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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                  For the fiscal year ended September 28, 2003

           |_|Transition Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934
                 for the transition period from ______ to _____

                         Commission file number 33-91600

                            SWEETHEART HOLDINGS INC.*
             (Exact name of registrant as specified in its charter)

                    Delaware                                      06-1281287
        (State or other jurisdiction of                       (I.R.S. Employer
         incorporation or organization)                      Identification No.)

10100 Reisterstown Road, Owings Mills, Maryland                     21117
    (Address of principal executive office)                      (Zip Code)

        Registrant's telephone number, including area code: 410/363-1111

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

         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 if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of the  registrant's  knowledge,  in  definitive  proxy or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. x

         The aggregate  market value of the voting stock of the Registrant  held
by  non-affiliates  of the Registrant as of December 11, 2003.  Not  Applicable.

There is no market for the Common Stock of the Registrant.

    The number of shares outstanding of the Registrant's common stock as of
                               December 11, 2003:
Sweetheart Holdings Inc. Class A Common Stock, $0.01 par value- 1,046,000 shares
Sweetheart Holdings Inc. Class B Common Stock, $0.01 par value- 4,393,200 shares

* The  Registrant  is the guarantor of $93.8 million 12.0% Senior Notes due July
15, 2004 of  Sweetheart  Cup Company  Inc.,  a wholly  owned  subsidiary  of the
Registrant.

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                                     PART I



Item 1.     BUSINESS


General

         Sweetheart  Holdings Inc.  ("Sweetheart  Holdings"),  together with its
wholly owned subsidiary  Sweetheart Cup Company Inc. ("Sweetheart Cup"), and its
subsidiaries,  (the "Company"),  believes it is one of the largest producers and
marketers  of  disposable  foodservice  and  food  packaging  products  in North
America.  In  Fiscal  2003,  the  Company  had net sales of  approximately  $1.3
billion.  The Company sells a broad line of disposable  paper,  plastic and foam
foodservice and food packaging  products,  consisting  primarily of cups,  lids,
plates,  bowls,  napkins  and  containers.  The  Company  markets  its  products
primarily to leading foodservice distributors, national quick service restaurant
chains, catering companies, retailers and food processing companies. The Company
markets  its  products  under  both  private  label  brands  and  the  Company's
well-recognized  Sweetheart(R),  Trophy(R),  Sensations(R),   Hoffmaster(R)  and
Lily(R) brands.

         In addition,  the Company  designs,  manufactures  and leases container
filling and lidding  equipment to dairies and other food  processors  to package
food items in the Company's  containers at their plants.  The Company also sells
paper  converting  equipment used primarily in the manufacture of paper cups and
food containers.

         With over 90 years of operating history,  the Company has a diversified
customer  base  of over  5,000  customers,  consisting  primarily  of (i)  major
foodservice  distributors,  such as Sysco Corporation and U.S. Foodservice Inc.,
who serve both national and regional institutional  foodservice customers,  (ii)
quick service restaurant chains, such as McDonald's  Corporation and Burger King
Corporation,  and convenience  stores,  such as 7 Eleven,  Inc.,  (iii) national
catering  companies,   such  as  ARAMARK  Corporation  and  Sodexho,   and  (iv)
supermarkets,  mass merchants,  warehouse clubs and other retailers, such as The
Great  Atlantic & Pacific  Tea  Company,  Inc.,  The Kroger Co.,  Target  Stores
Corporation,  Wal-Mart Stores,  Inc. and  Price-Costco,  Inc. The Company's food
packaging  containers  and lids are sold to national and regional dairy and food
companies such as Ben & Jerry's Homemade, Inc., Blue Bell Creameries, L.P., Dean
Foods Co. and Prairie Farms Dairy, Inc.

         On April 8, 2003, Sweetheart Cup consummated its offer to exchange (the
"Exchange  Offer") its newly  issued  12.0%  Senior Notes due July 15, 2004 (the
"12.0%  Senior  Notes")  for  its   outstanding   $110.0  million  12.0%  Senior
Subordinated  Notes due September 2003 (the "12.0% Senior  Subordinated  Notes")
and solicitation of consents of holders of the 12.0% Senior  Subordinated  Notes
to  the  proposed  amendments  to  the  indenture  governing  the  12.0%  Senior
Subordinated  Notes (the "Consent  Solicitation").  Sweetheart  Cup,  Sweetheart
Holdings,  as  guarantor,  and Wells  Fargo Bank  Minnesota,  N.A.,  as trustee,
executed the  indenture  governing  the 12.0% Senior Notes and $93.8  million in
aggregate  principal  amount of the 12.0%  Senior  Notes were  issued  under the
indenture in exchange for like amount of the 12.0%  Senior  Subordinated  Notes.
Payment of the consent payments to all holders of the 12.0% Senior  Subordinated
Notes who timely  tendered was made in April 2003.  In Fiscal 2003,  the Company
recorded a $0.5  million  loss on debt  extinguishment  in  connection  with the
Exchange Offer which consisted of the write-off of deferred financing costs.

         In September 2003,  $16.2 million in aggregate  principal amount of the
12.0% Senior Subordinated Notes that remained outstanding following the Exchange
Offer, including accrued interest thereon, was paid in full using funds borrowed
under the Company's  senior credit facility.  The indenture  governing the 12.0%
Senior Subordinated Notes has been satisfied and discharged.

         The Company's  senior credit  facility with Bank of America,  N.A. (the
"Senior  Credit  Facility")  was amended on February 28, 2003 to require,  among
other things,  the date by which the refinancing,  repayment or extension of the
12.0%  Senior  Notes must occur shall be December  31,  2003.  If the Company is
unable to  refinance,  repay or extend the  maturity of the 12.0%  Senior  Notes
prior to  December  31,  2003,  the Senior  Credit  Facility,  unless  otherwise
amended, will become due and payable. See "--Recent Developments".

         The Company is evaluating various strategic options which may include a
restructuring of its debt and capital structure,  including, among other things,
the public sale or private placement of debt or equity securities, joint venture
transactions, sale of assets or the business, new borrowings, the refinancing of
the Company's existing

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debt  agreements,  open market  purchases,  tender offers or exchange  offer and
consent solicitations of the Company's outstanding  securities.  There can be no
assurances that any of these strategic options will be consummated.

         Pursuant  to an  agreement,  dated as of March  22,  2002 by and  among
Dennis Mehiel, the Company's  Chairman and Chief Executive Officer,  SF Holdings
Group, Inc. ("SF Holdings"),  American  Industrial  Partners Management Company,
Inc.,  American  Industrial  Partners  Capital  Fund L.P.  ("AIP") and the other
stockholders of the Company signatory to that certain  Stockholders'  Agreement,
dated as of March 12, 1998,  (together with AIP and any permitted  transferee of
shares  of Class A common  stock or Class B common  stock of the  Company  ("the
Shares"), the "Original  Stockholders"),  all of the outstanding Shares not held
by SF Holdings (which  consisted of 52% of the voting stock of the Company) were
delivered to SF Holdings and exchanged for 96,000 shares of Class C common stock
of SF Holdings.  As a result,  SF Holdings became the sole  beneficial  owner of
100% of the issued and outstanding capital stock of the Company. In addition and
in connection  therewith,  the Stockholders  Agreement and related stockholders'
right agreement were terminated.

         On March 25,  2002,  pursuant to an Agreement  and Plan of Merger,  The
Fonda Group,  Inc., a company  under common  control,  ("Fonda") was merged (the
"Merger")  with and into  Sweetheart  Cup, with  Sweetheart Cup as the surviving
entity. In connection with the Merger, all of the assets and operations of Fonda
were assigned to, and all  liabilities of Fonda were assumed by,  Sweetheart Cup
by operation of law and all of the outstanding shares of Fonda were cancelled.


Manufacturing and Sales

         The Company has  historically  sold its  Sweetheart  products under the
Sweetheart(R)  brand as well as private labels to two principal customer groups,
institutional   foodservice  and  food  packaging  customers.  The  Company  has
historically sold its Fonda products under the Fonda(R) brand and private labels
to  consumer  and  institutional   foodservice   customers.   The  Company  also
manufactures  and distributes  disposable  party goods products  directly to the
specialty  (party)  channel  of the  Company's  consumer  market.  Institutional
foodservice  customers  primarily  purchase  disposable hot and cold drink cups,
lids, food containers,  plates, bowls, cutlery, straws, napkins, placemats, food
trays and  tablecovers.  The Company sells these  products  directly and through
foodservice  distributors and national accounts.  Consumer  customers  primarily
purchase  disposable hot and cold drink cups, paper plates,  bowls,  napkins and
tablecovers.   The  Company   sells  these   consumer   products   primarily  to
supermarkets,  mass  merchants,  warehouse  clubs,  discount  chains  and  other
retailers.  Food  packaging  customers  primarily  directly  purchase  paper and
plastic containers for the dairy and food processing industries.  Food packaging
customers also lease filling and packaging machines designed and manufactured by
the Company  that,  in turn,  fill and seal the  Company's  containers  in their
plants.  The Company's  consumer  specialty (party) channel  customers  purchase
disposable plates,  napkins,  cups, tablecovers and a variety of accessory decor
items sold in ensembles or separately to party goods retailers,  mass merchants,
drugstores  and  supermarkets.  The Company  also  manufactures  and markets its
products in Canada and Mexico principally to institutional national accounts.

         The  Company  markets to both the  distributor  and  end-use  customer,
tailoring  programs  to meet the  specific  needs of its  target  customers  and
markets.  The Company  sells these  programs,  which  include  products,  price,
promotional  and  merchandising  materials,  and  training  and  sales/marketing
coverage, through a direct sales organization. The Company supports this process
by developing innovative new products, materials and processes, while leveraging
its  strong  brand   recognition  and  national  network  of  manufacturing  and
distribution  centers.  The Company  focuses on two major customer groups within
this  customer  base,  national  account  quick  service  restaurant  chains and
foodservice  distributors.  The Company  believes  that it is one of the largest
manufacturers of disposable  foodservice  products in North America. The Company
believes its approximately 120 person sales force is larger and more experienced
than those of its  competitors,  which it believes  enables it to  maintain  and
expand its customer base.


Products

         The Company  manufactures a broad line of disposable  products.  Paper,
foam and  plastic  cups,  lids and  straws  represent  the  largest  part of the
Company's North American operations. The largest single product type within this
category is cups,  which the Company offers in various sizes (ranging from three
to 64 ounces)  for both hot and cold  beverages.  Brand  names of the  Company's
principal beverage service products include Sweetheart(R),

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Lily(R), Trophy(R),  PreferenceTM,  Jazz(R), Gallery(R),  Clarity(R), Lumina(R),
Sherri(R), ClearLight(R) and GoCupsTM.

         The  Company  also  offers a variety  of other  disposable  foodservice
products,  including paper,  foam, and plastic plates,  paper and plastic bowls,
portion cups, food containers,  food trays,  paper and plastic tubs,  containers
and hinged  foam  containers.  The  Company  believes  it is one of the  largest
manufacturers  of paper tubs for chicken,  popcorn and  take-out  foods in North
America. Munchie Cup(R), Flexstyle(R), Highlights(R), MaximizersTM and Scoop Cup
are some of the Company's carry-out service brands.

         The  Company  sells  paper  plates and bowls to both the  consumer  and
institutional  markets. These products include coated and uncoated white plates,
decorated  plates and bowls and are  offered in a range of sizes.  Uncoated  and
coated paper plates are considered  commodity items and are generally  purchased
by  cost-conscious  consumers for everyday use. Printed and decorated plates and
bowls,  which are  typically  sold in lower count  packages,  are  purchased for
everyday use as well as for parties and seasonal  celebrations such as Halloween
and Christmas.  The Company also sells,  under its  Sensations(R)  brand,  party
packages which include solid color paper plates with coordinating napkins, cups,
cutlery and tablecovers.

         Napkins  are sold  under  the  Company's  Hoffmaster(R),  Fonda(R)  and
Sensations(R)  brands,  as well as under national  distributor  private  labels.
Napkin  products  range from  decorated-colored,  multi-ply  napkins  and simple
custom printed  napkins  featuring an end-user's  name or logo to fully printed,
graphic-intensive  napkins for the  premium  paper  goods  sector.  Tablecovers,
ranging from economy to premium  product  lines,  are sold in various prints and
colors under the  Hoffmaster(R),  Linen-Like(R),  Windsor(R)  and  Sensations(R)
brands. The Company also sells placemats, traycovers, paper doilies, lunch bags,
paper  portion  cups and fluted  products in a variety of shapes and sizes.  The
Company  manufactures  unique  decorated  placemats  in a variety of shapes.  In
addition,  the Company  produces  non-skid  traycovers that serve the particular
needs of the airline and healthcare industries.

         The  Company  also  manufactures  paperboard  and  tissue  party  goods
products  under the Company's  Paper  Art(R),  Party  Creations(R)  and Touch of
Color(R) brand names.

         The Company's other products include Flex-E-FormTM  straight-wall paper
manufacturing technology and Flex-GuardTM, a spiral wound tamper-evident lid. In
addition,  the Company provides foodservice  customers with retail packages sold
through retailers under various Sweetheart and private label brands.

         To enhance packaging  product sales, the Company designs,  manufactures
and leases  container  filling and lidding  equipment  to dairies and other food
processors  to package food items in the  Company's  containers at their plants.
The Company  leases its filling and lidding  equipment  to  customers  under the
trade names Auto-Pak,  Flex-E-FillTM and FoodPac.  The Company manufactures this
equipment in the Company's  machine shop and assembly  plants  located in Owings
Mills, Maryland and Kensington,  Connecticut. Products packaged in the Company's
machines  include ice cream,  factory-filled  jacketed ice cream cones,  cottage
cheese, yogurt, sour cream and squeeze-up desserts.

         The Company also sells paper converting equipment used primarily in the
manufacture  of paper  cups and food  containers.  The  Company's  product  line
includes four sizes of cup formers,  insulated  paper cup  machinery,  paper lid
machines,  high speed  blanking  machines,  flat rim machinery and other related
equipment.  The Company also sells spare parts, engineering services and machine
rehabilitation services and stamped sheet metal parts used for protective covers
and assemblies.


Production

         The Company  manufactures its products at 22 plants located  throughout
North America. See "--Properties." The Company's manufacturing processes consist
of  converting  processed  paperboard,  paper,  tissue and resin  into  finished
disposable foodservice products through the use of four principal  technologies:
paper forming, thermoforming, injection molding, and foam extrusion and forming.
The Company provides its customers with a wide variety of printing (flexography,
letter press,  paper  lithography  and plastic dry offset)  options across these
various  technologies.  The Company operates  approximately 290 printing presses
capable of producing  high quality,  customized  graphics to meet its customers'
requirements.  The Company believes that its ability to manufacture a broad line
of products  enables it to provide its customers  with numerous  choices to meet
their  needs.  The  Company's  plants  operate  on a  variety  of  manufacturing
schedules.  Paper operations generally run five days per

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week, 24 hours per day,  with Saturday  scheduled as an overtime day when needed
to meet customer demand.  Plastic operations  generally run seven days per week,
24 hours per day.  Due to the  seasonality  of customer  demand,  the  Company's
production is generally  greater  during late spring and summer than during fall
and winter.


Raw Materials and Suppliers

         Raw  materials are a critical  part of the  Company's  cost  structure.
Principal  raw  materials  for the  Company's  paper  operations  include  solid
bleached  sulfate  paperboard,  napkin  tissue,  bond paper and waxed bond paper
obtained  directly  from  major  North  American  manufacturers,  along with wax
adhesives,  coating and inks. The Company purchases  paperboard,  napkin tissue,
bond paper and waxed bond paper in "jumbo"  rolls and then  prints and  converts
them into smaller rolls, or blanks, for processing into final products. The main
raw material for the Company's plastic operations is plastic resin (polystyrene,
polypropylene  and high and low density  polyethylene)  purchased  directly from
major petrochemical  companies and other resin suppliers.  The Company processes
and forms resin into cups,  cutlery,  meal service  products,  straws,  lids and
containers.  The  Company  manufactures  foam  products  by melting  polystyrene
plastic  and  adding a  blowing  agent  that is then  passed  through  a die and
extruded  into  sheets of plastic  foam  material.  The foam is then formed into
cups, bowls and plates.

         The Company  purchases a substantial  portion of its  requirements  for
paperboard  and  resin  from  several  suppliers.  The  Company  has a number of
potential  suppliers  for most of its raw  materials  and believes  that current
sources of supply are sufficient to meet the Company's requirements.


