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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                     for the Six Months Ended June 30, 2004

              [ ] 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                          (IRS Employer
        incorporation or organization)                       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 [  ] No [ X]


        The number of shares outstanding of the Registrant's common stock
                             as of August 13, 2004:
               Class A Common Stock, $0.01 par value - 100 shares


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<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1.       FINANCIAL STATEMENTS

                        SOLO CUP COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                  June 30,      December 31,
                                                                                    2004            2003
                                                                               -------------   --------------
                                                                                (Unaudited)
<S>                                                                            <C>             <C>
                                  Assets
Current assets:
  Cash and cash equivalents                                                     $    22,339      $    3,269
  Cash in escrow                                                                     15,000          10,003
  Accounts receivable:
    Trade, less allowance for doubtful accounts of $8,038 and $3,900                229,978          88,393
    Other                                                                            26,750           5,917
  Inventories                                                                       323,115          99,719
  Spare parts                                                                        31,256           7,864
  Deferred income taxes                                                              54,776             895
  Prepaid expenses and other current assets                                          18,735           4,951
                                                                                -----------      ----------
    Total current assets                                                            721,949         221,011

Property, plant and equipment, net                                                  858,609         299,284
Spare parts                                                                          11,669               -
Goodwill and intangible assets                                                      289,371          95,495
Restricted cash                                                                       1,905           2,139
Other assets                                                                         42,817          11,681
                                                                                -----------      ----------

    Total assets                                                                $ 1,926,320      $  629,610
                                                                                ===========      ==========

                   Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                                              $   181,769      $   64,140
  Accrued payroll and related costs                                                  60,372          15,202
  Accrued customer allowances                                                        28,286          10,304
  Accrued expenses and other current liabilities                                     50,765          18,545
  Short-term debt                                                                     6,854          44,182
  Current maturities of long-term debt                                                7,126           5,916
                                                                                -----------      ----------
    Total current liabilities                                                       335,172         158,289

Long-term debt, net of current maturities                                           994,624         202,878
Deferred income taxes                                                                94,737           1,605
Pensions and post retirement benefits                                                76,167          12,460
Other liabilities                                                                     3,266           1,656
                                                                                -----------      ----------

    Total liabilities                                                             1,503,966         376,888
                                                                                -----------      ----------

Minority interest                                                                     1,009           2,060
                                                                                -----------      ----------

Shareholders' equity:
  Class A Common  Stock of Solo  Delaware  - Par value $0.01  per  share;
    1,000 shares  authorized;  100 shares issued and  outstanding
    at June 30, 2004                                                                      -               -
  Class A Common  Stock of Solo  Illinois  - Par value  $0.01  per  share;
    10,367,626 shares  authorized,  issued and outstanding
    at December 31, 2003                                                                  -             103
  Class B Common  Stock of Solo  Illinois  - Par value  $0.01  per  share;
    57,474 shares authorized, issued and outstanding
    at December 31, 2003                                                                  -               1
  Additional paid-in capital                                                        258,818          24,965
  Retained earnings                                                                 159,738         225,244
  Accumulated other comprehensive income                                              2,789             349
                                                                                -----------      ----------
    Total shareholders' equity                                                      421,345         250,662
                                                                                -----------      ----------

    Total liabilities and shareholders' equity                                  $ 1,926,320      $  629,610
                                                                                ===========      ==========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                       2
<PAGE>
                        SOLO CUP COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)
                                   (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                         Three months ended          Six months ended
                                                              June 30,                   June 30,
                                                     -------------------------  -------------------------
                                                        2004           2003        2004           2003
                                                     -----------   -----------  -----------   -----------
<S>                                                  <C>           <C>          <C>           <C>
Net sales                                             $ 597,850     $ 240,043    $ 925,146     $ 416,800
Cost of goods sold                                      512,616       200,518      802,988       360,513
                                                      ----------    ----------   ----------    ----------

    Gross profit                                         85,234        39,525      122,158        56,287

Selling, general and administrative expenses             58,985        24,981      104,673        44,750
                                                      ----------    ----------   ----------    ----------

    Operating income                                     26,249        14,544       17,485        11,537

Interest expense, net of interest income of
  $39, $678, $128 and $1,417                             14,927         4,014       23,273         6,573
Prepayment penalties                                          -             -       30,690             -
Loss on debt extinguishment                                   -             -          916             -
Foreign currency exchange loss (gain), net                  999        (1,612)        (375)            1
Other (income) expense, net                                 (84)           84          684            17
                                                      ----------    ----------   ----------    ----------

    Income (loss) before income taxes
      and minority interest                              10,407        12,058      (37,703)        4,946

Income tax provision                                      4,131         1,211       14,679         1,667
Minority interest                                           105            75          116            39
                                                      ----------    ----------   ----------    ----------

    Net income (loss)                                 $   6,171     $  10,772    $ (52,498)    $   3,240
                                                      ==========    ==========   ==========    ==========

Comprehensive income (loss):

    Net income (loss)                                 $   6,171     $  10,772    $ (52,498)    $   3,240
    Foreign currency translation adjustment              (3,003)        1,906         (707)        2,298
    Minimum pension liability adjustment (net of
      income tax benefit of $(232))                        (348)            -         (348)            -
    Unrealized investment gain (net of
      income tax provision of $289)                         416             -          416             -
    Unrealized gain on cash flow hedge (net of
      income tax provision $2,053)                        3,079             -        3,079             -
                                                      ----------    ----------   ----------    ----------

    Comprehensive income (loss)                       $   6,315     $  12,678    $ (50,058)    $   5,538
                                                      ==========    ==========   ==========    ==========
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.

                                       3
<PAGE>
                        SOLO CUP COMPANY AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                   (Unaudited)
                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                        Class A             Class B
                                      Common stock       Common stock
                                ---------------------- -----------------
                                                                                                     Accumulated
                                                                                                        other         Total
                                                                            Additional    Retained  comprehensive shareholders'
                                   Shares      Amount   Shares   Amount  paid-in capital  earnings  income (loss)    equity
                                ------------- -------- -------- -------- --------------- ---------- ------------- -------------
<S>                             <C>           <C>      <C>      <C>      <C>             <C>        <C>           <C>
Balances at December 31, 2003     10,367,626   $  103   57,474   $    1     $  24,965    $ 225,244     $   349      $ 250,662
Net loss (Unaudited)                       -        -        -        -             -      (52,498)          -        (52,498)
Dividends declared (Unaudited)             -        -        -        -             -      (13,008)          -        (13,008)
Retirement of common stock -
  Solo Illinois (Unaudited)      (10,367,626)    (103) (57,474)      (1)      (24,965)           -           -        (25,069)
Issuance of common stock -
  Solo Delaware  (Unaudited)             100        -        -        -       258,818            -           -        258,818
Foreign currency translation
   adjustment (Unaudited)                  -        -        -        -             -            -        (707)          (707)
Minimum pension liability
   adjustment (Unaudited)                  -        -        -        -             -            -        (348)          (348)
Unrealized investment gain
   (Unaudited)                             -        -        -        -             -            -         416            416
Unrealized gain on cash flow
   hedge (Unaudited)                       -        -        -        -             -            -       3,079          3,079
                                 ------------  -------  -------  -------    ----------   ----------    --------     ----------
Balances at June 30, 2004
   (Unaudited)                           100   $    -        -   $    -     $ 258,818    $ 159,738     $ 2,789      $ 421,345
                                 ============  =======  =======  =======    ==========   ==========    ========     ==========
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.

                                       4
<PAGE>
                        SOLO CUP COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                      Six months ended June 30,
                                                                                ------------------------------------
                                                                                   2004                      2003
                                                                                -----------              -----------
<S>                                                                             <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES

  Net income (loss)                                                              $ (52,498)               $  3,240

  Adjustments  to reconcile net income (loss) to net cash (used in) provided
    by operating activities:
    Depreciation and amortization                                                   41,117                  20,131
    Gain on sale of property, plant and equipment                                   (1,210)                   (236)
    Loss on debt extinguishment                                                        916                       -
    Minority interest                                                                  116                      39
    Deferred income taxes                                                           12,742                   1,483
  Changes in operating assets and liabilities (net of business acquisitions):
    Accounts receivable                                                            (32,029)                 (2,190)
    Inventories                                                                     (5,280)                (21,268)
    Prepaid expenses and other current assets                                       (7,176)                 (2,962)
    Other assets                                                                     5,430                   1,868
    Accounts payable                                                                (3,500)                 10,029
    Accrued expenses and other current liabilities                                  16,181                    (989)
    Other liabilities                                                                  220                    (425)
    Other, net                                                                        (942)                    208
                                                                                -----------               ---------
      Net cash (used in) provided by operating activities                          (25,913)                  8,928
                                                                                -----------               ---------

CASH FLOWS FROM INVESTING ACTIVITIES

  Payment for business acquisitions, net of cash acquired                         (874,734)                   (132)
  Purchase of property, plant and equipment                                        (17,681)                (24,846)
  Proceeds from sale of property, plant and equipment                                2,006                   2,527
  Increase in cash in escrow                                                        (4,997)                      -
                                                                                -----------               ---------
      Net cash used in investing activities                                       (895,406)                (22,451)
                                                                                -----------               ---------

CASH FLOWS FROM FINANCING ACTIVITIES

  Net borrowings under revolving credit facilities                                  24,800                   4,500
  Borrowings under the term notes                                                  650,000                       -
  Borrowings under the 8.5% Senior Subordinated Notes                              325,000                       -
  Borrowings under the Securitization Facility                                       5,000                  71,300
  Borrowings under the 364-day revolving credit agreement                           16,500                       -
  Proceeds from sale of common stock                                               230,463                       -
  Repayments of the 7.08% Senior Notes                                            (160,000)                      -
  Repayments of the 3.67% Yen-denominated Senior Notes                             (44,170)                      -
  Repayments of the interest rate swap                                              (1,656)                      -
  Repayments of the Securitization Facility                                        (27,800)                (63,000)
  Repayments of the 364-day revolving credit agreement                             (29,500)                      -
  Repayments of the term notes                                                      (1,625)                      -
  Repayments of other debt                                                          (2,361)                 (3,640)
  Debt issuance costs                                                              (31,497)                      -
  Dividends paid                                                                   (13,008)                 (5,238)
  Decrease in restricted cash                                                          234                       -
                                                                                -----------               ---------
      Net cash provided by financing activities                                    940,380                   3,922
                                                                                -----------               ---------

Effect of exchange rate changes on cash                                                  9                     (88)
                                                                                -----------               ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                19,070                  (9,689)

CASH AND CASH EQUIVALENTS, beginning of period                                       3,269                  12,627
                                                                                -----------               ---------

CASH AND CASH EQUIVALENTS, end of period                                        $   22,339                $  2,938
                                                                                ===========               =========

SUPPLEMENTAL CASH FLOW DISCLOSURES:

      Interest paid                                                             $   11,028                $  6,723
                                                                                ===========               =========

      Income taxes paid                                                         $    1,537                $    230
                                                                                ===========               =========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                       5
<PAGE>
                        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  ("Solo  Delaware"),  a  Delaware
corporation which is the holding company for Solo Cup Company ("Solo Illinois"),
an Illinois  corporation,  and its subsidiaries and SF Holdings Group, Inc. ("SF
Holdings")  and  its   subsidiaries,   including   Sweetheart  Cup  Company Inc.
("Sweetheart").  The Company is a wholly owned subsidiary of Solo Cup Investment
Corporation ("SCI Corporation"), a Delaware corporation. SCC Holding Company LLC
("SCC  Holding"),  a Delaware  limited  liability  company  and  Vestar  Capital
Partners ("Vestar") own 67.2% and 32.7% of SCI Corporation, respectively.

         Effective February 22, 2004,  the  predecessor  company,  Solo Illinois
became  a  wholly-owned  subsidiary  of a newly  formed  holding  company,  Solo
Delaware.  Solo Delaware is a holding company,  the material assets of which are
100% of the capital  stock of Solo  Illinois and 100% of the capital stock of SF
Holdings.  The consolidated financial statements presented herein as of December
31,  2003 and for the three and six  months  ended  June 30,  2003  present  the
financial  position and results of operations of the predecessor  company,  Solo
Illinois,  which  are the  same  operations  as  those  of the  Company  under a
different capital structure.

         On February 27, 2004,  with an effective date of February 22, 2004, the
Company acquired 100.0% of the outstanding  stock of SF Holdings.  For the three
and six months  ended June 30,  2004,  the  financial  position  and  results of
operations  for the Company  include the accounts of SF Holdings for the periods
from March 29, 2004 to June 27,  2004 and  February  22, 2004 to June 27,  2004,
respectively.

         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 operating results and cash flows for these periods.  Results
for the interim periods are not necessarily indicative of results 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 December 31, 2003 included in its registration  statement on Form S-4
filed July 13, 2004 with the Securities and Exchange Commission.

