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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the thirteen weeks ended September 27, 2009



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

For the transition period from  to

Commission File Number: 333-116843





SOLO CUP COMPANY

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 47-0938234                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                 |  |           
|------------------------------------------------ |  | ----------
|1700 Old Deerfield Road, Highland Park, Illinois |  | 60035     
|(Address of principal executive offices)         |  | (Zip Code)

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





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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

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



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

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

The number of shares outstanding of the Registrants common stock as of November 12, 2009:

Common Stock, $0.01 par value  100 shares









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##### Table of Contents

INDEX



|         |  |                                                                                       |  |     
|-------- |  | ------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                       |  | Page
|PART I.  |  | Financial Information                                                                 |  |     
|         |  |                                                                                      
|Item 1.  |  | Financial Statements                                                                  |  | 3   
|         |  |                                                                                      
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 23  
|         |  |                                                                                      
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 33  
|         |  |                                                                                      
|Item 4T. |  | Controls and Procedures                                                               |  | 33  
|         |  |                                                                                      
|PART II. |  | Other Information                                                                     |  |     
|         |  |                                                                                      
|Item 1.  |  | Legal Proceedings                                                                     |  | 34  
|         |  |                                                                                      
|Item 1A. |  | Risk Factors                                                                          |  | 34  
|         |  |                                                                                      
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 34  
|         |  |                                                                                      
|Item 3.  |  | Defaults Upon Senior Securities                                                       |  | 34  
|         |  |                                                                                      
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 34  
|         |  |                                                                                      
|Item 5.  |  | Other Information                                                                     |  | 34  
|         |  |                                                                                      
|Item 6.  |  | Exhibits                                                                              |  | 34  



2



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##### Table of Contents

PART I - FINANCIAL INFORMATION



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

SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



|                                                                                                       |  |                   |          |   |                  |   |           |  
|------------------------------------------------------------------------------------------------------ |  | ----------------- | -------- | - | ---------------- | - | --------- | -
|                                                                                                       |  | September 27,2009 |          |   | December 28,2008 |  
|                                                                                                       |  | (Unaudited)       |          |   |                  |  
|Assets:                                                                                                |  |                   |          |   |                  |   |           |  
|Current assets:                                                                                        |  |                   |          |   |                  |   |           |  
|Cash and cash equivalents                                                                              |  | $                 | 23,596   |   |                  | $ | 57,504    |  
|Cash in escrow                                                                                         |  |                   | 470      |   |                  |   | 50        |  
|Accounts receivable:                                                                                   |  |                   |          |   |                  |   |           |  
|Trade, less allowance for doubtful accounts of $1,071 and $1,453                                       |  |                   | 104,549  |   |                  |   | 121,002   |  
|Other                                                                                                  |  |                   | 4,609    |   |                  |   | 3,039     |  
|Inventories                                                                                            |  |                   | 255,842  |   |                  |   | 283,261   |  
|Deferred income taxes                                                                                  |  |                   | 20,236   |   |                  |   | 21,882    |  
|Prepaid expenses                                                                                       |  |                   | 7,415    |   |                  |   | 5,664     |  
|Assets held for sale                                                                                   |  |                   | 2,825    |   |                  |   | 9,832     |  
|Other current assets                                                                                   |  |                   | 21,272   |   |                  |   | 23,376    |  
|                                                                                                       |  |                   |          |   |                  |   |           |  
|Total current assets                                                                                   |  |                   | 440,814  |   |                  |   | 525,610   |  
|Property, plant and equipment, less accumulated depreciation and amortization of $514,238 and $657,222 |  |                   | 501,242  |   |                  |   | 511,129   |  
|Goodwill                                                                                               |  |                   |         |   |                  |   | 15,459    |  
|Restricted cash                                                                                        |  |                   | 11,540   |   |                  |   |          |  
|Other assets                                                                                           |  |                   | 33,935   |   |                  |   | 21,597    |  
|                                                                                                       |  |                   |          |   |                  |   |           |  
|Total assets                                                                                           |  | $                 | 987,531  |   |                  | $ | 1,073,795 |  
|                                                                                                       |  |                   |          |   |                  |   |           |  
|                                                                                                       |  |                  
|Liabilities and Shareholders Equity                                                                   |  |                   |          |   |                  |   |           |  
|Current liabilities:                                                                                   |  |                   |          |   |                  |   |           |  
|Accounts payable                                                                                       |  | $                 | 85,810   |   |                  | $ | 74,759    |  
|Accrued payroll and related costs                                                                      |  |                   | 32,968   |   |                  |   | 31,155    |  
|Accrued customer allowances                                                                            |  |                   | 26,305   |   |                  |   | 26,322    |  
|Current maturities of long-term debt                                                                   |  |                   | 1,096    |   |                  |   | 1,368     |  
|Other current liabilities                                                                              |  |                   | 42,645   |   |                  |   | 45,548    |  
|                                                                                                       |  |                   |          |   |                  |   |           |  
|Total current liabilities                                                                              |  |                   | 188,824  |   |                  |   | 179,152   |  
|Long-term debt, net of current maturities                                                              |  |                   | 629,821  |   |                  |   | 716,822   |  
|Deferred income taxes                                                                                  |  |                   | 23,843   |   |                  |   | 30,850    |  
|Pensions and other postretirement benefits                                                             |  |                   | 35,872   |   |                  |   | 36,021    |  
|Deferred gain on sale-leaseback                                                                        |  |                   | 44,199   |   |                  |   | 46,178    |  
|Other liabilities                                                                                      |  |                   | 44,414   |   |                  |   | 33,480    |  
|                                                                                                       |  |                   |          |   |                  |   |           |  
|Total liabilities                                                                                      |  |                   | 966,973  |   |                  |   | 1,042,503 |  
|Shareholders equity:                                                                                  |  |                   |          |   |                  |   |           |  
|Common stock - Par value $0.01 per share; 1,000 shares authorized; 100 shares issued and outstanding   |  |                   |         |   |                  |   |          |  
|Additional paid-in capital                                                                             |  |                   | 254,995  |   |                  |   | 254,995   |  
|Accumulated deficit                                                                                    |  |                   | (222,372 | ) |                  |   | (191,247  | )
|Accumulated other comprehensive loss                                                                   |  |                   | (12,065  | ) |                  |   | (32,456   | )
|                                                                                                       |  |                   |          |   |                  |   |           |  
|Total shareholders equity                                                                             |  |                   | 20,558   |   |                  |   | 31,292    |  
|                                                                                                       |  |                   |          |   |                  |   |           |  
|Total liabilities and shareholders equity                                                             |  | $                 | 987,531  |   |                  | $ | 1,073,795 |  
|                                                                                                       |  |                   |          |   |                  |   |           |  

See accompanying Notes to Consolidated Financial Statements.



3



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SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands)



|                                                                            |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |           |  
|--------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ------------------------------------- | - | ------- | ---------------------------------------- |  | - | ---------------------------------------- | - |  | - | --------- | -
|                                                                            |  | Thirteenweeks
endedSeptember 27, 2009 |         |   | Thirteenweeks
endedSeptember 28, 2008 |   |         | Thirty-nineweeks
endedSeptember 27, 2009 |  |   | Thirty-nineweeks
endedSeptember 28, 2008 |  
|Net sales                                                                   |  | $                                     | 370,058 |   |                                       | $ | 462,158 |                                          |  | $ | 1,115,516                                |   |  | $ | 1,442,748 |  
|Cost of goods sold                                                          |  |                                       | 316,266 |   |                                       |   | 402,149 |                                          |  |   | 960,035                                  |   |  |   | 1,238,539 |  
|                                                                            |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |           |  
|Gross profit                                                                |  |                                       | 53,792  |   |                                       |   | 60,009  |                                          |  |   | 155,481                                  |   |  |   | 204,209   |  
|Selling, general and administrative expenses                                |  |                                       | 38,557  |   |                                       |   | 43,318  |                                          |  |   | 112,644                                  |   |  |   | 130,368   |  
|Impairment of goodwill                                                      |  |                                       | 17,210  |   |                                       |   |        |                                          |  |   | 17,210                                   |   |  |   |          |  
|Loss on asset disposals                                                     |  |                                       | 5,024   |   |                                       |   | 6,497   |                                          |  |   | 7,447                                    |   |  |   | 18,535    |  
|                                                                            |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |           |  
|Operating (loss) income                                                     |  |                                       | (6,999  | ) |                                       |   | 10,194  |                                          |  |   | 18,180                                   |   |  |   | 55,306    |  
|Interest expense, net of interest income of $242, $286, $501 and $888       |  |                                       | 17,498  |   |                                       |   | 14,798  |                                          |  |   | 45,399                                   |   |  |   | 46,344    |  
|Reclassification of unrealized loss on cash flow hedges to interest expense |  |                                       |        |   |                                       |   |        |                                          |  |   | 9,108                                    |   |  |   |          |  
|Loss on debt extinguishment                                                 |  |                                       | 2,520   |   |                                       |   |        |                                          |  |   | 2,520                                    |   |  |   |          |  
|Foreign currency exchange loss (gain), net                                  |  |                                       | 98      |   |                                       |   | 4,406   |                                          |  |   | (2,372                                   | ) |  |   | 3,160     |  
|                                                                            |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |           |  
|(Loss) income from continuing operations before income taxes                |  |                                       | (27,115 | ) |                                       |   | (9,010  | )                                        |  |   | (36,475                                  | ) |  |   | 5,802     |  
|Income tax provision (benefit)                                              |  |                                       | 763     |   |                                       |   | (1,196  | )                                        |  |   | (5,350                                   | ) |  |   | 4,500     |  
|                                                                            |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |           |  
|(Loss) income from continuing operations                                    |  |                                       | (27,878 | ) |                                       |   | (7,814  | )                                        |  |   | (31,125                                  | ) |  |   | 1,302     |  
|Loss from discontinued operations, net of income taxes of $0                |  |                                       |        |   |                                       |   | (181    | )                                        |  |   |                                         |   |  |   | (610      | )
|                                                                            |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |           |  
|Net (loss) income                                                           |  | $                                     | (27,878 | ) |                                       | $ | (7,995  | )                                        |  | $ | (31,125                                  | ) |  | $ | 692       |  
|                                                                            |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |           |  

See accompanying Notes to Consolidated Financial Statements.



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SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY

(Unaudited, in thousands)



|                                                                                                                                   |  |             |   |                          |   |                    |  |   |                                            |   |  |                          |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | - | ------------------------ | - | ------------------ |  | - | ------------------------------------------ | - |  | ------------------------ | ------- | - |  | - | ------- | -
|                                                                                                                                   |  | Commonstock |   | Additionalpaid-incapital |   | Accumulateddeficit |  |   | Accumulatedothercomprehensiveincome (loss) |   |  | Totalshareholdersequity |        
|Balance at December 28, 2008                                                                                                       |  | $           |  |                          | $ | 254,995            |  | $ | (191,247                                   | ) |  | $                        | (32,456 | ) |  | $ | 31,292  |  
|Net loss                                                                                                                           |  |             |  |                          |   |                   |  |   | (31,125                                    | ) |  |                          |        |   |  |   | (31,125 | )
|Foreign currency translation adjustment                                                                                            |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | 7,854   |   |  |   | 7,854   |  
|Pension liability adjustments, net of tax of $98                                                                                   |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | 1,569   |   |  |   | 1,569   |  
|Unrealized investment loss, net of tax of $0                                                                                       |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | 12      |   |  |   | 12      |  
|Recognition of realized gain on cash flow hedge, net of tax of $215                                                                |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | (150    | ) |  |   | (150    | )
|Unrealized loss on cash flow hedges, net of tax of $0                                                                              |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | (1,514  | ) |  |   | (1,514  | )
|Reclassification of realized loss on cash flow hedges to interest expense, net of tax of $0                                        |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | 3,512   |   |  |   | 3,512   |  
|Reclassification of unrealized loss on cash flow hedges to interest expense upon termination of hedge accounting, net of tax of
$0 |  |             |  |                          |   |                   |  |   |                                           |   |  |                          | 9,108   |   |  |   | 9,108   |  
|                                                                                                                                   |  |             |   |                          |   |                    |  |   |                                            |   |  |                          |         |   |  |   |         |  
|Balance at September 27, 2009                                                                                                      |  | $           |  |                          | $ | 254,995            |  | $ | (222,372                                   | ) |  | $                        | (12,065 | ) |  | $ | 20,558  |  
|                                                                                                                                   |  |             |   |                          |   |                    |  |   |                                            |   |  |                          |         |   |  |   |         |  

See accompanying Notes to Consolidated Financial Statements.



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SOLO CUP COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)



|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|--------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | -------- | - | ---------------------------------------- | - | ------- | -
|                                                                                                                |  | Thirty-nineweeks
endedSeptember 27, 2009 |          |   | Thirty-nineweeks
endedSeptember 28, 2008 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                            |  |                                          |          |   |                                          |   |         |  
|Net (loss) income                                                                                               |  | $                                        | (31,125  | ) |                                          | $ | 692     |  
|Loss from discontinued operations, net of income taxes                                                          |  |                                          |         |   |                                          |   | (610    | )
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|(Loss) income from continuing operations                                                                        |  |                                          | (31,125  | ) |                                          |   | 1,302   |  
|Adjustments to reconcile (loss) income from continuing operations to net cash provided by operating activities: |  |                                          |          |   |                                          |   |         |  
|Depreciation and amortization                                                                                   |  |                                          | 51,868   |   |                                          |   | 59,731  |  
|Deferred financing fee amortization                                                                             |  |                                          | 4,332    |   |                                          |   | 3,212   |  
|Impairment of goodwill                                                                                          |  |                                          | 17,210   |   |                                          |   |        |  
|Loss on asset disposals                                                                                         |  |                                          | 7,447    |   |                                          |   | 18,535  |  
|Loss on debt extinguishment                                                                                     |  |                                          | 2,520    |   |                                          |   |        |  
|Reclassification of unrealized loss on cash flow hedges to interest expense                                     |  |                                          | 9,108    |   |                                          |   |        |  
|Deferred income taxes                                                                                           |  |                                          | (5,208   | ) |                                          |   | (250    | )
|Foreign currency exchange (gain) loss, net                                                                      |  |                                          | (2,372   | ) |                                          |   | 3,160   |  
|Changes in operating assets and liabilities:                                                                    |  |                                          |          |   |                                          |   |         |  
|Accounts receivable, net                                                                                        |  |                                          | 16,470   |   |                                          |   | 31,756  |  
|Inventories                                                                                                     |  |                                          | 30,322   |   |                                          |   | (29,490 | )
|Prepaid expenses and other current assets                                                                       |  |                                          | 3,639    |   |                                          |   | (213    | )
|Other assets                                                                                                    |  |                                          | (1,037   | ) |                                          |   | 72      |  
|Accounts payable                                                                                                |  |                                          | 10,830   |   |                                          |   | 5,893   |  
|Accrued expenses and other current liabilities                                                                  |  |                                          | (1,397   | ) |                                          |   | (16,768 | )
|Other liabilities                                                                                               |  |                                          | 4,435    |   |                                          |   | 1,734   |  
|Other, net                                                                                                      |  |                                          | 1,735    |   |                                          |   | (531    | )
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|Net cash provided by operating activities-continuing operations                                                 |  |                                          | 118,777  |   |                                          |   | 78,143  |  
|Net cash provided by operating activities-discontinued operations                                               |  |                                          |         |   |                                          |   | (594    | )
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|Net cash provided by operating activities                                                                       |  |                                          | 118,777  |   |                                          |   | 77,549  |  
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                            |  |                                          |          |   |                                          |   |         |  
|Purchases of property, plant and equipment                                                                      |  |                                          | (52,741  | ) |                                          |   | (51,753 | )
|Proceeds from sale of property, plant and equipment                                                             |  |                                          | 16,584   |   |                                          |   | 10,485  |  
|Increase in restricted cash                                                                                     |  |                                          | (11,540  | ) |                                          |   |        |  
|Increase in cash in escrow                                                                                      |  |                                          | (420     | ) |                                          |   | (50     | )
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|Net cash used in investing activities                                                                           |  |                                          | (48,117  | ) |                                          |   | (41,318 | )
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                            |  |                                          |          |   |                                          |   |         |  
|Net repayments under revolving credit facilities                                                                |  |                                          | (18,300  | ) |                                          |   | (24,700 | )
|Borrowings under the 10.5% Senior Secured Notes                                                                 |  |                                          | 293,784  |   |                                          |   |        |  
|Repayments of term notes                                                                                        |  |                                          | (362,861 | ) |                                          |   | (9,957  | )
|Repayments of other debt                                                                                        |  |                                          | (275     | ) |                                          |   | (584    | )
|Debt issuance costs                                                                                             |  |                                          | (17,818  | ) |                                          |   |        |  
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|Net cash used in financing activities                                                                           |  |                                          | (105,470 | ) |                                          |   | (35,241 | )
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|Effect of exchange rate changes on cash                                                                         |  |                                          | 902      |   |                                          |   | 1,302   |  
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                            |  |                                          | (33,908  | ) |                                          |   | 2,292   |  
|CASH AND CASH EQUIVALENTS, beginning of period                                                                  |  |                                          | 57,504   |   |                                          |   | 33,583  |  
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|CASH AND CASH EQUIVALENTS, end of period                                                                        |  | $                                        | 23,596   |   |                                          | $ | 35,875  |  
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|SUPPLEMENTAL CASH FLOW DISCLOSURES:                                                                             |  |                                          |          |   |                                          |   |         |  
|Interest paid, net of capitalized interest                                                                      |  | $                                        | 41,296   |   |                                          | $ | 50,803  |  
|                                                                                                                |  |                                          |          |   |                                          |   |         |  
|Income taxes paid, net of income tax refunds                                                                    |  | $                                        | 688      |   |                                          | $ | 5,537   |  
|                                                                                                                |  |                                          |          |   |                                          |   |         |  

See accompanying Notes to Consolidated Financial Statements.