Competition

         The  Company  sells  its  products  in  extremely  competitive markets.
Because ofthe low barriers to entry for new  competitors,  competition has been,
and may continue to be,  intense as new entrants try to gain market  share.  The
Company's competitors include large multinational  companies as well as regional
manufacturers.  Some of the  Company's  competitors  have greater  financial and
other resources than the Company.  The marketplace for the Company's products is
fragmented.  The Company has competitors who compete across the full line of its
products,  as well as those  who  compete  against  only  some of the  Company's
products.  A few of the Company's  competitors also produce paper or plastic raw
materials  and have  greater  access  to  financial  and  other  resources.  The
Company's  primary  competitors in the  institutional  and consumer  foodservice
markets include Dart Container Corporation,  Dixie Foodservice Corp. (a division
of Georgia  Pacific  Corp.),  Solo Cup Co.,  International  Paper  Food  Service
Business (a division of International  Paper Co.), AJM Packaging Corp.,  Dopaco,
Inc.  ("Dopaco"),  Genpak LLC and Pactiv  Corporation.  Major competitors in the
food packaging  market  include Landis  Plastics,  Inc.,  Interbake  Foods Inc.,
Polytainer, Ltd. and Huhtamaki, Inc. The Company's competitors in the disposable
tissue  and  other  specialty   products  and  party  goods  accessory  products
categories include Duni Corp.,  Erving Paper Products Inc. and SCA North America
Tissue (a division of Svenska Celluosa Aktiebolaget).


Customers

         The  Company  believes  that it holds  leading market positions  in the
institutional  and consumer  foodservice and food packaging  markets for each of
the Company's major product categories.  The Company has a diverse and extensive
customer base of over 5,000 customers located throughout North America,  in both
the institutional and consumer markets. In the institutional market, the Company
sells to many major foodservice  distributors and chain accounts,  such as Sysco
Corporation,  U.S.  Foodservice Inc., Bunzl USA, Inc.,  McDonald's  Corporation,
Burger King Corporation, ARAMARK Corporation and Sodexho. In the consumer market
the Company sells to  supermarkets,  mass  merchants,  warehouse clubs and other
retail stores,  such as The Kroger Co., The Stop & Shop  Supermarket  Co., Topco
Associates  Inc.,  The  Great  Atlantic  & Pacific  Tea  Company,  Inc.,  Publix
Supermarkets Inc., Target Corporation, Wal-Mart Stores, Inc., Price-Costco, Inc.
and Staples Inc. The Company has developed long-term  relationships with many of
the Company's customers.

         The Company  markets its products  primarily to customers in the United
States.  In Fiscal  2003,  approximately  7.0% of net sales  came from  sales to
customers in Mexico,  Canada and Latin  America.  In Fiscal  2003,  sales to the
Company's five largest customers  represented  approximately  31.2% of net sales
with no one customer  accounting  for more than 10% of net sales.  The Company's
operating results could be adversely affected if

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the  Company  were to  lose  one or more of its  large  customers.  The  Company
believes it has strong  relationships  with its major  accounts  which have been
developed over many years.


Environmental Matters

         The Company's  operations are subject to  comprehensive  and frequently
changing federal, state, foreign and local environmental and occupational health
and  safety  laws and  regulations,  including  laws and  regulations  governing
emissions  of air  pollutants,  discharges  of waste  and  storm  water  and the
disposal  of  hazardous  wastes.  The  Company is subject to  liability  for the
investigation   and  remediation  of  environmental   contamination   (including
contamination  caused by other  parties) at properties  that it owns or operates
and at other properties where the Company or its predecessors  have arranged for
the disposal of hazardous substances.  As a result, the Company is involved from
time to time in administrative  and judicial  proceedings and inquiries relating
to  environmental  matters.  The Company  believes that,  except as noted below,
there are  currently no material  pending  environmental  investigations  at the
Company's plants or sites.  However,  there can be no assurance that the Company
will not be involved in any such proceeding in the future and that any amount of
future clean up costs and other environmental  liabilities will not be material.
The Company spent  aproximately  $0.8 million for environmental and occupational
health and safety  compliance in Fiscal 2003 and anticipates  spending less than
$1.0 million for environmental and occupational  health and safety compliance in
Fiscal 2004.

         The  Company   cannot   predict  what   environmental   legislation  or
regulations  will be enacted  in the  future,  how  existing  or future  laws or
regulations will be administered or interpreted or what environmental conditions
may be found to exist at the Company's facilities. Enactment of stricter laws or
regulations, or a stricter interpretation of existing laws and regulations,  may
require  the  Company to make  additional  expenditures,  some of which could be
material.

         The  Clean  Air Act  requires  the  phase  out of  certain  refrigerant
compounds.  Therefore, the Company must upgrade or retrofit air conditioning and
chilling  systems during the next few years.  The Company has decided to replace
units as they  become  inefficient  or  unserviceable.  The  Company  expects to
complete the replacement of all such units within the next five to ten years, at
an estimated total cost of less than $1.3 million.

         Some of the Company's facilities contain asbestos. Although there is no
current legal requirement to remove it, the Company monitors such asbestos on an
ongoing  basis and maintains  and/or  removes it as  appropriate  to prevent the
release of friable asbestos. The Company believes the costs associated with such
program will not be material to its business or financial condition.

         Certain of the  Company's  facilities  are  located in states that have
regulations  governing  emissions of nitrogen oxide.  While the Company believes
that these regulations do not apply to its operations, the Company will continue
to monitor its operations for compliance.

         On July  13,  1999,  the  Company  received  a  letter  from  the  U.S.
Environmental  Protection Agency ("EPA") identifying the Company, among numerous
others, as a "potential responsible party" under the Comprehensive Environmental
Response,  Compensation and Liability Act of 1980, as amended  ("CERCLA"),  at a
site in Baltimore,  Maryland. The EPA letter is not a final determination by the
EPA  concerning  the  liability  of the  Company or the  liability  of any other
entity. The Company responded to the EPA that upon review of its files it had no
information  with respect to any dealings  with that site. On December 20, 1999,
the Company  received an information  request  letter from the EPA,  pursuant to
CERCLA,  regarding a Container  Recycling  Superfund Site in Kansas City, Kansas
and in January 2000 the Company  responded to such inquiry.  In both  instances,
the Company  has  received no further  communication  from the EPA.  The Company
denies  liability  and has no reason to  believe  the  final  outcomes  of these
matters will have a material adverse effect on the Company's financial condition
or results of operations.  However, no assurance can be given about the ultimate
effect on the Company, if any.


Technology and Research

         The Company  maintains  facilities for the  development of new products
and product  line  extensions  in Owings  Mills,  Maryland  and  facilities  for
machinery  design  in  Kensington,   Connecticut.   A  staff  of  engineers  and
technicians is responsible for product quality, process control,  improvement of
existing  products,  development  of

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new  products  and   processes,   and   technical   assistance  in  adhering  to
environmental rules and regulations.

         In Fiscal  2003,  the  Company  continued  to  address  cost  reduction
opportunities in its manufacturing operations and to leverage market demands for
selective  new  products.  These  initiatives  include the  expansion of process
capabilities  for  manufacturing  low cost expanded  polystyrene  products,  the
introduction  of a new line of rolled  rimmed  plastic  portion  containers  and
equipment  enhancements to increase the  effectiveness of both paper and plastic
production   systems.   The   consolidation   of  production  lines  into  fewer
manufacturing sites, which began in Fiscal 2001, was also successfully completed
in Fiscal 2003.

         The  Company  tests new  product  concepts  at  facilities  located  in
Oshkosh,  Wisconsin;  Appleton,  Wisconsin and St. Albans, Vermont.  Management,
supervisors and experienced operators are responsible for plant safety,  product
quality, process control,  improvement of existing products,  development of new
products and  processes and  technical  assistance in adhering to  environmental
rules and regulations.

         The Company strives to expand its proprietary manufacturing technology,
further  automate and  streamline  its  manufacturing  operations,  improve upon
safety and performance, and develop improved manufacturing processes, equipment,
and product designs.


Employees

         At September 28, 2003, the Company  employed  7,442  persons,  6,218 of
whom were hourly employees.  Approximately 91.3% of the employees are located at
facilities in the United States. The Company currently has collective bargaining
agreements in effect at its facilities in Appleton, Wisconsin; Augusta, Georgia;
Indianapolis,  Indiana; Kensington, Connecticut; Oshkosh, Wisconsin; St. Albans,
Vermont;  Springfield,   Missouri;  Williamsburg,   Pennsylvania;   Scarborough,
Ontario,  Canada and Cuautitlan,  Mexico. These agreements cover all production,
maintenance and distribution  hourly-paid employees at each facility and contain
standard  provisions  relating  to,  among  other  things,   management  rights,
grievance  procedures,  strikes and lockouts,  seniority and union rights. As of
September 28, 2003,  approximately  31.9% of the Company's hourly employees were
covered by these  agreements.  The  current  expiration  dates of the  Appleton;
Augusta;   Indianapolis;   Kensington;   Oshkosh;   St.   Albans;   Springfield;
Williamsburg; Ontario; and Cuautitlan agreements are March 31, 2006, October 30,
2005,  December 1, 2007,  September  30, 2004,  May 31, 2007,  January 31, 2005,
February  29,  2004,  June 13,  2004,  November  30, 2008 and December 31, 2003,
respectively.  The  Company  believes  it  has  a  good  relationship  with  its
employees.

         In an election held on August 21, 2003,  the employees of the El Cajon,
California  facility voted to bargain  collectively and to be represented by the
United  Food and  Commercial  Workers  Union.  The  proposed  agreement  effects
approximately  165  hourly  employees.  Based  on a good  relationship  with its
employees, the Company anticipates reaching an agreement by March 2004.


Item 2.     PROPERTIES

         The  Company  operates 36  manufacturing  and  distribution  facilities
located  throughout  North  America.  All of the Company's  facilities  are well
maintained,   in  good  operating  condition  and  suitable  for  the  Company's
operations.   The  table  below  provides  summary  information   regarding  the
properties owned or leased by the Company.

                                       7
<PAGE>
<TABLE>
<CAPTION>
                                                                    Size
                                                   Type of      (Approximate   Owned/
                   Location                      Facility (1)   square feet)   Leased   Lease Expiration
                   --------                      ------------   ------------   ------   -----------------
<S>                                              <C>            <C>            <C>      <C>
Appleton, Wisconsin (2 facilities)............       M/W           271,000       O
                                                     W             118,000       L      May 30, 2004

Augusta, Georgia (2 facilities)...............       M/W           369,000       O
                                                     M/W            75,000       O

Chicago, Illinois (2 facilities)..............       M/W           824,000       O
                                                     W             908,000       L      May 14, 2023

Conyers, Georgia (2 facilities)...............       M/W           350,000       O
                                                     W             555,000       O

Cuautitlan, Mexico (3 facilities).............       M              24,000       L      September 3, 2009
                                                     W              26,000       L      September 3, 2009
                                                     W              29,000       L      April 1, 2010

Dallas, Texas ................................       M/W         1,304,000       O

El Cajon, California (2 facilities)...........       M/W           101,000       L      June 30, 2011
                                                     W              82,000       L      July 31, 2010

Glens Falls, New York.........................       M/W            59,000       O

Goshen, Indiana...............................       M/W            63,000       O

Hampstead, Maryland...........................       W           1,035,000       L      May 30, 2020

Indianapolis, Indiana.........................       W             735,000       L      June 30, 2007

Kensington, Connecticut (4 facilities)........       M/W            96,000       L(2)   May 15, 2010
                                                     M/W           112,000       L(2)   May 15, 2010
                                                     W              30,000       L(2)   May 15, 2010
                                                     W              34,000       L      May 31, 2004

Lakeland, Florida.............................       M/W            45,000       L      January 31, 2004

North Andover, Massachusetts..................       M/W           249,000       L      October 31, 2020

North Las Vegas, Nevada (2 facilities)........       M/W            99,000       L      August 31, 2010
                                                     W              96,000       L      August 31, 2010

Ontario, California...........................       W             396,000       L      May 1, 2014

Oshkosh, Wisconsin............................       M/W           486,000       O

Owings Mills, Maryland (2 facilities).........       M/W         1,495,000       O
                                                     M/W           258,000       O

St. Albans, Vermont (2 facilities)............       M             115,000       O
                                                     W             186,000       L(3)   March 31, 2007

Scarborough, Ontario, Canada (2 facilities)...       M/W           400,000       O
                                                     W             262,000       L      March 1, 2008

Somerville, Massachusetts.....................       M/W           194,000       O(4)

Springfield, Missouri.........................       M/W           942,000       O

Williamsburg, Pennsylvania....................       M/W           146,000       L(5)   June 26, 2005
</TABLE>

(1)  M-Manufacturing;  W-Warehouse;  M/W-Manufacturing  and  Warehouse  in  same
     facility.  (2) Subject to a purchase option which expires May 15, 2005. (3)
     Subject to a purchase option which expires March 31, 2007.
(4)  Operations  at this  facility have ceased and the Company is in the process
     of selling this  facility.  The Company has  reclassified  this facility to
     assets held for sale.
(5)  Subject  to  capital  lease.( See  Note  18  of  the  Notes to Consolidated
     Financial Statements)

                                       8
<PAGE>
         The Company leases a warehouse in Augusta,  Georgia which was closed in
1997.  The Company is currently  subleasing  this  property to a third party and
plans to sublet this property  through the lease  termination  date of March 31,
2008.  The Company also leases a  manufacturing  facility  from its Chairman and
Chief Executive  Officer in Jacksonville,  Florida which was closed in 1998. The
Company is  currently  subleasing  such  property  to a third party and plans to
sublet the property through the lease termination date of December 31, 2014. See
"--Certain Relationships and Related Transactions".

         The Company also occupies a retail  facility  located in  Indianapolis,
Indiana in connection  with the Company's  party goods consumer  business.  This
facility is comprised of an outlet store maintained for marketing purposes.


Item 3.     LEGAL PROCEEDINGS

         On  July  13,  1999,  the  Company  received  a  letter  from  the  EPA
identifying  the Company,  among numerous  others,  as a "potential  responsible
party" under CERCLA, at a site in Baltimore,  Maryland.  The EPA letter is not a
final  determination  by the EPA  concerning the liability of the Company or the
liability of any other entity. The Company responded to the EPA that upon review
of its files it had no information  with respect to any dealings with that site.
On December 20, 1999, the Company  received an  information  request letter from
the EPA, pursuant to CERCLA,  regarding a Container  Recycling Superfund Site in
Kansas City,  Kansas and in January 2000 the Company  responded to such inquiry.
In both instances,  the Company has received no further  communication  from the
EPA. The Company denies liability and has no reason to believe the final outcome
of these matters will have a material adverse effect on the Company's  financial
condition or results of operations. However, no assurance can be given about the
ultimate effect on the Company, if any.

         The Company is subject to legal proceedings and other claims arising in
the ordinary course of its business. The Company maintains insurance coverage of
types and in amounts which it believes to be adequate. The Company believes that
it is not  presently  a party to any  litigation,  the  outcome  of which  could
reasonably  be  expected  to have a  material  adverse  effect on its  financial
condition or results of operations.


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

         On   July   7,  2003,  the  shareholders  of  Sweetheart  Holdings  and
Sweetheart Cup voted on the election of directors.


                                                       PART II


Item 5.     MARKET  FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED  STOCKHOLDER
            MATTERS

         Sweetheart  Cup is a wholly owned  subsidiary of  Sweetheart  Holdings,
which is a  privately  held  corporation.  No equity  securities  of  Sweetheart
Holdings  or  Sweetheart  Cup  are  publicly  traded  or  registered  under  the
Securities  Exchange  Act of 1934,  as amended,  and there is no public  trading
market for the stock.

         Payment of cash dividends is restricted under the instruments governing
the Company's indebtedness. The Company has not paid cash dividends and does not
anticipate paying any cash dividends in the foreseeable future.

         As of December 11, 2003,  there was one holder of Sweetheart  Holdings'
Class A Common Stock and Sweetheart Holdings' Class B Common Stock.


Item 6.     SELECTED FINANCIAL DATA

         Set forth below are selected historical  consolidated financial data of
the Company at the dates and for the fiscal years shown. The selected historical
consolidated financial data at September 28, 2003 and September 29, 2002 and for
Fiscal  2003,   Fiscal  2002  and  Fiscal  2001  are  derived  from   historical
consolidated  financial  statements of the

                                       9
<PAGE>
Company  for such  years  that have  been  audited  by  Deloitte  & Touche  LLP,
independent auditors, and are included elsewhere herein. The selected historical
consolidated  financial  data at  September  30,  2001,  September  24, 2000 and
September  26, 1999 and for Fiscal  2000 and Fiscal  1999 are  derived  from the
audited  historical  consolidated  financial  statements of the Company for such
years which are not included herein.