(2)   INVENTORIES

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

                                         June 30,         December 31,
                                           2004              2003
                                      -------------     ----------------

         Finished goods                 $ 246,821           $ 70,249
         Work in progress                  17,362              5,189
         Raw materials and supplies        58,932             24,281
                                        ---------           --------

           Total inventories            $ 323,115           $ 99,719
                                        =========           ========

(3)   INCOME TAXES

         Prior to January 1, 2004, the Company was subject to taxation under the
provisions  of  subchapter S of the Internal  Revenue Code in the United  States
and, as a result,  the federal and certain state income tax  liabilities  of the
Company were the responsibility of its shareholders.  As of January 1, 2004, the
Company  revoked its  subchapter S status and became a subchapter C Corporation,
and  became  subject  to  United  States  federal  and state  income  tax at the
corporate  level.  Consequently,  the Company,  pursuant to  generally  accepted
accounting principles in the United States,  recorded a one-time,  $29.8 million
non-cash  tax expense to  establish  a $29.8  million  net  deferred  income tax
liability for the future tax  consequences  attributable to differences  between
the financial statement and income tax

                                       6
<PAGE>
bases of its assets and liabilities as of January 1, 2004.

         From December 31, 2003 to June 30, 2004, the net deferred tax liability
of the Company  increased by $39.3  million from a $0.7 million net deferred tax
liability to a $40.0 million net deferred tax liability,  respectively.  At June
30, 2004,  the balances  include the  preliminary  valuation of the deferred tax
assets and liabilities resulting from the SF Holdings acquisition.

         The increase is comprised of the following (in thousands):


Net deferred tax liability of SF Holdings as of acquisition         $ (26,509)
Effect of the Company's change from S corporation to C corporation    (29,792)
Benefit of book loss through June 30, 2004                             15,113
Other                                                                   1,937
                                                                    ----------
  Increase in net deferred tax liability                            $ (39,251)
                                                                    ==========

         The net  deferred tax asset of SF Holdings  decreased by $71.3  million
from a $44.8 million net deferred tax asset at March 31, 2004 to a $26.5 million
net deferred tax liability at June 30, 2004 due to purchase  price  adjustments,
comprised  primarily of deferred tax liabilities  totaling $67.8 million related
to step-up in basis of property,  plant and equipment and intangible  assets for
financial statement purposes.

         The  income  tax  expense   includes  the  following   components   (in
thousands):

<TABLE>
<CAPTION>
                                                               Three months ended           Six months ended
                                                                    June 30,                    June 30,
                                                            ------------------------  --------------------------
                                                               2004         2003          2004          2003
                                                            -----------  -----------  -------------  -----------
<S>                                                         <C>          <C>          <C>            <C>
Income tax expense (benefit) at federal statutory tax rate    $ 3,642      $ 4,220      $ (13,196)     $ 1,731
Effect of United States S corporation status                        -       (3,344)             -         (391)
Effect of change from S Corporation to C Corporation                -            -         29,792            -
State income taxes (net of federal benefit)                       462            -         (1,905)           -
Foreign tax rate differentials                                     27          335            (12)         327
                                                              -------      --------     ----------     --------

    Income tax provision                                      $ 4,131      $ 1,211      $  14,679      $ 1,667
                                                              =======      ========     ==========     ========
</TABLE>


(4)   PROPERTY, PLANT AND EQUIPMENT, NET

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

                                                    June 30,      December 31,
                                                      2004            2003
                                                  ------------   --------------

Land                                               $   44,115      $  22,350
Buildings and improvements                            307,762         95,631
Machinery and equipment                               882,596        528,221
Construction in progress                               29,651         23,865
                                                   -----------     ----------

  Total property, plant and equipment               1,264,124        670,067

Less - accumulated depreciation and amortization     (405,515)      (370,783)
                                                   -----------     ----------

  Property, plant and equipment, net               $  858,609      $ 299,284
                                                   ===========     ==========

         Depreciation  of property,  plant and  equipment  was $22.1 million and
$36.6  million  for the  three  months  and six  months  ended  June  30,  2004,
respectively.  Capitalized  interest  was $0.3  million and $0.4 million for the
three months and six months ended June 30, 2004, respectively.

                                       7
<PAGE>
(5)   ACQUISITION

         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  and its
subsidiaries  are one of the largest  converters  and  marketers  of plastic and
paper disposable  foodservice and food packaging products in North America.  The
results of operations of SF Holdings from February 22, 2004 to June 27, 2004 are
included in the consolidated financial statements of the Company.

         The aggregate  purchase price was $917.1 million of which $15.0 million
is being held in an escrow account pending the final working capital adjustment.
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. 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 $917.1 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 $151.2  million  that is not tax  deductible  and $44.8  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 $1.5  million  of other  intangible  assets  previously  established  by the
acquired company with an estimated useful life of three year.

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

Purchase price                                                  $  917.1
Less cash in escrow                                                (15.0)
                                                                ---------
   Adjusted purchase price                                      $  902.1
                                                                =========

Cash                                                            $   30.2
Accounts receivable                                                130.9
Inventories                                                        218.2
Other current assets                                                63.6
Property, plant and equipment, net                                 579.7
Intangible assets                                                   44.8
Other long term assets                                              39.4
                                                                ---------
   Total assets                                                  1,106.8
                                                                =========

Current liabilities                                             $  200.7
Other long term liabilities                                        155.2
                                                                ---------
   Total liabilities                                            $  355.9
                                                                =========

Excess of purchase price over assets and liabilities acquired   $  151.2
                                                                =========

         The  allocation  of  purchase  price is subject to final  determination
based on valuations and other  determinations  that are expected to be completed
during  2004.  The  Company  is  obtaining  valuations  of  certain  actuarially
determined  liabilities,  and finalizing  estimates  related to income taxes and
certain restructuring liabilities.

                                       8
<PAGE>
         The following are the pro-forma  results  assuming that the acquisition
had occurred as of January 1, 2003 (in thousands):

                      Three months ended           Six months ended
                           June 30,                    June 30,
                   ------------------------  ----------------------------
                      2004         2003          2004           2003
                   -----------  -----------  -------------  -------------

Net sales           $ 597,850    $ 585,892    $ 1,092,668    $ 1,055,994
                    ==========   ==========   ============   ============

Net income (loss)   $   6,171    $  15,973    $   (11,239)   $     6,810
                    ==========   ==========   ============   ============

         In a subsequent transaction, on May 20, 2004 SF Holdings and Sweetheart
purchased the remaining  issued and  outstanding  20.0%  interest in Global Cup,
S.A. De C.V. ("Global  Cup") for $2.9  million.  The  purchase  resulted in $0.4
million of goodwill.

(6)   GOODWILL AND OTHER INTANGIBLE ASSETS

         The  following  are  changes  in the  carrying  value  of  goodwill  by
reporting unit (in thousands):

                                North                 Asia -
                               America    Europe     Pacific      Total
                              ---------  ---------  ---------  -----------
Balance at December 31, 2003  $ 56,298   $ 38,362   $    216   $   94,876
Acquisition of SF Holdings     151,174          -          -      151,174
Purchase  of Global Cup
  minority interest                350          -          -          350
Translation adjustment               -        573         (4)         569
                              ---------  ---------  ---------  -----------

  Balance at June 30, 2004    $207,822   $ 38,935   $    212   $  246,969
                              =========  =========  =========  ===========

         The following are changes in the carrying value of intangible assets by
reporting unit (in thousands):

                                North                 Asia -
                               America    Europe     Pacific      Total
                              ---------  ---------  ---------  -----------
Balance at December 31, 2003  $      -   $    105   $    514   $      619
Acquisition of SF Holdings      44,849          -          -       44,849
Other additions                    179          -          -          179
Amortization                    (3,183)         -        (55)      (3,238)
Translation adjustment               -          2         (9)          (7)
                              ---------  ---------  ---------  -----------

  Balance at June 30, 2004    $ 41,845   $    107   $    450   $   42,402
                              =========  =========  =========  ===========

                                       9
<PAGE>
(7)   DEBT

         Long-term  debt,  including  amounts  payable  within  one year,  is as
follows (in thousands):

                                               June 30,     December 31,
                                                 2004           2003
                                             ------------  --------------
Yen-denominated short term bank borrowings    $    6,854     $   8,382
Securitization facility                                -        22,800
364-day revolving credit agreement                     -        13,000
Senior Credit Facility                           673,175             -
8.5% Senior Subordinated Notes                   325,000             -
Capital lease obligations                          3,575         3,966
7.08% Senior Notes                                     -       160,000
3.67% Yen-denominated Senior Notes                     -        44,828
                                              -----------    ----------
  Total debt                                   1,008,604       252,976

Less - Current maturities of long-term debt       13,980        50,098
                                              -----------
  Total long-term debt                        $  994,624     $ 202,878
                                              ===========    ==========


         On February  27,  2004,  the  Company  entered  into credit  facilities
comprised of a $150.0 million  revolving credit facility  maturing in 2010 and a
$650.0 million term loan facility  maturing in 2011 ("Senior Credit  Facility").
The revolver is principally used for working capital purposes, and the term loan
was used to finance the  acquisition and related  transactions.  For purposes of
calculating  interest,  loans  under  the  credit  facility  are  designated  as
Eurodollar rate loans or, in certain circumstances,  base rate loans. Eurodollar
rate loans bear interest at the British Bankers Association  Interest Settlement
Rate for  deposits  in  dollars  plus a  borrowing  margin as  described  below.
Interest  on  Eurodollar  rate  loans is  payable  at the end of the  applicable
interest  period of one, two, three or six months,  but not less frequently than
quarterly. Base rate loans bear interest at (a) the greater of (i) the rate most
recently  announced  by Bank of America as its "prime  rate" or (ii) the Federal
Funds Rate plus 1/2 of 1% per annum,  plus (b) a borrowing  margin as  described
below.  The margin varies from 2.0% to 2.75% on  Eurodollar  rate loans and from
1.0% to 1.75% on base rate loans,  depending on the Company's leverage ratio. As
of June 30, 2004,  the weighted  average  annual  interest  rate  applicable  to
Eurodollar  rate loans was 3.94% and the weighted  average annual  interest rate
applicable to base rate loans was 5.75%.  During the three months ended June 30,
2004, the weighted  average annual  interest rate for the credit  facilities was
3.98%. A commitment fee of 0.50% on the unused portion of the credit  facilities
is payable  on a  quarterly  basis.  As of June 30,  2004,  $122.9  million  was
available under the credit facilities.

         The Senior  Credit  Facility  is secured by (i) the  present and future
personal  and  real  property  and  assets  of the  Company  and its  restricted
subsidiaries,  as  defined;  (ii) a pledge of 100.0% of the stock of each of SCI
Corporation's  present and future direct and indirect domestic  subsidiaries and
66.0% of the stock of each first-tier foreign subsidiary,  as defined; (iii) all
present  and  future  intercompany  debt  of  the  Company  and  its  restricted
subsidiaries;  and (iv) all proceeds of the  foregoing.  Under the Senior Credit
Facility,  the  Company  is  required  to  meet  certain  restrictive  financial
covenants, including a maximum consolidated leverage ratio, minimum consolidated
interest  coverage  ratio and maximum  capital  expenditures.  The Senior Credit
Facility also contains other various  covenants that limit,  or restrict,  among
other things, indebtedness,  dividends, leases, capital expenditures and the use
of proceeds from asset sales and certain other business activities.  The Company
is currently in compliance with all covenants under the Senior Credit  Facility.
At June 30,  2004,  the  interest  rate on the term loan  facility was 3.95% and
4.86% on the revolving credit facility.

         The Company may make optional  prepayments to either credit facility in
million dollar increments with a minimum prepayment of $10.0 million.  There are
mandatory  quarterly  prepayments  for the term loan.  The first  prepayment  of
$1.625 million was made on its scheduled due date of May 27, 2004. The quarterly
prepayments  range from $1.625 million per quarter through  February 27, 2006 to
$6.25  million per quarter from May 27, 2006 through  February 27, 2008 to $12.5
million per quarter from May 27, 2008  through  November 27, 2010 with a

                                       10
<PAGE>
balloon  payment of $449.5  million due on  February  27,  2011.  The Company is
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,  the Company is 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.

         The credit facilities  require the Company to fix the interest rate for
a portion of the borrowings. Accordingly, on March 10, 2004, the Company entered
into an interest rate swap agreement to hedge the cash flows associated with the
interest  payments on $180.0  million of the Eurodollar  rate based  borrowings.
Also, on June 1, 2004,  the Company  entered into an interest rate cap agreement
to hedge the cash flows  associated with the interest  payments on $30.0 million
of the Eurodollar rate based borrowings.