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SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) BASIS OF PRESENTATION

Organization - Solo Cup Company, a Delaware corporation (Solo Delaware) is the holding company for Solo Cup Operating
Corporation, a Delaware corporation (SCOC). Solo Delaware is a wholly owned subsidiary of Solo Cup Investment Corporation, a Delaware corporation (SCIC). SCC Holding Company LLC, a Delaware limited liability company
(SCC Holding) and Vestar Capital Partners (Vestar) own 67.2% and 32.7% of SCIC, respectively. Company management holds the remaining 0.1% of SCIC.

Principles of consolidation -These unaudited condensed consolidated financial statements include the accounts of Solo Cup Company and its subsidiaries (the Company). All material
intercompany accounts, transactions and profits are eliminated in consolidation. The information included in the accompanying interim consolidated financial statements of the Company is unaudited but, in the opinion of management, includes all
adjustments (consisting only of normal recurring adjustments and accruals unless otherwise indicated) which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods
presented. Results for the interim periods are not necessarily indicative of results expected for the entire year. These interim consolidated financial statements should be read in conjunction with the Companys consolidated financial
statements and notes thereto for the fiscal year ended December 28, 2008, included in its 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2009.

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

Subsequent events - Management has evaluated subsequent events after the balance sheet date through November 12, 2009 (the financial statement issuance date) for appropriate accounting and
disclosure.

(2) RECENTLY ADOPTED ACCOUNTING STANDARDS

In July 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 168, The FASB Accounting Standards CodificationTMand the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162. Pursuant to the statement, the FASB Accounting Standards Codification
(ASC) officially became the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP), superseding existing FASB, American Institute of Certified Public Accountants
(AICPA), Emerging Issues Task Force (EITF), and related accounting literature. After July 1, 2009, only one level of authoritative GAAP will exist. All other accounting literature will be considered non-authoritative.
The Codification reorganizes the thousands of GAAP pronouncements into approximately 90 accounting topics and displays them using a consistent structure. Also included in the Codification is relevant SEC guidance organized using the same topical
structure in separate sections within the Codification. The statement is effective for interim and annual periods ending after September 15, 2009; therefore, the Companys disclosures included in these financial statements which refer to
authoritative accounting literature are references in accordance with the Codification. This accounting standard is included in the FASB ASC under Topic 105, Generally Accepted Accounting Principles.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events. SFAS No. 165 does not require significant changes regarding
recognition or disclosure of subsequent events, but does require disclosure of the date through which subsequent events have been evaluated for disclosure and recognition. SFAS No. 165 is effective for financial statements issued after
June 15, 2009; therefore, the Company has included the additional disclosure in Note 1 above. This accounting standard is included in the FASB ASC under Topic 855, Subsequent Events.

In April 2009, the FASB issued FASB Staff Position (FSP) No. 107-1 and Accounting Principles Board (APB)
Opinion No. 28-1 (FSP 107-1 and APB 28-1), Interim Disclosures about Fair Value of Financial Instruments. This FSP requires disclosures of fair value for any financial instruments not currently reflected at fair value on the balance
sheet for all interim periods. This FSP is effective for interim and annual periods ending after June 15, 2009; therefore, the Company has included the required additional disclosure in Note 8. The transition and effective date of information
related to FSP 107-1 and APB 28-1 are included in the FASB ASC under Topic 825, Financial Instruments.



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SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(2) RECENTLY ADOPTED ACCOUNTING STANDARDS (continued)



In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities which amends and expands the disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities SFAS No. 161 was effective for the Company as of the first quarter in 2009. In
accordance with the new requirements, the Company expanded its disclosures to explain why it uses derivative instruments, how derivative instruments and related hedged items are accounted for, and the impact of derivative instruments and related
hedged items on the Companys financial statements. The disclosures required by SFAS No. 161 are included in Note 9. The provisions of SFAS No. 161 are included in the FASB ASC under Topic 815, Derivatives and Hedging.

SFAS No. 157, Fair Value Measurements, issued by the FASB in September 2006, defines fair value, establishes a framework for
measuring fair value in accordance with GAAP and expands disclosure about fair value measurements. In February 2008, the FASB issued FSP No. FAS 157-2, Effective Date of FASB Statement No. 157, which provides a one-year deferral of the
effective date of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually.

In 2008, the Company adopted the provisions of SFAS No. 157 with respect to its financial assets and financial liabilities that are measured
at fair value within the financial statements. As of September 27, 2009 and December 28, 2008 the expanded disclosure provisions of SFAS No. 157 were applied to the Companys derivative instruments recorded as financial liabilities, as
described in Note 9. In addition, as of the first quarter in 2009, the Company adopted the provisions of SFAS No. 157 with respect to its non-financial assets and non-financial liabilities, which had been deferred under FSP FAS 157-2. The provisions
of SFAS No. 157 are included in the FASB ASC under Topic 820, Fair Value Measurements and Disclosures. As of September 27, 2009, these disclosure provisions are applied to assets held for sale, as described in Note 3, because these
non-financial assets are required to be measured at the lower of carrying value or fair value less costs to sell in accordance with the provisions of FASB ASC Topic 360, Property, Plant and Equipment.

(3) ASSETS HELD FOR SALE

Assets held for sale as of September 27, 2009 and December 28, 2008, included within the Companys North America operating segment, includes properties that the Company intends to sell and that meet the criteria for held for sale as
defined by FASB ASC Topic 360, Property, Plant and Equipment. Assets held for sale are recorded at the lower of the assets carrying value or fair value less costs to sell. The fair values of the properties were determined using the
market approach which includes an analysis of sales prices for similar properties in similar locations. These are considered Level 2 inputs in the fair value hierarchy described in FASB ASC Topic 820, Fair Value Measurements and Disclosures.

As of September 27, 2009, assets held for sale includes a manufacturing facility in Belen, New Mexico which was closed and
subsequently reclassified to assets held for sale during the first quarter of 2009. The facilitys carrying value has not been adjusted as its estimated fair value less costs to sell exceeds carrying value.

As of December 28, 2008, assets held for sale included a distribution center in Havre de Grace, Maryland closed in December 2008 as well as
a manufacturing facility in Leominster, Massachusetts closed during the first quarter of 2008. In February 2009, the Company leased the Havre de Grace property to a related party (Note 12) and in September 2009, the Company completed the sale of the
property and simultaneously assigned the lease to the new owner. The property sold for an amount in excess of its carrying value. One of the contractual terms of the purchase agreement requires the Company to lease the property from the new owner
for years 8-15 beginning in 2016 in the event the tenant does not renew the lease. The Company recorded a liability equal to the estimated fair value of this guarantee, in accordance with FASB ASC Topic 460, Guarantees, and, due to the
continuing involvement in the property, deferred the gain on the sale. During the fourth quarter of 2008, the carrying value of the Leominster property was reduced by an impairment loss of $0.6 million to adjust the carrying value to approximately
$0.5 million, representing its estimated fair value less costs to sell. The Leominster property was sold in July 2009 for an amount in excess of its carrying value.



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SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(4) INVENTORIES

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



|                           |  |                   |         |                  |   |        
|-------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                           |  | September 27,2009 |         | December 28,2008
|Finished goods             |  | $                 | 183,770 |                  | $ | 202,458
|Work in process            |  |                   | 10,656  |                  |   | 10,269 
|Raw materials and supplies |  |                   | 61,416  |                  |   | 70,534 
|                           |  |                   |         |                  |   |        
|Total inventories          |  | $                 | 255,842 |                  | $ | 283,261
|                           |  |                   |         |                  |   |        

(5) GOODWILL

The Company tests goodwill for impairment at least annually, as of the end of October, or sooner if a triggering event occurs suggesting possible impairment of the value of the goodwill. The
Companys step-one test performed as of October 2008 resulted in a fair value which exceeded carrying value.

During the
third quarter of 2009, despite increasing sales in the first and second quarters and the implementation of programs intended to reduce costs and gain manufacturing efficiencies, the Companys Europe reporting unit continued to incur declining
margins and lower operating results. These results were in part due to increased competition, a decline in the European economy and higher input costs, such as resin and electricity, which were unable to be passed along through further price
increases. Management considered this combination of factors evidence of a permanent change in the long-term prospects of the European business. As a result, management determined that it was at risk of failing step one of the impairment test such
that the reporting units estimated fair value would not be in excess of its carrying value and concluded that there were sufficient indicators to perform an interim goodwill impairment analysis of the Companys Europe reporting unit. Step
one of the impairment test was performed as of September 27, 2009. Fair value was estimated using a discounted cash flow valuation model. The key assumptions used in the model include the discount rate, terminal growth rate, and cash flow
projections. These key assumptions represent significant unobservable inputs, which are considered Level 3 inputs as defined by FASB ASC Topic 820, Fair Value Measurements and Disclosures. The discount rate is set by using the Weighted
Average Cost of Capital (WACC) methodology, which considers market and industry data. The discount rate utilized is indicative of the return an investor would expect to receive for investing in such a business and was 14% for this test. The
determination of projected cash flows is based on the business strategic plans and long-range planning forecasts and represent managements best estimates based on current and forecasted market conditions, and the profit margin
assumptions are projected based on the current cost structure and anticipated net cost increases and/or reductions. The terminal business value is determined using a common methodology of capturing the present value of perpetual cash flow estimates
beyond the last projected period assuming a constant WACC and terminal growth rate of 3%. Step one of the impairment test resulted in an estimated fair value less than carrying value. Consequently, step two was performed to calculate the amount of
impairment, which concluded that the goodwill was fully impaired. As a result, the Company recorded a goodwill impairment charge of approximately $17.2 million during the thirteen weeks ended September 27, 2009. After this charge, there is no
remaining goodwill on the Companys Consolidated Balance Sheet.

For the third quarter of 2009, an impairment analysis of
long-lived assets, excluding goodwill, was performed in conjunction with the interim goodwill impairment test for the Companys Europe reporting unit. The analysis did not indicate any impairment of these assets.

(6) INCOME TAXES

During
the first quarter of fiscal year 2009, the Company recorded an adjustment to correct an error in its previously reported deferred tax liabilities. The adjustment increased its income tax benefit and decreased its deferred tax liabilities
(noncurrent) by $5.1 million. The Company determined that this adjustment was immaterial to its current and prior period financial statements. If the adjustment had been recorded to the corresponding prior period financial statements, it would have
increased (decreased) income tax provision by approximately $0.7 million, $2.4 million and $(8.0) million in fiscal years 2008, 2007 and 2006, respectively, and increased other comprehensive income by $0.2 million in 2008.



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SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(7) DEBT

A summary of long-term debt at September 27, 2009 and December 28, 2008, including amounts payable within one year, is as follows (in thousands):



|                                           |  |                   |         |   |                  |   |        
|------------------------------------------ |  | ----------------- | ------- | - | ---------------- | - | -------
|                                           |  | September 27,2009 |         |   | December 28,2008
|Long-term debt:                            |  |                   |         |   |                  |   |        
|10.5% Senior Secured Notes due 2013        |  | $                 | 300,000 |   |                  | $ |       
|Unamortized discount                       |  |                   | (5,991  | ) |                  |   |       
|                                           |  |                   |         |   |                  |   |        
|10.5% Senior Secured Notes due 2013, net   |  |                   | 294,009 |   |                  |   |       
|8.5% Senior Subordinated Notes due 2014    |  |                   | 325,000 |   |                  |   | 325,000
|Asset-based Revolving Credit Facility      |  |                   | 9,700   |   |                  |   |       
|First Lien Credit Facility  Term Loan     |  |                   |        |   |                  |   | 361,954
|First Lien Credit Facility  Revolver      |  |                   |        |   |                  |   | 28,000 
|Canadian Credit Facility  Term Loan       |  |                   | 720     |   |                  |   | 1,532  
|Capital lease obligations                  |  |                   | 1,488   |   |                  |   | 1,704  
|                                           |  |                   |         |   |                  |   |        
|Total long-term debt                       |  |                   | 630,917 |   |                  |   | 718,190
|Less: Current maturities of long-term debt |  |                   | 1,096   |   |                  |   | 1,368  
|                                           |  |                   |         |   |                  |   |        
|Long-term debt, net of current maturities  |  | $                 | 629,821 |   |                  | $ | 716,822
|                                           |  |                   |         |   |                  |   |        

On July 2, 2009, the Company and its wholly owned subsidiary SCOC, as co-Issuers,
issued $300.0 million of 10.5% Senior Secured Notes due 2013 (the Secured Notes) and entered into a new asset-based revolving credit facility providing for borrowings of up to $200.0 million subject to borrowing base limitations
(ABL Facility). Initial borrowings under the ABL Facility were $28.3 million. These funds together with the $293.8 million in net proceeds the Company received from the issuance of the Secured Notes were used to repay the $300.9 million
of borrowings outstanding and accrued interest on the Companys first lien credit facility, to pay $17.3 million of debt issuance costs relating to the Secured Notes and the ABL Facility, and to provide $3.9 million for operating needs. These
debt issuance costs were deferred and will be amortized through 2013, when the Secured Notes and ABL Facility mature. During the third quarter of 2009, the Company incurred additional debt issuance costs and as of September 27, 2009, the total
amount of unamortized debt issuance costs related to the refinancing of $17.5 million are included in other assets on the Companys Consolidated Balance Sheet.

In connection with these refinancing transactions, the Company reclassified $9.1 million of unrealized losses associated with existing interest rate swap agreements from accumulated other comprehensive
income to interest expense during the thirteen weeks ended June 28, 2009. See further description in Note 9. In addition, the unamortized balance of debt issuance costs related to the first lien credit facility of $2.5 million was written off during
July 2009 as a result of the refinancing.

Senior Secured Notes

The Secured Notes were issued pursuant to an indenture, dated as of July 2, 2009 (the Indenture), among the Company and SCOC (the
Issuers) and the following Company subsidiaries, as guarantors: SF Holdings Group, Inc., Solo Manufacturing LLC, P. R. Solo Cup, Inc., Solo Cup Owings Mills Holdings, Lily-Canada Holding Corporation, Solo Cup (UK) Limited, Insulpak
Holdings Limited and Solo Cup Europe Limited (collectively, Guarantors) and U.S. Bank National Association, as trustee.

The Secured Notes mature on November 1, 2013 and bear interest at a rate of 10.5% per annum. Interest on the Secured Notes is computed on the basis of a 360-day year composed of twelve 30-day months and is payable semi-annually on May 1 and
November 1 of each year, beginning on November 1, 2009. The Secured Notes were issued at 97.928% of the aggregate principal amount for gross proceeds of $293.8 million, representing a yield to maturity of 11.125%.



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SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(7) DEBT (continued)



Asset-Based Revolving Credit Facility

The ABL Facility provides for revolving credit financing of up to $200.0 million, including a $40.0 million sub-limit for letters of credit,
and has a maturity date of July 2, 2013.

The Companys ability to borrow under the ABL Facility is limited to a
borrowing base equal to 85% of eligible accounts receivable plus the lower of (1) 65% of eligible inventory and (2) 85% of the net orderly liquidation value of eligible inventory minus availability reserves, and is subject to other conditions,
limitations and reserve requirements.

Under the ABL Facility, the Company has the right to increase the aggregate principal
amount of the commitments from time to time, in an aggregate amount not to exceed $100.0 million, without the consent of any lender (other than the lenders participating in such increase), so long as any such increase is at least $25.0 million,
subject to borrowing base limitations and other specified terms and conditions.

Interest accrues on outstanding borrowings
under the ABL Facility at a rate of either LIBOR (as defined in the ABL Facility) plus a margin of 4% per annum or a specified base rate plus a margin of 3% per annum, at the option of the Company. These interest rate margins are subject to
adjustment after July 2, 2010 based on borrowing base availability.

(8) FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments consist primarily of cash equivalents, accounts receivable, accounts payable, derivative financial instruments (Note
9), and debt (Note 7), including obligations under capital leases. The carrying values of financial instruments other than fixed rate debt approximate their fair values at September 27, 2009 and December 28, 2008, due to their short-term maturities
or market rates of interest. The fair value of the Companys floating rate debt at September 27, 2009 and December 28, 2008 approximated its carrying value due to the Companys ability to borrow at comparable terms in the open market.

The Companys 8.5% Senior Subordinated Notes had a carrying value of $325.0 million and an estimated fair value of
$314.4 million and $219.1 million at September 27, 2009 and December 28, 2008, respectively. The fair value of these notes was determined based on the price of the last trade of the debt on September 25, 2009 and December 26, 2008, the last business
day of each respective fiscal period. The Companys 10.5% Senior Secured Notes, issued on July 2, 2009, had a carrying value of $294.0 million and an estimated fair value of $313.9 million at September 27, 2009. The fair value of these notes
was determined based on the average of the bid price (low) and the ask price (high) as of September 25, 2009, the last business day of the fiscal period.

