 |       |  | $ | (44,715 | ) |  | $ | 1,857,763 |  

(Continued)



14



---

(14) SEGMENTS (Continued)



|                                                |  |                                    |           |  
|----------------------------------------------- |  | ---------------------------------- | --------- | -
|(in thousands)                                  |  | Thirteen weeks ended April 2, 2006 |          
|Revenues:                                       |  |                                    |           |  
|Total segments and other net sales              |  | $                                  | 568,048   |  
|Eliminations of intersegment net sales          |  |                                    | (4,067    | )
|                                                |  |                                    |           |  
|Total consolidated net sales                    |  | $                                  | 563,981   |  
|                                                |  |                                    |           |  
|Operating loss:                                 |  |                                    |           |  
|Total segment operating loss                    |  | $                                  | (17,111   | )
|Elimination of intersegment operating income    |  |                                    | (229      | )
|Interest expense, net of interest income of $98 |  |                                    | (20,379   | )
|Foreign currency exchange gain (loss), net      |  |                                    | 1,034     |  
|Other expense, net                              |  |                                    | (127      | )
|                                                |  |                                    |           |  
|Total consolidated loss before income taxes     |  | $                                  | (36,812   | )
|                                                |  |                                    |           |  
|                                                | 
|(in thousands)                                  |  | At April 2, 2006                   |          
|Assets:                                         |  |                                    |           |  
|Total segments                                  |  | $                                  | 1,919,520 |  
|Eliminations of intersegment receivables        |  |                                    | (44,944   | )
|                                                |  |                                    |           |  
|Total consolidated assets                       |  | $                                  | 1,874,576 |  
|                                                |  |                                    |           |  

(15) SUBSEQUENT EVENTS

In April 2006, the Company announced a restructuring program, which eliminated positions representing approximately 3% of its total workforce. The Company expects to complete these activities by the end of the fiscal
year.

In May 2006, the Company received a neutral auditors final ruling on the SF Holdings Acquisition working capital adjustment
that awarded $7.8 million (including interest) to the Company. The remaining cash in escrow of $7.2 million will be held by the Company pending the final resolution of claims for indemnification.



15



---

(16) GUARANTOR NOTE

On February 27, 2004, with an effective date of February 22, 2004, the Company acquired SF Holdings. The Company partially funded this acquisition through the issuance of the 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 Management Company, P.R. SOLO CUP,
INC., SF Holdings Group, Inc., Solo Cup Operating Corporation (formerly known as Sweetheart Cup Company Inc.), 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 Sheet April 2, 2006 (In
thousands)
|                                               |  | Guarantors                                                        |           |   | Non-Guarantors |   | Eliminations |  |   | Consolidated
|Assets                                         |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Current assets:                                |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Cash and cash equivalents                      |  | $                                                                 | 5,761     |   |                | $ | 5,296        |  | $ |             |   |  | $ | 11,057   
|Cash in escrow                                 |  |                                                                   | 15,000    |   |                |   |             |  |   |             |   |  |   | 15,000   
|Accounts receivable:                           |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Trade                                          |  |                                                                   | 211,288   |   |                |   | 36,335       |  |   |             |   |  |   | 247,623  
|Other                                          |  |                                                                   | 28,079    |   |                |   |             |  |   | (6,305       | ) |  |   | 21,774   
|Inventories                                    |  |                                                                   | 390,582   |   |                |   | 29,001       |  |   | (809         | ) |  |   | 418,774  
|Deferred income taxes                          |  |                                                                   | 42,192    |   |                |   | 1,759        |  |   |             |   |  |   | 43,951   
|Prepaid expenses and other current assets      |  |                                                                   | 46,114    |   |                |   | 5,198        |  |   |             |   |  |   | 51,312   
|                                               |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Total current assets                           |  |                                                                   | 739,016   |   |                |   | 77,589       |  |   | (7,114       | ) |  |   | 809,491  
|                                               |  |                                                                   |           |  
|Property, plant and equipment, net             |  |                                                                   | 678,514   |   |                |   | 67,260       |  |   |             |   |  |   | 745,774  
|Goodwill and intangible assets, net            |  |                                                                   | 265,684   |   |                |   | 493          |  |   |             |   |  |   | 266,177  
|Other assets                                   |  |                                                                   | 99,093    |   |                |   | 4,319        |  |   | (50,278      | ) |  |   | 53,134   
|                                               |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Total assets                                   |  | $                                                                 | 1,782,307 |   |                | $ | 149,661      |  | $ | (57,392      | ) |  | $ | 1,874,576
|                                               |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Liabilities and Shareholders Equity           |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Current liabilities:                           |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Accounts payable                               |  | $                                                                 | 160,927   |   |                | $ | 28,568       |  | $ | (6,274       | ) |  | $ | 183,221  
|Accrued expenses and other current liabilities |  |                                                                   | 103,075   |   |                |   | 15,645       |  |   |             |   |  |   | 118,720  
|Short-term debt                                |  |                                                                   |          |   |                |   | 4,574        |  |   |             |   |  |   | 4,574    
|Current maturities of long-term debt           |  |                                                                   | 6,500     |   |                |   | 2,220        |  |   |             |   |  |   | 8,720    
|                                               |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Total current liabilities                      |  |                                                                   | 270,502   |   |                |   | 51,007       |  |   | (6,274       | ) |  |   | 315,235  
|Long-term debt, net of current maturities      |  |                                                                   | 1,059,300 |   |                |   | 14,368       |  |   |             |   |  |   | 1,073,668
|Deferred income taxes                          |  |                                                                   | 8,558     |   |                |   | 3,769        |  |   |             |   |  |   | 12,327   
|Other liabilities                              |  |                                                                   | 63,330    |   |                |   | 20,038       |  |   |             |   |  |   | 83,368   
|                                               |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Total liabilities                              |  |                                                                   | 1,401,690 |   |                |   | 89,182       |  |   | (6,274       | ) |  |   | 1,484,598
|                                               |  |                                                                   |           |  
|Shareholders equity:                          |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Common stock                                   |  |                                                                   |          |   |                |   | 2,114        |  |   | (2,114       | ) |  |   |         
|Additional paid-in capital                     |  |                                                                   | 258,109   |   |                |   | 39,168       |  |   | (39,168      | ) |  |   | 258,109  
|Retained earnings                              |  |                                                                   | 125,512   |   |                |   | 15,539       |  |   | (9,836       | ) |  |   | 131,215  
|Accumulated other comprehensive income (loss)  |  |                                                                   | (3,004    | ) |                |   | 3,658        |  |   |             |   |  |   | 654      
|                                               |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Total shareholders equity                     |  |                                                                   | 380,617   |   |                |   | 60,479       |  |   | (51,118      | ) |  |   | 389,978  
|                                               |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          
|Total liabilities and shareholders equity     |  | $                                                                 | 1,782,307 |   |                | $ | 149,661      |  | $ | (57,392      | ) |  | $ | 1,874,576
|                                               |  |                                                                   |           |   |                |   |              |  |   |              |   |  |   |          