         On February  27,  2004,  the Company  issued  $325.0  million of Senior
Subordinated Notes with a coupon of 8.5% (the "8.5% Senior Subordinated Notes").
The Company  registered the 8.5% Senior  Subordinated  Notes with the Securities
and Exchange  Commission on July 13, 2004.  The 8.5% Senior  Subordinated  Notes
mature on February 15, 2014 with interest paid  semi-annually  every February 15
and August 15. Under the indenture governing the 8.5% Senior Subordinated Notes,
the Company must meet a minimum fixed charge coverage ratio to incur  additional
indebtedness.  The 8.5% Senior Subordinated Notes are non-callable for the first
five years.  Starting on February 15, 2009, the Company has the option to redeem
all or a portion of the 8.5% Senior  Subordinated  Notes at a  redemption  price
equal to a percentage of the principal amount there of plus accrued interest. If
redeemed during the twelve-month period beginning on February 15, 2009 the price
is 104.25%, from February 15, 2010 the price is 102.833%, from February 15, 2011
the price is 101.417% and from  February 15, 2012 and  thereafter,  the price is
100.0% of the principal amount. The 8.5% Senior  Subordinated Notes provide that
upon the  occurrence  of a change of control (as defined),  the holders  thereof
will have an option to require the  redemption  of the 8.5% Senior  Subordinated
Notes at a redemption price equal to 101.0% of the principal amount thereof plus
accrued interest.  The 8.5% Senior  Subordinated Notes contain various covenants
which prohibit,  or limit, among other things,  asset sales,  change of control,
dividend payments, equity repurchases or redemption the incurrence of additional
indebtedness,  the issuance of disqualified  stock,  certain  transactions  with
affiliates,  the  creation  of  additional  liens  and  certain  other  business
activities.

         On February 27, 2004, the Company  extinguished $160.0 million of 7.08%
senior notes due June 30, 2011 (the "7.08%  Senior  Notes") and $44.2 million of
3.67% Yen-denominated senior notes due July 16, 2008 (the "3.67% Yen-denominated
Senior  Notes")  resulting in  prepayment  penalties  of $26.9  million and $3.8
million,  respectively. As a result of early extinguishment of debt, the Company
incurred a $0.9 million loss from the write off of deferred finance fees.

         The  following  sets  forth  the  payments  made  in  connection   with
termination  of the  debt  instruments  outstanding  on  February  27,  2004 (in
thousands):

<TABLE>
<CAPTION>
                                                                                Foreign
                                                     Prepayment                 Exchange
                                      Principal       Penalties     Interest      Loss         Total
                                     ------------  --------------  ----------  -----------  -----------
<S>                                  <C>           <C>             <C>         <C>          <C>
Interest rate swap                     $   1,656      $      -      $     -       $   -      $   1,656
Securitization facility                   27,800             -           34           -         27,834
364-day revolving credit agreement        29,500             -            -           -         29,500
7.08% Senior Notes                       160,000        26,920        1,713           -        188,633
3.67% Yen-denominated Senior Notes        44,170         3,770          228         679         48,847
                                       ----------     ---------     --------      ------     ----------

  Total                                $ 263,126      $ 30,690      $ 1,975       $ 679      $ 296,470
                                       ==========     =========     ========      ======     ==========
</TABLE>

                                       11
<PAGE>
(8)   DERIVATIVES AND HEDGING ACTIVITIES

         The Company  historically  used interest rate swap  contracts to manage
exposure  relating to the fair value of its outstanding  fixed rate debt. During
2004,  the Company  entered  into an interest  rate swap  contract to manage the
exposure related to variability in the future interest  payments on a portion of
its  variable  rate  debt.  The  Company  does  not  use  derivative   financial
instruments for trading or other speculative purposes.

         All  derivative  financial  instruments,  such as  interest  rate  swap
agreements,  are required to be recorded on the balance sheet at fair value.  At
inception of the  derivative  contract,  the Company  designates  the derivative
contract as a hedge of the fair value of the  underlying  debt or a hedge of the
future cash flows associated with interest payments on its variable rate debt.

         For  those  contracts  designated  as a hedge of the fair  value of the
underlying  debt, the Company  assesses  whether or not the derivative  contract
qualifies  as a  highly  effective  hedge  of  the  underlying  hedged  item  as
prescribed by Statement of Financial  Accounting Standards ("SFAS") Nos. 133 and
138. Changes in the fair value of derivative contracts are recorded in earnings.
To the extent that a derivative  contract is effective as a hedge of an exposure
to future changes in fair value,  the change in the derivative  contract's  fair
value  will  be  offset  in  the  Consolidated   Statements  of  Operations  and
Comprehensive  Income  (Loss) by the  change in the fair value of the item being
hedged.

         If the  derivative is  designated  as a cash flow hedge,  the effective
portion  of  changes  in the  fair  value  of the  derivative  are  recorded  in
comprehensive  income (loss) and are  recognized  in operations  when the hedged
item affects earnings. Ineffective portions of changes in the fair value of cash
flow hedges are recognized in earnings.

         Derivative  financial  instruments  involve elements of credit risk not
recognized in the financial  statements.  The credit risk relates to the risk of
nonperformance   by  a   counterparty   to  one  of  the  Company's   derivative
transactions.  The Company  believes  that there is no  significant  credit risk
associated with the potential  failure of the  counterparty to perform under the
terms of its derivative financial instrument.

         To limit the  variability  of a portion of the interest  payments under
the  credit   facilities,   on  March  10,   2004  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. At June 30, 2004, the
fair value of these swap agreements was a $5.1 million asset.

         Also,  on June 1, 2004 the Company  entered  into an interest  rate cap
agreement  with a total notional  amount of $30.0  million.  Under this interest
rate cap agreement,  the Company receives  variable  interest rate payments when
the three  month  Eurodollar  rises  above 4.0%  before  January  1, 2005.  This
interest  rate cap agreement  extends  through March 31, 2005. At June 30, 2004,
the fair value of the interest rate cap was $1,000.

(9)   PENSIONS

         In connection with the SF Holdings Acquisition, the Company assumed the
obligations of certain domestic employee benefit plans. The related  liabilities
recorded in the initial purchase price  allocation were $66.5 million,  of which
$56.5  million is long-term  and $10.0 million is  short-term,  included  within
accrued payroll and related costs on the consolidated balance sheet.

                                       12
<PAGE>
         The  following  are  components  of  net  periodic  benefit  costs  (in
thousands):

                                   Pension Benefits          Other Benefits
                                ----------------------   ----------------------
                                          Three months ended June 30,
                                -----------------------------------------------
                                   2004        2003         2004        2003
                                ----------  ----------   ----------  ----------
Service costs                    $    192    $      -     $    317    $      -
Interest costs                      1,239           -          785           -
Expected return on plan assets     (1,396)          -            -           -
                                 ---------   ---------    ---------   ---------

  Net periodic benefit costs     $     35    $      -     $  1,102    $      -
                                 ==========  =========    =========   =========
                                                  -


                                   Pension Benefits          Other Benefits
                                ----------------------   ----------------------
                                          Six months ended June 30,
                                -----------------------------------------------
                                   2004        2003         2004        2003
                                ----------  ----------   ----------  ----------
Service costs                    $    255    $      -     $    423    $      -
Interest costs                      1,652           -        1,046           -
Expected return on plan assets     (1,860)          -            -           -
                                 ---------   ---------    ---------   ---------

  Net periodic benefit costs     $     47    $      -     $  1,469    $      -
                                 =========   =========    =========   =========

         As of June 30, 2004, $0.8 million of contributions had been made to the
Company's  pension plans.  The Company  presently  anticipates  contributing  an
additional  $2.1  million to fund its pension  plans in 2004 for a total of $2.9
million.

(10)  EQUITY TRANSACTIONS

         During the six months  ended June 30,  2004,  the Company  received net
proceeds of $230,463  from the issuance of 100 shares of Class A common stock to
SCI  Corporation.  SCI  Corporation  is a holding  company that owns 100% of the
outstanding stock of the Company.  SCI Corporation has no operations and no cash
flows,  other than those  provided by its  investors,  or resulting  from equity
transactions with its subsidiaries, which include the Company and its investors.
In order to fund the  proceeds for this  purchase of stock in the  Company,  SCI
Corporation   issued  $240.9  million  of  convertible   preferred  stock  to  a
third-party  investor.  The convertible preferred stock pays cash dividends at a
rate of 10.0% per annum on an amount equal to the sum of the  original  purchase
price of the convertible  preferred stock plus all accrued and unpaid dividends.
Dividends  will  accumulate  to the  extent  not paid,  whether or not earned or
declared.  SCI  Corporation  is  further  required  to  redeem  the  convertible
preferred stock for an amount in cash equal to its original  purchase price plus
all accrued and unpaid  dividends on the eleventh  anniversary  of its issuance,
and is subject to other accelerated  redemption clauses. The Company provides no
guarantees  with  respect  to  these  obligations  of SCI  Corporation,  and the
recourse of the holders of the preferred  stock is limited to claims against the
common stockholders of SCI Corporation.

(11)  STOCK-BASED COMPENSATION

         SCI Corporation,  the Company's parent, has a management investment and
incentive compensation plan for certain key employees of the Company. Under this
plan, SCI Corporation has reserved 1.4 million shares of common stock, and 5,000
shares of convertible participating preferred stock for issuance. As of June 30,
2004,  SCI  Corporation  issued 3,283  Convertible  Preferred  Units ("CPU's) to
certain  Company  employees  in  settlement  of  certain  deferred  compensation
liabilities.  The fair value of the CPU's granted by SCI Corporation  was linked
to  the  fair  market  value  of  one  share  of  SCI  Corporation   convertible
participating  preferred stock. The fair market value of a share of common stock
as of June 30, 2004 was $47.32 per share,  based on a  conversion  rate of 21.13
shares of common for each convertible  participating  preferred share.  CPU's do
not have voting rights and are in certain  circumstances  convertible  to common
stock or  convertible  preferred  participating  stock of SCI  Corporation.  The
issuance of CPU's by SCI  Corporation  in  settlement  of deferred  compensation
liabilities  of the Company  totaling  $3.3 million were  recorded as additional
paid in capital.  As of June 30, 2004, SCI Corporation granted 1,036,624 options
to purchase shares of SCI Corporation  common stock at a price equal to the fair
market value at the date of grant.  Included in this grant were 414,646  options
that are conditional  upon the Company  achieving  certain  defined  performance
targets for EBITDA and debt reduction.

                                       13
<PAGE>
         The Company accounts for these stock-based compensation arrangements in
accordance  with the provisions of Accounting  Principles  Board ("APB") Opinion
No. 25,  "Accounting  for Stock  Issued to  Employees,"  and  complies  with the
disclosure   provisions   of  SFAS  No.   123,   "Accounting   for   Stock-Based
Compensation."   Under  APB  No.  25,  compensation  expense  is  based  on  the
difference, if any, on the measurement date, between the estimated fair value of
the  Company's  stock and the exercise  price of options to purchase that stock.
The compensation  expense is amortized on a straight-line basis over the vesting
period of the options. For  performance-based  options,  compensation expense is
recognized periodically based on changes in the fair value of the stock relative
to  the  exercise  price  of the  option,  the  ratable  vesting  schedule,  and
management's  estimate  regarding the Company's  ability to meet the performance
criteria.  For CPU's,  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.  To  date,  no  compensation  expense  has been  recorded  related  to
stock-based compensation agreements with employees.

(12)  ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

         The components of accumulated other comprehensive  income (loss) are as
follows (in thousands):

                                               June 30,      December 31,
                                                 2004            2003
                                            --------------  --------------

Foreign currency translation adjustment        $  2,701        $ 3,408
Minimum pension liability adjustment             (3,407)        (3,059)
Unrealized investment gain                          416              -
Unrealized gain on cash flow hedge                3,079              -
                                               ---------       --------
  Accumulated other comprehensive income       $  2,789        $   349
                                               =========       ========

(13)  RELATED PARTY TRANSACTIONS

         Robert L. Hulseman,  who is John F. Hulseman's  brother and the husband
of Sheila M.  Hulseman,  is the  Chairman  and Chief  Executive  Officer  of the
Company,  received salary and benefits of $552,367 for the six months ended June
30,  2004 and June 30,  2003.  John F.  Hulseman,  who is Robert  L.  Hulseman's
brother  and the  husband of  Georgia  S.  Hulseman,  is the Vice  Chairman  and
Secretary of the Company,  received  salary and benefits of $552,367 for the six
months  ended June 30, 2004 and June 30,  2003.  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 the SCI Corporation. In addition, Robert L., Sheila
M., John F., Georgia S. Hulseman and Ronald L. Whaley,  the Company's  President
and Chief Operating Officer, are directors of the Company.

         In the six months ended June 30, 2004, the Company and SCI  Corporation
entered into a management  agreement with SCC Holding providing for, among other
things,  the  payment  by SCI  Corporation  of an  annual  advisory  fee of $2.5
million.  In  addition,  SCC Holding  and Vestar  entered  into a  stockholders'
agreement relating to their ownership of voting stock of SCI Corporation. Robert
L. Hulseman and John F. Hulseman,  as a result of their  ownership of voting and
non-voting  membership  interests in SCC  Holding,  have  economic  interests of
0.2758% and 0.8512%, respectively, in SCC Holding. Ten children of Robert L. and
Sheila M. Hulseman each have economic interests in SCC Holding,  either directly
or as  beneficiaries  of trusts,  of  4.9765%;  and six  children of John F. and
Georgia S. Hulseman each have economic interests in SCC Holding, either directly
or as beneficiaries of trusts,  of 8.1859% (in the case of two of the children),
8.1841% (in the case of three of the  children)  and 8.1849% (in the case of the
remaining child).