(9) DERIVATIVE INSTRUMENTS

As of September 27, 2009, the Company had
outstanding interest rate swap agreements with a notional amount of $150 million that were originally entered into to hedge a portion of the Companys exposure to interest rate risk under its variable-rate first lien facility term loan
borrowings. The interest rate swaps were designated and qualified as highly effective cash flow hedges. As of June 28, 2009, these swaps no longer qualified for hedge accounting because the Companys first lien facility was extinguished in
conjunction with the Companys refinancing transactions in July 2009, as further described in Note 7. As a result of the refinancing transactions, the counterparty to these interest rate swaps required the Company to post a specified amount of
collateral against the current market value of the swaps, to be maintained by the counterparty through the expiration date of the swaps in February 2011. The balance of such collateral at September 27, 2009 of $11.5 million is included in restricted
cash on the Companys Consolidated Balance Sheet, and will fluctuate based on future changes in the estimated fair value of the swaps.

As long as these swaps had been designated as cash flow hedges, following the guidance of FASB ASC Topic 815, Derivatives, the mark-to-market changes on these interest rate swaps had been reported
as a component of accumulated other comprehensive income. As a result of the refinancing, the hedged forecasted payments of variable-rate interest under the first lien borrowings were no longer probable of occurring. Accordingly, the Company
discontinued hedge accounting prospectively, and, as a result, the cumulative mark-to-market loss of $9.1 million associated with these swaps was reclassified from accumulated other comprehensive loss to interest expense in June 2009. Because the
swaps no longer qualified for hedge accounting, the mark-to-market impact of these interest rate swaps is included in interest expense for the thirteen weeks ended September 27, 2009.



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SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(9) DERIVATIVE INSTRUMENTS (continued)



The location and amount of all losses recognized in income on the interest rate swaps,
including the reclassification from accumulated other comprehensive loss to interest expense, for the thirteen week and thirty-nine week periods ended September 27, 2009 and September 28, 2008 are as follows (in millions):



|                       |  |                                                                             |  |                                      |      |   |                         |   |      |                    |  |   |                    |   |  |   |      |  
|---------------------- |  | --------------------------------------------------------------------------- |  | ------------------------------------ | ---- | - | ----------------------- | - | ---- | ------------------ |  | - | ------------------ | - |  | - | ---- | -
|                       |  |                                                                             |  | Amount of Loss Recognized during the |     
|                       |  |                                                                             |  | Thirteen weeks ended                 |      |   | Thirty-nine weeks ended |  
|Derivative Instruments |  | Location in Consolidated Statement of Operations                            |  | September 27, 2009                   |      |   | September 28, 2008      |   |      | September 27, 2009 |  |   | September 28, 2008 |  
|Interest rate swaps    |  | Interest expense, net                                                       |  | $                                    | (1.3 | ) |                         | $ | (1.3 | )                  |  | $ | (4.7               | ) |  | $ | (2.9 | )
|Interest rate swaps    |  | Reclassification of unrealized loss on cash flow hedges to interest expense |  |                                      |     |   |                         |   |     |                    |  |   | (9.1               | ) |  |   |     |  

The interest rate swaps are reported as current or non-current liabilities at fair
value on the Companys consolidated balance sheets based on their expiration dates as shown in the table below:



|                                                                                |  |               |  |                |  |               |   |  |                          |       |                                          |   |      |                                         |  |   |       |  
|------------------------------------------------------------------------------- |  | ------------- |  | -------------- |  | ------------- | - |  | ------------------------ | ----- | ---------------------------------------- | - | ---- | --------------------------------------- |  | - | ----- | -
|Location in Consolidated Balance Sheet and Description of Derivative Instrument |  | EffectiveDate |  | ExpirationDate |  | FixedRatePaid |   |  | NotionalAmount(millions) |       | Fair Value atSeptember 27,2009(millions) |   |      | Fair Value atDecember 28,2008(millions) | 
|Other current liabilities -                                                     |  |               |  |                |  |               |   |  |                          |       |                                          |   |      |                                         |  |   |       |  
|Receive-variable (Eurodollar) pay-fixed interest rate swap                      |  | 10/02/07      |  | 04/02/09       |  | 4.6475        | % |  | $                        | 50.0  |                                          | $ |     |                                         |  | $ | (0.5  | )
|Other liabilities -                                                             |  |               |  |                |  |               |   |  |                          |       |                                          |   |      |                                         |  |   |       |  
|Receive-variable (Eurodollar) pay-fixed interest rate swaps                     |  | 08/28/07      |  | 02/28/11       |  | 5.3765        | % |  |                          | 150.0 |                                          |   | (8.6 | )                                       |  |   | (10.6 | )
|                                                                                |  |               |  |                |  |               |   |  |                          |       |                                          |   |      |                                         |  |   |       |  
|                                                                                |  |               |  |                |  |               |   |  | $                        | 200.0 |                                          | $ | (8.6 | )                                       |  | $ | (11.1 | )
|                                                                                |  |               |  |                |  |               |   |  |                          |       |                                          |   |      |                                         |  |   |       |  

The Companys interest rate swaps are measured at fair value on a recurring
basis using Level 2 inputs in the fair value hierarchy described in FASB ASC Topic 820, Fair Value Measurements and Disclosures. The fair values were determined using the income approach based on a discounted cash flow model to determine the
present value of future cash flows over the remaining terms of the contracts incorporating observable market inputs such as prevailing interest rates as of the reporting date. Both the counterparty credit risk and the Companys credit risk were
considered in the fair value determination.

In March 2004, June 2005 and March 2006, the Company entered into
receive-variable, pay-fixed interest rate swaps with a total notional amount of $300.0 million. In September 2006, the Company terminated these agreements prior to their stated expirations. Through the termination date, these interest rate swap
agreements were accounted for as cash flow hedges and their fair values were included in other current assets and other assets on the Companys Consolidated Balance Sheets. Included in accumulated other comprehensive income was a deferred gain
on the qualified hedged transactions of $0.2 million, net of tax, as of December 28, 2008. The deferred gain was being amortized over the remaining term of the underlying debt increasing interest income and income tax expense. The remaining deferred
gain of $0.1 million, as of June 28, 2009, was fully amortized in July 2009 as a result of the extinguishment of the underlying debt.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(10) PENSIONS AND OTHER POSTRETIREMENT BENEFITS

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



|                                      |  |                                       |        |   |                                       |   |        |                                          |  |   |                                          |   |  |   |        |  
|------------------------------------- |  | ------------------------------------- | ------ | - | ------------------------------------- | - | ------ | ---------------------------------------- |  | - | ---------------------------------------- | - |  | - | ------ | -
|                                      |  | Thirteenweeks endedSeptember 27, 2009 |        |   | Thirteenweeks endedSeptember 28, 2008 |   |        | Thirty-nineweeks endedSeptember 27, 2009 |  |   | Thirty-nineweeks endedSeptember 28, 2008 |  
|Pension Benefits                      |  |                                       |        |   |                                       |   |        |                                          |  |   |                                          |   |  |   |        |  
|Service cost                          |  | $                                     | 256    |   |                                       | $ | 313    |                                          |  | $ | 711                                      |   |  | $ | 953    |  
|Interest cost                         |  |                                       | 1,872  |   |                                       |   | 1,804  |                                          |  |   | 5,381                                    |   |  |   | 5,456  |  
|Expected return on plan assets        |  |                                       | (1,571 | ) |                                       |   | (2,219 | )                                        |  |   | (4,480                                   | ) |  |   | (6,715 | )
|Amortization of prior service cost    |  |                                       | 573    |   |                                       |   | 51     |                                          |  |   | 1,670                                    |   |  |   | 153    |  
|Amortization of net loss              |  |                                       | 51     |   |                                       |   |       |                                          |  |   | 153                                      |   |  |   |       |  
|                                      |  |                                       |        |   |                                       |   |        |                                          |  |   |                                          |   |  |   |        |  
|Net periodic benefit cost (income)    |  | $                                     | 1,181  |   |                                       | $ | (51    | )                                        |  | $ | 3,435                                    |   |  | $ | (153   | )
|                                      |  |                                       |        |   |                                       |   |        |                                          |  |   |                                          |   |  |   |        |  
|                                      |  |                                       |        |  
|Other Postretirement Benefits         |  |                                       |        |   |                                       |   |        |                                          |  |   |                                          |   |  |   |        |  
|Service cost                          |  | $                                     | 10     |   |                                       | $ | 14     |                                          |  | $ | 28                                       |   |  | $ | 43     |  
|Interest cost                         |  |                                       | 197    |   |                                       |   | 171    |                                          |  |   | 582                                      |   |  |   | 514    |  
|Amortization of prior service benefit |  |                                       | (109   | ) |                                       |   | (109   | )                                        |  |   | (326                                     | ) |  |   | (326   | )
|Amortization of net loss              |  |                                       | 84     |   |                                       |   | 77     |                                          |  |   | 256                                      |   |  |   | 231    |  
|                                      |  |                                       |        |   |                                       |   |        |                                          |  |   |                                          |   |  |   |        |  
|Net periodic benefit cost             |  | $                                     | 182    |   |                                       | $ | 153    |                                          |  | $ | 540                                      |   |  | $ | 462    |  
|                                      |  |                                       |        |   |                                       |   |        |                                          |  |   |                                          |   |  |   |        |  

During the thirty-nine weeks ended September 27, 2009, $3.0 million of contributions
had been made by the Company to its pension and other postretirement benefit plans. The Company presently anticipates contributing an additional $2.4 million to fund its pension and other postretirement benefit plans in 2009 for a total of
approximately $5.4 million.

On January 1, 2009, the Company implemented an indefinite suspension of company matching
contributions for its 401(k) defined contribution plan which covers substantially all U.S. employees, except for certain facilities operating under a collective bargaining agreement.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(11) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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



|                                                                                                                 |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |        |  
|---------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ------------------------------------- | - | ------- | ---------------------------------------- |  | - | ---------------------------------------- | - |  | - | ------ | -
|                                                                                                                 |  | Thirteenweeks endedSeptember 27, 2009 |         |   | Thirteenweeks endedSeptember 28, 2008 |   |         | Thirty-nineweeks endedSeptember 27, 2009 |  |   | Thirty-nineweeks endedSeptember 28, 2008 |  
|Net (loss) income                                                                                                |  | $                                     | (27,878 | ) |                                       | $ | (7,995  | )                                        |  | $ | (31,125                                  | ) |  | $ | 692    |  
|Foreign currency translation adjustment                                                                          |  |                                       | 1,293   |   |                                       |   | (2,366  | )                                        |  |   | 7,854                                    |   |  |   | (2,917 | )
|Pension liability adjustment                                                                                     |  |                                       | 487     |   |                                       |   | 24      |                                          |  |   | 1,569                                    |   |  |   | 72     |  
|Unrealized investment gain (loss)                                                                                |  |                                       | 9       |   |                                       |   | 2       |                                          |  |   | 12                                       |   |  |   | (4     | )
|Recognition of realized loss on cash flow hedges                                                                 |  |                                       |        |   |                                       |   | (27     | )                                        |  |   | (150                                     | ) |  |   | (81    | )
|Unrealized investment loss on cash flow hedges                                                                   |  |                                       | (93     | ) |                                       |   | (1,011  | )                                        |  |   | (1,514                                   | ) |  |   | (2,324 | )
|Reclassification of realized loss on cash flow hedges to interest expense                                        |  |                                       |        |   |                                       |   | 1,291   |                                          |  |   | 3,512                                    |   |  |   | 2,971  |  
|Reclassification of unrealized loss on cash flow hedges to interest expense upon termination of hedge accounting |  |                                       |        |   |                                       |   |        |                                          |  |   | 9,108                                    |   |  |   |       |  
|                                                                                                                 |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |        |  
|Comprehensive loss                                                                                               |  | $                                     | (26,182 | ) |                                       | $ | (10,082 | )                                        |  | $ | (10,734                                  | ) |  | $ | (1,591 | )
|                                                                                                                 |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |        |  

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



|                                                               |  |                   |         |   |                  |   |         |  
|-------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                               |  | September 27,2009 |         |   | December 28,2008 |  
|Foreign currency translation adjustments                       |  | $                 | 8,659   |   |                  | $ | 805     |  
|Pension liability adjustments, net of tax of $5,772 and $5,870 |  |                   | (20,724 | ) |                  |   | (22,293 | )
|Unrealized investment loss, net of tax of $0                   |  |                   |        |   |                  |   | (12     | )
|Unrealized loss on cash flow hedges, net of tax of $0          |  |                   |        |   |                  |   | (11,106 | )
|Unrecognized gain on cash flow hedges, net of tax of $215      |  |                   |        |   |                  |   | 150     |  
|                                                               |  |                   |         |   |                  |   |         |  
|Accumulated other comprehensive loss                           |  | $                 | (12,065 | ) |                  | $ | (32,456 | )
|                                                               |  |                   |         |   |                  |   |         |  



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SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(12) RELATED PARTY TRANSACTIONS

In 2004, the Company and SCIC entered into a management agreement with SCC Holding providing for, among other items, the payment by SCIC of
an annual advisory fee of $2.5 million to SCC Holding (SCC Holding Agreement). On June 30, 2009, the Company and SCIC entered into a second amendment to the management agreement with SCC Holding. The amendment provided that the
annual advisory fee would be $0.8 million beginning with the 2009 fee, which the Company paid in July 2009. As of September 27, 2009, prepaid advisory fees of $0.2 million were included in prepaid expenses on the Companys Consolidated
Balance Sheet. Pursuant to the SCC Holding Agreement, the Company incurred $0.2 million and $0.6 million of advisory fees during the thirteen weeks and thirty-nine weeks ended September 27, 2009, respectively.

Pursuant to the SCC Holding Agreement, during the thirteen-week and thirty-nine week periods ended September 28, 2008, the Company
recorded $0.6 million and $1.9 million of advisory fees, respectively. On December 19, 2008, the Company and SCIC entered into an amendment to the SCC Holding Agreement which provided that SCC Holding would not receive any fees for the fiscal
year ended December 28, 2008; therefore, in the fourth quarter of 2008, the previously recognized expense for advisory fees to SCC Holding was reversed, and no expense was incurred by the Company for the 2008 fiscal year related to this
agreement.

Also in 2004, the Company and SCIC entered into a management agreement with Vestar pursuant to which SCIC would
pay Vestar a $0.8 million annual advisory fee, plus reimbursement of its expenses (Vestar Agreement). Pursuant to the Vestar Agreement, the Company recorded $0.2 million of advisory fees during each of the thirteen-week periods ended
September 27, 2009 and September 28, 2008, and $0.6 million and $0.7 million during each of the thirty-nine week periods ended September 27, 2009 and September 28, 2008. The Company paid the 2009 annual advisory fee of $0.8
million in July 2009. As of September 27, 2009, prepaid advisory fees of $0.2 million were included in prepaid expenses on the Companys Consolidated Balance Sheet. As of September 27, 2009 and December 28, 2008, $0.1 million was
included in other current liabilities for out-of-pocket expenses.

On December 19, 2008, the Company and Vestar entered
into an amendment to the Vestar Agreement which provided that Vestar would not receive any advisory fees for the fiscal year ended December 28, 2008. As a result, in the fourth quarter of 2008, the previously recognized expense for advisory
fees to Vestar was reversed, and no expense was incurred by the Company for the 2008 fiscal year related to this agreement.

In July 2008, the Company extended an interest-free loan of $0.2 million to one of its executive officers. The loan is included in other assets (noncurrent) on the Companys Consolidated Balance Sheet as of December 28, 2008. The
loan was fully repaid in July 2009.

In February 2009, SCOC entered into a real estate lease agreement (the Lease)
with Sun Products Corporation (Sun) for a warehouse located in Havre de Grace, Maryland, which the Company closed in December 2008. See Note 3. One or more Vestar entities have an equity interest in Sun. The Lease is for a term of seven
years and includes two 5-year renewal options. During September 2009, the Company sold the Havre de Grace property and simultaneously assigned the Lease to the new owner. One of the contractual terms of the purchase agreement requires the Company to
lease the property from the new owner for years 8-15 beginning in 2016 in the event the tenant does not renew the lease. The Company recorded a liability equal to the estimated fair value of this guarantee, in accordance with FASB ASC Topic 460,
Guarantees, and, due to the continuing involvement in the property, deferred the gain on the sale.