(Continued)



16



---

(16) GUARANTOR NOTE (Continued)



|                                               |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|---------------------------------------------- |  | ------------------------------------------------------------------- | --------- | - | -------------- | - | ------------ |  | - | ------------ | - |  | - | --------- | -
|                                               |  | Condensed Consolidated Balance Sheet January 1, 2006 (In
thousands) |          
|                                               |  | Guarantor                                                           |           |   | Non-Guarantors |   | Eliminations |  |   | Consolidated |  
|Assets                                         |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Current assets:                                |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Cash and cash equivalents                      |  | $                                                                   | 7,038     |   |                | $ | 5,049        |  | $ |             |   |  | $ | 12,087    |  
|Cash in escrow                                 |  |                                                                     | 15,000    |   |                |   |             |  |   |             |   |  |   | 15,000    |  
|Accounts receivable:                           |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Trade                                          |  |                                                                     | 212,758   |   |                |   | 39,288       |  |   |             |   |  |   | 252,046   |  
|Other                                          |  |                                                                     | 36,401    |   |                |   |             |  |   | (12,275      | ) |  |   | 24,126    |  
|Inventories                                    |  |                                                                     | 355,320   |   |                |   | 25,996       |  |   | (596         | ) |  |   | 380,720   |  
|Deferred income taxes                          |  |                                                                     | 42,192    |   |                |   | 1,864        |  |   |             |   |  |   | 44,056    |  
|Other current assets                           |  |                                                                     | 48,898    |   |                |   | 5,266        |  |   |             |   |  |   | 54,164    |  
|                                               |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Total current assets                           |  |                                                                     | 717,607   |   |                |   | 77,463       |  |   | (12,871      | ) |  |   | 782,199   |  
|                                               |  |                                                                     |           |  
|Property, plant and equipment, net             |  |                                                                     | 686,968   |   |                |   | 69,217       |  |   |             |   |  |   | 756,185   |  
|Goodwill and intangible assets                 |  |                                                                     | 267,604   |   |                |   | 491          |  |   |             |   |  |   | 268,095   |  
|Other assets                                   |  |                                                                     | 97,602    |   |                |   | 3,960        |  |   | (50,278      | ) |  |   | 51,284    |  
|                                               |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Total assets                                   |  | $                                                                   | 1,769,781 |   |                | $ | 151,131      |  | $ | (63,149      | ) |  | $ | 1,857,763 |  
|                                               |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Liabilities and Shareholders Equity           |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|                                               |  |                                                                     |           |  
|Current liabilities:                           |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Accounts payable                               |  | $                                                                   | 141,277   |   |                | $ | 34,637       |  | $ | (12,315      | ) |  | $ | 163,599   |  
|Accrued expenses and other current liabilities |  |                                                                     | 113,632   |   |                |   | 13,521       |  |   |             |   |  |   | 127,153   |  
|Short-term debt                                |  |                                                                     |          |   |                |   | 5,546        |  |   |             |   |  |   | 5,546     |  
|Current maturities of long-term debt           |  |                                                                     | 6,500     |   |                |   | 2,226        |  |   |             |   |  |   | 8,726     |  
|                                               |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Total current liabilities                      |  |                                                                     | 261,409   |   |                |   | 55,930       |  |   | (12,315      | ) |  |   | 305,024   |  
|                                               |  |                                                                     |           |  
|Long-term debt, less current maturities        |  |                                                                     | 1,018,825 |   |                |   | 10,184       |  |   |             |   |  |   | 1,029,009 |  
|Deferred income taxes                          |  |                                                                     | 24,258    |   |                |   | 3,801        |  |   |             |   |  |   | 28,059    |  
|Other liabilities                              |  |                                                                     | 62,052    |   |                |   | 22,330       |  |   |             |   |  |   | 84,382    |  
|                                               |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Total liabilities                              |  |                                                                     | 1,366,544 |   |                |   | 92,245       |  |   | (12,315      | ) |  |   | 1,446,474 |  
|                                               |  |                                                                     |           |  
|Shareholders equity:                          |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Common stock                                   |  |                                                                     |          |   |                |   | 2,114        |  |   | (2,114       | ) |  |   |          |  
|Additional paid-in capital                     |  |                                                                     | 258,049   |   |                |   | 39,168       |  |   | (39,168      | ) |  |   | 258,049   |  
|Retained earnings                              |  |                                                                     | 148,661   |   |                |   | 14,193       |  |   | (9,552       | ) |  |   | 153,302   |  
|Accumulated other comprehensive loss           |  |                                                                     | (3,473    | ) |                |   | 3,411        |  |   |             |   |  |   | (62       | )
|                                               |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Total shareholders equity                     |  |                                                                     | 403,237   |   |                |   | 58,886       |  |   | (50,834      | ) |  |   | 411,289   |  
|                                               |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  
|Total liabilities and shareholders equity     |  | $                                                                   | 1,769,781 |   |                | $ | 151,131      |  | $ | (63,149      | ) |  | $ | 1,857,763 |  
|                                               |  |                                                                     |           |   |                |   |              |  |   |              |   |  |   |           |  

(Continued)