         In the six months ended June 30, 2004, SCI Corporation paid to Vestar a
one-time  $4.0  million  advisory  fee and  reimbursed  specified  out of pocket
expenses of Vestar.  SCI  Corporation  also entered into a management  agreement
with Vestar pursuant to which SCI Corporation will pay Vestar an $800,000 annual
advisory fee,  plus  reimbursement  of its  expenses.  Vestar also is party to a
registration rights agreement with SCI Corporation and SCC Holding. In addition,
Vestar and SCC Holding entered into a stockholders' agreement relating to, among
other things,  their ownership of voting stock of SCI  Corporation.  Vestar owns
convertible  preferred  stock  representing  32.7%  of the  voting  stock of SCI
Corporation.  Daniel S. O'Connell and Norman W. Alpert are directors the Company
and are both employees and equity owners of Vestar.

                                       14
<PAGE>
         The  Company  paid  dividends  of $13.0  million  and $5.2  million  to
shareholders  for the six  months  ended  June  30,  2004  and  June  30,  2003,
respectively.

(14)  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 ten 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
June 30, 2004 are as follows (in thousands):

               Remainder of 2004      $  15,331
               2005                      25,099
               2006                      22,018
               2007                      19,014
               2008                      16,592
               2009                      15,453
               Thereafter               149,362
                                      ----------
                 Total                $ 262,869
                                      ==========

(15)  SEGMENTS

         The Company manages and evaluates its operations  in  three  reportable
segments:  North America,  Europe and Asia-Pacific.  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 Denmark;  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 the notes to  consolidated  financial  statements  in the Company's
registration  statement on Form S-4 filed July 13, 2004 with the  Securities and
Exchange  Commission listed in the summary of significant  accounting  policies.
Interest  expense,  interest  income and  income  taxes are not  reported  on an
operating  segment  basis  because they are not  considered  in the  performance
evaluation by the Company's chief operating  decision-maker.  Segment  operating
results are measured based on operating  income (loss).  Intersegment  net sales
are accounted for on an arm's length pricing basis.

                                       15
<PAGE>
<TABLE>
<CAPTION>
     Three months ended          North                Asia-               Total      Elimin-
       June 30, 2004            America    Europe    Pacific    Other    Segments     ations       Total
-----------------------------  ---------  --------  ---------  -------  ----------  ----------  -----------
                                                            (in thousands)
<S>                            <C>        <C>       <C>        <C>      <C>         <C>         <C>
Net sales from external
  customers                    $ 554,214  $ 18,868  $  28,039  $ 2,815  $  603,936  $  (6,086)  $  597,850
Intersegment net sales             5,578         -          -      508       6,086     (6,086)           -
Operating income                  23,280     1,592      1,170      185      26,227         22       26,249

      Six months ended
       June 30, 2004
-----------------------------
Net sales from external
  customers                    $ 842,558  $ 35,948  $  51,297  $ 5,842  $  935,645  $ (10,499)  $  925,146
Intersegment net sales             9,631         -          -      868      10,499    (10,499)           -
Operating income                  12,246     2,974      1,830      413      17,463         22       17,485
Depreciation and amortization     36,185     1,830      2,729      373      41,117          -       41,117
Expenditures for long-lived
  assets                          15,496       255      1,793      137      17,681          -       17,681

      At June 30, 2004
-----------------------------
Property, plant and            $ 794,254  $ 24,253  $  37,480  $ 2,622  $  858,609  $       -   $  858,609
  equipment, net
Total assets                   1,872,343    89,815     85,802   11,668   2,059,628   (133,308)   1,926,320

     Three months ended
       June 30, 2003
-----------------------------
Net sales from external
  customers                    $ 201,587  $ 16,070  $  24,757  $ 2,525  $  244,939  $  (4,896)  $  240,043
Intersegment net sales             4,535         -          -      361       4,896     (4,896)           -
Operating income                  11,258     1,774      1,353      159      14,544          -       14,544

      Six months ended
       June 30, 2003
-----------------------------
Net sales from external
  customers                    $ 345,118  $ 29,708  $  45,007  $ 5,232  $  425,065  $  (8,265)  $  416,800
Intersegment net sales             7,679         -          -      586       8,265     (8,265)           -
Operating income                   6,732     2,740      1,896      177      11,545         (8)      11,537
Depreciation and amortization     15,204     1,604      2,925      398      20,131          -       20,131
Expenditures for long-lived
  assets                          21,218     1,245      2,281      102      24,846          -       24,846
</TABLE>


<TABLE>
<CAPTION>
                                                             Three months     Six months
                                                                ended            ended
                                                            June 30, 2004    June 30, 2004
                                                           ---------------  ---------------
                                                                     (in thousands)
<S>                                                        <C>              <C>
Revenues:
Total segments and other net sales                            $ 603,936        $ 935,645
Eliminations of intersegment net sales                           (6,086)         (10,499)
                                                              ----------       ----------
  Total consolidated net sales                                $ 597,850        $ 925,146
                                                              ==========       ==========

Operating income (loss):
Total segment operating income                                $  26,249        $  17,485
Interest expense, net of interest income of $39 and $128         14,927           23,273
Prepayment penalties                                                  -           30,690
Loss on debt extinguishment                                           -              916
Foreign currency exchange loss (gain), net                          999             (375)
Other (income) expense, net                                         (84)             684
                                                              ----------       ----------

  Total consolidated income (loss) before income taxes,
    and minority interest                                     $  10,407        $ (37,703)
                                                              ==========       ==========
</TABLE>


                                       16
<PAGE>
                                             At June 30, 2004
                                            ------------------
                                              (in thousands)
Assets:
Total segments                                 $ 2,059,628
Eliminations of intersegment receivables          (133,308)
                                               ------------
  Total consolidated assets                    $ 1,926,320
                                               ============

(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 guaranteed, jointly and severally, by all of the domestic
and European  subsidiaries of the Company. The consolidated  guarantors include:
Solo Cup Company, Solo Management Company, P.R. SOLO CUP, INC., SOLO TEXAS, LLC,
SF  Holdings,   Inc.,  Sweetheart  Cup  Company,   Inc.,  Lily  Canada  Holdings
Corporation, EMERALD LADY INC., Solo Cup (UK) Limited, Insulpak Holdings Limited
and Solo Cup Europe Limited.  The following financial  information  presents the
consolidated  guarantors  and  non-guarantors  of the 8.5%  Senior  Subordinated
Notes, in accordance with Rule 3-10 of Regulation S-K (in thousands):

                                       17
<PAGE>
<TABLE>
<CAPTION>
                                                                   Consolidated Balance Sheet
                                                                         June 30, 2004
                                                                    Non-
                                                   Guarantors    Guarantors    Eliminations    Consolidated
                                                  ------------  ------------  --------------  --------------
<S>                                               <C>           <C>           <C>             <C>

                     Assets
Current assets:
  Cash and cash equivalents                       $     9,853    $  12,486      $       -      $    22,339
  Cash in escrow                                       15,000            -              -           15,000
  Accounts receivable:
    Trade                                             194,101       44,788         (8,911)         229,978
    Other                                              24,826        1,924              -           26,750
  Inventories                                         302,908       20,462           (255)         323,115
  Deferred income taxes                                54,043          733              -           54,776
  Prepaid expenses and other current assets            42,568        7,423              -           49,991
                                                  ------------   ----------     ----------     ------------
      Total current assets                            643,299       87,816         (9,166)         721,949

Property, plant and equipment, net                    794,060       64,549              -          858,609
Goodwill and intangible assets                        285,565        3,806              -          289,371
Restricted cash                                         1,905            -              -            1,905
Other assets                                          103,564        5,306        (54,384)          54,486
                                                  ------------   ----------     ----------     ------------

      Total assets                                $ 1,828,393    $ 161,477      $ (63,550)     $ 1,926,320
                                                  ============   ==========     ==========     ============

      Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                $   134,361    $  56,330      $  (8,922)     $   181,769
  Accrued expenses and other current liabilities      125,164       14,249             10          139,423
  Short-term debt                                           -        6,854              -            6,854
  Current maturities of long-term debt                  6,500          626              -            7,126
                                                  ------------   ----------     ----------     ------------
      Total current liabilities                       266,025       78,059         (8,912)         335,172

Long-term debt, net of current maturities             978,163       16,461              -          994,624
Deferred income taxes                                  94,014          723              -           94,737
Other liabilities                                      72,913       34,791        (28,271)          79,433
                                                  ------------   ----------     ----------     ------------
      Total liabilities                             1,411,115      130,034        (37,183)       1,503,966
                                                  ------------   ----------     ----------     ------------

Minority interest                                           -        1,009              -            1,009
                                                  ------------   ----------     ----------     ------------

Shareholders' equity:
  Class A common stock                                      -        2,114         (2,114)               -
  Additional paid-in capital                          258,818       16,630        (16,630)         258,818
  Retained earnings                                   154,920       12,441         (7,623)         159,738
  Accumulated other comprehensive income (loss)         3,540         (751)             -            2,789
                                                  ------------   ----------     ----------     ------------
      Total shareholders' equity                      417,278       30,434        (26,367)         421,345
                                                  ------------   ----------     ----------     ------------

      Total liabilities and shareholders' equity  $ 1,828,393    $ 161,477      $ (63,550)     $ 1,926,320
                                                  ============   ==========     ==========     ============
</TABLE>


                                       18
<PAGE>
<TABLE>
<CAPTION>
                                                                   Consolidated Balance Sheet
                                                                       December 31, 2003
                                                                    Non-
                                                   Guarantors    Guarantors    Eliminations    Consolidated
                                                  ------------  ------------  --------------  --------------
<S>                                               <C>           <C>           <C>             <C>

                     Assets
Current assets:
  Cash and cash equivalents                       $     1,987    $   1,282      $       -      $     3,269
  Cash in escrow                                       10,003            -              -           10,003
  Accounts receivable:
    Trade                                              53,253       35,140              -           88,393
    Other                                              13,135        3,369        (10,587)           5,917
  Inventories                                          90,509        9,279            (69)          99,719
  Deferred income taxes                                     -          895              -              895
  Prepaid expenses and other current assets            10,341        2,474              -           12,815
                                                  ------------   ----------     ----------     ------------
      Total current assets                            179,228       52,439       (10,656)          221,011

Property, plant and equipment, net                    257,013       42,271              -          299,284
Goodwill and intangible assets                         94,765          730              -           95,495
Restricted cash                                         2,139            -              -            2,139
Other assets                                           50,097        3,063        (41,479)          11,681
                                                  ------------   ----------     ----------     ------------

      Total assets                                $   583,242    $  98,503      $ (52,135)     $   629,610
                                                  ============   ==========     ==========     ============

      Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                $    46,453    $  28,277      $ (10,590)     $    64,140
  Accrued expenses and other current liabilities       37,373        6,678              -           44,051
  Short-term debt                                      35,800        8,382              -           44,182
  Current maturities of long-term debt                  5,274          642              -            5,916
                                                  ------------   ----------     ----------     ------------
      Total current liabilities                       124,900       43,979        (10,590)         158,289

Long-term debt, net of current maturities             199,554        3,324              -          202,878
Deferred income taxes                                   2,396         (791)             -            1,605
Other liabilities                                      10,153       22,918        (18,955)          14,116
                                                  ------------   ----------     ----------     ------------
      Total liabilities                               337,003       69,430        (29,545)         376,888
                                                  ------------   ----------     ----------     ------------

Minority interest                                           -        2,060              -            2,060
                                                  ------------   ----------     ----------     ------------

Shareholders' equity:
  Class A common stock                                    103          843           (843)             103
  Class B common stock                                      1            -              -                1
  Additional paid-in capital                           24,965       14,088        (14,088)          24,965
  Retained earnings                                   222,708       10,195         (7,659)         225,244
  Accumulated other comprehensive income (loss)        (1,538)       1,887              -              349
                                                  ------------   ----------     ----------     ------------
      Total shareholders' equity                      246,239       27,013        (22,590)         250,662
                                                  ------------   ----------     ----------     ------------

      Total liabilities and shareholders' equity  $   583,242    $  98,503      $ (52,135)     $   629,610
                                                  ============   ==========     ==========     ============
</TABLE>


                                       19
<PAGE>
<TABLE>
<CAPTION>
                                                                        Consolidated Statement of Operations
                                                                          Three Months Ended June 30, 2004
                                                                                Non-
                                                               Guarantors    Guarantors    Eliminations    Consolidated
                                                              ------------  ------------  --------------  --------------
<S>                                                           <C>           <C>           <C>             <C>
Net sales                                                      $ 547,363      $ 59,432      $  (8,945)       $ 597,850
Cost of goods sold                                               471,994        49,562         (8,940)         512,616
                                                               ----------     ---------     ----------       ----------

      Gross profit                                                75,369         9,870             (5)          85,234

Selling, general and administrative expenses                      53,780         5,299            (94)          58,985
                                                               ----------     ---------     ----------       ----------