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SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(13) SEGMENTS

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

The accounting policies of the operating segments are the same as
those described in Note 2 to the consolidated financial statements in the Companys 2008 Annual Report on Form 10-K. Segment operating results are measured based on operating income (loss). Intersegment net sales are accounted for on an
arms length pricing basis.



|                                                   |  |              |           |        |   |         |       |  |   |               |   |  |              |           |   |       |   |         |   |  |   |           |  
|-------------------------------------------------- |  | ------------ | --------- | ------ | - | ------- | ----- |  | - | ------------- | - |  | ------------ | --------- | - | ----- | - | ------- | - |  | - | --------- | -
|(in thousands)                                     |  | NorthAmerica |           | Europe |   |         | Other |  |   | TotalSegments |   |  | Eliminations |           |   | Total |  
|For the thirteen weeks ended September 27, 2009    |  |              |           |        |   |         |       |  |   |               |   |  |              |           |   |       |   |         |   |  |   |           |  
|Net sales                                          |  | $            | 345,974   |        | $ | 27,886  |       |  | $ | 3,187         |   |  | $            | 377,047   |   |       | $ | (6,989  | ) |  | $ | 370,058   |  
|Intersegment net sales                             |  |              | 6,989     |        |   |        |       |  |   |              |   |  |              | 6,989     |   |       |   | (6,989  | ) |  |   |          |  
|Operating income (loss)(1)                         |  |              | 11,709    |        |   | (18,830 | )     |  |   | 287           |   |  |              | (6,834    | ) |       |   | (165    | ) |  |   | (6,999    | )
|                                                   |  |              |           |        |   |        
|For the thirteen weeks ended September 28, 2008    |  |              |           |        |   |         |       |  |   |               |   |  |              |           |   |       |   |         |   |  |   |           |  
|Net sales                                          |  | $            | 436,587   |        | $ | 29,249  |       |  | $ | 3,492         |   |  | $            | 469,328   |   |       | $ | (7,170  | ) |  | $ | 462,158   |  
|Intersegment net sales                             |  |              | 7,170     |        |   |        |       |  |   |              |   |  |              | 7,170     |   |       |   | (7,170  | ) |  |   |          |  
|Operating income                                   |  |              | 9,465     |        |   | 663     |       |  |   | 92            |   |  |              | 10,220    |   |       |   | (26     | ) |  |   | 10,194    |  
|                                                   |  |              |           |        |   |        
|For the thirty-nine weeks ended September 27, 2009 |  |              |           |        |   |         |       |  |   |               |   |  |              |           |   |       |   |         |   |  |   |           |  
|Net sales                                          |  | $            | 1,046,787 |        | $ | 77,245  |       |  | $ | 9,878         |   |  | $            | 1,133,910 |   |       | $ | (18,394 | ) |  | $ | 1,115,516 |  
|Intersegment net sales                             |  |              | 18,394    |        |   |        |       |  |   |              |   |  |              | 18,394    |   |       |   | (18,394 | ) |  |   |          |  
|Operating income (loss)(1)                         |  |              | 38,268    |        |   | (20,990 | )     |  |   | 1,088         |   |  |              | 18,366    |   |       |   | (186    | ) |  |   | 18,180    |  
|                                                   |  |              |           |        |   |        
|For the thirty-nine weeks ended September 28, 2008 |  |              |           |        |   |         |       |  |   |               |   |  |              |           |   |       |   |         |   |  |   |           |  
|Net sales                                          |  | $            | 1,366,768 |        | $ | 84,599  |       |  | $ | 10,102        |   |  | $            | 1,461,469 |   |       | $ | (18,721 | ) |  | $ | 1,442,748 |  
|Intersegment net sales                             |  |              | 18,721    |        |   |        |       |  |   |              |   |  |              | 18,721    |   |       |   | (18,721 | ) |  |   |          |  
|Operating income (loss)                            |  |              | 53,222    |        |   | 2,238   |       |  |   | (209          | ) |  |              | 55,251    |   |       |   | 55      |   |  |   | 55,306    |  



|                                                                            |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |         |  
|--------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ------------------------------------- | - | ------- | ---------------------------------------- |  | - | ---------------------------------------- | - |  | - | ------- | -
|(in thousands)                                                              |  | Thirteenweeks
endedSeptember 27, 2009 |         |   | Thirteenweeks
endedSeptember 28, 2008 |   |         | Thirty-nineweeks
endedSeptember 27, 2009 |  |   | Thirty-nineweeks
endedSeptember 28, 2008 |  
|Operating income:                                                           |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |         |  
|Total segment operating (loss) income                                       |  | $                                     | (6,834  | ) |                                       | $ | 10,220  |                                          |  | $ | 18,366                                   |   |  | $ | 55,251  |  
|Elimination of intersegment operating (income) loss                         |  |                                       | (165    | ) |                                       |   | (26     | )                                        |  |   | (186                                     | ) |  |   | 55      |  
|Interest expense, net of interest income of $242, $286, $501 and $888       |  |                                       | (17,498 | ) |                                       |   | (14,798 | )                                        |  |   | (45,399                                  | ) |  |   | (46,344 | )
|Reclassification of unrealized loss on cash flow hedges to interest expense |  |                                       |        |   |                                       |   |        |                                          |  |   | (9,108                                   | ) |  |   |        |  
|Loss on debt extinguishment                                                 |  |                                       | (2,520  | ) |                                       |   |        |                                          |  |   | (2,520                                   | ) |  |   |        |  
|Foreign currency exchange (loss) gain, net                                  |  |                                       | (98     | ) |                                       |   | (4,406  | )                                        |  |   | 2,372                                    |   |  |   | (3,160  | )
|                                                                            |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |         |  
|(Loss) income from continuing operations before income taxes                |  | $                                     | (27,115 | ) |                                       | $ | (9,010  | )                                        |  | $ | (36,475                                  | ) |  | $ | 5,802   |  
|                                                                            |  |                                       |         |   |                                       |   |         |                                          |  |   |                                          |   |  |   |         |  



|(1) | For the thirteen weeks and thirty-nine weeks ended September 27, 2009, the operating loss for the Companys Europe segment includes a goodwill impairment
charge of $17.2 million. See note 5.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(14) GUARANTOR NOTE

On February 27, 2004, with an effective date of February 22, 2004, the Company (Solo Delaware) acquired SF Holdings. The Company partially funded this acquisition through the
issuance of 8.5% Senior Subordinated Notes. The 8.5% Senior Subordinated Notes were issued by Solo Delaware and are fully and unconditionally guaranteed, on a joint and several basis, by certain of the Companys subsidiaries. Each of the
subsidiary guarantors are 100% directly or indirectly owned by the parent company issuer. The consolidated guarantors are: P.R. Solo Cup, Inc., SF Holdings Group, Inc., Solo Cup Operating Corporation (formerly known as Sweetheart Cup Company Inc.),
Solo Manufacturing LLC, Solo Cup Owings Mills Holdings, Lily-Canada Holding Corporation, Solo Cup (UK) Limited, Insulpak Holdings Limited and Solo Cup Europe Limited. The following financial information presents the guarantors and non-guarantors of
the 8.5% Senior Subordinated Notes, in accordance with Rule 3-10 of Regulation S-X.

In previous filings, these condensed
consolidated financial statements did not reflect investments in subsidiaries using the equity method, as instructed by Rule 3-10 of Regulation S-X. In presenting these condensed consolidating financial statements below, the equity method of
accounting has been applied to (i) Solo Delawares investment in the Guarantor Subsidiaries and (ii) the Guarantor Subsidiaries investment in the Non-Guarantor Subsidiaries. All such subsidiaries meet the requirements to be
consolidated under U.S. generally accepted accounting principles. All intercompany balances and transactions between Solo Delaware, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries have been eliminated.

The previous periods presented below include the addition of the caption Investments in subsidiaries to the December 28,
2008 Condensed Consolidated Balance Sheet, and the addition of the caption Equity in (earnings) loss of subsidiaries to the Condensed Consolidated Statements of Operations for the thirteen and thirty-nine weeks ended September 28,
2008, reflecting this immaterial correction of an error. There was no impact to the Consolidated column during any periods.

(Continued)



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(14) GUARANTOR NOTE (Continued)



|                                               |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|---------------------------------------------- |  | -------------------------------------------------------------------- | ------ | ---------- | - | -------------- |  | ------------ | ------ |  | ------------ | -------- | - |  | - | -------
|                                               |  | Condensed Consolidated Balance SheetSeptember 27, 2009(In thousands)
|                                               |  | SoloDelaware                                                         |        | Guarantors |   | Non-Guarantors |  | Eliminations |        |  | Consolidated
|Assets                                         |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|Current assets:                                |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|Cash and cash equivalents                      |  | $                                                                    |       |            | $ | 4,945          |  | $            | 18,651 |  | $            |         |   |  | $ | 23,596 
|Cash in escrow                                 |  |                                                                      |       |            |   | 470            |  |              |       |  |              |         |   |  |   | 470    
|Accounts receivable  trade                    |  |                                                                      |       |            |   | 90,546         |  |              | 14,003 |  |              |         |   |  |   | 104,549
|Accounts receivable  other                    |  |                                                                      |       |            |   | 13,042         |  |              | 414    |  |              | (8,847   | ) |  |   | 4,609  
|Inventories                                    |  |                                                                      |       |            |   | 232,739        |  |              | 25,319 |  |              | (2,216   | ) |  |   | 255,842
|Deferred income taxes                          |  |                                                                      |       |            |   | 19,904         |  |              | 332    |  |              |         |   |  |   | 20,236 
|Prepaid expenses and other current assets      |  |                                                                      |       |            |   | 27,978         |  |              | 3,534  |  |              |         |   |  |   | 31,512 
|                                               |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|Total current assets                           |  |                                                                      |       |            |   | 389,624        |  |              | 62,253 |  |              | (11,063  | ) |  |   | 440,814
|Property, plant and equipment, net             |  |                                                                      |       |            |   | 469,360        |  |              | 31,882 |  |              |         |   |  |   | 501,242
|Investments in subsidiaries                    |  |                                                                      | 36,989 |            |   | 69,221         |  |              |       |  |              | (106,210 | ) |  |   |       
|Restricted cash                                |  |                                                                      | 11,540 |            |   |               |  |              |       |  |              |         |   |  |   | 11,540 
|Other assets                                   |  |                                                                      | 15,937 |            |   | 15,521         |  |              | 2,477  |  |              |         |   |  |   | 33,935 
|                                               |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|Total assets                                   |  | $                                                                    | 64,466 |            | $ | 943,726        |  | $            | 96,612 |  | $            | (117,273 | ) |  | $ | 987,531
|                                               |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|                                               |  |                                                                      |        |            |  
|Liabilities and Shareholders Equity           |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|Current liabilities:                           |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|Accounts payable                               |  | $                                                                    | 23,523 |            | $ | 56,520         |  | $            | 14,612 |  | $            | (8,845   | ) |  |   | 85,810 
|Accrued expenses and other current liabilities |  |                                                                      | 11,766 |            |   | 85,421         |  |              | 4,731  |  |              |         |   |  |   | 101,918
|Current maturities of long-term debt           |  |                                                                      |       |            |   | 375            |  |              | 721    |  |              |         |   |  |   | 1,096  
|                                               |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|Total current liabilities                      |  |                                                                      | 35,289 |            |   | 142,316        |  |              | 20,064 |  |              | (8,845   | ) |  |   | 188,824
|Long-term debt, net of current maturities      |  |                                                                      |       |            |   | 629,821        |  |              |       |  |              |         |   |  |   | 629,821
|Deferred income taxes                          |  |                                                                      |       |            |   | 20,981         |  |              | 2,862  |  |              |         |   |  |   | 23,843 
|Other liabilities                              |  |                                                                      | 8,619  |            |   | 113,619        |  |              | 2,247  |  |              |         |   |  |   | 124,485
|                                               |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|Total liabilities                              |  |                                                                      | 43,908 |            |   | 906,737        |  |              | 25,173 |  |              | (8,845   | ) |  |   | 966,973
|                                               |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|Total shareholders equity                     |  |                                                                      | 20,558 |            |   | 36,989         |  |              | 71,439 |  |              | (108,428 | ) |  |   | 20,558 
|                                               |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        
|Total liabilities and shareholders equity     |  | $                                                                    | 64,466 |            | $ | 943,726        |  | $            | 96,612 |  | $            | (117,273 | ) |  | $ | 987,531
|                                               |  |                                                                      |        |            |   |                |  |              |        |  |              |          |   |  |   |        

(Continued)



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SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(14) GUARANTOR NOTE (Continued)



|                                               |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|---------------------------------------------- |  | ------------------------------------------------------------------- | ------ | ---------- | - | -------------- |  | ------------ | ------ |  | ------------ | -------- | - |  | - | ---------
|                                               |  | Condensed Consolidated Balance SheetDecember 28, 2008(In thousands)
|                                               |  | SoloDelaware                                                        |        | Guarantors |   | Non-Guarantors |  | Eliminations |        |  | Consolidated
|Assets                                         |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|Current assets:                                |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|Cash and cash equivalents                      |  | $                                                                   | 40,310 |            | $ | 1,028          |  | $            | 16,166 |  | $            |         |   |  | $ | 57,504   
|Cash in escrow                                 |  |                                                                     |       |            |   | 50             |  |              |       |  |              |         |   |  |   | 50       
|Accounts receivable  trade                    |  |                                                                     |       |            |   | 104,876        |  |              | 16,126 |  |              |         |   |  |   | 121,002  
|Accounts receivable  other                    |  |                                                                     |       |            |   | 137,044        |  |              | 247    |  |              | (134,252 | ) |  |   | 3,039    
|Inventories                                    |  |                                                                     |       |            |   | 264,133        |  |              | 20,911 |  |              | (1,783   | ) |  |   | 283,261  
|Deferred income taxes                          |  |                                                                     |       |            |   | 21,647         |  |              | 235    |  |              |         |   |  |   | 21,882   
|Prepaid expenses and other current assets      |  |                                                                     |       |            |   | 35,170         |  |              | 3,702  |  |              |         |   |  |   | 38,872   
|                                               |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|Total current assets                           |  |                                                                     | 40,310 |            |   | 563,948        |  |              | 57,387 |  |              | (136,035 | ) |  |   | 525,610  
|Property, plant and equipment, net             |  |                                                                     |       |            |   | 479,697        |  |              | 31,432 |  |              |         |   |  |   | 511,129  
|Goodwill                                       |  |                                                                     |       |            |   | 15,459         |  |              |       |  |              |         |   |  |   | 15,459   
|Investments in subsidiaries                    |  |                                                                     | 42,537 |            |   | 62,300         |  |              |       |  |              | (104,837 | ) |  |   |         
|Other assets                                   |  |                                                                     | 12,210 |            |   | 6,582          |  |              | 2,805  |  |              |         |   |  |   | 21,597   
|                                               |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|Total assets                                   |  | $                                                                   | 95,057 |            | $ | 1,127,986      |  | $            | 91,624 |  | $            | (240,872 | ) |  | $ | 1,073,795
|                                               |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|                                               |  |                                                                     |        |            |  
|Liabilities and Shareholders Equity           |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|Current liabilities:                           |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|Accounts payable                               |  | $                                                                   | 40,508 |            | $ | 151,335        |  | $            | 17,168 |  | $            | (134,252 | ) |  | $ | 74,759   
|Accrued expenses and other current liabilities |  |                                                                     | 12,673 |            |   | 86,095         |  |              | 4,257  |  |              |         |   |  |   | 103,025  
|Current maturities of long-term debt           |  |                                                                     |       |            |   | 183            |  |              | 1,185  |  |              |         |   |  |   | 1,368    
|                                               |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|Total current liabilities                      |  |                                                                     | 53,181 |            |   | 237,613        |  |              | 22,610 |  |              | (134,252 | ) |  |   | 179,152  
|Long-term debt, net of current maturities      |  |                                                                     |       |            |   | 716,475        |  |              | 347    |  |              |         |   |  |   | 716,822  
|Deferred income taxes                          |  |                                                                     |       |            |   | 28,559         |  |              | 2,291  |  |              |         |   |  |   | 30,850   
|Other liabilities                              |  |                                                                     | 10,584 |            |   | 102,802        |  |              | 2,293  |  |              |         |   |  |   | 115,679  
|                                               |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|Total liabilities                              |  |                                                                     | 63,765 |            |   | 1,085,449      |  |              | 27,541 |  |              | (134,252 | ) |  |   | 1,042,503
|                                               |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|Total shareholders equity                     |  |                                                                     | 31,292 |            |   | 42,537         |  |              | 64,083 |  |              | (106,620 | ) |  |   | 31,292   
|                                               |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          
|Total liabilities and shareholders equity     |  | $                                                                   | 95,057 |            | $ | 1,127,986      |  | $            | 91,624 |  | $            | (240,872 | ) |  | $ | 1,073,795
|                                               |  |                                                                     |        |            |   |                |  |              |        |  |              |          |   |  |   |          

(Continued)