17



---

(16) GUARANTOR NOTE (Continued)



|                                              |  |                                                                                        |         |   |                |   |        |              |  |   |              |   |  |   |         |  
|--------------------------------------------- |  | -------------------------------------------------------------------------------------- | ------- | - | -------------- | - | ------ | ------------ |  | - | ------------ | - |  | - | ------- | -
|                                              |  | Consolidated Statement of Operations Thirteen weeks ended April 2, 2006 (In thousands) |        
|                                              |  | Guarantors                                                                             |         |   | Non-Guarantors |   |        | Eliminations |  |   | Consolidated |  
|Net sales                                     |  | $                                                                                      | 520,157 |   |                | $ | 63,880 |              |  | $ | (20,056      | ) |  | $ | 563,981 |  
|Cost of goods sold                            |  |                                                                                        | 476,597 |   |                |   | 55,874 |              |  |   | (19,752      | ) |  |   | 512,719 |  
|                                              |  |                                                                                        |         |   |                |   |        |              |  |   |              |   |  |   |         |  
|Gross profit                                  |  |                                                                                        | 43,560  |   |                |   | 8,006  |              |  |   | (304         | ) |  |   | 51,262  |  
|                                              |  |                                                                                        |         |  
|Selling, general and administrative expenses  |  |                                                                                        | 61,427  |   |                |   | 5,167  |              |  |   | (20          | ) |  |   | 66,574  |  
|Restructuring expense                         |  |                                                                                        | 1,164   |   |                |   |       |              |  |   |             |   |  |   | 1,164   |  
|Loss on sale of property, plant and equipment |  |                                                                                        | 723     |   |                |   | 141    |              |  |   |             |   |  |   | 864     |  
|                                              |  |                                                                                        |         |   |                |   |        |              |  |   |              |   |  |   |         |  
|Operating income (loss)                       |  |                                                                                        | (19,754 | ) |                |   | 2,698  |              |  |   | (284         | ) |  |   | (17,340 | )
|                                              |  |                                                                                        |         |  
|Interest expense, net                         |  |                                                                                        | 19,883  |   |                |   | 496    |              |  |   |             |   |  |   | 20,379  |  
|Foreign currency exchange (gain) loss, net    |  |                                                                                        | (698    | ) |                |   | (336   | )            |  |   |             |   |  |   | (1,034  | )
|Other (income) expense, net                   |  |                                                                                        | 125     |   |                |   | 2      |              |  |   |             |   |  |   | 127     |  
|                                              |  |                                                                                        |         |   |                |   |        |              |  |   |              |   |  |   |         |  
|Income (loss) before income taxes             |  |                                                                                        | (39,064 | ) |                |   | 2,536  |              |  |   | (284         | ) |  |   | (36,812 | )
|Income tax (benefit) provision                |  |                                                                                        | (15,915 | ) |                |   | 1,190  |              |  |   |             |   |  |   | (14,725 | )
|                                              |  |                                                                                        |         |   |                |   |        |              |  |   |              |   |  |   |         |  
|Net income (loss)                             |  | $                                                                                      | (23,149 | ) |                | $ | 1,346  |              |  | $ | (284         | ) |  | $ | (22,087 | )
|                                              |  |                                                                                        |         |   |                |   |        |              |  |   |              |   |  |   |         |  



|                                                 |  |                                                                                       |         |   |                |   |        |              |  |   |              |   |  |   |         |  
|------------------------------------------------ |  | ------------------------------------------------------------------------------------- | ------- | - | -------------- | - | ------ | ------------ |  | - | ------------ | - |  | - | ------- | -
|                                                 |  | Consolidated Statement of Operations Three months ended March 31, 2005 (In thousands) |        
|                                                 |  | Guarantors                                                                            |         |   | Non-Guarantors |   |        | Eliminations |  |   | Consolidated |  
|Net sales                                        |  | $                                                                                     | 501,657 |   |                | $ | 57,546 |              |  | $ | (13,110      | ) |  | $ | 546,093 |  
|Cost of goods sold                               |  |                                                                                       | 460,198 |   |                |   | 50,112 |              |  |   | (12,712      | ) |  |   | 497,598 |  
|                                                 |  |                                                                                       |         |   |                |   |        |              |  |   |              |   |  |   |         |  
|Gross profit                                     |  |                                                                                       | 41,459  |   |                |   | 7,434  |              |  |   | (398         | ) |  |   | 48,495  |  
|                                                 |  |                                                                                       |         |  
|Selling, general and administrative expenses     |  |                                                                                       | 54,343  |   |                |   | 5,719  |              |  |   | (26          | ) |  |   | 60,036  |  
|Restructuring expense                            |  |                                                                                       | 868     |   |                |   |       |              |  |   |             |   |  |   | 868     |  
|Loss on sale of property, plant and equipment    |  |                                                                                       | 768     |   |                |   | 6      |              |  |   |             |   |  |   | 774     |  
|                                                 |  |                                                                                       |         |   |                |   |        |              |  |   |              |   |  |   |         |  
|Operating income (loss)                          |  |                                                                                       | (14,520 | ) |                |   | 1,709  |              |  |   | (372         | ) |  |   | (13,183 | )
|                                                 |  |                                                                                       |         |  
|Interest expense, net                            |  |                                                                                       | 16,754  |   |                |   | 319    |              |  |   |             |   |  |   | 17,073  |  
|Foreign currency exchange loss (gain), net       |  |                                                                                       | 1,236   |   |                |   | (429   | )            |  |   |             |   |  |   | 807     |  
|Other (income) expense, net                      |  |                                                                                       | (1      | ) |                |   | (112   | )            |  |   |             |   |  |   | (113    | )
|                                                 |  |                                                                                       |         |   |                |   |        |              |  |   |              |   |  |   |         |  
|Income before income taxes and minority interest |  |                                                                                       | (32,509 | ) |                |   | 1,931  |              |  |   | (372         | ) |  |   | (30,950 | )
|Income tax (benefit) provision                   |  |                                                                                       | (12,624 | ) |                |   | 244    |              |  |   |              |   |  |   | (12,380 | )
|Minority interest                                |  |                                                                                       |        |   |                |   | (2     | )            |  |   |             |   |  |   | (2      | )
|                                                 |  |                                                                                       |         |   |                |   |        |              |  |   |              |   |  |   |         |  
|Net income (loss)                                |  | $                                                                                     | (19,885 | ) |                | $ | 1,689  |              |  | $ | (372         | ) |  | $ | (18,568 | )
|                                                 |  |                                                                                       |         |   |                |   |        |              |  |   |              |   |  |   |         |  