      Operating income                                            21,589         4,571             89           26,249

Interest expense, net                                             14,201           726              -           14,927
Foreign currency exchange loss, net                                  598           401              -              999
Other expense (income), net                                            5           (89)             -              (84)
                                                               ----------     ---------     ----------       ----------

      Income before income tax and minority interest               6,785         3,533             89           10,407

Income tax provision                                               2,358         1,797            (24)           4,131
Minority interest                                                      -           105              -              105
                                                               ----------     ---------     ----------       ----------

      Net income                                               $   4,427      $  1,631      $     113        $   6,171
                                                               ==========     =========     ==========       ==========
</TABLE>









<TABLE>
<CAPTION>
                                                                        Consolidated Statement of Operations
                                                                          Three Months ended June 30, 2003
                                                                                Non-
                                                               Guarantors    Guarantors    Eliminations    Consolidated
                                                              ------------  ------------  --------------  --------------
<S>                                                           <C>           <C>           <C>             <C>
Net sales                                                      $ 213,034      $ 30,057      $  (3,048)       $ 240,043
Cost of goods sold                                               178,344        25,222         (3,048)         200,518
                                                               ----------     ---------     ----------       ----------

      Gross profit                                                34,690         4,835              -           39,525

Selling, general and administrative expenses                      21,678         3,303              -           24,981
                                                               ----------     ---------     ----------       ----------

      Operating income                                            13,012         1,532              -           14,544

Interest expense, net                                              3,776           238              -            4,014
Foreign currency exchange gain, net                               (1,612)            -              -          (1,612)
Other expense, net                                                    95            32            (43)              84
                                                               ----------     ---------     ----------       ----------

      Income before income tax and minority interest              10,753         1,262             43           12,058


Income tax provision                                                 591           620              -            1,211
Minority interest                                                      -            75              -               75
                                                               ----------     ---------     ----------       ----------

      Net income                                               $  10,162      $    567      $      43        $  10,772
                                                               ==========     =========     ==========       ==========
</TABLE>

                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                                        Consolidated Statement of Operations
                                                                          Six Months Ended June 30, 2004
                                                                                Non-
                                                               Guarantors    Guarantors    Eliminations    Consolidated
                                                              ------------  ------------  --------------  --------------
<S>                                                           <C>           <C>           <C>             <C>
Net sales                                                      $ 841,719      $ 97,048      $ (13,621)       $ 925,146
Cost of goods sold                                               735,320        81,177        (13,509)         802,988
                                                               ----------     ---------     ----------       ----------

      Gross profit                                               106,399        15,871           (112)         122,158

Selling, general and administrative expenses                      95,623         9,174           (124)         104,673
                                                               ----------     ---------     ----------       ----------

      Operating income                                            10,776         6,697             12           17,485

Interest expense, net                                             22,248         1,025              -           23,273
Prepayment penalties                                              30,690             -              -           30,690
Foreign currency exchange (gain) loss, net                          (444)           69              -             (375)
Other expense, net                                                   965           635              -            1,600
                                                               ----------     ---------     ----------       ----------

      Income (loss) before income tax and  minority interest     (42,683)        4,968             12          (37,703)


Income tax provision                                              12,098         2,605            (24)          14,679
Minority interest                                                      -           116              -              116
                                                               ----------     ---------     ----------       ----------

      Net income (loss)                                        $ (54,781)     $  2,247      $      36        $ (52,498)
                                                               ==========     =========     ==========       ==========
</TABLE>





<TABLE>
<CAPTION>
                                                                        Consolidated Statement of Operations
                                                                          Six Months ended June 30, 2003
                                                                                Non-
                                                               Guarantors    Guarantors    Eliminations    Consolidated
                                                              ------------  ------------  --------------  --------------
<S>                                                           <C>           <C>           <C>             <C>
Net sales                                                      $ 366,432      $ 55,333      $  (4,965)       $ 416,800
Cost of goods sold                                               318,905        46,573         (4,965)         360,513
                                                               ----------     ---------     ----------       ----------

      Gross profit                                                47,527         8,760              -           56,287

Selling, general and administrative expenses                      38,605         6,145              -           44,750
                                                               ----------     ---------     ----------       ----------

      Operating income                                             8,922         2,615              -           11,537

Interest expense, net                                              6,119           454              -            6,573
Foreign currency exchange loss, net                                    1             -              -                1
Other (income) expense, net                                         (251)          134            134               17
                                                               ----------     ---------     ----------       ----------

      Income before income tax and minority interest               3,053         2,027           (134)           4,946


Income tax provision                                                 873           794              -            1,667
Minority interest                                                      -            39              -               39
                                                               ----------     ---------     ----------       ----------

      Net income                                               $   2,180      $  1,194      $    (134)       $   3,240
                                                               ==========     =========     ==========       ==========
</TABLE>

                                 21
<PAGE>
<TABLE>
<CAPTION>
                                                                        Consolidated Statement of Cash Flows
                                                                          Six months ended June 30, 2004
                                                              ----------------------------------------------------------
                                                                                Non-
                                                               Guarantors    Guarantors    Eliminations    Consolidated
                                                              ------------  ------------  --------------  --------------
<S>                                                           <C>           <C>           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES

      Net cash (used in) provided by operating activities      $ (41,022)     $ 15,109      $       -        $ (25,913)
                                                               ----------     ---------     ----------       ----------

CASH FLOWS FROM INVESTING ACTIVITIES

  Payment for business acquisition, net of cash acquired        (874,734)            -              -         (874,734)
  Purchase of property, plant and equipment                      (14,648)       (3,033)             -          (17,681)
  Proceeds from sale of property, plant and equipment              1,741           265              -            2,006
  Increase in cash in escrow                                      (4,997)            -              -           (4,997)
                                                               ----------     ---------     ----------       ----------
      Net cash used in investing activities                     (892,638)       (2,768)             -         (895,406)
                                                               ----------     ---------     ----------       ----------

CASH FLOWS FROM FINANCING ACTIVITIES

  Net borrowings under revolving credit facilities                24,263           537              -           24,800
  Borrowings under the term notes                                650,000             -              -          650,000
  Borrowings under the 8.5% Senior Subordinated Notes            325,000             -              -          325,000
  Borrowings under the Securitization Facility                     5,000             -              -            5,000
  Borrowings under the 364-day revolving credit agreement         16,500             -              -           16,500
  Proceeds from sale of common stock                             230,463             -              -          230,463
  Repayments of the 7.08% Senior Notes                          (160,000)            -              -         (160,000)
  Repayments of the 3.67% Yen-denominated Senior Notes           (44,170)            -              -          (44,170)
  Repayments of interest rate swap                                (1,656)            -              -           (1,656)
  Repayments of the Securitization Facility                      (27,800)            -              -          (27,800)
  Repayments of the 364-day revolving credit agreement           (29,500)            -              -          (29,500)
  Repayments of the term notes                                    (1,625)            -              -           (1,625)
  Repayments of other debt                                          (657)       (1,704)             -           (2,361)
  Debt issuance costs                                            (31,497)            -              -          (31,497)
  Dividends paid                                                 (13,008)            -              -          (13,008)
  Decrease in restricted cash                                        234             -              -              234
                                                               ----------     ---------     ----------       ----------
      Net cash provided by (used in) financing activities        941,547        (1,167)             -          940,380
                                                               ----------     ---------     ----------       ----------

Effect of exchange rate changes on cash                              (21)           30              -                9
                                                               ----------     ---------     ----------       ----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                          7,866        11,204              -           19,070

Cash and cash equivalents, beginning of period                     1,987         1,282              -            3,269
                                                               ----------     ---------     ----------       ----------

Cash and cash equivalents, end of period                       $   9,853      $ 12,486      $       -        $  22,339
                                                               ==========     =========     ==========       ==========

SUPPLEMENTAL CASH FLOW DISCLOSURES:

Interest paid                                                  $  10,980      $     48      $       -        $  11,028
                                                               ==========     =========     ==========       ==========

Income taxes paid                                              $   1,278      $    259      $       -        $   1,537
                                                               ==========     =========     ==========       ==========
</TABLE>

                                     22
<PAGE>
<TABLE>
<CAPTION>
                                                                         Consolidated Statement of Cash Flows
                                                                          Six months ended June 30, 2003
                                                              ----------------------------------------------------------
                                                                                Non-
                                                               Guarantors    Guarantors    Eliminations    Consolidated
                                                              ------------  ------------  --------------  --------------
<S>                                                           <C>           <C>           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES

      Net cash provided by operating activities                $   5,671      $  3,257      $       -        $   8,928
                                                               ----------     ---------     ----------       ----------

CASH FLOWS FROM INVESTING ACTIVITIES

  Payment for business acquisition, net of cash acquired            (132)            -              -             (132)
  Purchase of property, plant and equipment                      (22,463)       (2,383)             -          (24,846)
  Proceeds from sale of property, plant and equipment                564         1,963              -            2,527
                                                               ----------     ---------     ----------       ----------
      Net cash used in investing activities                      (22,031)         (420)             -          (22,451)
                                                               ----------     ---------     ----------       ----------

CASH FLOWS FROM FINANCING ACTIVITIES

  Net borrowings under revolver credit facilities                  4,500             -              -            4,500
  Borrowings under the Securitization Facility                    71,300             -              -           71,300
  Repayments of the Securitization Facility                      (63,000)            -              -          (63,000)
  Repayments of other debt                                           (75)       (3,565)             -           (3,640)
  Dividends paid                                                  (5,238)            -              -           (5,238)
                                                               ----------     ---------     ----------       ----------
      Net cash provided by (used in) financing activities          7,487        (3,565)             -            3,922
                                                               ----------     ---------     ----------       ----------

Effect of exchange rate changes on cash                              (80)           (8)             -              (88)
                                                               ----------     ---------     ----------       ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS                         (8,953)         (736)             -           (9,689)

Cash and cash equivalents, beginning of period                    10,769         1,858              -           12,627
                                                               ----------     ---------     ----------       ----------

Cash and cash equivalents, end of period                       $   1,816      $  1,122      $       -        $   2,938
                                                               ==========     =========     ==========       ==========

SUPPLEMENTAL CASH FLOW DISCLOSURES:

Interest paid                                                  $   6,653      $     70      $       -        $   6,723
                                                               ==========     =========     ==========       ==========

Income taxes paid                                              $      84      $    146      $       -        $     230
                                                               ==========     =========     ==========       ==========
</TABLE>

(17)  SUBSEQUENT EVENTS

         On July 6, 2004, the Company consummated the purchase of certain assets
and liabilities of Erving Paper Products,  Inc. ("Erving") located in Green Bay,
Wisconsin. Erving specializes in and provides foodservice distributors with high
quality paper products which include:  placemats,  banquet rolls,  table covers,
white and color napkins,  seasonal designs and specialty  prints.  The aggregate
purchase price was $2.6 million and was paid in cash.

         On July 19, 2004, the Company announced the elimination of thirty-three
sales  people  in  association   with  the  integration  of  Sweetheart.   These
individuals will be terminated by September 30, 2004.

         On July 27,  2004,  the Company  announced  the  reorganization  of its
administrative   offices,   including  the  closure  of  its  Urbana,   Illinois
administrative  office  and  the  transfer  of  various  functions  between  the
Company's Owings Mills,  Maryland and Highland Park,  Illinois  facilities.  The
Company expects this reorganization to be substantially completed during 2005.

         In  connection  with the  Company's  closure of its  manufacturing  and
warehouse facilities in Kensington, Connecticut, the Company sold certain assets
of its  Worthington  Tool and Sherwood Tool  businesses.  On June 23, 2004,  the
Company  consummated the sale of certain assets of its Worthington tool business
to Lanco Manufacturing Inc. for an aggregate purchase price of $60,000, of which
$40,000  was paid in cash and the  remainder  is payable by  promissory  note in
twelve equal monthly installments. On July 12, 2004, the Company consummated the
sale of certain  assets of its  Sherwood  Tool  business to Paper  Manufacturing
Corporation  for an

                                       23
<PAGE>
aggregate  purchase  price of $2.3 million  which was paid in cash.  On July 30,
2004,  the  Company  sold  the  remaining  assets  of  Sherwood  Tool to  Thomas
Industries Inc. for an aggregate purchase price of $0.3 million.

Item 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATION

         Forward-looking statements in this filing, including those in the Notes
to  Consolidated  Financial  Statements,  are made  pursuant  to the safe harbor
provisions  of the  Private  Securities  Litigation  Reform  Act of  1995.  Such
forward-looking  statements  are subject to risks and  uncertainties  and actual
results could differ materially.  Such risks and uncertainties  include, but are
not limited to, general  economic and business  conditions,  competitive  market
pricing,  increases in raw material costs,  energy costs and other manufacturing
costs,  fluctuations in demand for the Company's  products,  potential equipment
malfunctions and pending litigation.

General

         On February 27, 2004,  with an effective date of February 22, 2004, the
Company  completed  the  SF  Holdings   Acquisition.   In  connection  with  the
acquisition,  the  Company  became the parent  company of Solo  Illinois  and SF
Holdings.  The Company is a holding  company,  the material  assets of which are
100% of the capital  stock of Solo  Illinois and 100% of the capital stock of SF
Holdings.