19



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##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(14) GUARANTOR NOTE (Continued)



|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------- | ------- | - | ---------- | - | ------- | -------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                             |  | Consolidated Statement of OperationsThirteen weeks ended September 27, 2009(In thousands) |        
|                                                             |  | SoloDelaware                                                                              |         |   | Guarantors |   |         | Non-Guarantors |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                                    |  | $                                                                                         |        |   |            | $ | 339,358 |                |  | $ | 43,804       |   |  | $            | (13,104 | ) |  | $ | 370,058 |  
|Cost of goods sold                                           |  |                                                                                           |        |   |            |   | 289,913 |                |  |   | 39,476       |   |  |              | (13,123 | ) |  |   | 316,266 |  
|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                                 |  |                                                                                           |        |   |            |   | 49,445  |                |  |   | 4,328        |   |  |              | 19      |   |  |   | 53,792  |  
|Selling, general and administrative expenses                 |  |                                                                                           |        |   |            |   | 35,933  |                |  |   | 2,624        |   |  |              |        |   |  |   | 38,557  |  
|Impairment of goodwill                                       |  |                                                                                           |        |   |            |   | 17,210  |                |  |   |             |   |  |              |        |   |  |   | 17,210  |  
|Loss on asset disposals                                      |  |                                                                                           |        |   |            |   | 5,024   |                |  |   |             |   |  |              |        |   |  |   | 5,024   |  
|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Operating (loss) income                                      |  |                                                                                           |        |   |            |   | (8,722  | )              |  |   | 1,704        |   |  |              | 19      |   |  |   | (6,999  | )
|Interest expense, net                                        |  |                                                                                           | 3,795   |   |            |   | 13,677  |                |  |   | 26           |   |  |              |        |   |  |   | 17,498  |  
|Loss on debt extinguishment                                  |  |                                                                                           | 2,520   |   |            |   |        |                |  |   |             |   |  |              |        |   |  |   | 2,520   |  
|Foreign currency exchange loss (gain), net                   |  |                                                                                           |        |   |            |   | 398     |                |  |   | (300         | ) |  |              |        |   |  |   | 98      |  
|Equity in loss (earnings) of subsidiaries                    |  |                                                                                           | 21,433  |   |            |   | (1,542  | )              |  |   |             |   |  |              | (19,891 | ) |  |   |        |  
|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|(Loss) income before income taxes                            |  |                                                                                           | (27,748 | ) |            |   | (21,255 | )              |  |   | 1,978        |   |  |              | 19,910  |   |  |   | (27,115 | )
|Income tax provision                                         |  |                                                                                           | 130     |   |            |   | 178     |                |  |   | 455          |   |  |              |        |   |  |   | 763     |  
|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Net (loss) income                                            |  | $                                                                                         | (27,878 | ) |            | $ | (21,433 | )              |  | $ | 1,523        |   |  | $            | 19,910  |   |  | $ | (27,878 | )
|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|                                                             | 
|                                                             |  | Consolidated Statement of OperationsThirteen weeks ended September 28, 2008(In thousands) |        
|                                                             |  | SoloDelaware                                                                              |         |   | Guarantors |   |         | Non-Guarantors |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                                    |  | $                                                                                         |        |   |            | $ | 426,009 |                |  | $ | 51,404       |   |  | $            | (15,255 | ) |  | $ | 462,158 |  
|Cost of goods sold                                           |  |                                                                                           |        |   |            |   | 371,311 |                |  |   | 46,143       |   |  |              | (15,305 | ) |  |   | 402,149 |  
|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                                 |  |                                                                                           |        |   |            |   | 54,698  |                |  |   | 5,261        |   |  |              | 50      |   |  |   | 60,009  |  
|Selling, general and administrative expenses                 |  |                                                                                           |        |   |            |   | 41,019  |                |  |   | 2,299        |   |  |              |        |   |  |   | 43,318  |  
|Loss (gain) on asset disposals                               |  |                                                                                           |        |   |            |   | 6,505   |                |  |   | (8           | ) |  |              |        |   |  |   | 6,497   |  
|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income                                             |  |                                                                                           |        |   |            |   | 7,174   |                |  |   | 2,970        |   |  |              | 50      |   |  |   | 10,194  |  
|Interest expense (income), net                               |  |                                                                                           | 192     |   |            |   | 14,613  |                |  |   | (7           | ) |  |              |        |   |  |   | 14,798  |  
|Foreign currency exchange loss (gain), net                   |  |                                                                                           |        |   |            |   | 5,056   |                |  |   | (650         | ) |  |              |        |   |  |   | 4,406   |  
|Equity in loss (earnings) of subsidiaries                    |  |                                                                                           | 7,765   |   |            |   | (1,960  | )              |  |   |             |   |  |              | (5,805  | ) |  |   |        |  
|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|(Loss) income from continuing operations before income taxes |  |                                                                                           | (7,957  | ) |            |   | (10,535 | )              |  |   | 3,627        |   |  |              | 5,855   |   |  |   | (9,010  | )
|Income tax provision (benefit)                               |  |                                                                                           | 38      |   |            |   | (2,951  | )              |  |   | 1,717        |   |  |              |        |   |  |   | (1,196  | )
|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|(Loss) income from continuing operations                     |  |                                                                                           | (7,995  | ) |            |   | (7,584  | )              |  |   | 1,910        |   |  |              | 5,855   |   |  |   | (7,814  | )
|Loss from discontinued operations, net of income taxes of $0 |  |                                                                                           |        |   |            |   | (181    | )              |  |   |             |   |  |              |        |   |  |   | (181    | )
|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  
|Net (loss) income                                            |  | $                                                                                         | (7,995  | ) |            | $ | (7,765  | )              |  | $ | 1,910        |   |  | $            | 5,855   |   |  | $ | (7,995  | )
|                                                             |  |                                                                                           |         |   |            |   |         |                |  |   |              |   |  |              |         |   |  |   |         |  

(Continued)



20



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##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(14) GUARANTOR NOTE (Continued)



|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|--------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- | ------- | - | ---------- | - | --------- | -------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | --------- | -
|                                                                            |  | Consolidated Statement of OperationsThirty-nine weeks ended September 27, 2009(In thousands) |        
|                                                                            |  | SoloDelaware                                                                                 |         |   | Guarantors |   |           | Non-Guarantors |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                                                   |  | $                                                                                            |        |   |            | $ | 1,045,080 |                |  | $ | 126,557      |   |  | $            | (56,121 | ) |  | $ | 1,115,516 |  
|Cost of goods sold                                                          |  |                                                                                              |        |   |            |   | 899,947   |                |  |   | 116,203      |   |  |              | (56,115 | ) |  |   | 960,035   |  
|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|Gross profit                                                                |  |                                                                                              |        |   |            |   | 145,133   |                |  |   | 10,354       |   |  |              | (6      | ) |  |   | 155,481   |  
|Selling, general and administrative expenses                                |  |                                                                                              | 1       |   |            |   | 105,451   |                |  |   | 7,192        |   |  |              |        |   |  |   | 112,644   |  
|Impairment of goodwill                                                      |  |                                                                                              |        |   |            |   | 17,210    |                |  |   |             |   |  |              |        |   |  |   | 17,210    |  
|Loss on asset disposals                                                     |  |                                                                                              |        |   |            |   | 6,995     |                |  |   | 452          |   |  |              |        |   |  |   | 7,447     |  
|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|Operating (loss) income                                                     |  |                                                                                              | (1      | ) |            |   | 15,477    |                |  |   | 2,710        |   |  |              | (6      | ) |  |   | 18,180    |  
|Interest expense, net                                                       |  |                                                                                              | 4,303   |   |            |   | 41,068    |                |  |   | 28           |   |  |              |        |   |  |   | 45,399    |  
|Reclassification of unrealized loss on cash flow hedges to interest expense |  |                                                                                              | 9,108   |   |            |   |          |                |  |   |             |   |  |              |        |   |  |   | 9,108     |  
|Loss on debt extinguishment                                                 |  |                                                                                              | 2,520   |   |            |   |          |                |  |   |             |   |  |              |        |   |  |   | 2,520     |  
|Foreign currency exchange gain, net                                         |  |                                                                                              |        |   |            |   | (1,784    | )              |  |   | (588         | ) |  |              |        |   |  |   | (2,372    | )
|Equity in loss (earnings) of subsidiaries                                   |  |                                                                                              | 14,981  |   |            |   | (2,851    | )              |  |   |             |   |  |              | (12,130 | ) |  |   |          |  
|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|(Loss) income from before income taxes                                      |  |                                                                                              | (30,913 | ) |            |   | (20,956   | )              |  |   | 3,270        |   |  |              | 12,124  |   |  |   | (36,475   | )
|Income tax provision (benefit)                                              |  |                                                                                              | 212     |   |            |   | (5,975    | )              |  |   | 413          |   |  |              |        |   |  |   | (5,350    | )
|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|Net (loss) income                                                           |  | $                                                                                            | (31,125 | ) |            | $ | (14,981   | )              |  | $ | 2,857        |   |  | $            | 12,124  |   |  | $ | (31,125   | )
|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|                                                                            | 
|                                                                            |  | Consolidated Statement of OperationsThirty-nine weeks ended September 28, 2008(In thousands) |        
|                                                                            |  | SoloDelaware                                                                                 |         |   | Guarantors |   |           | Non-Guarantors |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                                                   |  | $                                                                                            |        |   |            | $ | 1,350,767 |                |  | $ | 159,849      |   |  | $            | (67,868 | ) |  | $ | 1,442,748 |  
|Cost of goods sold                                                          |  |                                                                                              |        |   |            |   | 1,164,714 |                |  |   | 141,583      |   |  |              | (67,758 | ) |  |   | 1,238,539 |  
|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|Gross profit                                                                |  |                                                                                              |        |   |            |   | 186,053   |                |  |   | 18,266       |   |  |              | (110    | ) |  |   | 204,209   |  
|Selling, general and administrative expenses                                |  |                                                                                              | 17      |   |            |   | 122,875   |                |  |   | 7,477        |   |  |              | (1      | ) |  |   | 130,368   |  
|Loss on asset disposals                                                     |  |                                                                                              |        |   |            |   | 18,497    |                |  |   | 38           |   |  |              |        |   |  |   | 18,535    |  
|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|Operating (loss) income                                                     |  |                                                                                              | (17     | ) |            |   | 44,681    |                |  |   | 10,751       |   |  |              | (109    | ) |  |   | 55,306    |  
|Interest (income) expense, net                                              |  |                                                                                              | (14,759 | ) |            |   | 61,072    |                |  |   | 31           |   |  |              |        |   |  |   | 46,344    |  
|Foreign currency exchange loss (gain), net                                  |  |                                                                                              |        |   |            |   | 4,506     |                |  |   | (1,346       | ) |  |              |        |   |  |   | 3,160     |  
|Equity in loss (earnings) of subsidiaries                                   |  |                                                                                              | 13,935  |   |            |   | (7,680    | )              |  |   |             |   |  |              | (6,255  | ) |  |   |          |  
|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|Income (loss) from continuing operations before income taxes                |  |                                                                                              | 807     |   |            |   | (13,217   | )              |  |   | 12,066       |   |  |              | 6,146   |   |  |   | 5,802     |  
|Income tax provision                                                        |  |                                                                                              | 115     |   |            |   | 108       |                |  |   | 4,277        |   |  |              |        |   |  |   | 4,500     |  
|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|Income (loss) from continuing operations                                    |  |                                                                                              | 692     |   |            |   | (13,325   | )              |  |   | 7,789        |   |  |              | 6,146   |   |  |   | 1,302     |  
|Loss from discontinued operations, net of income taxes of $0                |  |                                                                                              |        |   |            |   | (610      | )              |  |   |             |   |  |              |        |   |  |   | (610      | )
|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  
|Net income (loss)                                                           |  | $                                                                                            | 692     |   |            | $ | (13,935   | )              |  | $ | 7,789        |   |  | $            | 6,146   |   |  | $ | 692       |  
|                                                                            |  |                                                                                              |         |   |            |   |           |                |  |   |              |   |  |              |         |   |  |   |           |  

(Continued)



21



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##### Table of Contents

SOLO CUP COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



(14) GUARANTOR NOTE (Continued)



|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|----------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------ | -------- | - | ---------- | - | ------- | -------------- |  | - | ------------ | - |  | - | -------- | -
|                                                                  |  | Condensed Consolidated Statement of Cash FlowsThirty-nine weeks ended September 27, 2009(In thousands) |         
|                                                                  |  | SoloDelaware                                                                                           |          |   | Guarantors |   |         | Non-Guarantors |  |   | Consolidated |  
|CASH FLOW FROM OPERATING ACTIVITIES                               |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Net cash (used in) provided by operating activities               |  | $                                                                                                      | (19,181  | ) |            | $ | 135,176 |                |  | $ | 2,782        |   |  | $ | 118,777  |  
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|CASH FLOW FROM INVESTING ACTIVITIES                               |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Purchases of property, plant and equipment                        |  |                                                                                                        |         |   |            |   | (52,466 | )              |  |   | (275         | ) |  |   | (52,741  | )
|Proceeds from sale of property, plant and equipment               |  |                                                                                                        |         |   |            |   | 16,562  |                |  |   | 22           |   |  |   | 16,584   |  
|Increase in restricted cash                                       |  |                                                                                                        | (11,540  | ) |            |   |        |                |  |   |             |   |  |   | (11,540  | )
|Increase in cash in escrow                                        |  |                                                                                                        |         |   |            |   | (420    | )              |  |   |             |   |  |   | (420     | )
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Net cash used in investing activities                             |  |                                                                                                        | (11,540  | ) |            |   | (36,324 | )              |  |   | (253         | ) |  |   | (48,117  | )
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|CASH FLOW FROM FINANCING ACTIVITIES                               |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Net (repayments) borrowings under revolving credit facilities     |  |                                                                                                        | (28,000  | ) |            |   | 9,700   |                |  |   |             |   |  |   | (18,300  | )
|Borrowings under the 10.5% Senior Secured Notes                   |  |                                                                                                        | 293,784  |   |            |   |        |                |  |   |             |   |  |   | 293,784  |  
|Collection on (repayments of) intercompany debt                   |  |                                                                                                        | 96,111   |   |            |   | (96,111 | )              |  |   |             |   |  |   |         |  
|Repayments of term notes                                          |  |                                                                                                        | (361,954 | ) |            |   |        |                |  |   | (907         | ) |  |   | (362,861 | )
|Repayments of other debt                                          |  |                                                                                                        |         |   |            |   | (275    | )              |  |   |             |   |  |   | (275     | )
|Debt issuance costs                                               |  |                                                                                                        | (9,529   | ) |            |   | (8,289  | )              |  |   |             |   |  |   | (17,818  | )
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Net cash used in financing activities                             |  |                                                                                                        | (9,588   | ) |            |   | (94,975 | )              |  |   | (907         | ) |  |   | (105,470 | )
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Effect of exchange rate changes on cash                           |  |                                                                                                        |         |   |            |   | 42      |                |  |   | 860          |   |  |   | 902      |  
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Net (decrease) increase in cash and cash equivalents              |  |                                                                                                        | (40,309  | ) |            |   | 3,919   |                |  |   | 2,482        |   |  |   | (33,908  | )
|Cash and cash equivalents, beginning of period                    |  |                                                                                                        | 40,309   |   |            |   | 1,027   |                |  |   | 16,168       |   |  |   | 57,504   |  
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Cash and cash equivalents, end of period                          |  | $                                                                                                      |         |   |            | $ | 4,946   |                |  | $ | 18,650       |   |  | $ | 23,596   |  
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|                                                                  | 
|                                                                  |  | Condensed Consolidated Statement of Cash FlowsThirty-nine weeks ended September 28, 2008(In thousands) |         
|                                                                  |  | SoloDelaware                                                                                           |          |   | Guarantors |   |         | Non-Guarantors |  |   | Consolidated |  
|CASH FLOW FROM OPERATING ACTIVITIES                               |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Net cash provided by operating activities  continuing operations |  | $                                                                                                      | 12,152   |   |            | $ | 64,624  |                |  | $ | 1,367        |   |  | $ | 78,143   |  
|Net cash used in operating activities  discontinued operations   |  |                                                                                                        |         |   |            |   | (594    | )              |  |   |             |   |  |   | (594     | )
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Net cash provided by operating activities                         |  |                                                                                                        | 12,152   |   |            |   | 64,030  |                |  |   | 1,367        |   |  |   | 77,549   |  
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|CASH FLOW FROM INVESTING ACTIVITIES                               |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Purchases of property, plant and equipment                        |  |                                                                                                        |         |   |            |   | (49,526 | )              |  |   | (2,227       | ) |  |   | (51,753  | )
|Proceeds from sale of property, plant and equipment               |  |                                                                                                        |         |   |            |   | 10,446  |                |  |   | 39           |   |  |   | 10,485   |  
|Increase in cash in escrow                                        |  |                                                                                                        |         |   |            |   | (50     | )              |  |   |             |   |  |   | (50      | )
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Net cash used in investing activities                             |  |                                                                                                        |         |   |            |   | (39,130 | )              |  |   | (2,188       | ) |  |   | (41,318  | )
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|CASH FLOW FROM FINANCING ACTIVITIES                               |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Net repayments under revolving credit facilities                  |  |                                                                                                        | (24,700  | ) |            |   |        |                |  |   |             |   |  |   | (24,700  | )
|Repayments of term notes                                          |  |                                                                                                        | (9,243   | ) |            |   |        |                |  |   | (714         | ) |  |   | (9,957   | )
|Repayments of other debt                                          |  |                                                                                                        |         |   |            |   | (226    | )              |  |   | (358         | ) |  |   | (584     | )
|Collection on (repayments of) intercompany debt                   |  |                                                                                                        | 28,118   |   |            |   | (28,118 | )              |  |   |             |   |  |   |         |  
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Net cash used in financing activities                             |  |                                                                                                        | (5,825   | ) |            |   | (28,344 | )              |  |   | (1,072       | ) |  |   | (35,241  | )
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Effect of exchange rate changes on cash                           |  |                                                                                                        |         |   |            |   | 28      |                |  |   | 1,274        |   |  |   | 1,302    |  
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Net increase (decrease) in cash and cash equivalents              |  |                                                                                                        | 6,327    |   |            |   | (3,416  | )              |  |   | (619         | ) |  |   | 2,292    |  
|Cash and cash equivalents, beginning of period                    |  |                                                                                                        | 10,464   |   |            |   | 4,881   |                |  |   | 18,238       |   |  |   | 33,583   |  
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  
|Cash and cash equivalents, end of period                          |  | $                                                                                                      | 16,791   |   |            | $ | 1,465   |                |  | $ | 17,619       |   |  | $ | 35,875   |  
|                                                                  |  |                                                                                                        |          |   |            |   |         |                |  |   |              |   |  |   |          |  



22



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

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in
this report, as well as consolidated financial statements and notes thereto and related management discussion and analysis of financial condition and results of operations included in our 2008 Annual Report on Form 10-K.