<TABLE>
<CAPTION>
                                                                                  Fiscal(1)
                                                     --------------------------------------------------------------------
                                                         2003          2002          2001          2000          1999
                                                     ------------  ------------  ------------  ------------  ------------
<S>                                                  <C>           <C>           <C>           <C>           <C>
                                                                                (In thousands)
Statement of Operations Data (2):
Net sales                                            $ 1,307,921   $ 1,283,547   $ 1,316,672   $ 1,276,617   $ 1,182,004
Cost of sales                                          1,141,738     1,130,264     1,143,806     1,090,286     1,022,800
                                                     ------------  ------------  ------------  ------------  ------------
  Gross profit                                           166,183       153,283       172,866       186,331       159,204
Selling, general and administrative expenses (3)         108,240       114,823       113,231       112,559       118,479
Restructuring charge (credit) (4)                            486         1,893           504         1,153          (512)
Asset impairment expense(5)                                  721           593         2,244             -             -
Other (income) expense, net(6)                            (8,323)        2,102        (9,836)       (4,943)       (1,563)
                                                     ------------  ------------  ------------  ------------  ------------
  Operating income                                        65,059        33,872        66,723        77,562        42,800
Interest expense, net                                     39,297        37,079        38,919        52,608        58,413
Loss on debt extinguishment                                  475         1,798             -           522             -
                                                     ------------  ------------  ------------  ------------  ------------
Income (loss) before tax and minority
  interest                                                25,287        (5,005)       27,804        24,432       (15,613)
Income tax expense (benefit)                              10,115        (2,002)       11,220         9,887        (5,527)
Minority interest in subsidiary                              127           145            68             -             -
                                                     ------------  ------------  ------------  ------------  ------------
  Net income (loss)                                  $    15,045   $    (3,148)  $    16,516   $    14,545   $   (10,086)
                                                     ============  ============  ============  ============  ============

Balance Sheet Data (at end of year):
  Cash and cash equivalents                          $    10,447   $     8,035   $    11,616   $     4,828   $     3,589
  Working capital (deficiency)                           117,881       126,804       249,450       173,299       (96,045)
  Property, plant and equipment, net                     240,975       252,491       260,666       254,844       374,666
  Total assets                                           808,246       820,843       855,173       805,273       842,975
  Total debt                                             403,879       437,301       440,820       387,988       527,335
  Shareholder's equity                                    54,372        47,237        56,130        45,074        29,946
</TABLE>

(1)  On March 25, 2002,  Sweetheart Cup merged with Fonda in a transaction  that
     was accounted for in a manner similar to a pooling-of-interests.
(2)  The selected historical  consolidated  financial and operating data include
     the  operations  of the  Company  and each of its  acquisitions  since  the
     respective dates of such acquisitions.
(3)  The Company adopted Statement of Financial  Accounting  Standards  ("SFAS")
     No. 142,  Goodwill and Other  Intangible  Assets,  effective  September 30,
     2002.  SFAS No. 142 requires  that  goodwill and certain  intangibles  with
     indefinite lives not be amortized,  but subject to an impairment test on an
     annual  basis  or  when  facts  and  circumstances  suggest  that it may be
     impaired.  As a result,  the Company ceased  amortization of goodwill as of
     that date.  Goodwill  amortization  was $2.0 million in Fiscal  2002,  $1.9
     million in Fiscal 2001,  $1.2  million in Fiscal 2000,  and $1.2 million in
     Fiscal 1999.
(4)  In Fiscal 2003,  the Company  established a  restructuring  reserve of $0.6
     million resulting from the elimination of 18 salaried positions.  In Fiscal
     2002, the Company  established a  restructuring  reserve of $0.3 million in
     conjunction  with the planned closure of its Lafayette,  Georgia  facility,
     from which 101 primarily  manufacturing  positions were  eliminated,  and a
     restructuring   reserve  of  $1.6  million  in  conjunction   with  planned
     consolidation  initiatives from which 475 primarily manufacturing positions
     were  eliminated.  In Fiscal  2001,  the Company  recorded a  restructuring
     reserve in conjunction with the consolidation of the administrative offices
     of Creative  Expressions  Group,  Inc.  ("CEG"),  a former affiliate of the
     Company,  with its Oshkosh  administrative  offices.  In Fiscal  2000,  the
     Company established a restructuring reserve for severance and related costs
     for the elimination of its centralized  machine shop and for the closure of
     its Maspeth,  New York facility.  In Fiscal 1998, the Company established a
     restructuring  reserve  for  severance  and  related  costs for a workforce
     reduction,  which was adjusted in Fiscal  1999,  and for the closure of its
     Jacksonville,  Florida and  Indianapolis,  Indiana  facilities  and the St.
     Albans, Vermont administrative offices.
(5)  In Fiscal 2003,  Fiscal 2002 and Fiscal 2001, the Company recorded an asset
     impairment expense as a result of a review of the carrying value of certain
     of its long-lived assets.
(6)  Other (income)  expense,  net in Fiscal 2003,  Fiscal 2002, Fiscal 2001 and
     Fiscal 2000 includes $10.1 million,  $10.2 million,  $10.3 million and $2.8
     million,  respectively,  of amortization of the deferred gain in connection
     with the  sale-leaseback  transaction.  In the Fiscal 2003,  Other (income)
     expense also includes:  (i) $1.2 million of foreign  currency  transactions
     gains,  (ii) $0.2  million  gain from the sale of its 25% interest in Fibre
     Marketing Group, LLC ("Fibre Marketing"),  the successor of Fibre Marketing
     Group,  Inc.,  a waste  recovery  business,  (iii)  $0.8  million

                                       10
<PAGE>
     of costs  associated  with the opening of a mid-west  distribution  center,
     (iv)  $0.7   million  of  costs   associated   with  the   rationalization,
     consolidation  and improvement of the Company's  manufacturing  facilities,
     (v)  $0.8   million   of  costs   associated   with  the   maintenance   of
     non-operational  facilities and (vi) $0.9 million of costs  associated with
     the establishment of new information systems.


Item 7.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL CONDITION AND
            RESULTS OF OPERATION

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


General

         The  Company  believes  that  it is one of the  largest  producers  and
marketers  of  disposable  foodservice  and  food  packaging  products  in North
America.  The Company sells a broad line of disposable  paper,  plastic and foam
foodservice  and food  packaging  products at all major price  points under both
branded and  private  labels to  institutional  foodservice,  consumer  and food
packaging  customers.  The Company markets its products under its Sweetheart(R),
Lily(R),  Trophy(R),  Jazz(R),  Preference(TM),  Go Cup(R),  Silent  Service(R),
Centerpiece(TM),  Basix(R),  Guildware(R),  Simple  Elegance(R),  Sensations(R),
Hoffmaster(R), Paper Art(R), and Touch of Color(R) brands.

         The  Company's  product  offerings  cover  a  broad  range  within  the
industry,  including (i) paper, plastic and foam foodservice products, primarily
cups, lids, plates, bowls, plastic cutlery, food trays and food containers; (ii)
tissue and specialty  foodservice  products,  primarily  napkins,  table covers,
placemats  and  lunch  bags;  and  (iii)  food  packaging  products,   primarily
containers  for the dairy and food  processing  industries.  To enhance  product
sales,  the  Company  designs,  manufactures  and leases  container  filling and
lidding  equipment to dairies and other food processors to package food items in
the Company's containers at customers' plants. Types of products packaged in the
Company's machines include: ice cream,  factory-filled jacketed ice cream cones,
cottage cheese,  yogurt,  sour cream and squeeze-up  desserts.  The Company also
sells paper converting equipment used primarily in the manufacture of paper cups
and food containers.

         The  Company  sells  its  products  to  institutional  foodservice  and
consumer  customers,  including large national accounts,  located throughout the
United  States,  Canada and Mexico.  The Company has  developed  and  maintained
long-term relationships with many of its customers.  The Company's institutional
foodservice customers include (i) major foodservice distributors,  (ii) national
accounts,  including quick service restaurant chains and catering companies, and
(iii)  schools,  hospitals  and (iv) other  major  institutions.  The  Company's
consumer  customers include (i)  supermarkets,  (ii) mass  merchandisers,  (iii)
warehouse clubs,  (iv) party good stores and (v) other retailers.  The Company's
food packaging  customers  include (i) national and regional dairy and (ii) food
companies.

         The  Company's  business  is  seasonal  with a majority of its net cash
flows from  operations  realized  during the last six months of the fiscal year.
Sales for such periods  reflect the high  seasonal  demands of the summer months
when outdoor and  away-from-home  consumption  increases.  In the event that the
Company's cash flows from  operations is insufficient to provide working capital
necessary  to fund its  requirements,  the Company will need to borrow under its
credit  facility or seek other  sources of capital.  The Company  believes  that
funds  available under such credit  facility,  together with cash generated from
operations,  will be  adequate  to provide  for cash  requirements  for the next
twelve months.

         On March 25, 2002,  pursuant to an Agreement and Plan of Merger,  Fonda
was merged with and into  Sweetheart  Cup, with  Sweetheart Cup as the surviving
entity. In connection with the merger, all of the assets and operations of Fonda
were assigned to, and all  liabilities of Fonda were assumed by,  Sweetheart Cup
by operation of law and all of the  outstanding  shares of Fonda were cancelled.
Sweetheart  Cup is a wholly owned  subsidiary of Sweetheart  Holdings which is a
wholly owned subsidiary of SF Holdings.  Sweetheart Holdings and Fonda are under
common

                                       11
<PAGE>
control, and therefore, the transaction was accounted for in a manner similar to
a pooling-of-interests.


Critical Accounting Policies and Estimates

         Management's Discussion and Analysis of Financial Condition and Results
of Operations discusses the Company's consolidated  financial statements,  which
have been prepared in accordance with accounting  principles  generally accepted
in the United States of America.  The preparation of these financial  statements
requires  management to make  estimates  and  assumptions  that affect  reported
amounts of assets and  liabilities  and the disclosure of contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues  and  expenses  during  the  reported  period.  On an  on-going  basis,
management  evaluates its estimates and  judgments,  including  those related to
revenue recognition,  receivables reserves, inventory reserves, goodwill, income
taxes  and  contingencies.  Management  bases  its  estimates  and  judgment  on
historical  experience  and on various  other  factors  that are  believed to be
reasonable  under the  circumstances,  the  results  of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent from other  sources.  Actual results may differ from these
estimates under different assumptions or conditions.

         Revenue  recognition / receivable reserves - Revenue is recognized upon
shipment of product and when  collectability  is reasonably  assured.  Also, the
Company rents filling  equipment to certain of its customers and recognizes this
income over the life of the lease.  The  Company's  sales are  evidenced and the
sales  price  fixed  based upon  either a  purchase  order,  contract  or buying
agreement with the customer. The Company's freight terms are either FOB shipping
point or freight prepaid by the customer.  The customer may also be eligible for
promotional  incentives  or  rebates.  The  Company at the time of sale  records
reserves  for  promotional  allowances,  rebates  and other  discounts  based on
historical experience, which are charged to net sales.

         Raw materials - Raw materials are critical  components of the Company's
cost  structure.  The prices for these raw  materials  may  fluctuate.  When raw
material prices decrease, selling prices have historically decreased. The actual
impact  from raw  material  price  changes  is  affected  by a number of factors
including the level of inventories  at the time of a price change,  the specific
timing and frequency of price changes,  and the lead and lag time that generally
accompanies  the  implementation  of both raw materials and  subsequent  selling
price changes.  In the event that raw material  prices decrease over a period of
several  months,  the  Company  may  suffer  margin  erosion on the sale of such
inventory.

         Inventory reserves - The Company establishes reserves for its inventory
to reflect those conditions when the cost of the inventory is not expected to be
recovered. The Company reviews such circumstances when products are not expected
to be saleable based on standards established by the Company's quality assurance
standards.  The reserve  for these  products is equal to all or a portion of the
cost of the inventory based on the specific facts and circumstances. The Company
monitors  inventory  levels on a regular  basis and record  changes in inventory
reserves as part of costs of goods sold.

         Goodwill - Goodwill  represents  the excess of the purchase  price over
the fair value of tangible and  identifiable  intangible net assets acquired and
was being  amortized on a  straight-line  basis over twenty years.  The carrying
value of goodwill is subject to an  impairment  test on an annual  basis or when
facts and circumstances suggest that it may be impaired. See "Impact of Recently
Issued Accounting Standards, SFAS No. 142".

         Income taxes - The Company  applies an asset and liability  approach to
accounting for income taxes.  Deferred tax assets and liabilities are recognized
for the expected future tax  consequences of temporary  differences  between the
financial  statement and tax basis of assets and  liabilities  using enacted tax
rates in effect for the year in which the  differences  are expected to reverse.
The  recoverability  of  deferred  tax assets is  dependent  upon the  Company's
assessment of whether it is more likely than not that sufficient  future taxable
income  will be  generated  in the  relevant  tax  jurisdiction  to utilize  the
deferred  tax asset.  The Company  reviews  its  internal  forecasted  sales and
pre-tax  earnings  estimates to make its  assessment  about the  utilization  of
deferred  tax  assets.  In the event,  the  Company  determines  that the future
taxable  income will not be  sufficient  to utilize the  deferred  tax asset,  a
valuation  allowance  is recorded.  If that  assessment  changes,  a charge or a
benefit would be recorded on the statement of operations.

         Contingencies  - The Company is subject to  litigation  in the ordinary
course of business and also to certain other  contingencies  (See Note 26 to the
Notes to Consolidated Financial Statements).  The Company records legal

                                       12
<PAGE>
fees and other  expenses  related to litigation and  contingencies  as incurred.
Additionally,  the Company assesses,  in consultation with its counsel, the need
to record a liability for litigation and contingencies on a case-by-case  basis.
Reserves are recorded when the Company, in consultation with counsel, determines
that a loss related to a matter is both probable and reasonably estimable.

         Selling,  general and  administrative  expenses - Selling,  general and
administrative expenses consist primarily of salaries, benefits, promotional and
advertising costs, rent, depreciation of equipment and broker fees.


Recent Developments

         The  Company  has  entered  into  an  agreement  for  the  sale  of its
Somerville,  Massachusetts  facility for a purchase price of approximately $10.1
million.  According to the agreement, the closing of this sale is to occur on or
before January 16, 2004. However, there can be no assurances that this sale will
be consummated.

         Pursuant to a preliminary  offering  circular,  dated December 2, 2003,
the Company is proposing  to sell $100.0  million of senior  secured  notes in a
private placement.  In addition,  the Company is selling $20.0 million of junior
subordinated  notes  in a  separate  private  placement.  The  proceeds  of both
offerings  would be used to repay a portion of its Senior Credit Facility and to
redeem all of its  outstanding  12% Senior  Notes due 2004.  The senior  secured
notes would bear interest at a fixed rate that has not yet been  determined  and
would mature in 2007. The junior subordinated notes, which would be purchased by
International Paper Company, one of the Company's raw materials suppliers, would
bear interest at the rate of 9-1/2% and would mature in 2008. The senior secured
notes and the junior  subordinated notes are being offered in private placements
and will not be registered under the Securities Act of 1933. The Company intends
to complete the private placements and debt repayments by December 31, 2003.


Fiscal 2003 Compared to Fiscal 2002

         Net sales  increased  $24.4  million,  or 1.9%, to $1,307.9  million in
Fiscal  2003  compared  to $1,283.5  million in Fiscal  2002  reflecting  a 0.6%
decrease in sales volume and a 2.5%  increase in average  realized  sales price.
Sales  volume  decreased  primarily  as a result of lower  demand from  consumer
customers,  which was partially  offset by increased  demand from  institutional
customers.  Average  realized  sales  prices  increased  as a result of  pricing
increases associated with higher raw material costs and a change in product mix.

         Gross profit  increased  $12.9  million,  or 8.4%, to $166.2 million in
Fiscal 2003  compared to $153.3  million in Fiscal 2002.  As a percentage of net
sales, gross profit increased to 12.7% in Fiscal 2003 from 11.9% in Fiscal 2002.
The  increase  in  gross  profit  is  primarily  due to  improved  manufacturing
efficiencies and labor utilization resulting from the Company's rationalization,
consolidation and improvement of its manufacturing facilities. The benefits from
improved  manufacturing  efficiencies  were partially  offset by average selling
prices increasing at a slower rate than increasing raw material costs.