         The Company is a leading  global  producer and  marketer of  disposable
foodservice  products and has served the industry for over 60 years. The Company
manufactures  one of the broadest  product lines of cups, lids, food containers,
plates, bowls, cutlery,  napkins and tablecovers in the industry,  with products
available  in plastic,  paper and foam.  The Company is  recognized  for product
innovation and customer  service,  and its products are known for their quality,
reliability and consistency. The Company's products are marketed primarily under
the Solo and  Sweetheart  brands,  as well as Jack Frost,  Lily,  Trophy,  Jazz,
Hoffmaster,  Creative Expressions and All Occasions.  The Company believes it is
the leading supplier of branded  disposable cups and plastic plates and bowls to
consumer  customers in the United States.  In addition to its branded  products,
the  Company  provides a majority of its product  lines to its  customers  under
private  label.  The Company  currently  operates  manufacturing  facilities and
warehouse  distribution centers in North America,  Japan and the United Kingdom,
and the Company sells its products worldwide.

         The Company serves two primary customer groups:

          o  Foodservice:   The  Company's  foodservice  customers  include  (1)
          broadline   distributors,   such  as  Sysco   Corporation   and  Bunzl
          Distribution USA, Inc., (2) quick service  restaurants,  or QSRs, such
          as McDonald's Corporation, Wendy's International, Inc. and Burger King
          Corporation,  (3) national accounts, such as Starbucks Corporation and
          7-Eleven, Inc., and (4) dairy and food processors, such as Nissin Food
          Products  Company  Ltd.  and Blue Bell  Creameries  Inc.  The  Company
          believes  it  has   developed   strong   relationships   with  leading
          foodservice  customers due to its emphasis on product  innovation  and
          customer  service and the fact that it has one of the broadest product
          offerings  in  the  industry.   The  Company  sells  its  products  to
          foodservice  customers  through  its  regionally-organized,   in-house
          direct sales force and through national account representatives.

          o  Consumer:  The  Company's  consumer  customers  include (1) grocery
          stores,   such  as  Publix  Supermarkets  Inc.,  The  Kroger  Co.  and
          Albertson's,  Inc., (2) mass  merchandisers,  such as Wal-Mart Stores,
          Inc.  and Target  Corporation,  (3)  warehouse  clubs,  such as Costco
          Wholesale  Corporation  and BJ's Wholesale  Club, and (4) other retail
          outlets,  such as drug  stores,  party stores and dollar  stores.  The
          Company believes it is the leading supplier of branded disposable cups
          and  plastic  plates  and bowls to  consumer  customers  in the United
          States,  which it sells under the Solo and Jack Frost brand names.  In
          addition,  The  Company  sells  paper and party  goods under the brand
          names Creative Expressions and All Occasions.  The Company's sales and
          marketing   strategy  for  consumer   customers  is  designed   around
          supporting  the  Company's  strong  brand  names,  as well as  selling
          private  label  products.  The Company  sells its products to consumer
          customers  through  both  regional  broker  networks  and our in-house
          direct sales force.

                                       24
<PAGE>
         Seasonality  has a limited  impact on the  Company's  business.  In the
past,  the Company  experienced  seasonality as more of its products are sold in
the warmer  months  with the  majority  of its net cash  flows  from  operations
realized  during the last six months of the fiscal year.  Sales for such periods
reflect  the high  seasonal  demands  of the  summer  months  when  outdoor  and
away-from-home  consumption increases.  However, with the increase in popularity
of hot  drinks  and  the  introduction  of more  indoor  sporting  events,  this
seasonality has been decreasing. In the event that the Company's cash flows from
operations are  insufficient to provide  working  capital  necessary to fund its
requirements,  the Company will need to borrow under its credit facility or seek
other sources of capital.  The Company  believes that funds available under such
credit facility,  together with cash generated from operations, will be adequate
to provide for cash  requirements  for the remainder of the calendar year. Since
these  forward-looking  statements are based upon current expectations of future
events and projections  and are subject to a number of risks and  uncertainties,
many of which are beyond our  control,  actual  results or  outcomes  may differ
materially  from those  expressed  or implied  herein,  and you should not place
undue reliance on these statements.

Critical Accounting Policies and Estimates

           The  Company's  critical  accounting  policies  are  described in its
registration  statement on Form S-4 filed July 13, 2004 with the  Securities and
Exchange Commission.

Recent Developments

         On July 6, 2004, the Company consummated the purchase of certain assets
and liabilities of Erving Paper Products,  Inc. ("Erving") located in Green Bay,
Wisconsin. Erving specializes in and provides foodservice distributors with high
quality paper products which include:  placemats,  banquet rolls,  table covers,
white and color napkins,  seasonal designs and specialty  prints.  The aggregate
purchase price was $2.6 million and was paid in cash.

         On July 19, 2004, the Company announced the elimination of thirty-three
sales  people  in  association   with  the  integration  of  Sweetheart.   These
individuals will be terminated by September 30, 2004.

         On July 27,  2004,  the Company  announced  the  reorganization  of its
administrative   offices,   including  the  closure  of  its  Urbana,   Illinois
administrative  office  and  the  transfer  of  various  functions  between  the
Company's Owings Mills,  Maryland and Highland Park,  Illinois  facilities.  The
Company expects this reorganization to be substantially completed during 2005.

         In  connection  with the  Company's  closure of its  manufacturing  and
warehouse facilities in Kensington, Connecticut, the Company sold certain assets
of its  Worthington  Tool and Sherwood Tool  businesses.  On June 23, 2004,  the
Company  consummated the sale of certain assets of its Worthington tool business
to Lanco Manufacturing Inc. for an aggregate purchase price of $60,000, of which
$40,000  was paid in cash and the  remainder  is payable by  promissory  note in
twelve equal monthly installments. On July 12, 2004, the Company consummated the
sale of certain  assets of its  Sherwood  Tool  business to Paper  Manufacturing
Corporation  for an aggregate  purchase  price of $2.3 million which was paid in
cash. On July 30, 2004,  the Company sold the remaining  assets of Sherwood Tool
to Thomas Industries Inc. for an aggregate purchase price of $0.3 million.

Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003

         Net Sales

         Net sales increased  $357.8 million,  or 149.1%,  to $597.9 million for
the three  months ended June 30, 2004  compared to $240.0  million for the three
months ended June 30, 2003, reflecting a 4.0% increase in average realized sales
prices and a 145.1% increase in sales volume.  The increase in average  realized
sales prices reflects the implementation of several price increases to customers
as a result of higher raw material  costs.  Sales volume  growth was primarily a
result of the acquisition.  Excluding the impact of the  acquisition,  net sales
increased $19.0 million, or 7.9%, reflecting a 4.0% increase in average realized
sales prices and a 3.9% increase in sales volume as compared to the three months
ended June 30, 2003.

                                       25
<PAGE>
         Gross Profit

         Gross profit increased $45.7 million,  or 115.6%,  to $85.2 million for
the three  months  ended June 30, 2004  compared to $39.5  million for the three
months ended June 30, 2003. As a percentage of net sales, gross profit decreased
to 14.3% for the  three  months  ended  June 30,  2004 from  16.5% for the three
months ended June 30, 2003. Gross profit increased $44.5 million  primarily as a
result of the  acquisition.  Excluding  the  results of the  acquisition,  gross
profit  increased  $1.2 million,  or 3.0%, to $40.7 million for the three months
ended June 30, 2004  compared to $39.5  million for the three  months ended June
30, 2003 primarily due to increased sales volume and increased  prices offset by
higher raw material prices.

         Selling, general and administrative expenses

         Selling,  general and administrative  expenses increased $34.0 million,
or 136.1%, to $59.0 million for the three months ended June 30, 2004 compared to
$25.0 million for the three months ended June 30, 2003.  This increase  includes
$23.9  million  of  expenses  associated  with the  Sweetheart  operations.  The
remaining  increase  of  $9.0  million  resulted  from  $7.9  million  of  costs
associated with the  integration of support  functions and systems of Sweetheart
in connection with the acquisition and $0.9 million of professional services.

         Operating income

         Operating  income  increased $11.7 million,  or 80.5%, to $26.2 million
for the three months ended June 30, 2004 compared to $14.5 million for the three
months ended June 30, 2003, due to the reasons stated above.

         Interest expense, net

         Interest  expense,  net increased  $10.9 million,  or 271.9%,  to $14.9
million for the three  months  ended June 30, 2004  compared to $4.0 million for
the three months ended June 30, 2003.  This increase is primarily  attributed to
borrowings  under the Company's  credit  facilities and the additional  interest
associated with the 8.5% Senior Subordinated Notes issued in connection with the
acquisition.

         Foreign currency exchange loss (gain), net

         Foreign  currency  exchange loss (gain),  net changed $2.6 million,  or
162.5%  to a loss of $1.0  million  for the three  months  ended  June 30,  2004
compared to a gain of $1.6  million for the three  months  ended June 30,  2003.
This change is primarily  attributed to fluctuations in the United Kingdom pound
sterling denominated inter-company debt.

         Income tax provision

         Income tax provision increased $2.9 million, or 241.1%, to $4.1 million
for the three months ended June 30, 2004  compared to $1.2 million for the three
months ended June 30, 2003. This increase resulted  primarily from the Company's
change in tax filing  status from  subchapter S to  subchapter C of the Internal
Revenue Code in the United States.

         Minority interest

         Minority  interest  increased  $30,000,  or 40.0%,  to $105,000 for the
three months ended June 30, 2004  compared to $75,000 for the three months ended
June 30, 2003. This amount  represents a 20.0% ownership in Global Cup which was
purchased  by the Company as of May 20, 2004 and a 2.0%  ownership  in Sanyo Pax
Operations Company, LTD for the three months ended June 30, 2004.

         Net income

         Net income  decreased $4.6 million,  or 42.7%,  to $6.2 million for the
three months ended June 30, 2004  compared to $10.8 million for the three months
ended June 30, 2003, due to the reasons stated above.

                                       26
<PAGE>
Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003

         Net Sales

         Net sales increased  $508.3 million,  or 122.0%,  to $925.1 million for
the six months ended June 30, 2004 compared to $416.8 million for the six months
ended June 30, 2003, reflecting a 2.9% increase in average realized sales prices
and a 119.1%  increase in sales volume.  The increase in average  realized sales
prices reflects the  implementation of several price increases to customers as a
result of higher raw material costs.  Sales volume growth was primarily a result
of the acquisition. Excluding the impact of the acquisition, net sales increased
$40.1  million,  or 9.6%,  reflecting a 2.9% increase in average  realized sales
prices and a 6.7%  increase in sales  volume as compared to the six months ended
June 30, 2003.

         Gross Profit

         Gross profit increased $65.9 million,  or 117.0%, to $122.2 million for
the six months ended June 30, 2004  compared to $56.3 million for the six months
ended June 30, 2003.  As a percentage  of net sales,  gross profit  decreased to
13.2% for the six months ended June 30, 2004 from 13.5% for the six months ended
June 30, 2003. Gross profit increased $63.6 million primarily as a result of the
acquisition.  Excluding the results of the  acquisition,  gross profit increased
$2.3  million,  or 4.1%, to $58.6 million for the six months ended June 30, 2004
compared to $56.3 million for the six months ended June 30, 2003,  primarily due
to increased sales volume offset by higher raw material prices.

         Selling, general and administrative expenses

         Selling,  general and administrative  expenses increased $59.9 million,
or 133.9%,  to $104.7 million for the six months ended June 30, 2004 compared to
$44.8  million for the six months ended June 30, 2003.  This  increase  includes
$37.6  million  of  expenses  associated  with the  Sweetheart  operations.  The
remaining increase of $22.3 million resulted primarily from (i) $15.1 million of
costs  associated  with the  integration  of support  functions  and  systems of
Sweetheart in connection with the acquisition, (ii) $2.3 million of professional
services  (iii) $1.6 million of costs  associated  with higher  employee  health
insurance  benefits  and  (iv)  $1.1  million  of  management  fees  due  to SCI
Corporation.

         Operating income

         Operating income increased $5.9 million, or 51.6%, to $17.5 million for
the six months ended June 30, 2004  compared to $11.5 million for the six months
ended June 30, 2003, due to the reasons stated above.

         Interest expense, net

         Interest  expense,  net increased  $16.7 million,  or 254.1%,  to $23.3
million for the six months ended June 30, 2004  compared to $6.6 million for the
six months  ended June 30,  2003.  This  increase  is  primarily  attributed  to
borrowings  under the Company's  credit  facilities and the additional  interest
associated with the 8.5% Senior Subordinated Notes issued in connection with the
acquisition.

         Prepayment penalties

         Prepayment  penalties  were $30.7 million for the six months ended June
30,  2004.  This  expense  was  primarily  attributed  to  the  prepayment  fees
associated with early extinguishment of $160.0 million of 7.08% senior notes due
2011 and $40.5 million of 3.67% Yen-denominated senior notes due 2008.