General

We are a leading producer and marketer of single-use products used to serve food and beverages in quick service restaurants (QSRs), other foodservice settings and homes. We distribute our products globally and have served our
industry for more than 70 years. We manufacture and supply a broad portfolio of single-use products, including cups, lids, food containers, plates, bowls, portion cups cutlery and straws, with products available in plastic, paper, foam,
post-consumer recycled content and renewable resources. We are recognized for our customer service, and our products are known for their quality, reliability and consistency. Our products are marketed primarily under the Solo® and Sweetheart® brands, as well as BareTMby Solo, Trophy® and Jack Frost®. We are one
of the leading suppliers of branded single-use cups, plates and bowls in the United States, and we also manufacture and supply a line of private label products to select customers. We operate manufacturing facilities and distribution centers in
North America, the United Kingdom and Panama.

Thirteen weeks ended September 27, 2009 compared to the thirteen weeks ended
September 28, 2008



|                                                             |  |                                       |       |   |                                       |   |       |                         |  |   |       |   |  |        |   
|------------------------------------------------------------ |  | ------------------------------------- | ----- | - | ------------------------------------- | - | ----- | ----------------------- |  | - | ----- | - |  | ------ | --
|(in millions)                                                |  | Thirteenweeks
endedSeptember 27, 2009 |       |   | Thirteenweeks
endedSeptember 28, 2008 |   |       | Favorable (Unfavorable) | 
|Net sales                                                    |  | $                                     | 370.1 |   |                                       | $ | 462.1 |                         |  | $ | (92.0 | ) |  | (19.9  | )%
|Cost of goods sold                                           |  |                                       | 316.3 |   |                                       |   | 402.1 |                         |  |   | 85.8  |   |  | 21.3   |   
|                                                             |  |                                       |       |   |                                       |   |       |                         |  |   |       |   |  |        |   
|Gross profit                                                 |  |                                       | 53.8  |   |                                       |   | 60.0  |                         |  |   | (6.2  | ) |  | (10.3  | ) 
|Selling, general and administrative expenses                 |  |                                       | 38.6  |   |                                       |   | 43.3  |                         |  |   | 4.7   |   |  | 10.9   |   
|Impairment of goodwill                                       |  |                                       | 17.2  |   |                                       |   |      |                         |  |   | (17.2 | ) |  | *      |   
|Loss on asset disposals                                      |  |                                       | 5.0   |   |                                       |   | 6.5   |                         |  |   | 1.5   |   |  | 23.1   |   
|                                                             |  |                                       |       |   |                                       |   |       |                         |  |   |       |   |  |        |   
|Operating (loss) income                                      |  |                                       | (7.0  | ) |                                       |   | 10.2  |                         |  |   | (17.2 | ) |  | *      |   
|Interest expense, net                                        |  |                                       | 17.5  |   |                                       |   | 14.8  |                         |  |   | (2.7  | ) |  | (18.2  | ) 
|Loss on debt extinguishment                                  |  |                                       | 2.5   |   |                                       |   |      |                         |  |   | (2.5  | ) |  | *      |   
|Foreign currency exchange loss, net                          |  |                                       | 0.1   |   |                                       |   | 4.4   |                         |  |   | 4.3   |   |  | 97.7   |   
|                                                             |  |                                       |       |   |                                       |   |       |                         |  |   |       |   |  |        |   
|Loss from continuing operations before income taxes          |  |                                       | (27.1 | ) |                                       |   | (9.0  | )                       |  |   | (18.1 | ) |  | (201.1 | ) 
|Income tax provision (benefit)                               |  |                                       | 0.8   |   |                                       |   | (1.2  | )                       |  |   | (2.0  | ) |  | *      |   
|                                                             |  |                                       |       |   |                                       |   |       |                         |  |   |       |   |  |        |   
|Loss from continuing operations                              |  |                                       | (27.9 | ) |                                       |   | (7.8  | )                       |  |   | (20.1 | ) |  | (257.7 | ) 
|Loss from discontinued operations, net of income taxes of $0 |  |                                       |      |   |                                       |   | (0.2  | )                       |  |   | 0.2   |   |  | *      |   
|                                                             |  |                                       |       |   |                                       |   |       |                         |  |   |       |   |  |        |   
|Net loss                                                     |  | $                                     | (27.9 | ) |                                       | $ | (8.0  | )                       |  | $ | (19.9 | ) |  | (248.8 | ) 
|                                                             |  |                                       |       |   |                                       |   |       |                         |  |   |       |   |  |        |   



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

Net sales
decreased $92.0 million, or 19.9%, for the thirteen weeks ended September 27, 2009 compared to the prior year period. The decrease in net sales reflects a 15.8% decrease in sales volume, a 2.0% decrease in average realized sales price and a
2.1% decrease from the impact of foreign currency fluctuations, as compared to the thirteen weeks ended September 28, 2008.

Lower sales volumes are the result of a combination of the continued softness in demand across the industry, a competitive marketplace and our strategic initiatives. Slightly more than half of the decline reflects the continuing global
economic recession which resulted in a significant contraction in the market for our products as well as the impact of a competitive marketplace. The remainder of the decrease in sales volume reflects our de-emphasis of certain product categories,
such as straws and stirrers which are high volume commodity products, and other strategic decisions made during 2008 and 2007 to improve commercial arrangements.

The decrease in average realized sales price in the third quarter of 2009, compared to the third quarter 2008, reflects lower pricing during the third quarter of 2009, partially offset by a favorable
shift in product mix.



23



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##### Table of Contents

For the thirteen weeks ended September 27, 2009, gross profit decreased by $6 million
compared to the prior year period. This includes a decline of approximately $18 million as a result of lower sales and production volumes partially offset by lower operating costs of approximately $12 million, primarily driven by the benefit of a
consolidated manufacturing footprint (net of related consolidation costs) and lower distribution costs compared to the prior year period.

As a percentage of net sales, gross profit was 14.5% in the third quarter of 2009 versus 13.0% in the third quarter of 2008, primarily driven by the favorable shift in product mix, and to a lesser extent,
an increase in the difference between sales prices and raw material costs, compared to the prior year quarter.

As noted
above, gross profit was impacted by costs incurred related to the consolidation of our production facilities in the third quarter of 2009 and 2008 of approximately $1.0 million and $4.9 million, respectively. In 2009, these consolidation costs
related to equipment transfers. In 2008, these costs included severance, equipment transfers, set-up expenses at the receiving plants and ramp down costs at the closing plants.

Selling, general and administrative expenses decreased $4.7 million for the thirteen weeks ended September 27, 2009 compared to the
thirteen weeks ended September 28, 2008. The decrease primarily reflects lower employee-related costs driven by cost savings measures implemented in December 2008 and continuing through 2009. The decrease also reflects lower incentive-based
compensation compared to the prior year period, primarily driven by lower operating results. As a percentage of net sales, selling, general and administrative expenses were 10.4% in the third quarter of 2009 versus 9.4% in the third quarter of 2008.

We test goodwill for impairment at least annually, as of the end of October, or sooner if a triggering event occurs
suggesting possible impairment of the value of the goodwill. Our step-one test performed as of October 2008 resulted in a fair value which exceeded carrying value. During the third quarter of 2009, despite increasing sales in the first and second
quarters and the implementation of programs intended to reduce costs and gain manufacturing efficiencies, the Companys Europe reporting unit continued to incur declining margins and lower operating results. These results were in part due to
increased competition, a decline in the European economy and higher input costs, such as resin and electricity, which were unable to be passed along through further price increases. Management considered this combination of factors evidence of a
permanent change in the long-term prospects of the European business. As a result, management determined that it was at risk of failing step one of the impairment test such that the reporting units estimated fair value would not be
substantially in excess of its carrying value and concluded that there were sufficient indicators to perform an interim goodwill impairment analysis of the Companys Europe reporting unit. Step one of the impairment test was performed as of
September 27, 2009. The fair value of the reporting unit was estimated using the present value of expected future cash flows. The discount rate and terminal value growth rate assumptions used for the valuation were 14% and 3%, respectively, and
resulted in an estimated fair value less than carrying value. Consequently, step two was performed to calculate the amount of impairment, which concluded that the goodwill was fully impaired. As a result, we recorded a goodwill impairment charge of
approximately $17.2 million during the thirteen weeks ended September 27, 2009. After this charge, there is no remaining goodwill on the Companys Consolidated Balance Sheet.

Loss on asset disposals for the thirteen weeks ended September 27, 2009 was $5.0 million compared to $6.5 million during the thirteen weeks
September 28, 2008. The loss during the current period includes the correction of an error representing the retirement of approximately $4.8 million of equipment which should have been recorded in prior periods. We determined this adjustment was
immaterial to our current and prior period consolidated financial statements. During the fourth quarter, we continue to refine the controls related to our asset disposal process. The loss during the prior year period primarily reflects the disposal
of outdated production equipment retired as a result of plant closures and consolidation.

For the thirteen weeks ended
September 27, 2009, interest expense, net, increased $2.7 million compared to the prior year period. The increase is primarily attributable to higher average interest rates compared to the prior year period due to the 10.5% Senior Secured Notes
issued in July 2009. See further discussion of our refinancing transactions in Liquidity and Capital Resources below. The impact of the higher average interest rates was partially offset by lower outstanding debt compared to the prior year
period, mainly due to prepayments of the term loan under our first lien credit facility made in the fourth quarter of 2008 and the first half of 2009.

The loss on debt extinguishment of $2.5 million represents the write-off of the unamortized deferred financing fees related to our first lien credit facility extinguished in July 2009 as a result of our
refinancing transactions.

During the thirteen weeks ended September 27, 2009, the income tax provision of $0.8 million
consists of a minimal domestic and foreign income tax provision. During the thirteen weeks ended September 28, 2008, the income tax benefit of $1.2 million is primarily related to our foreign jurisdictions. In both periods, as the Company
is in a net operating loss carry forward position in the United States, any taxes related to domestic earnings are largely offset by valuation allowances.



24



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##### Table of Contents

Thirty-nine weeks ended September 27, 2009 compared to the thirty-nine weeks ended
September 28, 2008



|                                                                            |  |                                          |         |   |                                          |   |         |                         |  |   |        |   |  |       |   
|--------------------------------------------------------------------------- |  | ---------------------------------------- | ------- | - | ---------------------------------------- | - | ------- | ----------------------- |  | - | ------ | - |  | ----- | --
|(in millions)                                                               |  | Thirty-nineweeks endedSeptember 27, 2009 |         |   | Thirty-nineweeks endedSeptember 28, 2008 |   |         | Favorable (Unfavorable) | 
|Net sales                                                                   |  | $                                        | 1,115.5 |   |                                          | $ | 1,442.7 |                         |  | $ | (327.2 | ) |  | (22.7 | )%
|Cost of goods sold                                                          |  |                                          | 960.0   |   |                                          |   | 1,238.5 |                         |  |   | 278.5  |   |  | 22.5  |   
|                                                                            |  |                                          |         |   |                                          |   |         |                         |  |   |        |   |  |       |   
|Gross profit                                                                |  |                                          | 155.5   |   |                                          |   | 204.2   |                         |  |   | (48.7  | ) |  | (23.8 | ) 
|Selling, general and administrative expenses                                |  |                                          | 112.7   |   |                                          |   | 130.4   |                         |  |   | 17.7   |   |  | 13.6  |   
|Impairment of goodwill                                                      |  |                                          | 17.2    |   |                                          |   |        |                         |  |   | (17.2  | ) |  | *     |   
|Loss on asset disposals                                                     |  |                                          | 7.4     |   |                                          |   | 18.5    |                         |  |   | 11.1   |   |  | 60.0  |   
|                                                                            |  |                                          |         |   |                                          |   |         |                         |  |   |        |   |  |       |   
|Operating income                                                            |  |                                          | 18.2    |   |                                          |   | 55.3    |                         |  |   | (37.1  | ) |  | (67.1 | ) 
|Interest expense, net                                                       |  |                                          | 45.4    |   |                                          |   | 46.3    |                         |  |   | 0.9    |   |  | 1.9   |   
|Reclassification of unrealized loss on cash flow hedges to interest expense |  |                                          | 9.1     |   |                                          |   |        |                         |  |   | (9.1   | ) |  | *     |   
|Loss on debt extinguishment                                                 |  |                                          | 2.5     |   |                                          |   |        |                         |  |   | (2.5   | ) |  | *     |   
|Foreign currency exchange (gain) loss, net                                  |  |                                          | (2.3    | ) |                                          |   | 3.2     |                         |  |   | 5.5    |   |  | *     |   
|                                                                            |  |                                          |         |   |                                          |   |         |                         |  |   |        |   |  |       |   
|(Loss) income from continuing operations before income taxes                |  |                                          | (36.5   | ) |                                          |   | 5.8     |                         |  |   | (42.3  | ) |  | *     |   
|Income tax (benefit) provision                                              |  |                                          | (5.4    | ) |                                          |   | 4.5     |                         |  |   | 9.9    |   |  | *     |   
|                                                                            |  |                                          |         |   |                                          |   |         |                         |  |   |        |   |  |       |   
|(Loss) income from continuing operations                                    |  |                                          | (31.1   | ) |                                          |   | 1.3     |                         |  |   | (32.4  | ) |  | *     |   
|Loss from discontinued operations, net of income taxes of $0                |  |                                          |        |   |                                          |   | (0.6    | )                       |  |   | 0.6    |   |  | *     |   
|                                                                            |  |                                          |         |   |                                          |   |         |                         |  |   |        |   |  |       |   
|Net (loss) income                                                           |  | $                                        | (31.1   | ) |                                          | $ | 0.7     |                         |  | $ | (31.8  | ) |  | *     |   
|                                                                            |  |                                          |         |   |                                          |   |         |                         |  |   |        |   |  |       |   



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

Net sales
decreased $327.2 million, or 22.7%, for the thirty-nine weeks ended September 27, 2009 compared to the prior year period. The decrease in net sales reflects a 20.5% decrease in sales volume and a 2.9% decrease from the impact of foreign
currency fluctuations, partially offset by a 0.7% increase in average realized sales price as compared to the prior year period.

Lower sales volumes are the result of a combination of the continued softness in demand across the industry, a competitive marketplace and our strategic initiatives. Approximately half of the decrease in sales volume reflects our
de-emphasis of certain product categories, such as straws and stirrers which are high volume commodity products, and other strategic decisions made during 2008 and 2007 to improve commercial arrangements. The other half of the decline reflects the
continuing global economic recession which resulted in a significant contraction in the market for our products as well as the impact of a competitive marketplace.

The slight increase in average realized sales price compared to the prior year period reflects the net impact of a shift in product mix offset by lower pricing during 2009.

For the thirty-nine weeks ended September 27, 2009, gross profit decreased by $49 million compared to the prior year period. This
includes a reduction of approximately $88 million, as a result of lower sales and production volume, a reduction of $17 million for our international subsidiaries, partially driven by foreign currency fluctuations, and a $4 million charge recognized
during the first quarter of 2009 in connection with the resolution of a contractual dispute. These factors were partially offset by (a) lower operating costs of approximately $33 million, driven by the benefit of a consolidated manufacturing
footprint (net of related consolidation costs) and lower distribution costs compared to the prior year period and (b) an increase in the difference between sales prices and raw material costs of approximately $27 million. As a percentage
of net sales, gross profit was 13.9% in the thirty-nine weeks of 2009 versus 14.2% in the comparable period of 2008.

As noted
above, gross profit includes costs related to the consolidation of our production facilities, which were approximately $9.0 million in the thirty-nine weeks ended September 27, 2009 and $10.2 million in the thirty-nine weeks ended
September 28, 2008. These consolidation costs included severance, equipment transfers, set-up expenses at the receiving plants and ramp down costs at the closing plants.

Selling, general and administrative expenses decreased $17.7 million for the thirty-nine weeks ended September 27, 2009 compared to the
thirty-nine weeks ended September 28, 2008. The decrease primarily reflects lower employee-related costs driven by cost savings measures implemented in December 2008 and continuing through 2009, and lower incentive-based compensation



25



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##### Table of Contents

compared to the prior year period, primarily driven by lower operating results. The decrease also reflects lower intangible asset amortization expense and lower management fees compared to the
prior period. These decreases in expenses were partially offset by an increase in advertising and promotional spending in support of new product launches in the second quarter of 2009 as well as an increase in transitional costs relating to the
Companys corporate office consolidation. As a percentage of net sales, selling, general and administrative expenses were 10.1% in the thirty-nine weeks of 2009 versus 9.0% in the comparable period of 2008.

The impairment of goodwill during the thirty-nine weeks ended September 27, 2009 is discussed above under Thirteen weeks ended
September 27, 2009 compared to the thirteen weeks ended September 28, 2008.

Loss on asset disposals for the
thirty-nine weeks ended September 27, 2009 was $7.4 million compared to $18.5 million during the thirty-nine weeks September 28, 2008. The loss during the current period reflects the disposal of production equipment retired as a result of plant
closures and consolidation and also includes the correction of an error during the thirteen weeks ended September 27, 2009 representing the retirement of approximately $4.8 million of equipment which should have been recorded in prior periods. We
determined this adjustment was immaterial to our current and prior period consolidated financial statements. During the fourth quarter, we continue to refine the controls related to our asset disposal process. The loss during the prior year period
primarily reflects the disposal of non-core assets including the sale of our dairy packaging machinery and equipment in March 2008.