         Selling, general and administrative expenses decreased $6.6 million, or
5.7%,  to $108.2  million in Fiscal 2003  compared  to $114.8  million in Fiscal
2002.  This decrease was primarily due to (i) $2.1 million  decrease in salaries
and related fringe benefits due to a workforce  reduction  program  initiated in
Fiscal 2002, (ii) $2.6 million decrease in depreciation  expense  resulting from
the full depreciation of certain computer equipment, (iii) $2.0 million decrease
in  goodwill  amortization  due to the  adoption  of SFAS No.  142 and (iv) $1.1
million decrease in expenses due to fewer customer  bankruptcy filings in Fiscal
2003.  These favorable  changes were partially offset by a $2.2 million increase
in promotional and advertising expenses.

         Restructuring  charge decreased $1.4 million, or 73.7%, to $0.5 million
in Fiscal 2003  compared to $1.9  million in Fiscal 2002.  In Fiscal  2003,  the
Company  established a restructuring  reserve of $0.6 million resulting from the
elimination  of 18 salaried  positions.  The plan was approved by  management on
July 7, 2003 and announced to employees on July 11, 2003. In the fourth  quarter
of Fiscal  2003,  the  Company  paid $0.3  million in  severance  payments.  The
remaining  $0.3  million of severance  payments  will be paid in the first three
quarters of Fiscal 2004. In Fiscal 2002, the Company established a restructuring
reserve of $0.3 million in conjunction with the planned closure of the Company's
Lafayette,  Georgia  facility from which 101 primarily  manufacturing  positions
were  eliminated.  The plan was approved by management on September 24, 2002 and
announced to employees on September 29, 2002.  In

                                       13
<PAGE>
Fiscal  2003,  the Company paid  severance  payments of $0.1 million and vacated
rent expense of $0.2 million.  Also, in Fiscal 2002,  the Company  established a
restructuring  reserve of $1.6 million in conjunction with planned consolidation
initiatives  from which 475 primarily  manufacturing  positions were eliminated.
The plan was approved by  management on June 19, 2002 and announced to employees
on June 28, 2002. A portion of the  severance  payments of $1.6 million was paid
in the fourth  quarter of Fiscal 2002 with the  remaining  payments  paid in the
first three quarters of Fiscal 2003.

         Asset  impairment  expense  increased $0.1 million,  or 16.7%,  to $0.7
million in Fiscal 2003  compared  to $0.6  million in Fiscal 2002 as a result of
the Company's evaluation of the usefulness of certain equipment no longer in use
in by the Company.

         Other (income) expense,  net changed $10.4 million,  or 495.2%, to $8.3
million of income in Fiscal 2003  compared to $2.1  million of expense in Fiscal
2002. In Fiscal 2003, the Company realized $10.1 million due to the amortization
of the  deferred  gain  in  conjunction  with  the  Fiscal  2000  sale-leaseback
transaction.  In  addition,  the Company  realized  $1.2  million  from  foreign
currency  transactions  gains and $0.2 million from the sale of its 25% interest
in Fibre  Marketing.  These gains were  partially  offset by (i) $0.8 million of
costs associated with the opening of a mid-west  distribution  center, (ii) $0.7
million  of  costs  associated  with  the  rationalization,   consolidation  and
improvement  of the Company's  manufacturing  facilities,  (iii) $0.8 million of
costs  associated  with the maintenance of  non-operational  facilities and (iv)
$0.9  million of costs  associated  with the  establishment  of new  information
systems.  In  Fiscal  2002,  the  Company  realized  $10.2  million  due  to the
amortization  of  the  deferred  gain  in  conjunction   with  the  Fiscal  2000
sale-leaseback transaction.  Also, in Fiscal 2002, the Company recognized a $3.0
million gain associated with the sale of the Company's manufacturing facility in
Manchester,  New  Hampshire.  These  gains  were  offset  by (i) a $5.4  million
write-off of the management  services agreement between Sweetheart  Holdings and
SF Holdings,  which had been assigned and assumed by Fonda in 1998,  (ii) a $2.6
million write-off of assets related to business initiatives which were abandoned
subsequent  to the Merger,  (iii) $6.9 million of costs in  connection  with the
rationalization,   consolidation  and  process   improvement  of  the  Company's
manufacturing facilities and (iv) $0.5 million of additional costs of associated
with the termination of the Lily-Tulip, Inc. Salary Retirement Plan.

         Operating income increased $31.2 million,  or 92.0% to $65.1 million in
Fiscal  2003  compared  to $33.9  million  in  Fiscal  2002  due to the  reasons
described above.

         Interest expense, net increased $2.2 million, or 5.9%, to $39.3 million
in Fiscal  2003  compared  to $37.1  million in Fiscal  2002.  This  increase is
primarily due to the amortization of fees associated with the Company's Exchange
Offer and  increase  in coupon  interest  effective  March 1, 2002 for the 12.0%
Senior Notes due September 2004.  These increases were partially offset by lower
interest rates under the Senior Credit Facility.

         Loss on debt  extinguishment  decreased $1.3 million, or 72.2%, to $0.5
million in Fiscal 2003  compared to $1.8 million in Fiscal 2002. In Fiscal 2003,
in  connection  with the  Exchange  Offer,  the Company  charged $0.5 million to
operations  which  amount  represents  the  write-off  of  unamortized  deferred
financing fees associated with the Company's 12.0% Senior Subordinated Notes. In
Fiscal 2002, in conjunction  with the refinancing of the Company's Senior Credit
Facility, the Company charged $1.8 million to operations which amount represents
the  write-off  of  unamortized  deferred  financing  fees and  redemption  fees
pertaining to such debt to results of operations.

         Income tax expense  (benefit)  changed $12.1  million,  or 605.0% to an
expense of $10.1 million in Fiscal 2003 compared to a benefit of $2.0 million in
Fiscal 2002 as a result of pre-tax  income.  The effective  rate for Fiscal 2003
and 2002 was 40%.

         Minority  interest in subsidiary was $0.1 million in Fiscal 2003 and in
Fiscal 2002.  This amount  represents  the 20%  ownership of Global Cup, S.A. De
C.V.'s ("Global Cup") income.

         Net income (loss) increased $18.1 million,  or 583.9%, to $15.0 million
of income in Fiscal 2003  compared to $3.1 million of loss in Fiscal 2002 due to
the reasons described above.


Fiscal 2002 Compared to Fiscal 2001

         Net sales  decreased  $33.2  million,  or 2.5%, to $1,283.5  million in
Fiscal  2002  compared  to $1,316.7

                                       14
<PAGE>
million in Fiscal 2001  reflecting a 2.5% decrease in average  realized  selling
prices  resulting from lower raw material costs and competitive  pressures while
sales volumes remained  constant.  Sales volumes declined  domestically due to a
reduction  in the  business  and leisure  travel  industries  and a reduction in
foodservice  and  away-from-home  dining  which  resulted  from  the  events  of
September  11,  2001 and the fact  that  Fiscal  2002  consisted  of 52 weeks as
compared  with 53 weeks for Fiscal 2001.  This  decrease was offset by increased
sales volume due to the  incremental  sales  obtained from the  acquisitions  of
Global Cup in April 2001 and the consumer division of Dopaco in August 2001. Net
sales excluding  Global Cup and the consumer  division of Dopaco decreased $72.2
million,  or 5.5%,  to  $1,235.4  million in Fiscal  2002  compared  to $1,307.6
million in Fiscal 2001  reflecting  a 2.5%  decrease in average  realized  sales
price and a 3.2% decrease in sales volume.

         Gross profit  decreased  $19.6 million,  or 11.3%, to $153.3 million in
Fiscal 2002  compared to $172.9  million in Fiscal 2001.  As a percentage of net
sales, gross profit decreased to 11.9% in Fiscal 2002 from 13.1% in Fiscal 2001.
The $19.6 million decline in gross profit was due (i) 66.7% to the manufacturing
inefficiencies  related to the  Company's  consolidation  initiatives  and lower
fixed cost  absorption as Fiscal 2002  consisted of 52 weeks as compared with 53
weeks for  Fiscal  2001,  (ii)  22.2% to the  impact of lower  average  realized
selling  prices and (iii) 11.1% to a decrease  from a mix shift to lower  margin
volumes as a result of the acquisition of the consumer division of Dopaco.

         Selling, general and administrative expenses increased $1.6 million, or
1.4%,  to $114.8  million in Fiscal 2002  compared  to $113.2  million in Fiscal
2001.  This  increase   resulted   primarily  from  $2.2  million  of  increased
promotional and advertising expenses, $1.5 million of increased bad debt expense
due to a  customer  bankruptcy  filing  and $1.0  million  and $1.4  million  of
increased  expenses due to the  acquisitions of both Global Cup and the consumer
division of Dopaco,  respectively.  These increases were partially offset by (i)
lower expenses as a result of Fiscal 2002  consisting of 52 weeks as compared to
53 weeks in Fiscal 2001,  (ii)$3.7  million in reduced salaries and benefits and
(iii)$1.3 million in lower depreciation expense.

         Restructuring charge increased $1.4 million, or 280.0%, to $1.9 million
in Fiscal 2002  compared to $0.5  million in Fiscal 2001.  In Fiscal  2002,  the
Company established a restructuring  reserve of $0.3 million in conjunction with
the planned closure of the Company's Lafayette,  Georgia facility from which 101
primarily  manufacturing  positions  were  eliminated.  The plan was approved by
management  on September  24, 2002 and  announced to employees on September  29,
2002.  Severance  payments  of $0.1  million  and $0.2  million of vacated  rent
expense was paid in Fiscal 2003. Also, in Fiscal 2002, the Company established a
restructuring  reserve of $1.6 million in conjunction with planned consolidation
initiatives  from which 475 primarily  manufacturing  positions were eliminated.
The plan was approved by  management on June 19, 2002 and announced to employees
on June 28, 2002. A portion of the severance  payments of $1.6 million were paid
in the fourth  quarter of Fiscal 2002 with the remaining  payments to be paid in
the first three quarters of Fiscal 2003. In Fiscal 2001, the Company established
a restructuring reserve of $0.5 million in conjunction with the consolidation of
the former  administrative  offices  of CEG in  Indianapolis,  Indiana  into the
Company's  administrative  offices in  Oshkosh,  Wisconsin.  This  consolidation
included the elimination of approximately 40 positions. The plan was approved by
management  on October 30, 2000 and  announced to employees on May 1, 2001.  The
effective  date of the  consolidation  and  elimination of positions was delayed
until the fourth quarter of Fiscal 2001. Severance payments of $0.1 million were
paid in the fourth quarter of Fiscal 2001.

         Asset impairment expense was $0.6 million in Fiscal 2002 as a result of
the Company's evaluation of the usefulness of certain equipment no longer in use
in connection with the closure of its Lafayette, Georgia facility.

         Other (income) expense,  net changed $11.9 million,  or 121.4%, to $2.1
million of expense in Fiscal 2002  compared to $9.8  million of income in Fiscal
2001. In Fiscal 2002, the Company realized $10.2 million due to the amortization
of the  deferred  gain  in  conjunction  with  the  Fiscal  2000  sale-leaseback
transaction.  Also, in Fiscal 2002,  the Company  recognized a $3.0 million gain
associated with the sale of the Company's  manufacturing facility in Manchester,
New  Hampshire.  These gains were offset by (i) a $5.4 million  write-off of the
management services agreement between Sweetheart Holdings and SF Holdings, which
had been assigned and assumed by Fonda in 1998, (ii) a $2.6 million write-off of
assets related to business  initiatives  which were abandoned  subsequent to the
Merger,  (iii) $6.9  million of costs in  connection  with the  rationalization,
consolidation and process improvement of the Company's manufacturing  facilities
and (iv) $0.5 million of additional costs associated with the termination of the
Lily-Tulip,  Inc. Salary  Retirement  Plan. In Fiscal 2001, the Company realized
$10.3 million due to the  amortization of the deferred gain in conjunction  with
the  sale-leaseback  transaction.  This  amortization  of the deferred  gain was
partially  offset by $1.6 million in expenses  associated with the relocation of
the  Company's  Somerville,

                                       15
<PAGE>
Massachusetts, manufacturing facility to North Andover, Massachusetts.

         Operating income decreased $32.8 million,  or 49.2% to $33.9 million in
Fiscal  2002  compared  to $66.7  million  in  Fiscal  2001  due to the  reasons
described above.

         Interest expense, net decreased $1.8 million, or 4.6%, to $37.1 million
in Fiscal  2002  compared  to $38.9  million in Fiscal  2001.  This  decrease is
attributable  to lower  interest  rates on  higher  average  balances  under the
Company's  Senior Credit  Facility  which was partially  offset by the increased
interest rate on $110 million of Senior  Subordinated  Notes from 10.5% to 12.0%
which was effective March 1, 2002.

         Loss on debt  extinguishment  was $1.8 million in Fiscal 2002 resulting
from the write-off of unamortized  deferred  financing costs and redemption fees
in connection with the refinancing of the Company's Senior Credit Facility.

         Income tax expense  (benefit)  changed  $13.2  million,  or 117.9% to a
benefit of $2.0 million in Fiscal 2002  compared to an expense of $11.2  million
in Fiscal 2001 as a result of a pre-tax loss. The effective rate for Fiscal 2002
and 2001 was 40%.

         Minority  interest in subsidiary was $0.1 million in Fiscal 2002 and in
Fiscal 2001. This amount represents the 20% ownership of Global Cup's income.

         Net income (loss) decreased $19.6 million, or 118.8%, to a $3.1 million
loss in Fiscal 2002  compared  to $16.5  million of income in Fiscal 2001 due to
the reasons described above.


Liquidity And Capital Resources

         Historically,  the Company has relied on cash flows from operations and
revolving  credit  borrowings to finance its working  capital  requirements  and
capital   expenditures.   In  Fiscal  2003,   the  Company  funded  its  capital
expenditures  from a  combination  of  cash  generated  from  operations,  funds
generated from asset sales and revolving credit borrowings.  The Company expects
to continue this method of funding for its Fiscal 2004 capital expenditures.

         Net cash  provided  by  operating  activities  in Fiscal 2003 was $57.9
million compared to $28.5 million in Fiscal 2002. This increase is primarily due
to improved  earnings and an increase in accounts  payable due to more favorable
trade terms.  This increase was partially offset by increases in receivables and
inventories.

         Net cash used in investing  activities in Fiscal 2003 was $13.4 million
compared to $16.0  million in Fiscal 2002.  This  decrease is  primarily  due to
lower capital spending which is offset,  in part, by the receipt of net proceeds
from the sale of the Manchester, New Hampshire facility in Fiscal 2002.

         Net cash used in financing  activities in Fiscal 2003 was $42.1 million
compared to net cash used in  financing  activities  of $16.1  million in Fiscal
2002.  This increase is primarily due to increased  repayments  under the Senior
Credit Facility and the repayment of $16.2 million of 12.0% Senior  Subordinated
Notes.

         Working  capital  decreased $8.9 million to $117.9 million at September
28, 2003 from $126.8 million at September 29, 2002. This decrease  resulted from
current liabilities  increasing $17.6 million which was offset by current assets
increasing $8.7 million.  The increase in current liabilities resulted primarily
from  increased  accounts  payable.  The  increase  in current  assets  resulted
primarily from increased receivables.

         Capital  expenditures  for Fiscal 2003 were $13.8  million  compared to
$21.2 million in Fiscal 2002. Capital expenditures for Fiscal 2003 included $9.4
million  for  new  production  equipment;   $0.9  million  associated  with  the
implementation  of  the  Company's   consolidation  program;  and  $3.5  million
primarily for routine capital improvements.  Funding for the Fiscal 2003 capital
expenditures  was  primarily  provided by cash  generated  from  operations  and
revolving credit borrowings.  In Fiscal 2004, the Company intends to continue to
rely on this  combination  of  funding  and the sale of assets  for its  capital
expenditures.

         On October 1, 2002, the Company  entered into a loan agreement with the
City of Chicago  to borrow  $2.0

                                       16
<PAGE>
million.  The loan bears no  interest  and is payable in equal  installments  of
$100,000  commencing  on February 1, 2004 and every six months  thereafter.  The
loan  matures  on the later of  August 1, 2014 or the date on which all  amounts
outstanding under the loan agreement have been paid in full.

         On June 10, 2002,  the Company  entered into a loan  agreement with the
Department of Business and Economic  Development,  a principal department of the
State of Maryland,  to borrow $2.0 million (the "Maryland  Loan").  The Maryland
Loan bears  interest at a rate ranging from 3.0% to 8.0% per annum  depending on
certain employment rates at the Company's Owings Mills,  Maryland facility.  The
Maryland Loan is payable in quarterly installments through March 1, 2007.