(Continued)



18



---

(16) GUARANTOR NOTE (Continued)



|                                                              |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------ | ------- | - | -------------- | - | ------ | ------------ |  | - | ------- | -
|                                                              |  | Condensed Consolidated Statement of Cash Flows Thirteen weeks ended April 2,
2006 (In thousands) |        
|                                                              |  | Guarantors                                                                                       |         |   | Non-Guarantors |   |        | Consolidated | 
|CASH FLOWS FROM OPERATING ACTIVITIES                          |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Net cash used in operating activities                         |  | $                                                                                                | (27,377 | ) |                | $ | (2,482 | )            |  | $ | (29,859 | )
|CASH FLOWS FROM INVESTING ACTIVITIES                          |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Purchase of property, plant and equipment                     |  |                                                                                                  | (13,003 | ) |                |   | (513   | )            |  |   | (13,516 | )
|Proceeds from sale of property, plant and equipment           |  |                                                                                                  | 1,334   |   |                |   |       |              |  |   | 1,334   |  
|                                                              |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Net cash used in investing activities                         |  |                                                                                                  | (11,669 | ) |                |   | (513   | )            |  |   | (12,182 | )
|CASH FLOWS FROM FINANCING ACTIVITIES                          |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Net borrowings (repayments) under revolving credit facilities |  |                                                                                                  | (37,900 | ) |                |   | 4,786  |              |  |   | (33,114 | )
|Borrowings under the term notes                               |  |                                                                                                  | 80,000  |   |                |   |       |              |  |   | 80,000  |  
|Repayments of the term notes                                  |  |                                                                                                  | (1,625  | ) |                |   | (417   | )            |  |   | (2,042  | )
|Repayments of other debt                                      |  |                                                                                                  |        |   |                |   | (1,155 | )            |  |   | (1,155  | )
|Debt issuance costs                                           |  |                                                                                                  | (2,694  | ) |                |   | (22    | )            |  |   | (2,716  | )
|                                                              |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Net cash provided by financing activities                     |  |                                                                                                  | 37,781  |   |                |   | 3,192  |              |  |   | 40,973  |  
|Effect of exchange rate changes on cash                       |  |                                                                                                  | (12     | ) |                |   | 50     |              |  |   | 38      |  
|                                                              |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS          |  |                                                                                                  | (1,277  | ) |                |   | 247    |              |  |   | (1,030  | )
|Cash and cash equivalents, beginning of period                |  |                                                                                                  | 7,038   |   |                |   | 5,049  |              |  |   | 12,087  |  
|                                                              |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Cash and cash equivalents, end of period                      |  | $                                                                                                | 5,761   |   |                | $ | 5,296  |              |  | $ | 11,057  |  
|                                                              |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|                                                              | 
|                                                              |  | Condensed Consolidated Statement of Cash Flows Three months ended March 31,
2005 (In thousands)  |        
|                                                              |  | Guarantors                                                                                       |         |   | Non-Guarantors |   |        | Consolidated | 
|CASH FLOWS FROM OPERATING ACTIVITIES                          |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Net cash (used in) provided by operating activities           |  | $                                                                                                | (41,672 | ) |                | $ | 7,748  |              |  | $ | (33,924 | )
|CASH FLOWS FROM INVESTING ACTIVITIES                          |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Purchase of property, plant and equipment                     |  |                                                                                                  | (13,950 | ) |                |   | (2,333 | )            |  |   | (16,283 | )
|Proceeds from sale of property, plant and equipment           |  |                                                                                                  | 5,614   |   |                |   |       |              |  |   | 5,614   |  
|                                                              |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Net cash used in investing activities                         |  |                                                                                                  | (8,336  | ) |                |   | (2,333 | )            |  |   | (10,669 | )
|CASH FLOWS FROM FINANCING ACTIVITIES                          |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Net borrowings under revolving credit facilities              |  |                                                                                                  | 49,773  |   |                |   | (344   | )            |  |   | 49,429  |  
|Contribution of capital from parent                           |  |                                                                                                  | 100     |   |                |   |       |              |  |   | 100     |  
|Repayments of the term notes                                  |  |                                                                                                  | (1,619  | ) |                |   | (787   | )            |  |   | (2,406  | )
|Repayments of other debt                                      |  |                                                                                                  |        |   |                |   | (2,233 | )            |  |   | (2,233  | )
|Debt issuance costs                                           |  |                                                                                                  | (1,044  | ) |                |   | (2     | )            |  |   | (1,046  | )
|Decrease in restricted cash                                   |  |                                                                                                  | 1,905   |   |                |   |       |              |  |   | 1,905   |  
|                                                              |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Net cash provided by (used in) financing activities           |  |                                                                                                  | 49,115  |   |                |   | (3,366 | )            |  |   | 45,749  |  
|Effect of exchange rate changes on cash                       |  |                                                                                                  | 41      |   |                |   | (77    | )            |  |   | (36     | )
|                                                              |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS          |  |                                                                                                  | (852    | ) |                |   | 1,972  |              |  |   | 1,120   |  
|Cash and cash equivalents, beginning of period                |  |                                                                                                  | 9,541   |   |                |   | 6,314  |              |  |   | 15,855  |  
|                                                              |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  
|Cash and cash equivalents, end of period                      |  | $                                                                                                | 8,689   |   |                | $ | 8,286  |              |  | $ | 16,975  |  
|                                                              |  |                                                                                                  |         |   |                |   |        |              |  |   |         |  



19



---

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operation.