For the thirty-nine weeks ended September 27, 2009, interest expense, net, decreased $0.9 million compared to the prior year period. Lower interest expense is primarily attributable to lower outstanding term debt, mainly due to
prepayments of the term loan under our first lien credit facility, partially offset by higher average interest rates compared to the prior year period.

The reclassification of unrealized losses on cash flow hedges to interest expense of $9.1 million was a result of our refinancing in July 2009. See further discussion under Liquidity and Capital Resources
below. These interest rate swaps were accounted for as cash flow hedges of the variable-rate interest payments on the first lien term loan borrowings. Due to the refinancing, the hedged forecasted payments of variable-rate interest under the first
lien term loan borrowings were no longer probable of occurring. Accordingly, we discontinued hedge accounting prospectively, and, as a result, the cumulative mark-to-market loss of $9.1 million associated with these swaps was reclassified from
accumulated other comprehensive loss to interest expense in June 2009.

The loss on debt extinguishment of $2.5 million
represents the write-off of the unamortized deferred financing fees related to our first lien credit facility extinguished in July 2009 as a result of our refinancing transactions.

During the thirty-nine weeks ended September 27, 2009, the income tax benefit of $5.4 million included a $5.1 million adjustment made
during the thirteen weeks ended March 29, 2009 to correct an error in our previously reported deferred tax liabilities. We determined that this adjustment was immaterial to our current and prior period financial statements. If the adjustment
had been recorded to the corresponding prior period financial statements, it would have increased (decreased) income tax provision by approximately $0.7 million, $2.4 million and $(8.0) million in fiscal years 2008, 2007 and 2006, respectively, and
increased other comprehensive income by $0.2 million in 2008. Excluding the $5.1 million adjustment, the remaining income tax benefit of approximately $0.3 million primarily relates to losses for our European operations. Income tax expense of $4.5
million for the thirty-nine weeks ended September 28, 2008 is primarily related to foreign jurisdictions. For our domestic operations, the tax expense generated from the taxable income was largely offset by a corresponding decrease in the
valuation allowance; therefore, a minimal net domestic tax benefit was recognized.

Liquidity and Capital Resources

Historically, the Company has relied on cash flows from operations and revolving credit borrowings to finance its working capital
requirements and capital expenditures. Net cash provided by operating activities for continuing operations during the thirty-nine weeks ended September 27, 2009 was $118.8 million compared to $78.1 million during the thirty-nine weeks ended
September 28, 2008. The increased cash flow from operations is primarily a result of a reduction in inventory levels in the thirty-nine weeks of 2009 compared to an increase in inventory levels in the thirty-nine weeks of 2008. The increase in
cash flow resulting from the reduced inventory levels was partially offset by lower operating results.

Working capital
decreased $94.5 million to $252.0 million at September 27, 2009, from $346.5 million at December 28, 2008. The decrease reflects lower inventory balances primarily driven by our focus to reduce inventory levels to align more closely with
lower forecasted demand, lower accounts receivable as a result of lower sales and an increase in accounts payable.

Net cash
used in investing activities during the thirty-nine weeks ended September 27, 2009 was $48.1 million compared to $41.3 million during the thirty-nine weeks ended September 28, 2008. Capital expenditures during the thirty-nine weeks ended
September 27, 2009 were $52.7 million compared to $51.8 million during the prior year period. Capital expenditures were funded by cash provided by operating activities. During the thirty-nine weeks ended September 27, 2009, the sale of
property, plant and equipment provided investing cash flows of $16.6 million and was primarily related to the September 2009 sale of a distribution center closed in the fourth quarter of 2008 and the July 2009 sale of a manufacturing plant, closed
during the fourth quarter of 2007. During the thirty-nine weeks ended September 28, 2008, the sale of property, plant and equipment provided investing cash flows of $10.5 million and was primarily related to the sale of dairy packaging
machinery and equipment and the sale of a manufacturing facility that was closed during the first quarter of 2008. In 2009, the increase in restricted cash of $11.5 million represents collateral which the counterparty to our interest rate swaps
required the Company to post against the current market value of the swaps, which will be maintained by the counterparty through the expiration date of the swaps in February 2011. The balance of such collateral will fluctuate based on future changes
in the estimated fair value of the swaps.



26



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##### Table of Contents

Net cash used in financing activities during the thirty-nine weeks ended September 27,
2009 was $105.5 million compared to $35.2 million during the thirty-nine weeks ended September 28, 2008. The cash flows in 2009 primarily represent the prepayment of $105.0 million of principal on the term loan under our first lien credit
facility which was made from cash flow generated from operations.

Refinancing Transactions

On July 2, 2009, the Company and its wholly owned subsidiary SCOC, as co-Issuers, issued $300.0 million of 10.5% Senior Secured Notes
due 2013 (the Secured Notes) and entered into a new asset-based revolving credit facility providing for borrowings of up to $200.0 million subject to borrowing base limitations (ABL Facility). Initial borrowings under the ABL
Facility were $28.3 million. These funds together with the $293.8 million in net proceeds we received from the issuance of the Secured Notes were used to repay the $300.9 million of borrowings outstanding and accrued interest on our first lien
credit facility, to pay $17.3 million of debt issuance costs relating to the Secured Notes and the ABL Facility, and to provide $3.9 million for operating needs. These debt issuance costs were deferred and will be amortized through 2013, when the
Secured Notes and ABL Facility mature. During the third quarter of 2009, we incurred additional debt issuance costs and as of September 27, 2009, the total amount of unamortized debt issuance costs related to the refinancing of $17.5 million
are included in other assets on the Companys Consolidated Balance Sheet.

In connection with these refinancing
transactions, we reclassified $9.1 million of unrealized losses associated with existing interest rate swap agreements from accumulated other comprehensive loss to interest expense during the thirteen weeks ended September 27, 2009. In
addition, the unamortized balance of debt issuance costs related to the first lien credit facility of $2.5 million was written off during July 2009 as a result of the refinancing.

The following is a summary of our committed revolving credit facilities at September 27, 2009 (in thousands):



|                                               |  |                  |         |                    |   |                      |  |                |        |  |   |        
|---------------------------------------------- |  | ---------------- | ------- | ------------------ | - | -------------------- |  | -------------- | ------ |  | - | -------
|                                               |  | CommitmentAmount |         | AmountsOutstanding |   | Letters ofCredit (1) |  | UnusedCapacity
|ABL Facility (2)                               |  | $                | 200,000 |                    | $ | 9,700                |  | $              | 12,370 |  | $ | 109,932
|Canadian Credit Facility-revolving facility(3) |  |                  | 15,129  |                    |   |                     |  |                |       |  |   | 10,950 
|                                               |  |                  |         |                    |   |                      |  |                |        |  |   |        
|                                               |  | $                | 215,129 |                    | $ | 9,700                |  | $              | 12,370 |  | $ | 120,882
|                                               |  |                  |         |                    |   |                      |  |                |        |  |   |        

| | 
| | 

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

| | (2) | The commitment amount for the ABL facility is $200.0 million; however, unused capacity is $109.9 million due to borrowing base limitations.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The commitment amount for the Canadian revolving credit facility is CAD $16.5 million (approximately $15.1 million); however, unused capacity is CAD
$11.9 million (approximately $11.0 million) due to borrowing base limitations.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Senior Secured Notes

The Secured Notes were issued pursuant to an indenture, dated as of July 2, 2009 (the Indenture), among the
Company and SCOC (the Issuers) and the following Company subsidiaries, as guarantors: SF Holdings Group, Inc., Solo Manufacturing LLC, P. R. Solo Cup, Inc., Solo Cup Owings Mills Holdings, Lily-Canada Holding Corporation, Solo
Cup (UK) Limited, Insulpak Holdings Limited and Solo Cup Europe Limited (collectively, Guarantors) and U.S. Bank National Association, as trustee. The description of the Indenture below is qualified in its entirety by reference to the
complete text of the Indenture, a copy of which is filed as Exhibit 4.6 to the Companys Form 8-K filed on July 9, 2009.

The Secured Notes mature on November 1, 2013 and bear interest at a rate of 10.5% per annum. Interest on the Secured Notes is computed on the basis of a 360-day year composed of twelve 30-day months and is payable semi-annually on
May 1 and November 1 of each year, beginning on November 1, 2009. The Secured Notes were issued at 97.928% of the aggregate principal amount for gross proceeds of $293.8 million, representing a yield to maturity of 11.125%.

Guarantees and security - The obligations under the Secured Notes are fully and unconditionally guaranteed, jointly
and severally, by the Guarantors and will be so guaranteed by any future domestic subsidiaries of the Company, subject to certain exceptions. The Secured Notes and the related note guarantees are secured by a senior lien on substantially all of the
assets (other than accounts receivable, certain payment intangibles, inventory, deposit accounts, commodity accounts, securities accounts, lock-boxes, instruments, chattel paper, cash and cash equivalents, general intangibles related to any of the
foregoing, proceeds and products of the foregoing and certain assets related thereto and specifically excluded assets) of the co-Issuers and the Guarantors and by a junior lien on accounts receivable, certain payment intangibles, inventory, deposit
accounts, commodity accounts, securities accounts, lock-boxes, instruments, chattel paper, cash and cash equivalents, general intangibles related to any of the foregoing, proceeds and products of the foregoing and certain assets related thereto and
specifically excluded assets.



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##### Table of Contents

Redemption options - On or after May 1, 2011, the Issuers may redeem all or a
part of the Secured Notes at the redemption prices set forth in the Indenture, plus accrued and unpaid interest and special interest, if any, to the applicable redemption date. In addition, at any time prior to May 1, 2011, the Issuers may, on
one or more than one occasion, redeem some or all of the Secured Notes at any time at a redemption price equal to 100% of the principal amount of the Secured Notes redeemed, plus a make-whole premium as of, and accrued and unpaid
interest and special interest, if any, to, the applicable redemption date. At any time prior to May 1, 2011, the Issuers may also redeem up to 35% of the aggregate principal amount of Secured Notes, using the proceeds of certain qualified
equity offerings, at a redemption price of 110.500% of the principal amount thereof and may, not more than once in any 12-month period, redeem up to 10% of the original aggregate principal amount of the Secured Notes at a redemption price of 103%,
in each case, plus accrued and unpaid interest and special interest, if any, to the applicable redemption date.

Requirements to repurchase - If the Company experiences specified change of control events, the Issuers must offer to repurchase the Secured Notes at a repurchase price equal to 101% of the principal amount of the Secured Notes
repurchased, plus accrued and unpaid interest and special interest, if any, to the applicable repurchase date. If the Company or its subsidiaries sell assets under specified circumstances, the Issuers must offer to repurchase the Secured Notes at a
repurchase price equal to 100% of the principal amount of the Secured Notes repurchased, plus accrued and unpaid interest and special interest, if any, to the applicable repurchase date.

Covenants - The Indenture contains covenants that, among other things, restrict the ability of the Company and its restricted
subsidiaries to:



| |  |  | incur additional indebtedness or issue disqualified stock or preferred stock;
| | - |  | -----------------------------------------------------------------------------



| |  |  | create liens;
| | - |  | -------------



| |  |  | pay dividends, make investments or make other restricted payments;
| | - |  | ------------------------------------------------------------------



| |  |  | sell assets;
| | - |  | ------------



| |  |  | consolidate, merge, sell or otherwise dispose of all or substantially all of the Companys or the restricted subsidiaries assets;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | enter into transactions with affiliates; and
| | - |  | --------------------------------------------



| |  |  | designate subsidiaries as unrestricted.
| | - |  | ---------------------------------------

These covenants are subject to a number of important limitations and exceptions.

Events of default - The Indenture provides for customary events of default, including, but not limited to, cross defaults to specified other debt of Solo Cup Company and its subsidiaries. In the case of an event of default arising
from specified events of bankruptcy or insolvency, all outstanding notes will become due and payable immediately without further action or notice. If any other event of default under the Indenture occurs or is continuing, the trustee or holders of
at least 25% in principal amount of the then outstanding notes may declare all the notes to be due and payable immediately, provided that, if any debt is outstanding under the ABL Facility, such acceleration of the notes will not be effective until
the earlier of the acceleration of debt under the ABL Facility or five business days after receipt by the issuers and the administrative agent under the Loan Agreement of notice of such acceleration.

Asset-Based Revolving Credit Facility

On July 2, 2009, the Company, SCOC and the Guarantors (collectively, the Borrowers) entered into a loan agreement, dated as of July 2, 2009 (the ABL Facility), with Bank
of America, N.A., as administrative agent, co-collateral agent and lender; General Electric Capital Corporation, as co-collateral agent and lender; and Wells Fargo Foothill, LLC and Goldman Sachs Lending Partners LLC, as lenders, providing for
revolving credit financing of up to $200.0 million, including a $40.0 million sub-limit for letters of credit, with a maturity date of July 2, 2013. The initial borrowers under the ABL Facility were the Company and SCOC (the
Borrowers). With respect to amounts borrowed under the ABL Facility from time to time after the closing date, SCOC will be the borrower and any one or more of the Companys other domestic subsidiaries may be approved as additional
borrowers from time to time by the administrative agent under the ABL Facility. The description of the ABL Facility below is qualified in its entirety by reference to the complete text of the ABL Facility, a copy of which is filed as Exhibit 10.37
to the Companys Form 8-K filed on July 9, 2009.

Guarantors - Subject to specified exceptions, newly-created
or acquired direct and indirect domestic subsidiaries of the Company will be required to become guarantors under the ABL Facility. The term domestic subsidiaries, as used in this description, includes, in addition to U.S. subsidiaries,
non-U.S. subsidiaries (including the Companys current subsidiaries located in the United Kingdom) other than controlled foreign corporations (as such term is defined under the Internal Revenue Code of 1986, as amended) and subsidiaries of
controlled foreign corporations.



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##### Table of Contents

Borrowing base and availability - The Borrowers ability to borrow under the ABL
Facility is limited to a borrowing base equal to 85% of eligible accounts receivable plus the lower of (1) 65% of eligible inventory and (2) 85% of the net orderly liquidation value of eligible inventory minus availability reserves, and is
subject to other conditions, limitations and reserve requirements.

Under the ABL Facility, the Borrowers have the right to
increase the aggregate principal amount of the commitments from time to time, in an aggregate amount not to exceed $100.0 million, without the consent of any lender (other than the lenders participating in such increase), so long as any such
increase is at least $25.0 million, subject to borrowing base limitations and other specified terms and conditions.

Security - The Borrowers are jointly and severally liable for all obligations under the ABL Facility and under certain hedging arrangements and bank product and cash management services provided by the ABL Facility lenders or their
affiliates to the Company and its subsidiaries, and such obligations will be guaranteed by the direct and indirect domestic subsidiaries of the Company that are not borrowers, subject to specified exceptions. These obligations will be secured by:



| |  |  | senior liens on the following assets of the ABL Facility borrowers and guarantors, referred to as ABL Collateral: their accounts receivable, specified
payment intangibles, inventory, deposit accounts, commodity accounts, securities accounts, lock-boxes, instruments, chattel paper, cash and cash equivalents, general intangibles related to any of the foregoing and proceeds and products of the
foregoing and certain assets related thereto, subject to specified exceptions; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | junior liens on the following assets of the ABL Facility borrowers and guarantors, referred to as Notes Collateral, which are subject to senior liens
in favor of holders of the 10.5% Senior Secured Notes due 2013 of the Company and SCOC: substantially all of their tangible and intangible assets, other than ABL Collateral and specified excluded assets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest - Interest accrues on outstanding borrowings under the ABL Facility at a rate of either LIBOR (as defined in the ABL
Facility) plus a margin of 4% per annum or a specified base rate plus a margin of 3% per annum, at the option of the borrowers. These interest rate margins are subject to adjustment after July 2, 2010 based on borrowing base
availability. Letters of credit issued and outstanding under the ABL Facility accrue fees at a per annum rate equal to the LIBOR interest rate margin described above plus a 0.125% per annum fronting fee to the issuing bank on the face amount
thereof, in addition to the issuing banks customary fees and charges in connection with the issuance, amendment, negotiation, payment, processing, transfer and administration of such letters of credit. An unused line fee of 0.75% per
annum accrues on an amount equal to (1) the aggregate lending commitments under the ABL Facility less (2) the average daily amount of the outstanding borrowings plus the face amount of any outstanding letters of credit under the ABL
Facility.

Covenants - The ABL Facility contains a springing covenant which is not currently applicable to the Company.
This springing covenant requires the Company to maintain a minimum fixed charge coverage ratio that is only activated during any period in which excess borrowing availability drops below a specified threshold. The ratio is defined as the ratio of
(1) EBITDA (as defined in the ABL Facility), minus capital expenditures and taxes paid in cash, to (2) cash interest expense net of interest income, plus scheduled principal payments of debt made in cash plus cash dividends and other cash
distributions. In any period where this covenant is in effect, the amount the Company can borrow is restricted. In addition, the ABL Facility contains customary affirmative and negative covenants, including covenants that restrict the ability of
each borrower, each guarantor and each subsidiary of the foregoing to, among other things:



| |  |  | incur, assume, guarantee or suffer to exist additional indebtedness or liens;
| | - |  | -----------------------------------------------------------------------------



| |  |  | make investments or loans or acquire any person or entity;
| | - |  | ----------------------------------------------------------



| |  |  | enter into transactions with affiliates;
| | - |  | ----------------------------------------



| |  |  | enter into certain restrictive agreements;
| | - |  | ------------------------------------------



| |  |  | engage in mergers, acquisitions, consolidations and asset sales;
| | - |  | ----------------------------------------------------------------



| |  |  | prepay, redeem, purchase, defease or otherwise satisfy specified types of indebtedness;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | modify the terms of other indebtedness; and
| | - |  | -------------------------------------------



| |  |  | declare, pay or make distributions or dividends.
| | - |  | ------------------------------------------------

These covenants are subject to a number of important limitations and exceptions.