         On March 25, 2002, the Company  refinanced  its existing  Senior Credit
Facility.  The Senior Credit Facility has a maturity date of March 25, 2007. The
Senior Credit Facility was amended on February 28, 2003 to require,  among other
things,  the  date by which  the  refinancing,  repayment  or  extension  of the
Company's  newly issued  12.0%  Senior Notes shall be December 31, 2003.  If the
Company is unable to refinance,  repay or extend the 12.0% Senior Notes prior to
December 31, 2003, the Senior Credit Facility,  unless otherwise  amended,  will
become due and payable.  The Senior Credit  Facility allows for a maximum credit
borrowing of $235 million subject to borrowing base limitations and satisfaction
of other  conditions of borrowing.  The revolving  borrowings  have a maximum of
$215  million.  The term  loans have a maximum of $25  million  and are  payable
monthly through March 2005.  Borrowings under the Senior Credit Facility, at the
Company's  election,  bear  interest at either (i) a bank's base rate  revolving
loan  reference  rate plus 0.5% or (ii) LIBOR plus 2.5%.  For Fiscal  2003,  the
weighted  average annual interest rate for the Senior Credit Facility was 3.97%.
The indebtness of Sweetheart Cup under the Senior Credit  Facility is guaranteed
by Sweetheart Holdings and secured by a first priority perfect security interest
in accounts receivable, inventory, general intangibles and certain other assets.
The fee for  outstanding  letters  of  credit  is 2.00% per annum and there is a
commitment  fee of 0.375% per annum on the daily  average  unused  amount of the
commitments.  As of September 28, 2003,  $49.1  million was available  under the
Senior Credit Facility. As of September 28, 2003, LIBOR was 1.12% and the bank's
base rate was 4.50%.

         The Senior Credit Facility  contains  various  covenants that limit, or
restrict,  among  other  things,   indebtedness,   dividends,   leases,  capital
expenditures and the use of proceeds from asset sales and certain other business
activities.  Additionally,  the Company must maintain on a  consolidated  basis,
certain  specified ratios at specified  times,  including,  without  limitation,
maintenance of minimum fixed charge coverage ratio.  The Company is currently in
compliance  with all  covenants  under the Senior  Credit  Facility.  The Senior
Credit  Facility  provides for partial  mandatory  prepayments  upon the sale of
equipment  collateral  unless  net  proceeds  are used to  purchase  replacement
collateral and full repayment upon any change of control (as defined in the loan
agreement governing the Senior Credit Facility).

         The Company's Canadian subsidiary has a credit agreement (the "Canadian
Credit  Facility")  which provides for a term loan and a credit  facility with a
maximum  credit  borrowing of Cdn $30 million  (approximately  US $22.1 million)
subject to borrowing base  limitations and  satisfaction of other  conditions of
borrowing.  The term borrowings are payable quarterly through May 2004. Both the
revolving credit and term loan borrowings have a final maturity date of June 15,
2004.  The Canadian  Credit  Facility is secured by all existing and  thereafter
acquired real and personal tangible assets of the Company's Canadian  subsidiary
and net  proceeds  on the sale of any of the  foregoing.  Borrowings  under  the
Canadian  Credit Facility bear interest at an index rate plus 1.75% with respect
to the  revolving  credit  facility and an index rate plus 2.00% with respect to
the term loan borrowings.  For Fiscal 2003, the weighted average annual interest
rate for the Canadian  Credit  Facility was 4.86%. As of September 28, 2003, Cdn
$2.1 million  (approximately  US $1.6 million) was available under the revolving
facility and the term loan balance was Cdn $10.2 million  (approximately US $7.5
million) under the Canadian Credit Facility.

         On April 8, 2003,  the Company  consummated  its offer to exchange  its
newly issued 12.0%  Senior Notes due July 15, 2004,  for all of its  outstanding
12.0% Senior  Subordinated  Notes and solicitation of consents of holders of the
12.0% Senior  Subordinated  Notes to the proposed  amendments  to the  indenture
governing  the 12.0%  Senior  Subordinated  Notes.  Sweetheart  Cup,  Sweetheart
Holdings,  as  guarantor,  and Wells  Fargo Bank  Minnesota,  N.A.,  as trustee,
executed the  indenture  governing  the 12.0% Senior Notes and $93.8  million in
aggregate  principal  amount of the 12.0%  Senior  Notes were  issued  under the
indenture in exchange for a like amount of the 12.0% Senior  Subordinated Notes.
Payment of the consent payments to all holders of the 12.0% Senior  Subordinated
Notes who timely tendered was made in April 2003 to the trustee. In Fiscal 2003,
the Company  recorded a $0.5 million loss on debt  extinguishment  in connection
with the Exchange Offer which  consisted of the write-off of deferred  financing
costs.

                                       17
<PAGE>
         In September 2003,  $16.2 million in aggregate  principal amount of the
12.0% Senior Subordinated Notes that remained outstanding following the Exchange
Offer, including accrued interest thereon, was paid in full using funds borrowed
under the Senior Credit  Facility and the  indenture  governing the 12.0% Senior
Subordinated Notes has been satisfied and discharged.

         Sweetheart  Cup is the obligor and  Sweetheart  Holdings the  guarantor
with  respect to the 12.0% Senior  Notes.  Interest on the 12.0% Senior Notes is
payable  quarterly  on January 15, April 15, July 15 and October 15. The Company
may redeem, at any time, all or a part of the 12.0% Senior Notes upon notice not
less than 30 nor more than 60 days prior to the redemption date, at a redemption
price of 100% of principal  amount plus accrued and unpaid interest on the 12.0%
Senior Notes redeemed to the applicable  redemption date. The 12.0% Senior Notes
are  general  unsecured  obligations  of the  Company and are senior in right of
payment to all existing and future  subordinated  indebtedness  including  the 9
1/2% Senior Subordinated Notes due 2007; are pari passu in right of payment with
all  existing  and  future  senior   indebtedness   of  the  Company;   and  are
unconditionally guaranteed by Sweetheart Holdings . In addition, the obligations
under the June 1, 2000 lease  between  Sweetheart  Cup and State Street Bank and
Trust Company of Connecticut,  National Association ("State Street") are secured
by  a  significant  portion  of  the  Company's  existing  property,  plant  and
equipment.  The 12.0% Senior Notes contain various covenants which prohibit,  or
limit, among other things,  change of control,  asset sales,  dividend payments,
equity  repurchases  or redemption,  the incurrence of additional  indebtedness,
make any  restrictive  investments,  the  issuance of  disqualified  stock,  the
creation of additional liens, certain transactions with affiliates,  and certain
other business activities.

         In Fiscal  1997,  the  Company  issued  $120.0  million  9 1/2%  Senior
Subordinated Notes due March 1, 2007 with interest payable semi-annually (the "9
1/2% Senior  Subordinated  Notes").  Payment of the  principal  and  interest is
subordinate in right to payment of all of the Company's  senior debt,  including
borrowings under the Senior Credit  Facility.  The Company may, at its election,
redeem the 9 1/2% Senior Subordinated Notes at any time after March 1, 2002 at a
redemption  price  equal to a  percentage  (104.750%  after  March  1,  2002 and
declining in annual steps to 100% after March 1, 2005) of the  principal  amount
thereof plus accrued  interest.  The 9 1/2 % Senior  Subordinated  Notes provide
that upon the  occurrence  of a change of  control  (as  defined  therein),  the
holders thereof will have the option to require the redemption of the notes at a
redemption  price equal to 101% of the  principal  amount  thereof  plus accrued
interest.  The 9 1/2% Senior  Subordinated  Notes are  subordinated  in right of
payment  to the  prior  payment  in full of all of the  Company's  senior  debt,
including  borrowings  under  the  Senior  Credit  Facility.  In  addition,  the
obligations under the June 1, 2000 lease between Sweetheart Cup and State Street
are secured by a significant  portion of the Company's existing property,  plant
and equipment.  The 9 1/2% Senior  Subordinated  Notes contain various covenants
which prohibit,  or limit, among other things,  asset sales,  change of control,
dividend  payments,   equity  repurchases  or  redemption,   the  incurrence  of
additional indebtedness, the issuance of disqualified stock, certain transaction
with  affiliates,  the creation of additional  liens and certain other  business
activities.

         In connection with a sale-leaseback  transaction, on June 15, 2000, the
Company sold certain  production  equipment  located in Owings Mills,  Maryland,
Chicago,  Illinois and Dallas,  Texas to several owner  participants  for a fair
market  value of $212.3  million.  Pursuant  to a lease dated as of June 1, 2000
(the "Lease") between  Sweetheart Cup and State Street,  as trustee,  Sweetheart
Cup leases the production equipment sold in connection with the sales lease-back
transaction  from State Street as owner trustee for several owner  participants,
through  November 9, 2010.  Sweetheart Cup has the option to renew the Lease for
up to four consecutive renewal terms of two years each.  Sweetheart Cup also has
the option to  purchase  such  equipment  for fair  market  value  either at the
conclusion  of the Lease term or November 21, 2006.  The  Company's  obligations
under the Lease are  collateralized by substantially all of the property,  plant
and  equipment  owned by the  Company as of June 15,  2000.  The Lease  contains
various  covenants,  which  prohibit,  or limit,  among other  things,  dividend
payments,  equity  repurchases  or  redemption,  the  incurrence  of  additional
indebtedness  and certain other business  activities.  The Company is accounting
for the  sale-leaseback  transaction  as an  operating  lease,  expensing  $31.5
million  annual rental  payments and removing the property,  plant and equipment
sold from its balance sheet. A deferred gain of $107.0 million was realized from
this sale and will be amortized over 125 months, which is the term of the Lease.

                                       18
<PAGE>
         The following  summarizes  the  Company's  contractual  obligations  at
September 28, 2003, and the effect such  obligations are expected to have on its
liquidity and cash flows in future periods (in 000's):

<TABLE>
<CAPTION>
                                            Payments Due In Fiscal
                      ------------------------------------------------------------------------
                         2004         2005        2006        2007         2008     Thereafter
                      ----------   ---------   ---------   ----------   ---------   ----------
<S>                   <C>          <C>         <C>         <C>          <C>         <C>
Long-term debt        $  116,824   $   4,503   $     612   $  280,519   $     200   $    1,000
Non-cancelable
  operating leases        54,223      52,377      49,366       47,278      53,512      189,969
Capital leases               124          97           -            -           -            -
                      ----------   ---------   ---------   ----------   ---------   ----------
Total obligations     $  171,171   $  56,977   $  49,978   $  327,797   $  53,712   $  190,969
                      ==========   =========   =========   ==========   =========   ==========
</TABLE>

         In  Fiscal  2001,  the  Company  experienced  a  casualty  loss  at its
Somerville,  Massachusetts  facility.  From January 2001 through  September  29,
2002,  the  Company  incurred  $11.6  million of expenses  associated  with this
casualty  loss. As of September  29, 2002,  the Company  received  $12.5 million
reimbursement  under the  casualty  and business  interruption  claim.  The $0.9
million of proceeds in excess of the expenses,  represents the net proceeds from
the business  interruption  claim, which were recorded as a reduction to cost of
sales in the fourth quarter of Fiscal 2002. In October 2002, the Company and its
insurance  provider  agreed to a final  settlement  of this  claim  whereby  the
Company  would  receive an  additional  $3.8  million of  business  interruption
proceeds. This amount was received and recorded as a reduction of cost of sales,
net of $0.2 million of expenses, in Fiscal 2003.

         The Company is subject to legal proceedings and other claims arising in
the ordinary course of its business. The Company maintains insurance coverage of
types and in amounts  which it believes to be adequate and  believes  that it is
not presently a party to any litigation,  the outcome of which could  reasonably
be expected to have a material  adverse  effect on its  financial  condition  or
results of operations.

         The Company's Senior Credit Facility requires it to refinance, repay or
extend the maturity of its 12.0% Senior Notes due 2004 by December 31, 2003.  If
the Company is unable to  refinance,  repay or extend the  maturity of the 12.0%
Senior Notes prior to December  31, 2003,  its Senior  Credit  Facility,  unless
otherwise amended will become due and payable. See "--Recent Developments".

         Except as stated  above,  management  believes  that cash  generated by
operations and amounts available under the Company's credit facilities and funds
generated  from asset sales should be sufficient to meet the Company's  expected
operating needs, planned capital expenditures,  payments in conjunction with the
Company's  lease  commitments  and debt  service  requirements  (other  than the
payment of principal under the 12.0% Senior Notes) in the next twelve months.

         The Company is evaluating various strategic options which may include a
restructuring of its debt and capital structure,  including, among other things,
the public sale or private placement of debt or equity securities, joint venture
transactions,  sales of assets or the business, new borrowings,  the refinancing
of the Company's existing debt agreements,  open market purchases, tender offers
or  exchange  offer  and  consent  solicitations  of the  Company's  outstanding
securities.  There can be no assurances that any of these strategic options will
be consummated.


Net Operating Loss Carryforwards

         As of September 28, 2003, the Company had  approximately $43 million of
net operating  loss  carryforwards  for federal income tax purposes of which $20
million will expire in 2018 and the  remaining  $23 million will expire in 2022.
Although  future  earnings  cannot  be  predicted  with  certainty,   management
currently believes that realization of the net deferred tax asset is more likely
than not.


Impact of Recently Issued Accounting Standards

         In June 2001, the Financial  Accounting Standards Board ("FASB") issued
SFAS No. 142, Goodwill and Other Intangible Assets.  SFAS No. 142 applies to all
goodwill and other  intangible  assets  recognized in an entity's

                                       19
<PAGE>
balance sheet regardless of when these assets were originally  recognized.  SFAS
No. 142 requires that goodwill and certain  intangibles  with an indefinite life
not be  amortized,  but be subject to an  impairment  test on an annual basis or
when facts and  circumstances  suggest such assets may be impaired.  The Company
has  adopted  SFAS  No.  142  effective   September  30,  2002  and  has  ceased
amortization of goodwill as of that date. SFAS No. 142 also requires the Company
to  complete a  transitional  goodwill  impairment  test no later than March 30,
2003. The transitional  goodwill impairment test was completed,  as required, by
March 30,  2003.  The  carrying  value of goodwill did not exceed its fair value
and, as a result, no transitional impairment loss was required.

          In June 2001,  the FASB  issued  SFAS No.  143,  Accounting  for Asset
Retirement  Obligations.   SFAS  No.  143  addresses  financial  accounting  and
reporting for obligations  associated with the retirement of tangible long-lived
assets and the associated asset retirement  costs. SFAS No. 143 applies to legal
obligations associated with the retirement of long-lived assets that result from
the  acquisition,  construction,  development and (or) the normal operation of a
long-lived asset,  except for certain obligations of leases. The Company adopted
SFAS No. 143 effective  September 30, 2002. The adoption of SFAS No. 143 did not
have an impact on the consolidated financial statements.

         In October 2001,  the FASB issued SFAS No. 144,  Impairment or Disposal
of Long-Lived Assets. SFAS No. 144 addresses financial  accounting and reporting
for the  impairment  or disposal of long-lived  assets.  The Company has adopted
SFAS No. 144 effective  September 30, 2002. The adoption of SFAS No. 144 did not
have an impact on the consolidated financial statements.

         In April 2002,  the FASB issued SFAS No. 145,  Recission of FASB No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.  SFAS
No. 145 addresses,  among other items,  the  classification  of gains and losses
from extinguishment of debt. In accordance with the statement,  any gain or loss
on  extinguishment of debt that does not meet the criteria in APB No. 30 will no
longer be classified as an extraordinary  item. The Company has adopted SFAS No.
145 effective September 30, 2002.

         In July  2002,  the FASB  issued  SFAS No.  146,  Accounting  for Costs
Associated  with Exit or Disposal  Activities.  SFAS No. 146  replaces  Emerging
Issues Task Force Issue 94-3,  requiring a company to recognize costs associated
with exit or disposal  activities when they are incurred rather than at the date
of a  commitment  to  an  exit  or  disposal  plan.  SFAS  No.  146  is  applied
prospectively to exit or disposal activities initiated after December 31, 2002.

         In  November  2002,  the FASB issued  FASB  Interpretation  ("FIN") 45,
Guarantor's  Accounting and Disclosure  Requirements  for Guarantees,  Including
Indirect  Guarantees  of  Indebtedness  of Others.  FIN 45  requires  additional
disclosure  relating to guarantees and in some cases requires the recognition of
a liability  for the fair value of certain  guarantees.  FIN 45 is applicable to
guarantees  issued or modified  after  December 31, 2002. The adoption of FIN 45
had no  effect on the  Company,  as it does not  guarantee  the  liabilities  of
others.