         Loss on debt extinguishment

         Loss on debt  extinguishment  was $0.9 million for the six months ended
June 30, 2004.  This loss was due to write off of debt issuance costs related to
the   extinguishment   of  the  7.08%  senior  notes  due  2011  and  the  3.67%
Yen-denominated senior notes due 2008.

                                       27
<PAGE>
         Foreign currency exchange loss (gain), net

         Foreign currency exchange loss (gain), net changed $376,000,  to a gain
of $375,000 for the six months ended June 30, 2004  compared to a loss of $1,000
for the six months ended June 30, 2003.  This change is primarily  attributed to
fluctuations  in the United  Kingdom pound  sterling  denominated  inter-company
debt.

         Income tax provision

         Income tax  provision  increased  $13.0  million,  or 780.6%,  to $14.7
million for the six months ended June 30, 2004  compared to $1.7 million for the
six months ended June 30, 2003.  This increase  resulted  primarily from a $29.8
million expense due to the Company's change in tax filing status from subchapter
S to  subchapter  C of the  Internal  Revenue  Code in the United  States.  This
expense  was  partially  offset by an  increased  tax  benefit of $15.1  million
resulting primarily from the operating losses.

         Minority interest

         Minority interest increased $77,000, or 197.4%, to $116,000 for the six
months ended June 30, 2004 compared to $39,000 for the six months ended June 30,
2003. This amount represents a 20.0% ownership in Global Cup which was purchased
by the Company as of May 20, 2004 and a 2.0%  ownership in Sanyo Pax  Operations
Company, LTD.

         Net income (loss)

         Net income (loss) changed $55.7 million, to a loss of $52.5 million for
the six months  ended June 30, 2004  compared to income of $3.2  million for the
six months ended June 30, 2003, due to the reasons stated above.

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.  During the six months ended June 30,  2004,  the Company
funded its business acquisition,  retirement of pre-acquisition debt and capital
expenditures  primarily from (i) borrowings  under the Company's  $800.0 million
credit facilities,  (ii) the issuance of the 8.5% senior  subordinated notes and
(iii)  proceeds from the sale of common stock.  The Company  expects to fund its
capital  expenditures  for the  remainder  of 2004  from a  combination  of cash
generated from operations, funds generated from asset sales and revolving credit
borrowings.

         Net cash used in operating  activities during the six months ended June
30, 2004 was $25.9 million compared to net cash provided by operating activities
of $8.9  million  during  the six  months  ended June 30,  2003.  This  decrease
primarily  resulted from $30.7 million  prepayment  penalties paid for the early
extinguishment  of debt,  higher  losses and  higher  trade  account  receivable
balances.

         Net cash used in investing  activities during the six months ended June
30,  2004 was $895.4  million  compared to $22.5  million  during the six months
ended June 30, 2003. This increase is primarily due to the acquisition.

         Net cash provided by financing  activities  during the six months ended
June 30, 2004 was $940.4 million  compared to $3.9 million during the six months
ended June 30,  2003.  This  increase  resulted  primarily  from (i)  additional
borrowing under the Company's credit  facilities,  (ii) the issuance of the 8.5%
senior  subordinated  notes due 2014 and (iii)  proceeds from the sale of common
stock.  Theses  increases  were  partially  offset by (i) repayment of the 7.08%
senior notes due 2011, (ii) repayment of the 3.67% Yen-denominated  senior notes
due 2008,  (iii)  repayment of a $27.8  million  securitization  facility,  (iv)
payment of debt issuance costs and (vi) payment of dividends.

         Working capital  increased $324.1 million to $386.8 million at June 30,
2004 from $62.7 million at December 31, 2003. This increase  resulted  primarily
due to the acquisition.

                                       28
<PAGE>
         Capital  expenditures  during the six months  ended June 30,  2004 were
$17.7  million  compared to $24.8  million  during the six months ended June 30,
2003.  Capital  expenditures  during the six months ended June 30, 2004 included
$12.0 million for new  production  equipment,  $2.3 million for routine  capital
improvements,  $1.2 million for renovations and equipment conversions,  $0.9 for
building and land  improvements,  and $1.3 million for various  other  projects.
Cash from revolving credit borrowings  primarily provided funding during the six
months ended June 30, 2004 for capital expenditures.  For the remainder of 2004,
the Company  intends to rely on cash provided by operations,  the sale of assets
and revolving credit borrowings for its capital expenditures.

         On February  27,  2004,  the  Company  entered  into credit  facilities
comprised of a $150.0 million  revolving credit facility  maturing in 2010 and a
$650.0  million  term loan  facility  maturing  in 2011.  The  revolving  credit
facility is principally used for working capital purposes, and the term loan was
used to finance  the  acquisition  and  related  transactions.  For  purposes of
calculating  interest,  loans  under  the  credit  facility  are  designated  as
Eurodollar rate loans or, in certain circumstances,  base rate loans. Eurodollar
rate loans bear interest at the British Bankers Association  Interest Settlement
Rate for  deposits  in  dollars  plus a  borrowing  margin as  described  below.
Interest  on  Eurodollar  rate  loans is  payable  at the end of the  applicable
interest  period of one, two, three or six months,  but not less frequently than
quarterly. Base rate loans bear interest at (a) the greater of (i) the rate most
recently  announced  by Bank of America as its "prime  rate" or (ii) the Federal
Funds Rate plus 1/2 of 1% per annum,  plus (b) a borrowing  margin as  described
below.  The margin varies from 2.0% to 2.75% on  Eurodollar  rate loans and from
1.0% to 1.75% on base rate loans,  depending on the Company's leverage ratio. As
of June 30, 2004,  the weighted  average  annual  interest  rate  applicable  to
Eurodollar  rate loans was 3.94% and the weighted  average annual  interest rate
applicable to base rate loans was 5.75%.  During the three months ended June 30,
2004, the weighted  average annual  interest rate for the credit  facilities was
3.98%. A commitment fee of 0.50% on the unused portion of the credit  facilities
is payable  on a  quarterly  basis.  As of June 30,  2004,  $122.9  million  was
available under the credit facilities.

         The Company's obligations under the credit facilities are guaranteed by
SCI  Corporation  and  each  existing  direct  and  indirect  subsidiary  of SCI
Corporation other than the issuer,  subject to certain exceptions.  In addition,
each significant domestic subsidiary of the issuer formed after the closing date
is required to guarantee those obligations. The credit facilities are secured by
(1) all  present  and future  property  and assets,  real and  personal,  of the
Company  and each  guarantor,  subject  to certain  exceptions;  (2) a pledge of
100.0% of the stock of each of SCI  Corporation's  present and future direct and
indirect  domestic  subsidiaries  and a lien  on  66.0%  of the  stock  of  each
first-tier foreign  subsidiary;  (3) all present and future intercompany debt of
the Company and each guarantor;  and (4) all proceeds of the assets described in
clauses  (1), (2) and (3) of this  sentence.  Under the credit  facilities,  the
Company is required to meet specified restrictive financial covenants, including
a maximum consolidated  leverage ratio,  minimum consolidated  interest coverage
ratio and maximum capital expenditures. The credit facilities also contain other
various covenants that limit the Company's ability to, among other things:

o incur additional indebtedness, including guarantees;

o create, incur, assume or permit to exist liens on property and assets;

o make loans and investments and enter into acquisitions and joint ventures;

o engage in sales, transfers and other dispositions of the Company's property or
  assets;

o prepay,  redeem  or  repurchase   the  Company's  debt, or amend or modify the
  terms of certain material debt or certain other agreements;

o declare  or  pay  dividends to, make  distributions to, or make redemption and
  repurchases from, equity holders; and

o restrict  the  ability of the Company's subsidiaries to pay dividends and make
  distributions.

         The Company is currently in  compliance  with all  covenants  under the
credit facilities.

                                       29
<PAGE>
         The term  loan  facility  under the  credit  facilities  are  amortized
quarterly  from  February 27, 2004 through the date of maturity,  with the first
amortization  payment of $1.625  million  paid on May 27,  2004.  The  scheduled
quarterly  amortization payments are $1.625 million per quarter through February
27, 2006,  $6.25 million per quarter from May 27, 2006 through February 27, 2008
and $12.5 million per quarter from May 27, 2008 through  November 27, 2010, with
a balloon payment of $449.5 million due on February 27, 2011.

         The Company is required to make a mandatory  annual  prepayment  of the
term loan  facility in an amount equal to 50.0% of excess cash flow,  as defined
in the term loan documentation,  when the consolidated leverage ratio is 3.5x or
greater,  or 25.0% of excess cash flow when the  consolidated  leverage ratio is
less than 3.5x.  In  addition,  the  Company  is  required  to make a  mandatory
prepayment  of the term loans and the revolving  credit loans with,  among other
things:

o 100.0%  of  the  net  cash proceeds of any property or asset sale,  subject to
  certain  exceptions  and  reinvestment requirements;

o 100.0%  of  the  net cash proceeds of any extraordinary  receipts,  as defined
  in  the  loan   documentation,  such as tax refunds,  pension plan reversions,
  proceeds   of   insurance   and  condemnation   awards,   subject  to  certain
  exceptions and reinvestment requirements;

o 100.0% of the net cash proceeds of certain debt issuances, subject to  certain
  exceptions; and

o 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.

         Mandatory  prepayments will be applied first to the term loans on a pro
rata basis, and thereafter to the revolving loans.

         The credit  facilities  require  the  Company to hedge a portion of the
borrowings under the credit facilities. On March 10, 2004 with an effective date
of March 31, 2004, the Company  entered into a swap  arrangement to hedge $180.0
million of  Eurodollar  rate loans at an average rate of 2.375% plus  applicable
margin  for three  years.  Also,  on June 1, 2004 the  Company  entered  into an
interest rate cap agreement with a total notional  amount of $30.0 million under
which the Company receives  variable interest rate payments when the three month
Eurodollar  rate rises above 4.0% before  January 1, 2005. The interest rate cap
agreement  extends through March 31, 2005. As of June 30, 2004,  there was $24.8
million drawn on the revolving  credit  facility and $648.4 million  outstanding
under the term loan facility.  At June 30, 2004, the interest rate on borrowings
under the term loan was 3.95%,  and the interest  rate on  borrowings  under the
revolving credit facility was 4.86%.

         On February 27, 2004,  the Company issued $325.0 million of 8.5% Senior
Subordinated  Notes due  2014.  The 8.5%  Senior  Subordinated  Notes  mature on
February 15, 2014 with interest paid semi-annually  every February 15 and August
15. Under the indenture governing the 8.5% Senior Subordinated Notes, subject to
exceptions, the Company must meet a minimum fixed charge coverage ratio to incur
additional indebtedness.  Prior to February 15, 2007, the issuer may, on any one
or more  occasions,  redeem up to 35% of the aggregate  principal  amount of the
notes  issued  under  the  indenture  at a  redemption  price of  108.5%  of the
principal amount thereof, plus accrued and unpaid interest. Otherwise, the notes
under the  indenture are not  redeemable  until  February 15, 2009.  Starting on
February 15, 2009,  the Company has the option to redeem all or a portion of the
8.5% Senior  Subordinated  Notes at a redemption  price equal to a percentage of
the principal amount thereof plus accrued and unpaid  interest.  In the event of
this kind of an optional  redemption,  the redemption price would be 104.25% for
the  twelve-month  period beginning  February 15, 2009;  102.833% for the twelve
month period beginning  February 15, 2010;  101.417% for the twelve month period
beginning on February 15, 2011 and 100.0% of the principal amount thereafter. If
the Company  experiences  specific kinds of changes of control, it must offer to
purchase  the 8.5%  Senior  Subordinated  Notes at a price  of  101.0%  of their
principal amount, plus accrued and unpaid interest.  The indenture governing the
8.5% Senior  Subordinated  Notes contain  various  covenants  which,  subject to
exception,  limit the ability of the issuer and its restricted  subsidiaries to,
among other things:

o borrow  money,  guarantee  debt  and, in the case of  restricted subsidiaries,
  sell preferred stock;

o create liens;

                                       30
<PAGE>
o pay dividends on or redeem or repurchase stock;

o make specified types of investments;

o restrict dividends or other payments from restricted subsidiaries;

o enter into transactions with affiliates; and

o sell assets or merge with other companies.

         On February 27, 2004, the Company  extinguished $160.0 million of 7.08%
senior notes due June 30, 2011 and $44.2 million of 3.67% Yen-denominated senior
notes due July 16, 2008  resulting in prepayment  penalties of $26.9 million and
$3.8 million,  respectively.  As a result of early  extinguishment  of debt, the
Company  incurred a $0.9  million  loss from the write off of  deferred  finance
fees.

         At June 30, 2004, the Company has approximately 750.0 million Yen ($6.9
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 0.84% and 0.89% per year

         The Company has capital leases of approximately 391.1 million Yen ($3.6
million) of which approximately 68.5 million Yen ($0.6 million) is classified as
short-term.