The following Managements Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under the heading Forward-Looking
Statements below and elsewhere in this report. The following discussion should be read in conjunction with the unaudited consolidated interim financial statements and related notes for the thirteen weeks ended April 2, 2006 included
elsewhere in this report and the audited consolidated financial statements and related notes for the fiscal year ended January 1, 2006 (fiscal 2005) included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission
(SEC) on March 30, 2006.

General

We are a leading global producer and marketer of disposable foodservice products and have served our industry for 70 years. We manufacture one of the broadest product lines of cups, lids, food containers, plates, bowls, portion cups,
stirrers, straws, cutlery, napkins, placemats, tablecovers and food packaging containers in the industry, with products available in plastic, paper and foam. We are recognized for product innovation and customer service, and our products are known
for their quality, reliability and consistency. Our products are marketed primarily under the Solo®and Sweetheart®brands, as well as Jack Frost®, Trophy®, Hoffmaster®, Sensations®and Creative
Expressions®. We are one of the leading suppliers of branded disposable cups and plastic
plates and bowls to consumer customers in the United States. We also provide a line of products to our customers under private label. We currently operate manufacturing facilities and distribution centers in North America, Japan, the United Kingdom
and Panama, and we sell our products worldwide.

Thirteen Weeks Ended April 2, 2006 Compared to the Three Months Ended March 31, 2005



|                                               |  |                                   |         |   |                                 |   |         |                          |  |   |         |   |  |       |   
|---------------------------------------------- |  | --------------------------------- | ------- | - | ------------------------------- | - | ------- | ------------------------ |  | - | ------- | - |  | ----- | --
|(in thousands)                                 |  | Thirteen weeksended April 2, 2006 |         |   | Three monthsendedMarch 31, 2005 |   |         | Favorable /(Unfavorable) | 
|                                               |  |                                   | $       |   |                                 | % |        
|Net sales                                      |  | $                                 | 563,981 |   |                                 | $ | 546,093 |                          |  | $ | 17,888  |   |  | 3.3   | % 
|Cost of goods sold                             |  |                                   | 512,719 |   |                                 |   | 497,598 |                          |  |   | (15,121 | ) |  | (3.0  | ) 
|                                               |  |                                   |         |   |                                 |   |         |                          |  |   |         |   |  |       |   
|Gross profit                                   |  |                                   | 51,262  |   |                                 |   | 48,495  |                          |  |   | 2,767   |   |  | 5.7   |   
|                                               |  |                                   |         |  
|Selling, general and administrative expenses   |  |                                   | 66,574  |   |                                 |   | 60,036  |                          |  |   | (6,538  | ) |  | (10.9 | ) 
|Restructuring expense                          |  |                                   | 1,164   |   |                                 |   | 868     |                          |  |   | (296    | ) |  | (34.1 | ) 
|Loss on sale of property, plant and equipment  |  |                                   | 864     |   |                                 |   | 774     |                          |  |   | (90     | ) |  | (11.6 | ) 
|                                               |  |                                   |         |   |                                 |   |         |                          |  |   |         |   |  |       |   
|Operating loss                                 |  |                                   | (17,340 | ) |                                 |   | (13,183 | )                        |  |   | (4,157  | ) |  | (31.5 | ) 
|                                               |  |                                   |         |  
|Interest expense, net                          |  |                                   | 20,379  |   |                                 |   | 17,073  |                          |  |   | (3,306  | ) |  | (19.4 | ) 
|Foreign currency exchange (gain) loss, net     |  |                                   | (1,034  | ) |                                 |   | 807     |                          |  |   | 1,841   |   |  | *     |   
|Other (income) expense, net                    |  |                                   | 127     |   |                                 |   | (113    | )                        |  |   | (240    | ) |  | *     |   
|                                               |  |                                   |         |   |                                 |   |         |                          |  |   |         |   |  |       |   
|Loss before income taxes and minority interest |  |                                   | (36,812 | ) |                                 |   | (30,950 | )                        |  |   | (5,862  | ) |  | (18.9 | ) 
|                                               |  |                                   |         |  
|Income tax benefit                             |  |                                   | (14,725 | ) |                                 |   | (12,380 | )                        |  |   | 2,345   |   |  | 18.9  |   
|Minority interest                              |  |                                   |        |   |                                 |   | (2      | )                        |  |   | (2      | ) |  | *     |   
|                                               |  |                                   |         |   |                                 |   |         |                          |  |   |         |   |  |       |   
|Net loss                                       |  | $                                 | (22,087 | ) |                                 | $ | (18,568 | )                        |  | $ | (3,519  | ) |  | (19.0 | %)
|                                               |  |                                   |         |   |                                 |   |         |                          |  |   |         |   |  |       |   

---

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

Net sales increased $17.9 million, or
3.3%, for the thirteen weeks ended April 2, 2006 compared to the prior year period. The increase in net sales reflected a 2.6% increase in average realized sales price and a 0.7% increase in sales volume as compared to the three months ended
March 31, 2005. The increase in average realized sales price reflects the impact of pricing increases implemented during the second half of 2005 in response to higher raw material costs.



20



---

For the thirteen weeks ended April 2, 2006, gross profit increased $2.8 million compared to the
prior year period. As a percentage of net sales, gross profit was 9.1% in the first quarter of 2006 versus 8.9% in the first quarter of 2005.

Restructuring expense for the thirteen weeks ended April 2, 2006 was $1.2 million representing severance costs incurred during the period. Restructuring expense for the three months ended March 31, 2005 was $0.9 million
representing severance costs related to manufacturing plants, which were closed in conjunction with the integration of SF Holdings. We expect that severance costs relating to our restructuring announced in April 2006 will be approximately $7 million
for the full 2006 fiscal year.

Selling, general and administrative expenses increased $6.5 million for the thirteen weeks ended
April 2, 2006 compared to the three months ended March 31, 2005. The increase was primarily driven by costs associated with the expansion and upgrade of our order management and enterprise resource planning systems. As a percentage of net
sales, selling, general and administrative expenses were 11.8% in the first quarter of 2006 versus 11.0% in the first quarter of 2005. Integration costs totaled $3.5 million and $7.9 million for the thirteen weeks ended April 2, 2006 and the
three months ended March 31, 2005, respectively.