         In December  2002,  the FASB issued SFAS No. 148,  Accounting for Stock
Based  Compensation.  SFAS No. 148 amends SFAS No.  123, to provide  alternative
methods of transition  for a voluntary  change to the fair value based method of
accounting for  stock-based  employee  compensation.  In addition,  SFAS No. 148
amends  the  disclosure  requirements  of  SFAS  No.  123 to  require  prominent
disclosures in both annual and interim financial  statements about the method of
accounting for stock-based  employee  compensation  and the effect of the method
used on reported results. The Company has implemented the disclosure  provisions
of SFAS No. 148.

         In May 2003,  the FASB  issued  SFAS No.  150,  Accounting  for Certain
Financial  Instruments with  Characteristic of both Liabilities and Equity. SFAS
No. 150 establishes  standards for how an issuer classifies and measures certain
financial  instruments with  characteristics  of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some  circumstances).  Many of those  instruments
were  previously  classified as equity.  SFAS No. 150 is effective for financial
instruments  entered into or modified  after May 31, 2003.  The adoption of SFAS
No. 150 did not have an impact on the consolidated financial statements.

         In March  2003,  the  Emerging  Issues  Task  Force  issued  EITF 02-16
Accounting  by a Customer  (including  a  reseller)  for  Certain  Consideration
Received from a Vendor ("EITF 02-16").  Under EITF 02-16 rebates or refunds of a
specified  amount of cash  consideration  that is payable  pursuant to a binding
arrangement  only if the  customer  completes  a specified  cumulative  level of
purchases or remains a customer for as specified time period are

                                       20
<PAGE>
recognized  as a  reduction  of the cost of  sales  based  on a  systematic  and
rational allocation of the cash consideration  offered to each of the underlying
transactions  that results in progress by the Company  toward earning the rebate
or refund  provided  the amounts are  probable  and  reasonably  estimable.  The
Company  has  adopted  EITF  02-16.  The  adoption of EITF 02-16 did not have an
impact on the consolidated financial statements.


Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

         The  Company  is  exposed  to  market  risk in the  ordinary  course of
business,  which consists  primarily of interest rate risk  associated  with its
variable rate debt. All borrowings under the Senior Credit Facility and Canadian
Credit  Facility,  each of which contains a revolving and term credit  facility,
bear interest at a variable rate.  Borrowings  under the Senior Credit Facility,
at the  Company's  election,  bear  interest  at either  (i) a bank's  base rate
revolving  loan  reference  rate plus 0.5% or (ii) LIBOR  plus 2.5%.  Borrowings
under the Canadian  Credit  Facility  bear  interest at an index rate plus 1.75%
with respect to the  revolving  credit  borrowings  and an index rate plus 2.00%
with  respect  to the  term  loan  borrowings.  As of  September  28  2003,  the
outstanding indebtedness under the Senior Credit Facility was $167.7 million and
the Canadian Credit Facility was $14.7 million in U.S. dollars.  As of September
28, 2003,  $49.1 million was available  under the Senior Credit Facility and Cdn
$2.1 million (approximately US $1.6 million) was available under Canadian Credit
Facility. Based upon amounts outstanding,  the annual net income would change by
approximately  $1.1 million for each one percentage point change in the interest
rates  applicable  to the  variable  rate  debt.  The level of the  exposure  to
interest rate  movements may fluctuate  significantly  as a result of changes in
the amount of indebtedness outstanding under the revolving credit facilities.


Item 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See the Financial  Statements and Financial Statement Schedule attached
hereto and listed in Item 15 (a)(1) and (a)(2) hereof.


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

               NONE


Item 9A.    CONTROLS AND PROCEDURES

         The Company carried out an evaluation,  under the  supervision  and the
participation of its management, of the effectiveness of its disclosure controls
and procedures (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) as of
the end the  period  covered  by this  report.  Based  on this  evaluation,  the
Company's  principal executive officer and principal financial officer concluded
that its disclosure  controls and procedures were effective.  It should be noted
that design of any system  controls is based in part upon  certain  assumptions,
and there can be no  assurance  that any design will  succeed in  achieving  its
stated goal.

         There was no significant  changes in the Company's internal controls or
in  other  factors  that  could  significantly   affect  the  internal  controls
subsequent  to the date the Company  completed  its  evaluation,  including  any
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses.


                                    PART III


Item 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The  following  table  sets  forth  information  with  respect  to  the
Company's  directors,  executive officers and key employees.  All directors hold
office until the next annual meeting of shareholders  and until their successors
are duly elected and qualified. Officers serve at the discretion of the Board of
Directors.

                                       21
<PAGE>
           Name                Age                             Position
-------------------------     ----    ---------------------------------
Dennis Mehiel............      61     Chairman and Chief Executive Officer
Thomas Uleau.............      59     Chief Operating Officer and Vice Chairman
Hans H. Heinsen..........      50     Senior  Vice  President-Finance and  Chief
                                      Financial Officer
Michael T. Hastings......      56     President-Sweetheart Brand
Robert M. Korzenski......      49     President-Hoffmaster Brand
Dennis Dorian Mehiel.....      35     President-Fonda Brand
Harvey L. Friedman.......      61     Senior Vice President, General Counsel and
                                      Secretary
Ingrid Santiago..........      51     Senior Vice President-- Materials
                                      Management
Thomas Pasqualini........      46     Senior Vice President-- Manufacturing  and
                                      Logistics
John A. Catsimatidis.....      54     Director
Dennis Pilotti...........      51     Director
G. William Seawright.....      62     Director

         Dennis  Mehiel  has  been  Chairman  and  Chief  Executive  Officer  of
Sweetheart  Holdings and  Sweetheart  Cup since March 1998.  Mr. Mehiel has been
Chairman and Chief Executive  Officer of SF Holdings since February 1998 and has
been Chairman and Chief Executive  Officer of Fonda since 1988. Since July 2000,
he has been a director of Box USA Holdings,  Inc.  ("Box USA")  (formerly Four M
Corporation, a converter and seller of interior packaging, corrugated sheets and
corrugated  containers  which Mr. Mehiel  cofounded ("Four M")). From 1966 until
July 2000, he was Chairman of Four M. From 1977 until July 2000 (except during a
leave of  absence  from  April  1994  through  July 1995) he served as the Chief
Executive  Officer of Four M. Mr. Mehiel is also Chief  Executive  Officer and a
director of  Mannkraft  Corporation  (formerly  Box USA of New  Jersey,  Inc.) a
manufacturer of corrugated containers.  He was also Chairman and Chief Executive
Officer of CEG (predecessor by merger to SF Holdings) until June 2003.

         Thomas  Uleau has been Chief  Operating  Officer  and Vice  Chairman of
Sweetheart Holdings and Sweetheart Cup since May 2002. Prior thereto,  Mr. Uleau
was  Executive  Vice  President  and  a  director  of  Sweetheart  Holdings  and
Sweetheart  Cup since  March 1,  2001 and prior  thereto  was  President,  Chief
Operating  Officer and a director since March 1998. Mr. Uleau also has been Vice
Chairman and Senior Vice  President of SF Holdings since March 1, 2001 and prior
thereto  was also  President,  Chief  Operating  Officer  and a  director  of SF
Holdings. He has been Executive Vice President of Fonda since March 1998 and has
been a  director  of Fonda  since  1988.  He has also  served  in a  variety  of
executive  officer  positions  at Fonda  since  1989.  He was a  Executive  Vice
President  of CEG from 1996 until June 2003 and was a director of CEG until June
2003.  Prior to July 2000 he was a  director  of Box USA  (formerly  Four M). He
served as Executive  Vice President and Chief  Financial  Officer of Four M from
1989 through 1993 and as its Chief Operating Officer in 1994.

         Hans H.  Heinsen has been Senior  Vice  President  -- Finance and Chief
Financial  Officer of Sweetheart  Holdings and  Sweetheart Cup since March 1998.
Mr. Heinsen also has been Senior Vice  President,  Chief  Financial  Officer and
Treasurer  of SF  Holdings  since  February  1998,  Senior  Vice  President  and
Treasurer of Fonda since February 1997,  Chief Financial  Officer of Fonda since
June 1996.  Mr.  Heinsen was Chief  Financial  Officer of CEG from November 1998
until June 2003. Prior to joining Fonda, Mr. Heinsen spent 21 years in a variety
of corporate finance positions with The Chase Manhattan Bank, N.A.

         Michael T.  Hastings  has been  President  of the  Sweetheart  Brand of
Sweetheart  Holdings and  Sweetheart Cup since March 2002.  Prior  thereto,  Mr.
Hastings was President of Sweetheart Holdings and Sweetheart Cup from March 2001
to March  2002,  and  prior  thereto  he was  Senior  Vice  President-Sales  and
Marketing for  Sweetheart  Holdings and  Sweetheart Cup from March 1998 to March
2002.  Mr.  Hastings was also Senior Vice  President of Fonda from March 1998 to
March 2002. Mr.  Hastings was Senior Vice President of SF Holdings from December
2001  until  May 2002.  Prior to  joining  Sweetheart,  Mr.  Hastings  served as
President  of the Fonda  Division  of Fonda,  which he joined in May 1995.  From
December 1990 to April 1995, Mr.  Hastings served as Vice President of Sales and
Marketing and as a member of the Board of Directors of Anchor Packaging Company,
a manufacturer of institutional films and thermoformed plastic packaging.  Prior
to joining Anchor Packaging Company, Mr. Hastings was employed for over 25 years
in a variety of positions in the paper and plastic industries,  including sales,
marketing  and plant  operations  management at Scott Paper Company and Thompson
Industries.

         Robert M.  Korzenski  has been  President  of the  Hoffmaster  Brand of
Sweetheart  Holdings and Sweetheart Cup since March 2002. Mr. Korzenski has been
Senior Vice  President  of SF Holdings  from  December  2001 to May

                                       22
<PAGE>
2002 and was President and Chief  Operating  Officer of Fonda from March 1998 to
March 2002.  Prior to that, he was Senior Vice  President of Fonda since January
1997 and President of the Hoffmaster  division since its acquisition by Fonda in
March 1995.  From  October  1988 to March 1995,  he served as Vice  President of
Operations  and Vice  President of Sales of Scott  Institutional,  a division of
Scott  Paper  Company.  Prior to that,  he was  director  of  National  Sales at
Thompson Industries.

         Dennis Dorian Mehiel,  the son of Dennis Mehiel,  has been President of
the Fonda Brand of Sweetheart  Holdings and  Sweetheart  Cup since May 2002. Mr.
Mehiel  has also  been  President  and  Chief  Operating  Officer  of  Mannkraft
Corporation (formerly Box USA of New Jersey, Inc.), a manufacturer of corrugated
containers  since June 2000,  and a member of Frontage  Road  Realty,  LLC,  the
parent of Mannkraft  Corporation  (formerly  Box USA of New Jersey,  Inc.) since
January 2002. Mr. Mehiel was Vice President-Operations of Fonda from August 2001
until  May 2002.  From  1996 to July  2000,  he  served  in  various  management
positions with Four M.

         Harvey L. Friedman has been Senior Vice President,  General Counsel and
Secretary of  Sweetheart  Holdings and  Sweetheart  Cup since March 2001. He has
been General Counsel and Secretary of SF Holdings since February 1998. He served
as Secretary and General Counsel of Fonda from May 1996 until the March 2002. He
was also a  director  of Fonda  from 1985 to  January  1997.  Mr.  Friedman  was
Secretary,  General  Counsel  and a  director  of CEG  until  June  2003.  He is
currently a director of Box USA  (formerly  Four M) and is a director and Senior
Vice President of Mannkraft  Corporation (formerly Box USA of New Jersey, Inc.).
He was  formerly a partner of Kramer  Levin  Naftalis & Frankel  LLP, a New York
City law firm. He is also Assistant Secretary of Box USA (formerly Four M).

         Ingrid Santiago has been Senior Vice President -- Materials  Management
of Sweetheart Holdings and Sweetheart Cup since May 2002. She was Vice President
-- Materials  Management of Sweetheart  Holdings and  Sweetheart  Cup from March
1998 to May 2002. She was also Vice  President of Materials  Management -- Fonda
from  1996  until  May 2002 and  also  served  as Vice  President  of  Materials
Management for Four M for over 10 years until July 2000.

         Thomas  Pasqualini has been Senior Vice President -- Manufacturing  and
Logistics of Sweetheart  Holdings and  Sweetheart  Cup since August 2000.  Prior
thereto,  he was Vice  President of Logistics and  Distribution  and director of
Distribution  for the past five years.  He has held several other positions with
us since 1981.

         John A.  Catsimatidis  has been a director of  Sweetheart  Holdings and
Sweetheart  Cup since May 2002.  Mr.  Catsimatidis  also served as a director of
Fonda  from  January  1997 to March  2002.  He also has  been a  director  of SF
Holdings since February 1998. He has been Chairman and Chief  Executive  Officer
of the Red Apple Group,  Inc., a company with diversified  holdings that include
oil refining,  supermarkets,  real estate, aviation and newspapers,  since 1969.
Mr.  Catsimatidis  serves as a Director of Sloan's  Supermarket,  Inc. and New's
Communications,  Inc.  He also  serves  on the  board  of  trustees  of New York
Hospital,  St. Vincent Home for Children,  New York University  Business School,
Athens  College,   Independent  Refiners  Coalition  and  New  York  State  Food
Merchant's  Association.  He is currently a member of the  Sweetheart  Holdings'
audit committee.

         Dennis  Pilotti  has  been  a  director  of  Sweetheart   Holdings  and
Sweetheart Cup since July 2002. He has also been a director of SF Holdings since
July 2003. He has been a managing  partner of Pilotti & Company,  PLLC, a public
accounting firm, since 1997.  Prior thereto,  he was a managing  director of BDO
Seidman,  LLP, a public accounting firm. Mr. Pilotti has over 25 years of public
accounting  experience.   Mr.  Pilotti  serves  as  the  Company's  "independent
financial  expert" in accordance  with the  Sarbanes-Oxley  Act. He is currently
chairman and the designated "financial expert" of the Sweetheart Holdings' audit
committee.

         G. William  Seawright  has been a director of  Sweetheart  Holdings and
Sweetheart Cup since May 2002. Mr.  Seawright also served as a director of Fonda
from  January  1997 to March  2002.  He also has been a director  of SF Holdings
since  February 1998. He was President and Chief  Executive  Officer of Stanhome
Inc., a manufacturer  and  distributor of giftware and  collectibles,  from 1993
through 1998.  Prior thereto,  he was President and Chief  Executive  Officer of
Paddington,  Inc., an importer of distilled  spirits,  since 1990.  From 1986 to
1990, he was President of Heublein International,  Inc. He is currently a member
of the Sweetheart Holdings' audit committee.

                                       23
<PAGE>
Compensation of Directors

         The  Company's   directors  who  are  not  employees   receive   annual
compensation of (i) $24,000,  (ii) $1,000 for each Board meeting  attended,  and
(iii) $1,000 for each committee  meeting  attended which is not held on the date
of a board meeting. The Company's directors who are employees do not receive any
compensation  or fees for  service on the Board of  Directors  or any  committee
thereof.


Item 11.    EXECUTIVE COMPENSATION

         The   following    table   sets  forth   information   concerning   the
compensation,  for  Fiscal  Years  2003,  2002 and 2001 of the  chief  executive
officer and the four most  highly  compensated  officers  and key  employees  of
Sweetheart  Holdings and  Sweetheart  Cup  (collectively,  the "named  executive
officers").  The Company has concluded that the aggregate  amount of perquisites
and other personal benefits paid to each of the named executive officers did not
exceed the lesser of (i) 10% of such officer's  total annual salary and bonus or
(ii) $50,000. Thus, such amounts are not reflected in the following table.

<TABLE>
<CAPTION>
                               Summary Compensation Table

                                                 Annual Compensation
-----------------------------------------  --------------------------------  --------------
                                                                                All Other
           Name and Principal                          Salary       Bonus     Compensation
                Position                    Fiscal       ($)       ($) (1)       ($) (2)
-----------------------------------------  --------  -----------  ---------  --------------
<S>                                        <C>       <C>          <C>        <C>
Dennis Mehiel
   Chairman and Chief Executive Officer      2003     1,047,184     94,000       438,074 (3)
                                             2002       722,212    170,000       551,135 (4)
                                             2001       735,570    340,000       396,725 (5)

Thomas Uleau
   Chief   Operating   Officer  and  Vice    2003       451,987     75,000        14,438
    Chairman                                 2002       423,366    100,000        15,588
                                             2001       433,173    116,411        12,724

Hans H. Heinsen
   Senior  Vice  President  - Finance and    2003       283,786     50,000        19,215
   Chief Financial Officer                   2002       281,848     70,000        19,915
                                             2001       255,428    176,411        17,534

Michael T. Hastings
   President - Sweetheart Brand              2003       307,050     50,000        15,560
                                             2002       298,846          -        24,244
                                             2001       266,602    100,000        11,232

Robert M. Korzenski
   President - Hoffmaster Brand              2003       281,319     15,000         9,440
                                             2002       277,269     90,000         8,494
                                             2001       244,543    140,000        11,480

Harvey L. Friedman
   Senior   Vice    President,    General    2003       318,093     50,000         1,861
   Counsel and Secretary                     2002       283,904     55,000           841
                                             2001       287,850    115,000             -
</TABLE>
(1) Amounts shown were paid based upon the Company's performance.
(2) Reflects matching contributions under 401(k) plans, long-term disability and
    life insurance premiums paid.