29



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##### Table of Contents

Events of default - The loan agreement underlying our ABL Facility contains customary
events of default, including, but not limited to, cross defaults to specified other debt of Solo Cup Company and its subsidiaries and specified change of control events. If an event of default occurs and is continuing under the loan agreement, the
lenders may, among other things, terminate their commitments and require immediate repayment of all amounts owed by the borrowers and the guarantors under the ABL Facility.

In addition, non-compliance with the springing covenant (activated during any period in which excess borrowing availability drops below a
specified threshold) to maintain a minimum fixed charge coverage ratio, as discussed above under Covenants, would require the Company to use all cash receipts to promptly pay down any outstanding debt.

Contractual Obligations

As of November 9, 2009, except for the refinancing transactions described above, there have been no material changes outside the normal course of business in the contractual obligations disclosed in
Item 7 to our Annual Report on Form 10-K for the fiscal year ended December 28, 2008, under the caption Contractual Obligations.

The following table updates our Long-term obligations and Interest payments in the previously reported Contractual Obligations table, to reflect the new debt structure which
includes the Secured Notes and ABL Facility, in addition to the 8.5% Senior Subordinated Notes due 2014 and Canadian Credit Facility, and the effect they are expected to have on our liquidity and cash flows in future periods (in thousands):



|                                     |  |       |         |                  |   |                        |  |      |        |      |   |        |  |            |        |  |   |         |  |   |        
|------------------------------------ |  | ----- | ------- | ---------------- | - | ---------------------- |  | ---- | ------ | ---- | - | ------ |  | ---------- | ------ |  | - | ------- |  | - | -------
|                                     |  |       |         |                  |   | Payments due in fiscal
|                                     |  | Total |         | Remainderof 2009 |   | 2010                   |  | 2011 |        | 2012 |   | 2013   |  | Thereafter
|Senior Secured Notes due 2013        |  | $     | 300,000 |                  | $ |                       |  | $    |       |      | $ |       |  | $          |       |  | $ | 300,000 |  | $ |       
|Senior Subordinated Notes due 2014   |  |       | 325,000 |                  |   |                       |  |      |       |      |   |       |  |            |       |  |   |        |  |   | 325,000
|ABL Facility(1)                      |  |       | 9,700   |                  |   |                       |  |      |       |      |   |       |  |            |       |  |   | 9,700   |  |   |       
|Canadian credit facility  term loan |  |       | 720     |                  |   |                       |  |      |       |      |   | 720    |  |            |       |  |   |        |  |   |       
|                                     |  |       |         |                  |   |                        |  |      |        |      |   |        |  |            |        |  |   |         |  |   |        
|Long-term obligations                |  |       | 635,420 |                  |   |                       |  |      |       |      |   | 720    |  |            |       |  |   | 309,700 |  |   | 325,000
|Interest payments(2)                 |  |       | 271,134 |                  |   | 16,149                 |  |      | 60,617 |      |   | 60,617 |  |            | 60,572 |  |   | 59,366  |  |   | 13,813 



|(1) | The ABL Facility amount represents borrowings as of September 27, 2009.
|--- | -----------------------------------------------------------------------

|(2) | In estimating future interest payments, we used interest rates in effect as of September 27, 2009 and used our average outstanding borrowings
under revolving credit facilities during 2008 as the estimate of future years average outstanding borrowings.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Contingencies

We are subject to agreements with the City of Chicago (City) and the State of
Illinois (State) relating to our 2001 acquisition of certain property located in Chicago, Illinois. Pursuant to these agreements, the City paid a portion of the 2001 purchase price on behalf of the Company in the form of cash and the
issuance of a note. The State also provided a grant to the Company. Under these agreements, we are required to fulfill certain obligations relating to development of the property and retention of a certain number of employees. Our intention is no
longer to develop the property, but rather to sell the property and we expect that these obligations will either transfer to a new owner or be repaid from the proceeds of a sale. The obligations total approximately $16.2 million and are included in
other current liabilities in the accompanying Consolidated Balance Sheets, of which approximately $3.0 million is interest bearing.

Outlook

Management believes that cash generated by operations and amounts available under our credit
facilities should be sufficient to meet our expected operating needs, planned capital expenditures, payments in conjunction with our lease commitments and debt service requirements for the remainder of 2009. We expect that our total 2009 capital
expenditures will be approximately $80 million. In addition, for 2009, we expect contributions to our defined benefit plans will be approximately $5 million.



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##### Table of Contents

Net Operating Loss Carryforwards

As of September 27, 2009, we have approximately $250.4 million of U.S. federal tax net operating loss carryforwards which expire between
2024 and 2028, and there are no carryforwards that are subject to the provisions of Internal Revenue Code Section 382. We establish a valuation allowance for deferred tax assets, including our net operating loss carryforwards, when the amount
of expected future taxable income is not likely to support the use of the deduction or credit. During the thirty-nine weeks ended September 27, 2009, our valuation allowance on all tax attributes increased by $7.3 million, to $109.8
million. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Critical Accounting Estimates

Our critical accounting estimates are described in our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2009. There have been no changes to the critical accounting estimates since that
filing.



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##### Table of Contents

Forward-Looking Statements

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

A description of
the risk factors associated with our business is contained in Item 1A, Risk Factors, of our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 16, 2009 and incorporated
herein by reference and in our other filings made from time to time with the SEC. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we undertake no obligation to
publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. These cautionary
statements are to be used as a reference in connection with any forward-looking statements. These risks and uncertainties include, but are not limited to:



| |  |  | the impact of our indebtedness, the continuing global recession and restricted credit markets on our cash flow and debt service requirements;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to generate cash from operations and the availability of credit impacts the refinancing options available to us;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | the impact of economic, financial, and industry conditions and our continued realization of cost savings on our ability to generate operating cash flow
to service our debt;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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



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



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



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



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



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



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



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



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



| |  |  | the impact of financial market conditions on the return of plan assets for our pension plans and any additional funding requirements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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

In the ordinary course of business, the Company is exposed to market risk-sensitive instruments, which consist primarily of interest rate risk associated with its variable rate debt. On July 2, 2009,
the Company extinguished the First Lien facility with the net proceeds from the issuance of $300.0 million of 10.5% Senior Secured Notes due 2013 (the Secured Notes) and initial borrowings of $28.5 million on a new asset-based revolving
credit facility (ABL Facility), which bears interest at a variable rate (collectively, the refinancing transactions).

As of September 27, 2009, the Company also has a Canadian credit facility which includes a revolving and term credit facility, which bears interest at a variable rate.

Interest accrues on outstanding borrowings under the ABL Facility at a rate of either LIBOR (as defined in the ABL Facility) plus a margin
of 4% per annum or a specified base rate plus a margin of 3% per annum, at the Companys option. These interest rate margins are subject to adjustment after July 2, 2010 based on borrowing base availability. As of
September 27, 2009, the ABL Facility had an outstanding balance of $9.7 million. As of September 27, 2009, outstanding borrowings under the ABL Facility carried an effective interest rate of 6.25%.

The Canadian revolving and term loan facilities bear interest at the Canadian prime rate plus 0.25% or the Canadian bankers acceptance
rate plus 1.50%, at the Companys option. As of September 27, 2009, outstanding borrowings under the term loan carried an effective interest rate of 1.89%. As of September 27, 2009, the outstanding indebtedness under the term loan was
CAD $0.8 million (approximately $0.7 million). CAD $11.9 million (approximately $11.0 million) was available under the revolving credit facility.

The Company enters into derivative instruments as part of its risk management strategy. As of September 27, 2009, the Company had three forward-starting receive-variable, pay-fixed interest rate swap
agreements with a total notional amount of $150.0 million that were entered into in August 2007 to hedge a portion of the Companys exposure to interest rate risk under its variable-rate borrowings under the First Lien facility. The variable
rate of interest received is the Eurodollar rate. The fixed rate of interest paid is 5.3765%. The swap agreements are effective from August 28, 2007 through February 28, 2011. Prior to the refinancing transactions, the interest rate swaps
were designated and qualified as highly effective cash flow hedges. As long as these swaps had been designated as cash flow hedges, the mark-to-market changes on these interest rate swaps had been reported as a component of accumulated other
comprehensive loss. As a result of the refinancing, the hedged forecasted payments of variable-rate interest under the First Lien borrowings were no longer probable of occurring. Accordingly, the Company discontinued hedge accounting prospectively,
and, as a result, the cumulative mark-to-market loss of $9.1 million associated with these swaps was reclassified from accumulated other comprehensive loss to interest expense in June 2009. In periods subsequent to June 2009 through the expiration
of these interest rate swaps, the Company will be exposed to future variations in the fair value of the swaps as 3-month LIBOR fluctuates.

Based upon the information above, the Companys annual pre-tax income would increase by approximately $1.4 million or decrease by approximately $0.3 million for each one-percentage point increase or
decrease, respectively, in the interest rates applicable to its variable rate debt and interest rate swap agreements. The level of the exposure to interest rate movements may fluctuate significantly as a result of changes in the amount of
indebtedness outstanding under the revolving credit facilities.



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



|(a) | Disclosure Controls and Procedures. The Companys management, with the participation of the Companys chief executive officer and chief financial officer,
evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by
this report. Based upon that evaluation, the Companys chief executive officer and chief financial officer concluded that, as of the end of such period, the Companys disclosure controls and procedures were effective.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Changes in Internal Control over Financial Reporting. There have been no changes in the Companys internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the thirteen weeks ended September 27, 2009, that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial
reporting.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PART II - OTHER INFORMATION



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

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



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

In
connection with our previously-announced offering to qualified institutional buyers in the United States pursuant to Rule 144A and outside the United States pursuant to Regulation S under the Securities Act of 1933, as amended (the Securities
Act), we revised our risk factors. Except as set forth below, we do not believe there have been any material changes in our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 28, 2008 filed
with the Securities and Exchange Commission on March 16, 2009.

Financial market conditions have had a negative
impact on the return of plan assets for our pension plans, which may require additional funding and negatively impact our cash flows.

Certain U.S., Canadian and European hourly and salaried employees are covered by our defined benefit pension plans. Between December 31, 1987 and March 31, 2001, the majority of the U.S. plans
were frozen to new participants. Our pension expense and required contributions to our pension plan are directly affected by the value of plan assets, the projected rate of return on plan assets, the actual rate of return on plan assets and the
actuarial assumptions we use to measure the defined benefit pension plan obligations. Due to the significant financial market downturn during 2008, the funded status of our pension plans has declined and actual asset returns were below the assumed
rate of return used to determine pension expense. Our pension plans were underfunded by approximately $26.1 million and $4.0 million, as of December 28, 2008 and December 30, 2007, respectively. If plan assets continue to perform below
expectations, future pension expense and funding obligations will increase, which could have a negative impact on our cash flows from operations, decrease borrowing capacity and increase interest expense. Moreover, under the Pension Protection Act
of 2006, it is possible that continued losses to asset values may necessitate accelerated funding of U.S. pension plans in the future to meet minimum federal government requirements.



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

Not applicable.



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

Not applicable.



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

Not applicable.



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

Not
applicable.



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

A list of
exhibits included as part of this Form 10-Q is set forth in an Exhibit Index that immediately precedes the exhibits filed herewith.



34



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##### Table of Contents

SIGNATURES

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



|                        |  |                  |  |                                                                         
|----------------------- |  | ---------------- |  | ------------------------------------------------------------------------
|                        |  | SOLO CUP COMPANY
|                        |  |                 
|Date: November 12, 2009 |  | By:              |  | /s/ Robert D. Koney, Jr.                                                
|                        |  |                  |  | Robert D. Koney, Jr.                                                    
|                        |  |                  |  | Executive Vice President and Chief Financial Officer                    
|                        |  |                  |  | (Principal Financial and Accounting Officer and Duly Authorized Officer)



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##### Table of Contents

INDEX OF EXHIBITS FILED WITH OR

INCORPORATED BY REFERENCE INTO

FORM 10-Q OF SOLO CUP COMPANY

FOR THE THIRTEEN WEEKS ENDED SEPTEMBER 27,
2009



|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|4.1  |  | Indenture, dated as of July 2, 2009, among Solo Cup Company, Solo Cup Operating Corporation, the guarantors listed on the signature pages thereto and U.S. Bank National
Association, as trustee (Incorporated by reference from Exhibit 4.6 to the form 8-K filed on July 9, 2009.)                                                                                                                                                                                                                                                  
|      | 
|4.2  |  | Registration Rights Agreement, dated as of July 2, 2009, among Solo Cup Company, Solo Cup Operating Corporation, the guarantors listed on the signature pages thereto and the initial
purchasers of Solo Cup Companys and Solo Cup Operating Corporations 10.5% Senior Secured Notes due 2013. (Incorporated by reference from Exhibit 4.7 to the form 8-K filed on July 9, 2009.)                                                                                                                                                  
|      | 
|4.3  |  | Security Agreement dated as of July 2, 2009 by and among Solo Cup Company, Solo Cup Operating Corporation, the other subsidiaries of Solo Cup Company listed on the signature pages
thereof and U.S. Bank National Association, as collateral trustee (Incorporated by reference from Exhibit 4.8 to the form 8-K filed on July 9, 2009.)                                                                                                                                                                                             
|      | 
|4.4  |  | Notes Debenture dated July 2, 2009 between U.S. Bank National Association, as collateral trustee, and Solo Cup (UK) Limited, Insulpak Holdings Limited and Solo Cup Europe Limited
(Incorporated by reference from Exhibit 4.9 to the form 8-K filed on July 9, 2009.)                                                                                                                                                                                                                                                                
|      | 
|4.5  |  | Collateral Trust Agreement, dated as of July 2, 2009, by and among Solo Cup Company, Solo Cup Operating Corporation, the guarantors from time to time party thereto, U.S. Bank
National Association, as trustee, the other secured debt representatives from time to time party thereto, and U.S. Bank National Association, as collateral trustee (Incorporated by reference from Exhibit 4.10 to the form 8-K filed on July 9, 2009.)                                                                                               
|      | 
|4.6  |  | Lien Subordination and Intercreditor Agreement, dated as of July 2, 2009, among Bank of America, N.A., as agent for the ABL Secured Parties referred to therein, U.S. Bank National
Association, as collateral trustee for the Priority Lien Secured Parties and the Subordinated Lien Secured Parties referred to therein, Solo Cup Company, Solo Cup Operating Corporation and the subsidiaries of Solo Cup Company named therein
(Incorporated by reference from Exhibit 4.11to the form 8-K filed on July 9, 2009.)               
|      | 
|4.13 |  | Second Supplemental Indenture dated as of June 30, 2005, by and among Solo Cup Company, certain guarantors of Solo Cup Company and U.S. Bank National Association, as Trustee
(Incorporated by reference from Exhibit 4.13 to the form 10-Q filed on August 11, 2009)                                                                                                                                                                                                                                                                 
|      | 
|4.14 |  | Third Supplemental Indenture dated as of July 2, 2009, by and among Solo Cup Company, certain guarantors of Solo Cup Company and U.S. Bank National Association, as Trustee
(Incorporated by reference from Exhibit 4.14 to the form 10-Q filed on August 11, 2009)                                                                                                                                                                                                                                                                   
|      | 
|10.1 |  | Amendment No. 2 to Management Agreement (Incorporated by reference from Exhibit 99.1 to the form 8-K filed on July 7, 2009.)                                                                                                                                                                                                                                                                                                                                                                                                          
|      | 
|10.2 |  | Loan Agreement, dated as of July 2, 2009, among Solo Cup Company, Solo Cup Operating Corporation, certain subsidiaries of Solo Cup Company from time to time party thereto as
guarantors, the financial institutions from time to time party thereto as lenders, Bank of America, N.A., as a co-collateral agent and as administrative agent for the lenders, and General Electric Capital Corporation, as a co-collateral agent for
the lenders (Incorporated by reference from Exhibit 10.37 to the form 8-K filed on July 9, 2009.)
|      | 
|10.3 |  | Security Agreement dated July 2, 2009 made by Solo Cup Company, Solo Cup Operating Corporation and the other subsidiaries of Solo Cup Company listed on the signature pages thereof
to Bank of America, N.A., as administrative agent (Incorporated by reference from Exhibit 10.38 to the form 8-K filed on July 9, 2009.)                                                                                                                                                                                                           
|      | 
|10.4 |  | ABL Debenture dated July 2, 2009 between Bank of America, N.A., as agent, and Solo Cup (UK) Limited, Insulpak Holdings Limited and Solo Cup Europe Limited (Incorporated by reference
from Exhibit 10.39 to the form 8-K filed on July 9, 2009.)                                                                                                                                                                                                                                                                                      
|      | 
|31.1  |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      | 
|31.2  |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      | 
|32.1  |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                    
|      | 
|32.2  |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                    



| | Previously filed
|- | ----------------



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