For the thirteen weeks ended April 2, 2006, interest expense, net increased
$3.3 million compared to the prior year period. This increase is primarily attributable to higher outstanding balances under our domestic revolving credit facility in addition to higher interest rates compared to the prior year period.

For the thirteen weeks ended April 2, 2006, foreign currency exchange (gain) loss, net was a gain of $1.0 million compared to a loss of $0.8
million for the three months ended March 31, 2005. This change is primarily attributed to currency fluctuations in the United Kingdom pound sterling denominated inter-company debt.

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 used in operating
activities during the thirteen weeks ended April 2, 2006 was $29.9 million compared to $33.9 million during the three months ended March 31, 2005. Working capital increased $17.1 million to $494.3 million at April 2, 2006 from $477.2
million at January 1, 2006. The increase primarily reflects higher inventory balances partially offset by higher accounts payable. Both increases were primarily driven by a planned inventory build as we prepare for higher sales during the
warmer seasons.

Net cash used in investing activities during the thirteen weeks ended April 2, 2006 was $12.2 million compared to
$10.7 million during the three months ended March 31, 2005. The decrease was primarily driven by lower proceeds from the sale of property, plant and equipment.

Capital expenditures during the thirteen weeks ended April 2, 2006 were $13.5 million compared to $16.3 million during the three months ended March 31, 2005. Capital expenditures during the thirteen weeks
ended April 2, 2006 included $10.9 million for new production equipment, $1.3 million for integration-related projects, $0.3 million for routine capital improvements, and $1.0 million for renovations and equipment conversions. Capital
expenditures were primarily funded by borrowings under our revolving credit facilities. For the remainder of 2006, the Company intends to rely on cash provided by operations and the revolving credit facilities for its capital expenditures.

Net cash provided by financing activities during the thirteen weeks ended April 2, 2006 was $41.0 million compared to $45.7 million
during the three months ended March 31, 2005. The net cash provided by financing activities during the thirteen weeks ended April 2, 2006 includes $80.0 million of borrowings under the Second Lien Facility offset by total net repayments of
$33.1 million on the domestic revolving credit facility and the Canadian Credit Facility.



21



---

Short-term debt

At April 2, 2006, we had approximately 537.3 million Yen (approximately $4.6 million) of short-term borrowings with Japanese banks. These borrowings have various termination dates and have no restrictive
covenants. The interest rate on these borrowings ranges between 0.71% and 1.375% per annum.

Long-term debt

The following is a summary of our long-term debt at April 2, 2006 (in thousands):



|                                            |  |               |          
|------------------------------------------- |  | ------------- | ---------
|                                            |  | April 2, 2006
|Long-term debt:                             |  |               |          
|8.5% Senior Subordinated Notes              |  | $             | 325,000  
|First Lien Facility  Term Loan             |  |               | 637,000  
|First Lien Facility  Revolver              |  |               | 23,800   
|Second Lien Facility                        |  |               | 80,000   
|Canadian Credit Facility  Term Loan        |  |               | 9,089    
|Canadian Credit Facility  Revolver         |  |               | 5,187    
|Capital lease obligations                   |  |               | 2,312    
|                                            |  |               |          
|Total long-term debt                        |  |               | 1,082,388
|Less - Current maturities of long-term debt |  |               | 8,720    
|                                            |  |               |          
|Long-term debt, net of current maturities   |  | $             | 1,073,668
|                                            |  |               |          

The following is a summary of our committed revolving credit facilities at April 2, 2006 (in
thousands):



|                          |  |                  |         |                    |   |                      |  |                |        |  |   |        
|------------------------- |  | ---------------- | ------- | ------------------ | - | -------------------- |  | -------------- | ------ |  | - | -------
|                          |  | CommitmentAmount |         | AmountsOutstanding |   | Letters ofCredit (1) |  | UnusedCapacity
|First Lien Facility:      |  |                  |         |                    |   |                      |  |                |        |  |   |        
|Revolving facility        |  | $                | 150,000 |                    | $ | 23,800               |  | $              | 18,367 |  | $ | 107,833
|Canadian Credit Facility: |  |                  |         |                    |   |                      |  |                |        |  |   |        
|Revolving facility        |  |                  | 11,438  |                    |   | 5,187                |  |                |       |  |   | 6,251  
|                          |  |                  |         |                    |   |                      |  |                |        |  |   |        
|                          |  | $                | 161,438 |                    | $ | 28,987               |  | $              | 18,367 |  | $ | 114,084
|                          |  |                  |         |                    |   |                      |  |                |        |  |   |        

---

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

Second Lien Facility

On
March 31, 2006, the Company and SCIC entered into a second lien credit agreement (Second Lien Facility). The Second Lien Facility provided a secured term loan facility in the amount of $80 million (Second Term Loan). The
Second Term Loan bears interest, at the option of the Company, at a rate equal to LIBOR plus 4.50% per annum; or 3.50% per annum plus the higher of (a) the Bank of America prime rate or (b) the Federal Funds rate plus 1/2of one percentage point. The principal amount will be due upon maturity in February 2012. The proceeds of the
Second Term Loan were used to reduce amounts outstanding under the Companys domestic revolving credit facility under its First Lien Facility, described below.