                                       24
<PAGE>
(3) Reflects  $5,346 of life insurance  premiums, $418,856 for personal expenses
    and $13,872 interest  forgiveness.
(4) Reflects  $4,192 of life insurance  premiums, $530,922 for personal expenses
    and $16,021 interest forgiveness.
(5) Reflects  $2,580 of life insurance  premiums, $342,508 for personal expenses
    and $51,637 interest forgiveness.

         At September 29, 2002, the Company had a loan receivable from its Chief
Executive  Officer of $0.3  million plus  accrued  interest at 5.06%.  In Fiscal
2003,  the  Company's  Chief  Executive  Officer  repaid  the  outstanding  loan
receivable. In the Fiscal 2003, Fiscal 2002 and Fiscal 2001, the Company forgave
$13,872, $16,021 and $51,637, respectively, of interest associated with the loan
to its Chief  Executive  Officer.  At September 29, 2002, the Company had a loan
receivable  from its  Chief  Operating  Officer  of $0.1  million  plus  accrued
interest at 5.39%. On February 28, 2003, the loan receivable was amended and the
rate  changed to the  federal  funds  rate.  At  September  28,  2003,  the loan
receivable is $0.1 million plus accrued interest.


Stock Options

         The  Company's   Chief   Executive   Officer  holds  71,515   currently
exercisable options to purchase Class A Common Stock of SF Holdings.

         In Fiscal 2001, SF Holdings  adopted the SF Holdings Group,  Inc. Share
Incentive  Plan in which SF Holdings may grant  options to its  employees and to
the Company's employees up to 95,995 shares of SF Holdings Class D Common Stock.

         In Fiscal 2001, SF Holdings  granted  options to purchase shares of its
common stock to certain employees of the Company. The options vest over a period
of three  years.  Certain of the  exercise  prices of the options were below the
fair market value of SF Holdings' common stock at the date of the grant.  During
the vesting  period,  these  discounts  of $0.3  million are being  amortized as
compensation  expense and credited to additional paid-in capital by the Company.
Amortization  expense  relating to SF Holdings' stock options was $38,158,  $0.1
million  and  $0.2  million  for  Fiscal  2003,  Fiscal  2002 and  Fiscal  2001,
respectively.

         The weighted  average fair value of the SF Holdings stock options,  was
$0.4  million  in  Fiscal  2001  estimated  on  the  date  of  grant  using  the
Black-Scholes   options-pricing   model  with  the  following   weighted-average
assumptions:  dividend  yield of zero,  risk-free  interest  rate of 2.75%,  and
expected life of option grants of 3 years.  The effects of applying SFAS No. 123
in this pro forma disclosure are not indicative of future pro forma effects.


Employee Benefit Plans

         The Company  sponsors  various defined benefit  post-retirement  health
care plans that cover substantially all full-time employees.  The plans, in most
cases,  pay stated  percentages  of most medical  expenses  incurred by retirees
after  subtracting  payments by Medicare or other  providers  and after a stated
deductible has been met.  Participants  generally become eligible after reaching
age 60 with ten years of service.  The majority of such plans are  contributory,
with retiree contributions adjusted annually.

         The  Company  provides  certain  union  and  non-union  employees  with
retirement and disability  income benefits under defined pension plans.  Pension
costs  are  based  upon  the  actuarially  normal  costs  plus  interest  on and
amortization  of the  unfunded  liabilities.  The  benefit for  participants  in
certain of the Company's non-union pension plans are frozen. In Fiscal 1999, the
assets and  obligations  of a pension plan for a number of the  Company's  union
employees were transferred to a multi-employer  pension plan resulting in a $0.2
million  charge to income.  The  Company's  policy has been to fund annually the
minimum contributions  required by applicable  regulations.  In Fiscal 2001, all
assets of a discontinued pension plan were distributed in full settlement of the
plan's obligations.  A credit to income of $30,000 was recognized as a result of
this settlement.  In Fiscal 2001, the valuation date for the plan assets and the
contributions  was changed from September to June and resulted in no significant
effect.

         A  majority  of the  Company's  employees  are  covered  under a 401(k)
defined  contribution  plan.  Effective  January 1, 2000, the Company provides a
matching  contribution of 100% on the first 2% of a participant's salary and 50%
on the next 4% of a  participant's  salary.  The  Company's  match is  currently
limited to participant  contributions up to 6% of the participant's salaries. In
addition,  the Company is allowed to make discretionary  contributions.  Certain

                                       25
<PAGE>
employees  are covered  under defined  benefit  plans.  On December 31, 2001 the
Fonda defined  contribution  plan was merged with and into the Sweetheart 401(k)
plan. Costs charged against  operations for this defined  contribution plan were
$6.1  million,  $6.4 million and $6.8  million for Fiscal 2003,  Fiscal 2002 and
Fiscal 2001, respectively.

         The Company  also  participates  in a  multi-employer  pension plan for
certain of its union  employees.  Contributions  to this plan, at a defined rate
per hour worked were $1.4  million in Fiscal  2003,  $1.4 million in Fiscal 2002
and $1.0 million in Fiscal 2001.


Item 12.    SECURITY  OWNERSHIP  OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
            RELATED STOCKHOLDER MATTERS

         All of the  Company's  common  stock is held of record by SF  Holdings.
Therefore,  the  following  table as of  December  11,  2003 sets forth  certain
information  regarding  the  beneficial  ownership  of the  common  stock  of SF
Holdings with respect to (i) holders  having  beneficial  ownership of more than
five percent of the common stock,  (ii) each of the Company's  directors,  (iii)
the  Named  Officers  and  (iv) all of the  Company's  directors  and  executive
officers as a group.  Unless otherwise  indicated below, the Company's directors
and executive officers do not beneficially own any common stock of SF Holdings.

<TABLE>
<CAPTION>
                                                                                  Number                Percent
Name of Beneficial Owner                                                         of Shares             Ownership
-----------------------                                                         -----------            ---------
<S>                                                                             <C>                    <C>
Dennis Mehiel................................................................... 701,463(1)               62.9%
373 Park Avenue South
New York, NY 10016

Thomas Uleau....................................................................  18,033(2)                1.6%
10100 Reisterstown Road
Owings Mills, MD 21117

Hans H. Heinsen.................................................................   5,000(3)                *
373 Park Avenue South
New York, NY 10016

Michael T. Hastings.............................................................   5,000(3)                *
10100 Reisterstown Road
Owings Mills, MD 21117

Robert M. Korzenski.............................................................   5,000(3)                *
2920 North Main Street
Oshkosh, WI 54901

Harvey L. Friedman..............................................................  14,535(4)                1.3%
115 Stevens Avenue
Valhalla, NY 10595

John A. Catsimatidis(5).........................................................     250(3)                *
Dennis Pilotti(5)...............................................................       -                   *
G. William Seawright(5).........................................................     250(3)                *
Directors and executive officers as a group (9 persons)......................... 749,531(6)               67.2%
</TABLE>

*    Less than one (1) percent.

(1)  Includes 378,385 shares of SF Holdings Class A common stock, 116,647 shares
     of SF Holdings Class A common stock that would be issuable upon  conversion
     of SF Holdings Class B Series 2 preferred stock,  71,515 shares  underlying
     options to purchase SF Holdings  Class A common  stock which are  currently
     exercisable,  778 shares of SF Holdings  Class C common stock,  and 134,138
     shares of SF Holdings  Class A common stock which Mr.  Mehiel has the power
     to vote pursuant to a voting trust agreement with Edith Mehiel.
(2)  Includes  3,498  shares of SF Holdings  Class A common  stock that would be
     issuable upon  conversion of SF Holdings  Class B Series 2 preferred  stock
     and 5,000 shares underlying  options to purchase SF Holdings Class D common
     stock which are currently exercisable.
(3)  Represents shares underlying options to purchase SF Holdings Class D common
     stock which are currently  exercisable.

                                       26
<PAGE>
(4)  Includes  shares held in trust for the benefit of Mr. Friedman's  children.
     Beneficial  ownership  of  these  shares  is  disclaimed  by  Mr. Friedman.
     Includes shares underlying options to purchase SF  Holdings  Class D common
     stock which are currently exercisable.
(5)  Business address is c/o Sweetheart Cup Company Inc., 373 Park Avenue South,
     New York, NY 10016.
(6)  Includes an aggregate of 25,500  shares  underlying  options to purchase SF
     Holdings Class D common stock which are currently exercisable.


Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Transactions with Affiliates

         All of the  affiliates  (other Fibre  Marketing)  referenced  below are
directly or indirectly under the common ownership of the Company's  Chairman and
Chief  Executive   Officer,   Dennis  Mehiel.  The  Company  believes  that  the
transactions  entered into with related  parties were  negotiated on terms which
are at least as favorable as it could have obtained from unrelated third parties
and were negotiated on an arm's length basis.

         Pursuant to a Management Services Agreement, as amended, SF Holdings is
entitled to receive from the Company an aggregate  annual fee of $1.85  million,
payable semi-annually,  and is reimbursed for out-of-pocket expenses. Under this
agreement,  SF Holdings has the right, subject to the direction of the Company's
Board  of  Directors,  to  manage  the  Company's  day  to day  operations.  The
outstanding  balance due to SF Holdings was $2.6  million at September  28, 2003
and $0.7 million at September 29, 2002 respectively.

         At September 29, 2002, the Company had a loan receivable from its Chief
Executive  Officer of $0.3  million plus  accrued  interest at 5.06%.  In Fiscal
2003,  the  Company's  Chief  Executive  Officer  repaid  the  outstanding  loan
receivable.  In Fiscal 2003,  Fiscal 2002 and Fiscal 2001,  the Company  forgave
$13,872, $16,021 and $51,637, respectively, of interest associated with the loan
to its Chief  Executive  Officer.  At September 29, 2002, the Company had a loan
receivable  from its  Chief  Operating  Officer  of $0.1  million  plus  accrued
interest at 5.39%. On February 28, 2003, the loan receivable was amended and the
rate  changed to the  federal  funds  rate.  At  September  28,  2003,  the loan
receivable is $0.1 million plus accrued interest.

         In Fiscal 1998,  the Company  purchased a 38.2%  ownership  interest in
Fibre Marketing from a director of the Company. In Fiscal 2000, the Company sold
a 13.2% interest in Fibre  Marketing to Mehiel  Enterprises,  Inc.,  retaining a
25.0%  ownership  interest  in Fibre  Marketing.  On July 17,  2000,  Box USA, a
converter and seller of interior  packaging,  corrugated  sheets and  corrugated
containers,  in which the Company's Chief Executive  Officer  beneficially  owns
more  than  10% of its  outstanding  capital  stock,  transferred  50.0%  of its
interest in Fibre Marketing to Mehiel Enterprises, Inc. Mehiel Enterprises, Inc.
owns a  63.2%  interest  in  Fibre  Marketing.  The  Company  accounted  for its
ownership  interest in Fibre Marketing using the equity method.  In Fiscal 2003,
the Company sold its 25% interest in Fibre Marketing to an unrelated third party
for $0.3 million which generated a gain of $0.2 million.

         On November 1, 2001,  Fibre Marketing  issued  promissory  notes to the
Company for $1.2 million in the aggregate,  in exchange for outstanding accounts
receivable from Fibre  Marketing,  at an annual interest rate of 7.0% payable in
36 monthly  installments.  As of September 29, 2002, $0.9 million was due to the
Company.  In Fiscal 2003,  Fibre Marketing  repaid the remaining  balance of the
outstanding promissory notes.

         In Fiscal  2003,  the Company  purchased  $13.6  million of  corrugated
containers  from Box USA. In Fiscal 2003, the Company  purchased $1.4 million of
travel  services from Emerald Lady, Inc, a company wholly owned by the Company's
Chief Executive  Officer  ("Emerald  Lady").  Included in accounts payable as of
September  28,  2003  is $0.5  million  due to Box  USA.  Other  purchases  from
affiliates in Fiscal 2003 were not significant.

         In Fiscal  2003,  the  Company  sold $9.0  million  of scrap  paper and
plastic to Fibre Marketing.  Included in accounts receivable as of September 28,
2003 is $1.0  million due from Fibre  Marketing.  Other sales to  affiliates  in
Fiscal 2003 were not significant.

         In Fiscal  2002,  the Company  purchased  $11.8  million of  corrugated
containers  from Box USA and $1.1 million of travel  services from Emerald Lady.
Included in accounts payable as of September 29, 2002 is $1.0 million due to Box
USA. Other purchases from affiliates in Fiscal 2002 were not significant.

                                       27
<PAGE>
         In Fiscal  2002,  the  Company  sold $8.9  million  of scrap  paper and
plastic to Fibre Marketing.  Included in accounts receivable as of September 29,
2002 is $1.3  million due from Fibre  Marketing.  Other sales to  affiliates  in
Fiscal 2002 were not significant.

         In Fiscal  2001,  the  Company  purchased  $7.6  million of  corrugated
containers  from Box USA and $1.0 million of travel  services from Emerald Lady.
Included in accounts payable as of September 30, 2001 is $0.6 million due to Box
USA. Other purchases from affiliates in Fiscal 2001 were not significant.

         In Fiscal  2001,  the  Company  sold $7.7  million  of scrap  paper and
plastic to Fibre Marketing.  Included in accounts receivable as of September 30,
2001 is $2.0  million due from Fibre  Marketing.  Other sales to  affiliates  in
Fiscal 2001 were not significant.

         In Fiscal 2001,  the Company began leasing a facility in North Andover,
Massachusetts  from D&L Andover Property,  LLC, an entity in which the Company's
Chief Executive  Officer  indirectly  owns 50%. In Fiscal 2003,  Fiscal 2002 and
Fiscal 2001,  rental  payments under this lease were $1.5 million,  $1.5 million
and $1.4 million,  respectively.  Annual rental payments under the 20-year lease
are  $1.5  million  in the  first  year,  escalating  at a rate of 2% each  year
thereafter.

         In Fiscal 2000,  the Company  entered into a lease  agreement  with D&L
Development,  LLC,  an entity in which the  Company's  Chief  Executive  Officer
indirectly owns 47%, to lease a warehouse  facility in Hampstead,  Maryland.  In
Fiscal 2003,  Fiscal 2002 and Fiscal 2001 rental  payments under this lease were
$3.7  million,  $3.7  million  and $3.6  million,  respectively.  Annual  rental
payments  under the 20-year lease are $3.7 million for the first 10 years of the
lease and $3.8 million annually, thereafter.

         The  Company  leases  a  building  in  Jacksonville,  Florida  from the
Company's  Chief  Executive  Officer.  Annual  payments under the lease are $0.2
million  plus  annual  increases  based on changes in the  Consumer  Price Index
("CPI")  through  December 31, 2014. In addition,  the Company's Chief Executive
Officer  can require the Company to  purchase  the  facility  for $1.5  million,
subject to a CPI-based  escalation,  until July 31, 2006.  In Fiscal  1998,  the
Company  terminated its operations at this facility and is currently  subleasing
the entire facility.  Rent expense, net of sublease income on the portion of the
premises subleased was $39,000,  $67,000 and $33,000 in Fiscal 2003, Fiscal 2002
and Fiscal 2001, respectively.


Item 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

Not applicable for the Company's fiscal year ending September 28, 2003.



                                                       PART IV


Item 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as a part of this report:

         1.  The  financial  statements  listed in  the  "Index  to Consolidated
             Financial Statements."

         2.  The financial statement schedule listed in the "Index to  Financial
             Statement Schedule."

         3.  Exhibits

         3.1      Certificate  of  Incorporation  of  Sweetheart  Holdings  Inc.
                  (incorporated by reference from Exhibit 3.1 of  the  Company's
                  report on Form 10-K dated December 22, 1993(the "1993 10-K")).
         3.3      Certificate  of  Amendment  to  the  Restated   Certificate of
                  Incorporation   of  Sweetheart   Holdings Inc.