         The following summarizes the Company's contractual  obligations at June
30, 2004, and the effect such  obligations are expected to have on its liquidity
and cash flows in future periods (in 000's):

<TABLE>
<CAPTION>
                                                        Payments Due in Fiscal
                   --------------------------------------------------------------------------------------------
                      Total        2004       2005       2006       2007       2008       2009      Thereafter
                   ------------  ---------  ---------  ---------  ---------  ---------  ---------  ------------
<S>                <C>           <C>        <C>        <C>        <C>        <C>        <C>        <C>
Non-cancelable
  operating
  leases           $   262,869   $ 15,331   $ 25,099   $ 22,018   $ 19,014   $ 16,592   $ 15,453   $   149,362
Total  debt          1,005,029     10,104      6,500     20,375     25,000     43,750     50,000       849,300
Capital leases           3,575        315        625        615        584        507        429           500
                   ------------  ---------  ---------  ---------  ---------  ---------  ---------  ------------

Total obligations  $ 1,271,473   $ 25,750   $ 32,224   $ 43,008   $ 44,598   $ 60,849   $ 65,882   $   999,162
                   ============  =========  =========  =========  =========  =========  =========  ============
</TABLE>

         In  November  2001,  the  Company  began   outsourcing  its  logistical
operations,  including  warehousing and  transportation  of products to and from
distribution  centers,  to DSC  Logistics,  Inc.  As part  of  this  outsourcing
arrangement,  in November  2001,  the Company and DSC executed an agreement that
provides  for a  five-year  term,  subject  to  earlier  termination  in certain
circumstances.  After DSC began providing  services under the agreement in 2002,
the compensation claimed by DSC under the agreement  significantly  exceeded the
amounts that the Company had contemplated,  and disputes arose regarding various
aspects of the outsourcing  arrangement,  including the amounts that the Company
would be required to pay under the agreement.  In 2002, the Company  invoked the
arbitration provisions of the agreement,  submitting a demand for arbitration to
the American Arbitration Association in Chicago, Illinois. The Company submitted
an amended demand for  arbitration in 2003. In the  arbitration,  the Company is
seeking to recoup from DSC amounts  that the Company  believes  are in excess of
those required by the agreement and an order  rescinding or allowing the Company
to terminate the agreement.  DSC has asserted  counterclaims  in the arbitration
against  the  Company  seeking  damages,  costs and  expenses  of less than $2.0
million in the aggregate.

         DSC  recently has claimed that its  outsourcing  arrangement  with Solo
Illinois  entitles  DSC  to  provide  customary  warehousing  and transportation
services  for  Sweetheart  and has  sought  to  amend  its  counterclaim  in the
arbitration to include Sweetheart and Sweetheart's  distribution facilities.  In
June 2004,  Sweetheart filed a declaratory judgment  action in the Circuit Court
for Baltimore County,  Maryland,  seeking a declaratory judgment that Sweetheart
is not bound by,  subject  to or  obligated  under the  outsourcing  arrangement
between DSC and Solo Illinois or the pending  arbitration.  Management  believes
that there is no  contractual  basis for DSC's claim.  However,  there can be no
assurances  that  Sweetheart  will be successful  in receiving  its  declaratory
judgment.

                                       31
<PAGE>
         The Company has entered  into an  agreement  with the State of Illinois
relating to the development of certain  properties.  The Company received grants
under this  agreement  of  approximately  $5.0  million and $7.0 million for the
years ended December 31, 2003 and 2001, respectively.  Under this agreement, the
Company is required to fulfill  certain  obligations,  which,  if not fulfilled,
would result in the repayment of amounts granted.

         Management  believes  that cash  generated  by  operations  and amounts
available under the Company's  credit  facilities and funds generated from asset
sales should be  sufficient  to meet the  Company's  expected  operating  needs,
planned capital  expenditures,  payments in conjunction with the Company's lease
commitments and debt service requirements in the next twelve months.

Net Operating Loss Carryforwards

         As of June 30, 2004, the Company had approximately $67.0 million of net
operating loss carryforwards for federal income tax purposes that expire between
2016 and 2023 that 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 asset is
more likely than not.

Item 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The  Company  is  exposed  to  market  risk in the  ordinary  course of
business,  which consists  primarily of interest rate risk  associated  with its
variable rate debt.  The senior credit  facilities  include a revolving and term
credit  facility  which bear interest at a variable  rate.  The interest rate on
both  facilities  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. The
margin varies from 2.0% to 2.75% on the Eurodollar  rate borrowing and from 1.0%
to 1.75% on the base rate borrowings  depending on the Company's leverage ratio.
As of June 30, 2004, the  outstanding  indebtedness  under the revolving  credit
facility was $24.8  million.  As of June 30, 2004,  $122.9 million was available
under the senior credit  facilities.  Based upon these  amounts,  the annual net
income would change by approximately $2.8 million for each one-percentage  point
change in the interest rates  applicable to the variable rate debt. 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.

Item 4.       CONTROLS AND PROCEDURES

         (a) Evaluation of disclosure controls and procedures:

         The Company  carried out an evaluation, under the  supervision and with
the  participation  of its management,  of the  effectiveness  of its disclosure
controls  and  procedures  (as  defined  in  Exchange  Act Rules  13a-15(e)  and
15d-15(e))  as of the end of the period  covered by this  report.  Based on this
evaluation,  the Company's chief executive  officer and chief financial  officer
have concluded that its disclosure controls and procedures were effective at the
end of the period covered by this report.

         (b) Changes in internal control over financial reporting:

         With respect to Solo Cup  Company's  (Solo  Illinois)  2003 audit,  the
Company's  auditors  identified  "material   weaknesses"  relating  to  internal
control,  its financial  reporting  systems and the manner in which it processed
consolidating  entries,  principally related to its reliance on manual processes
for  identifying  and  making   adjustments  and  for  consolidating   financial
information, particularly with respect to its non-U.S. subsidiaries.

         The Company has  implemented  processes to enhance  internal  controls.
Specifically, all entries are recorded on the general ledger, manual adjustments
have  been  eliminated,  sales  cut-off  procedures  for  recordation  have been
automated,  capital  interest is recorded on  construction in progress for fixed
assets,  and accrual and allowance  procedures have been  documented.  Also, the
Company has shifted the  recordation of purchase  accounting and  adjustments to
comply with Generally Accepted Accounting Principles in the United States to one
of the two foreign subsidiaries which were noted as having this weakness.  These
changes among others, in management's opinion, provide the Company with adequate
internal controls over its financial reporting.

                                       32
<PAGE>
                           PART II - OTHER INFORMATION


Item 1.       LEGAL PROCEEDINGS

         In  November  2001,  the  Company  began   outsourcing  its  logistical
operations,  including  warehousing and  transportation  of products to and from
distribution  centers,  to DSC  Logistics,  Inc.  As part  of  this  outsourcing
arrangement,  in November  2001,  the Company and DSC executed an agreement that
provides  for a  five-year  term,  subject  to  earlier  termination  in certain
circumstances.  After DSC began providing  services under the agreement in 2002,
the compensation claimed by DSC under the agreement  significantly  exceeded the
amounts that the Company had contemplated,  and disputes arose regarding various
aspects of the outsourcing  arrangement,  including the amounts that the Company
would be required to pay under the agreement.  In 2002, the Company  invoked the
arbitration provisions of the agreement,  submitting a demand for arbitration to
the American Arbitration Association in Chicago, Illinois. The Company submitted
an amended demand for  arbitration in 2003. In the  arbitration,  the Company is
seeking to recoup from DSC amounts  that the Company  believes  are in excess of
those required by the agreement and an order  rescinding or allowing the Company
to terminate the agreement.  DSC has asserted  counterclaims  in the arbitration
against  the  Company  seeking  damages,  costs and  expenses  of less than $2.0
million in the aggregate.

         DSC  recently has claimed that its  outsourcing  arrangement  with Solo
Illinois  entitles  DSC  to  provide  customary  warehousing  and transportation
services  for  Sweetheart  and has  sought  to  amend  its  counterclaim  in the
arbitration to include Sweetheart and Sweetheart's  distribution facilities.  In
June 2004,  Sweetheart filed a declaratory judgment  action in the Circuit Court
for Baltimore County,  Maryland,  seeking a declaratory judgment that Sweetheart
is not bound by,  subject  to or  obligated  under the  outsourcing  arrangement
between DSC and Solo Illinois or the pending  arbitration.  Management  believes
that there is no  contractual  basis for DSC's claim.  However,  there can be no
assurances  that  Sweetheart  will be successful  in receiving  its  declaratory
judgment.


Item 6.       EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits:
             99.1     Certification  Pursuant  to  18  U.S.C.  Section  1350, as
                      Adopted Pursuant to Section 906  of the Sarbanes-Oxley Act
                      of 2002 - Chief Executive Officer
             99.2     Certification  Pursuant  to  18  U.S.C.  Section  1350, as
                      Adopted Pursuant to Section 906  of the Sarbanes-Oxley Act
                      of 2002 - Chief Operating Officer
             99.3     Certification  Pursuant  to  18  U.S.C.  Section  1350, as
                      Adopted Pursuant to Section 906  of the Sarbanes-Oxley Act
                      of 2002 - Chief Financial Officer



         (b) Reports on Form 8-K:
             None.

                                       33
<PAGE>
                                   SIGNATURES


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



                                   SOLO CUP COMPANY
                                   (registrant)

Date:  August 13, 2004             By:  /s/ Susan H. Marks
       ---------------                  ------------------
                                   Susan H. Marks
                                   Chief Financial Officer,
                                   Executive Vice President and
                                   Assistant Secretary

                                   (Principal Financial and Accounting Officer
                                   and Duly Authorized Officer)

                                       34
<PAGE>
                            CERTIFICATION PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002


I, Robert L. Hulseman, certify that:


1.   I have reviewed this quarterly report on Form 10-Q of Solo Cup Company;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge,  the consolidated  financial  statements,  and other
     financial  information included in this quarterly report, fairly present in
     all material  respects the financial  condition,  results of operations and
     cash flows of the registrant as of, and for, the periods  presented in this
     quarterly report;

4.   The  registrant's  other  certifying  officers and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this quarterly report is being prepared;
     b)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the quarter covered by this report based on such evaluation; and
     c)   Disclosed  in this  report  any  change in the  registrant's  internal
          controls  over   financial   reporting   that   occurred   during  the
          registrant's most recent fiscal quarter that has materially  affected,
          or  is  reasonably  likely  to  materially  affect,  the  registrant's
          internal control over financial reporting; and

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's  auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and
     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date: August 13, 2004                      SOLO CUP COMPANY
      ---------------                      (Registrant)

                                           By: /s/  ROBERT L. HULSEMAN
                                               -----------------------
                                           Robert L. Hulseman
                                           Chairman, Chief Executive Officer and
                                           Director

                                       35
<PAGE>
                           CERTIFICATION PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002


I, Ronald L. Whaley, certify that:


1.   I have reviewed this quarterly report on Form 10-Q of Solo Cup Company;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge,  the consolidated  financial  statements,  and other
     financial  information included in this quarterly report, fairly present in
     all material  respects the financial  condition,  results of operations and
     cash flows of the registrant as of, and for, the periods  presented in this
     quarterly report;

4.   The  registrant's  other  certifying  officers and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this quarterly report is being prepared;
     b)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the quarter covered by this report based on such evaluation; and
     c)   Disclosed  in this  report  any  change in the  registrant's  internal
          controls  over   financial   reporting   that   occurred   during  the
          registrant's most recent fiscal quarter that has materially  affected,
          or  is  reasonably  likely  to  materially  affect,  the  registrant's
          internal control over financial reporting; and

5.   The registrant's  other certifying officers and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's  auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and
     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date: August 13, 2004                      SOLO CUP COMPANY
      ---------------                      (Registrant)

                                           By: /s/  RONALD L. WHALEY
                                               ---------------------
                                           Ronald L. Whaley
                                           President, Chief Operating Officer
                                           and Director

                                       36
<PAGE>
                            CERTIFICATION PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002



I, Susan H. Marks, certify that:


1.   I have reviewed this quarterly report on Form 10-Q of Solo Cup Company;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge,  the consolidated  financial  statements,  and other
     financial  information included in this quarterly report, fairly present in
     all material  respects the financial  condition,  results of operations and
     cash flows of the registrant as of, and for, the periods  presented in this
     quarterly report;

4.   The  registrant's  other  certifying  officers and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this quarterly report is being prepared;
     b)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the quarter covered by this report based on such evaluation; and
     c)   Disclosed  in this  report  any  change in the  registrant's  internal
          controls  over   financial   reporting   that   occurred   during  the
          registrant's most recent fiscal quarter that has materially  affected,
          or  is  reasonably  likely  to  materially  affect,  the  registrant's
          internal control over financial reporting; and

5.   The registrant's  other certifying officers and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's  auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and
     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.



Date: August 13, 2004                       SOLO CUP COMPANY
      ---------------                      (Registrant)

                                           By: /s/  SUSAN H. MARKS
                                               -------------------
                                           Susan H. Marks
                                           Chief Financial Officer,
                                           Executive Vice President and
                                           Assistant Secretary
                                           (Principal Financial and
                                           Accounting Officer)

                                       37