The Second Lien Facility contains customary affirmative and negative covenants substantially similar to those contained in the First Lien Facility and
financial covenants less restrictive than those in the First Lien Facility. During the term of the Second Lien Facility, the negative covenants restrict the Companys ability to do certain things, including but not limited to:



| |  |  | incur additional indebtedness, including guarantees;
| | - |  | ----------------------------------------------------



| |  |  | create, incur, assume or permit to exist liens on property and assets;
| | - |  | ----------------------------------------------------------------------



| |  |  | make loans and investments and enter into acquisitions and joint ventures;
| | - |  | --------------------------------------------------------------------------



| |  |  | engage in sales, transfers and other dispositions of our property or assets;
| | - |  | ----------------------------------------------------------------------------



| |  |  | prepay, redeem or repurchase our debt, or amend or modify the terms of certain material debt or certain other agreements;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



22



---

| |  |  | declare or pay dividends to, make distributions to, or make redemptions and repurchases from, equity holders; and
| | - |  | -----------------------------------------------------------------------------------------------------------------

| |  |  | restrict the ability of our subsidiaries to pay dividends and make distributions.
| | - |  | ---------------------------------------------------------------------------------

The Second Lien Facility includes the following financial covenants:



| |  |  | maximum consolidated leverage ratio;
| | - |  | ------------------------------------



| |  |  | maximum capital expenditures; and
| | - |  | ---------------------------------



| |  |  | minimum consolidated interest coverage ratio.
| | - |  | ---------------------------------------------

The Second
Lien Facility borrowings are secured by substantially all the assets of the Company subject however to an Intercreditor Agreement between lenders under the First Lien Facility and lenders under the Second Lien Facility. The Second Lien Facility
borrowings are guaranteed by SCIC and the Companys domestic subsidiaries and the Company may prepay the borrowings under certain conditions. Customary events of default are also included in the loan documentation including, but not limited to,
cross defaults to the Companys other material debt and certain change of control events.

As of April 2, 2006, the interest rate
on the Second Lien Facility was 11.25%.

First Lien Facility

On February 27, 2004, we 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 in 2011. The revolver is principally used for working capital purposes, and the term loan was used to finance the SF Holdings acquisition and related transactions.

Effective March 27, 2006, the Company and SCIC entered into an agreement (Amendment No. 3) to amend its Credit Agreement dated
February 27, 2004, as amended by Amendment No. 1, dated as of March 31, 2005, and by Amendment No. 2, dated as of October 14, 2005, collectively, the First Lien Facility. Amendment No. 3 was necessary to
permit the Company to enter into the Second Lien Facility. Amendment No. 3 also revised the ratios of the financial covenants that the Company is required to maintain by allowing lower ratios in certain quarters of Consolidated EBITDA to
Consolidated Cash Interest Expense, and by allowing higher ratios in certain quarters of Average Total Debt to Consolidated EBITDA.

As of
April 2, 2006, the weighted average annual interest rate applicable to Eurodollar rate loans was 6.60% and the weighted average annual interest rate applicable to base rate loans was 9.20%. During the thirteen weeks ended April 2, 2006,
the weighted average annual interest rate for the First Lien Facility was 6.71%. As of April 2, 2006, the interest rate on the term loan facility was 6.83% and the interest rate on the revolving credit facility was 9.50%.

All mandatory quarterly prepayments have been made to date.

A commitment fee of 0.50% on the unused portion of the credit facilities is payable on a quarterly basis.

We may make optional prepayments to either the revolver or the term loan in million dollar increments with a minimum prepayment of $10.0 million.

We are required to make a mandatory annual prepayment of the term loan facility and the revolving credit facility in an amount equal to 50.0% of excess cash flow, as defined, when the consolidated leverage ratio, as
defined, is 3.5x or greater, or 25.0% of excess cash flow when the Companys consolidated leverage ratio is less than 3.5x. In addition, we are required to make a mandatory prepayment of the term loan facility and the revolving credit facility
with, among other things: (i) 100.0% of the net cash proceeds of any property or asset sale, subject to certain exceptions and reinvestment requirements; (ii) 100.0% of the net cash proceeds of any extraordinary receipts, as defined,
subject to certain exceptions and reinvestment requirements; (iii) 100.0% of the net cash proceeds of certain debt issuances, subject to certain exceptions; and (iv) 50.0% of the net cash proceeds from the issuance of additional equity
interests when the consolidated leverage ratio is 3.5x or greater, or 25.0% of such proceeds when the consolidated leverage ratio is less than 3.5x.



23



---

During the thirteen weeks ended April 2, 2006, we were not required to make a mandatory annual
prepayment or any prepayments based on excess cash flow, dispositions of assets or extraordinary receipts.

The First Lien Facility
requires us to fix the interest rate for a portion of the borrowings. Accordingly, on March 10, 2004, the Company entered into interest rate swap agreements to hedge the cash flows associated with the interest payments on $180.0 million of the
Eurodollar rate based borrowings for three years. In June 2005, we entered into a forward-starting receive-variable, pay-fixed interest rate swap with a notional amount of $50.0 million. The variable rate of interest received is the Eurodollar rate.
The fixed rate of interest paid is 4.25%. The swap agreement is effective from March 31, 2007 through March 31, 2010.

On
March 31, 2006, we entered into two receive-variable, pay-fixed interest rate swaps with identical terms and a combined notional amount of $70.0 million. The swap agreements are effective March 31, 2006 through March 31, 2009. The
notional amount varies throughout the term of the agreements. The combined notional amount decreases to $35.0 million on September 29, 2006, increases to $150.0 million on March 30, 2007, and decreases to $75.0 million on December 31,
2007 through maturity. The variable rate of interest received is the Eurodollar rate. The fixed rate of interest paid is 5.15%. As of April 2, 2006, the fair values of these swap agreements were less than $10,000.

Canadian Credit Facility

Borrowings
under the revolving credit facility bear interest at the Canadian prime rate plus 0.50% or Canadian bankers acceptance rate plus 1.75%, at our option. Term loan borrowings bear interest at the Canadian prime rate plus 0.75% or Canadian bankers
acceptance rate plus 2.00%, at our option. As of April 2, 2006, borrowings under the revolving credit facility and the term loan carried effective interest rates of 5.62% and 5.87%, respectively. As of April 2, 2006, CAD $7.3 million
(approximately $6.2 million) was available under the revolving facility and the term loan balance was CAD $10.6 million (approximately $9.1 million).

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 over the next twelve months.

Net Operating Loss Carryforwards

As of April 2,
2006, we had approximately $238.1 million of U.S. federal tax net operating loss carry-forwards that expire between 2016 and 2025. Approximately $103.5 million of such carry-forwards are subject to the provisions of Internal Revenue Code
Section 382. Although future earnings cannot be predicted with certainty, management currently believes that realization of the net deferred tax assets is more likely than not.

Critical Accounting Estimates

The Companys critical accounting estimates are described in its
2005 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2006. There have been no changes to the critical accounting estimates since that filing.



24



---

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 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2006 and incorporated herein by reference and in our other filings made from time to time with the Securities and Exchange Commission. 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 effect of general economic and competitive business conditions in the disposable food service products industry;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | realization of cost savings, synergies or revenue enhancement that we anticipated when we acquired SF Holdings;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | impact of competitive products and pricing;
| | - |  | -------------------------------------------



| |  |  | interest rate fluctuations and continuing debt obligations;
| | - |  | -----------------------------------------------------------



| |  |  | impact on our ability to manage and grow our business if we are unable to adequately manage, integrate and implement our order management and enterprise resource planning systems;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | further consolidation in the food service and retail industries;
| | - |  | ----------------------------------------------------------------



| |  |  | availability of and increases in raw material costs;
| | - |  | ----------------------------------------------------



| |  |  | increases in energy and other manufacturing costs;
| | - |  | --------------------------------------------------



| |  |  | fluctuations in demand for the Companys products;
| | - |  | --------------------------------------------------



| |  |  | effect of changing federal, state, foreign and local environmental and occupation health and safety laws and regulations;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | risks related to 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;
| | - |  | -------------------------------------



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



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



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



| |  |  | diversion of management attention from other business activities in the event we pursue additional acquisition(s) in the future; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



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



25



---

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

In the ordinary course of business, the Company is exposed to market risk-sensitive instruments in the ordinary course of business, which consists
primarily of interest rate risk associated with its variable rate debt. The First Lien Facility and the Canadian Credit Facility both include a revolving and term credit facility, which bear interest at a variable rate. The Second Lien Facility
consists of a term loan facility, which also bears interest at a variable rate.

The interest rate on the First Lien Facility is either
Eurodollar rate based (1, 2, 3 or 6 months) plus a margin or the banks base rate plus a margin, whichever the Company selects. For the term loan, the margin varies from 2.25% to 2.50% on the Eurodollar rate borrowing and from 1.25% to 1.50% on
the base rate borrowings depending on the Companys public debt ratings. At April 2, 2006, the variable rate on borrowings excluding the effect of the interest rate swaps was 6.18% and the interest rate on borrowings under the revolving
credit facility was 9.50%.

The Canadian revolving facility bears interest at the Canadian prime rate plus 0.50% or Canadian bankers
acceptance rate plus 1.75%, at the Companys option, and the term loan bears interest at the Canadian prime rate plus 0.75% or Canadian bankers acceptance rate plus 2.00%, at the Companys option. As of April 2, 2006, borrowings under
the revolving credit facility and the term loan carried effective interest rates of 5.62% and 5.87%, respectively.

The term loan under the
Second Lien Facility bears interest, at the option of the Company, at a rate equal to LIBOR plus 4.50% per annum; or 3.50% per annum plus the higher of (a) the Bank of America prime rate or (b) the Federal Funds rate plus 1/2of one percentage point. As of April 2, 2006, the interest rate on the Second Lien Facility was 11.25%.

The First Lien Facility requires us to hedge a portion of the borrowings. On March 10, 2004, with an effective date of
March 31, 2004, we entered into interest rate swap agreements to hedge $180.0 million of Eurodollar rate loans at an average rate of 2.375% plus applicable margin for three years. In June 2005, the Company entered into a forward-starting
receive-variable, pay-fixed interest rate swap with a notional amount of $50.0 million. The variable rate of interest received is the Eurodollar rate. The fixed rate of interest paid is 4.25%. The swap agreement is effective March 31, 2007
through March 31, 2010.

On March 31, 2006, we entered into two receive-variable, pay-fixed interest rate swaps with identical
terms and a combined notional amount of $70.0 million. The swap agreements are effective March 31, 2006 through March 31, 2009. The notional amount varies throughout the term of the agreements. The combined notional amount decreases to
$35.0 million on September 29, 2006, increases to $150.0 million on March 30, 2007, and decreases to $75.0 million on December 31, 2007 through maturity. The variable rate of interest received is the Eurodollar rate. The fixed rate of
interest paid is 5.15%. As of April 2, 2006, the fair values of these swap agreements were less than $10,000.

As of April 2,
2006, the outstanding indebtedness under the First Lien Facility was $660.8 million and $107.8 million was available under the First Lien Facility. As of April 2, 2006, the outstanding indebtedness under the Second Lien Facility was $80.0
million. As of April 2, 2006, the outstanding indebtedness under the Canadian Credit facility was CAD $16.7 million (approximately $14.3 million) and CAD $7.3 million (approximately $6.2 million) was available under the Canadian Credit
Facility. Based upon the information above, the Companys annual pre-tax income would change by approximately $5.0 million for each one-percentage point change in the interest rates applicable to the variable rate debt after giving effect to
the interest rate swap agreements. The level of the exposure to interest rate movements may fluctuate significantly as a result of changes in the amount of indebtedness outstanding under the revolving credit facilities.



26



---

Item 4. Controls and Procedures.



|(a) | Disclosure Controls and Procedures. The Companys management, with the participation of the Companys chief executive officer, chief operating 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, chief operating 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) | 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 quarter ended April 2, 2006, that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



27



---

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 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 January 1, 2006 filed with the Securities and Exchange Commission on March 30, 2006.

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 Operating Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|31.3 |  | 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 Operating Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.3 |  | 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.



28



---

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: May 16, 2006 |  | By:              |  | /s/ Susan H. Marks                                  
|                   |  |                  |  | Susan H. Marks                                      
|                   |  |                  |  | Executive Vice President and Chief Financial Officer
|                   |  |                 
|                   |  |                  |  | (Principal Financial and Accounting Officer and Duly
|                   |  |                  |  | Authorized Officer)                                 



29



---

INDEX OF EXHIBITS FILED WITH OR

INCORPORATED BY REFERENCE INTO

FORM 10-Q OF SOLO CUP COMPANY

FOR THE THIRTEEN WEEKS ENDED APRIL 2, 2006



|     |  |                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|31.2 |  | Certification of Chief Operating Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|     | 
|31.3 |  | 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 Operating Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.3 |  | 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.



30