                                       28
<PAGE>
                  dated March 11, 1998  (incorporated by reference from  Exhibit
                  3.3  of the Company's report on Form 10-Q dated May 15, 1998).
         3.4      Amended  and  Restated  By-Laws  of  Sweetheart  Holdings Inc.
                  dated March 12, 1998  (incorporated by reference from  Exhibit
                  3.4 of  the Company's report on Form 10-Q dated May 15, 1998).
         3.5      Certification of  Restated   Certificate  of  Incorporation of
                  Sweetheart    Cup    Company   Inc.   date  August  30,   1993
                  (incorporated by  reference  to  Exhibit 3.4 of Sweetheart Cup
                  Company Inc.'s report on Form S-4 filed November 21, 2002).
         3.6      Certification  of  Amendment to the  Restated  Certificate  of
                  Incorporation  of  Sweetheart  Cup Company Inc. date March 11,
                  1998  (incorporated  by reference to Exhibit 3.5 of Sweetheart
                  Cup  Company  Inc.'s  report  on Form S-4 filed  November  21,
                  2002).
         3.7      Amended and Restated  By-Laws of Sweetheart Cup Company,  Inc.
                  dated March 12, 1998 (incorporated by reference to Exhibit 3.6
                  of  Sweetheart  Cup  Company  Inc.'s report on Form S-4  filed
                  November 21, 2002).
         4.1      Indenture,  dated as of February 27,  1997,  between The Fonda
                  Group,  Inc.  and the  Trustee in  respect of $120  million in
                  aggregate principal amount of 9 1/2% Senior Subordinated Notes
                  due 2007 (the "Fonda  Indenture")(incorporated by reference to
                  Exhibit  4.1  filed  as a  part  of  The  Fonda  Group  Inc.'s
                  Registration  Statement  on Form  S-4,  as  amended  (File No.
                  333-24939).
         4.2      First  Supplemental  Indenture,  dated as of March  25,  2002,
                  between Sweetheart Cup Company Inc., as successor to The Fonda
                  Group,   Inc.,   and  the  Trustee  to  the  Fonda   Indenture
                  (incorporated  by  reference  to  Exhibit  4.3  of  Sweetheart
                  Holdings Inc.'s report on Form 8-K dated April 9, 2002).
         4.3      Indenture,  dated as of April 8, 2003,  between Sweetheart Cup
                  Company  Inc., as issuer,  and  Sweetheart  Holdings  Inc., as
                  guarantor,  and  Wells  Fargo  Bank  of  Minnesota,   National
                  Association , as Trustee  (incorporate by reference to Exhibit
                  4.1 of Sweetheart  Holdings  Inc.'s report on Form-8K filed on
                  April 9, 2003)
         10.13    Asset  Sale  Agreement  dated as of  October  6, 1993  between
                  Sweetheart  Holdings  Inc.  and  Sweetheart  Cup Company  Inc.
                  (incorporated  by reference from Exhibit 10.1 of the Company's
                  report on Form 10-Q dated February 11, 1994).
         10.14    Bill of Sale,  Assignment and Assumption Agreement dated as of
                  October  6,  1993  between   Sweetheart   Holdings   Inc.  and
                  Sweetheart  Cup Company Inc.  (incorporated  by reference from
                  Exhibit  10.2  of the  Company's  report  on Form  10-Q  dated
                  February 11, 1994).
         10.15    Wraparound Note dated as of October 6, 1993 made by Sweetheart
                  Holdings Inc. to Sweetheart Cup Company Inc.  (incorporated by
                  reference  from Exhibit 10.3 of the  Company's  report on Form
                  10-Q dated February 11, 1994).
         10.16    Asset  Distribution  Agreement  dated as of  October  6,  1993
                  between  Sweetheart  Holdings Inc. and  Sweetheart Cup Company
                  Inc.  (incorporated  by  reference  from  Exhibit  10.4 of the
                  Company's report on Form 10-Q dated February 11, 1994).
         10.21    Sweetheart  Holdings Inc. Management  Incentive  Plan dated as
                  of   January   27,   1995   (incorporated   by  reference from
                  Exhibit   10.1 of   the   Company's  report on Form 10-Q dated
                  February 9, 1995).
         10.47    Second Restated  Management Services Agreement dated March 12,
                  1998  (incorporated  by  reference  from Exhibit 10.47 of  the
                  Company's report on Form 10-Q dated May 15, 1998).
         10.48    Amendment No. 1 to the  Second  Restated   Management Services
                  Agreement  dated  March  12, 1998 (incorporated   by reference
                  from Exhibit 10.48 of the Company's report on Form 10-Q  dated
                  May 15, 1998).
         10.51    Credit  Agreement  dated as of June 15, 1998 between Lily Cups
                  Inc. as Borrower and General  Electric  Capital Canada Inc. as
                  Lender  (incorporated  by reference from Exhibit 10.51 of  the
                  Company's  report on Form 10-Q dated August 14, 1998).
         10.52    Security Agreement  made as of June 15, 1998 between Lily Cups
                  Inc. as Grantor and General  Electric  Capital Canada  Inc. as
                  Lender  (incorporated  by reference from Exhibit 10.52 of  the
                  Company's  report on Form 10-Q dated August 14, 1998).
         10.58    Intercreditor  Agreement  dated as of June 15, 2000 among Bank
                  of America,  N.A., as Agent,  and State Street,  solely in its
                  capacity  as  Owner  Trustee  and  Lessor   (incorporated   by
                  reference  from Exhibit 10.58 of the Company's  report on Form
                  10-Q dated June 25, 2000).
         10.59    Lease Agreement dated as of June 1, 2000 between State Street,
                  solely  in its  capacity  as Owner  Trustee  and  Lessor,  and
                  Sweetheart  Cup, as Lessee  (incorporated  by  reference  from
                  Exhibit 10. 59 of the Company's report on Form 10-Q dated June
                  25, 2000).
         10.60    Lease  Supplement  dated  as of June  1,  2000  between  State
                  Street,  solely in its  capacity as Owner  Trustee and Lessor,
                  and Sweetheart Cup, as  Lessee(incorporated  by reference from
                  Exhibit 10.60

                                       29
<PAGE>
                  of the Company's  report on Form 10-Q dated June 25, 2000).
         10.61    Participation  Agreement  dated  as  of  June  1,  2000  among
                  Sweetheart Cup, as Lessee,  the Company,  as Guarantor,  State
                  Street,  solely in its capacity as Owner Trustee,  and several
                  Owner  Participants  (incorporated  by reference  from Exhibit
                  10.61 of the  Company's  report  on Form 10-Q  dated  June 25,
                  2000).
         10.62    Definitions  and  Rules  of  Usage  dated  as of June 1,  2000
                  executed  in  conjunction  with  the  Participation  Agreement
                  (incorporated by reference from Exhibit 10.62 of the Company's
                  report on Form 10-Q dated June 25, 2000).
         10.63    Third Amendment to Credit  Agreement dated as of June 19, 2001
                  between  Lily Cup,  Inc.  as  Borrower  and  General  Electric
                  Capital  Canada Inc. as Lender  (incorporated  by reference to
                  Exhibit  10.63 of  Sweetheart  Holdings  Inc.'s report on Form
                  10-K/A dated December 20, 2001).
         10.64    Fourth  Amendment To Credit  Agreement, dated as of August 15,
                  2001,  between  Lily Cups Inc.  and General  Electric  Capital
                  Canada Inc.  (incorporated  by reference to Exhibit 10.65   of
                  Sweetheart    Holdings    Inc.'s   report on Form 10-K/A dated
                  December 20, 2001).
         10.65    Third  Amended and Restated Loan and Security  Agreement dated
                  as of March 25, 2002 among the  financial  institutions  named
                  herein as the lenders and Bank of America,  N.A. as  the agent
                  and   Sweetheart   Cup   Company,  Inc.  Company Inc., as  the
                  borrower and Sweetheart  Holdings Inc., as the parent and Bank
                  of America  Securities LLC., as sole arranger and sole    book
                  manager  (incorporated   by   reference to Exhibit  10.66   of
                  Sweetheart    Holdings    Inc.'s   report  on Form 10-Q  dated
                  April 30,2002).
         10.66    Loan Agreement,  dated June 10, 2002,  between  Sweetheart Cup
                  Company,  Inc.  and the  Department  of Business  and Economic
                  Development,  a principal  department of the State of Maryland
                  (incorporated  by  reference  to Exhibit  10.67 of  Sweetheart
                  Holdings Inc.'s report on Form 10-Q dated August 6, 2002).
         10.67    Assignment  and  Assumption  Agreement,  dated as of March 25,
                  2002,  by and between SF Holdings  Group,  Inc.  and The Fonda
                  Group,  Inc.  (incorporated  by reference to Exhibit  10.18 of
                  Sweetheart  Cup  Company  Inc.'s  report  on  Form  S-4  filed
                  November 21, 2002).
         10.68    Amendment No.2 to Third Amended and Restated Loan and Security
                  agreement,  dated as of February 28,  2003,  among  Sweetheart
                  Cup Company Inc.,   Sweetheart   Holdings  Inc.,  the  lending
                  institutions   party  hereto  and Bank  of America,   N.A., as
                  agent.   (incorporated   by  reference  to  Exhibit  10.68  of
                  Sweetheart  Holdings Inc.'s  report on Form 8-K dated March 3,
                  2003).
         10.69    Loan Agreement, dated October 1, 2002, between Sweetheart  Cup
                  Company, Inc. and the City of Chicago
         21.1     Subsidiaries  of the Company   (incorporated  by reference  to
                  Exhibit  21.1 of  Sweetheart   Cup Company  Inc.'s  report  on
                  Form S-4 filed November 21, 2002).
         99.1     Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted
                  Pursuant to Section 906 of the  Sarbanes-Oxley   Act of 2002 -
                  Chief Executive Officer
         99.2     Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted
                  Pursuant to Section 906 of the  Sarbanes-Oxley   Act of 2002 -
                  Chief Financial Officer

(b) Current Reports on Form 8-K

                  A report on Form 8-K was filed on March 3, 2003  under  Item 5
                  and Item 7.
                  A report on Form 8-K was filed on April 4, 2003  under  Item 5
                  and  Item 7.
                  A report on Form 8-K was filed on April 9, 2003  under  Item 5
                  and Item 7.

                                       30
<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                            Page

Independent Auditors' Report                                                32


Consolidated Balance Sheets as of September 28, 2003
         and September 29, 2002                                             33


Consolidated Statements of Operations and Other Comprehensive
         Income (Loss)for Fiscal Years 2003, 2002 and 2001                  34


Consolidated Statements of Cash Flows for Fiscal
         Years 2003, 2002, and 2001                                         35


Consolidated Statements of Shareholder's Equity for Fiscal
              Years 2003, 2002, and 2001                                    36


Notes to Consolidated Financial Statements                                  37

                                       31
<PAGE>
INDEPENDENT AUDITORS' REPORT


To the Board of Directors of
Sweetheart Holdings Inc.


         We  have  audited  the  accompanying  consolidated  balance  sheets  of
Sweetheart  Holdings Inc. and  subsidiaries  (the "Company") as of September 28,
2003  and  September  29,  2002,  and the  related  consolidated  statements  of
operations and other comprehensive  income (loss), cash flows, and shareholder's
equity for each of the three  fiscal  years in the period  ended  September  28,
2003. These  consolidated  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

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

         In our opinion, such consolidated  financial statements present fairly,
in all material respects,  the financial position of the Company as of September
28, 2003 and September 29, 2002,  and the results of its operations and its cash
flows for each of the three fiscal years in the period ended  September 28, 2003
in conformity with accounting principles generally accepted in the United States
of America.

         As described in Note 7 to the consolidated  financial  statements,  the
Company adopted  Statement of Financial  Accounting  Standards No. 142, Goodwill
and Other Intangible Assets, effective September 30, 2002.





/s/ DELOITTE & TOUCHE LLP
Baltimore, Maryland
December 5, 2003

                                       32
<PAGE>
                    SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                September 28,       September 29,
                                                                                    2003                2002
                                                                                -------------       -------------
<S>                                                                             <C>                 <C>
                                    Assets
Current assets:
  Cash and cash equivalents                                                       $  10,447           $   8,035
  Cash in escrow                                                                         77                   -
  Receivables, less allowances of $3,881 and $3,741                                 158,491             152,541
  Inventories                                                                       220,433             219,427
  Deferred income taxes                                                              24,207              20,841
  Assets held for sale                                                                5,275               5,275
  Other current assets                                                               31,665              35,736
                                                                                  ----------          ----------
    Total current assets                                                            450,595             441,855

Property, plant and equipment, net                                                  240,975             252,491
Deferred income taxes                                                                22,022              29,879
Spare parts                                                                          13,310              13,428
Goodwill                                                                             41,232              41,232
Due from SF Holdings                                                                 17,960              17,962
Other assets                                                                         22,152              23,996
                                                                                  ----------          ----------

    Total assets                                                                  $ 808,246           $ 820,843
                                                                                  ==========          ==========

                     Liabilities and Shareholder's Equity
Current liabilities:
  Accounts payable                                                                $ 121,619           $ 102,986
  Accrued payroll and related costs                                                  44,192              38,009
  Other current liabilities                                                          39,855              44,000
  Current portion of deferred gain on sale of assets                                 10,100              10,203
  Current portion of long-term debt                                                 116,948             119,853
                                                                                  ----------          ----------
    Total current liabilities                                                       332,714             315,051

Long-term debt                                                                      286,931             317,448
Deferred gain on sale of assets                                                      62,054              72,883
Other liabilities                                                                    69,772              65,948
                                                                                  ----------          ----------

    Total liabilities                                                               751,471             771,330
                                                                                  ----------          ----------

Minority interest in subsidiary                                                       2,403               2,276
                                                                                  ----------          ----------

Commitments and contingencies  (See Notes)

Shareholder's equity:
  Class A Common Stock - Par value $.01 per share; 1,100,000 shares
    authorized; 1,046,000 shares issued and outstanding                                  10                  10
  Class B Common Stock - Par value $.01 per share; 4,600,000 shares
    authorized; 4,393,200 shares issued and outstanding                                  44                  44
  Additional paid-in capital                                                        101,212             101,173
  Accumulated deficit                                                               (25,532)            (40,577)
  Accumulated other comprehensive loss                                              (21,362)            (13,413)
                                                                                  ----------          ----------
    Total shareholder's equity                                                       54,372              47,237
                                                                                  ----------          ----------

              Total liabilities and shareholder's equity                          $ 808,246           $ 820,843
                                                                                  ==========          ==========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                       33
<PAGE>
                    SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     AND OTHER COMPREHENSIVE INCOME (LOSS)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                      Fiscal
                                                                    ------------------------------------------
                                                                        2003           2002           2001
                                                                    ------------   ------------   ------------
<S>                                                                 <C>            <C>            <C>
Net sales                                                           $ 1,307,921    $ 1,283,547    $ 1,316,672
Cost of sales                                                         1,141,738      1,130,264      1,143,806
                                                                    ------------   ------------   ------------

  Gross profit                                                          166,183        153,283        172,866

Selling, general and administrative expenses                            108,240        114,823        113,231
Restructuring charge                                                        486          1,893            504
Asset impairment expense                                                    721            593          2,244
Other (income) expense, net                                              (8,323)         2,102         (9,836)
                                                                    ------------   ------------   ------------

  Operating income                                                       65,059         33,872         66,723

Interest expense, net of interest income of
  $134, $211 and $100                                                    39,297         37,079         38,919
Loss on debt extinguishment                                                 475          1,798              -
                                                                    ------------   ------------   ------------

  Income (loss) before income tax and
  minority interest                                                      25,287         (5,005)        27,804


Income tax expense (benefit)                                             10,115         (2,002)        11,220
Minority interest in subsidiary                                             127            145             68
                                                                    ------------   ------------   ------------

  Net income (loss)                                                 $    15,045    $    (3,148)   $    16,516
                                                                    ============   ============   ============

Other comprehensive income (loss):

  Net income (loss)                                                 $    15,045    $    (3,148)   $    16,516
  Foreign currency translation adjustment                                   195           (912)          (393)
  Minimum pension liability adjustment
    (net of income tax benefit of $(5,429),
    $(3,166) and  $(3,489))                                              (8,144)        (4,749)        (5,234)
                                                                    ------------   ------------   ------------

  Comprehensive income (loss)                                       $     7,096    $    (8,809)   $    10,889
                                                                    ============   ============   ============
</TABLE>

       See accompanying Notes to Consolidated Financial Statements.

                                       34
<PAGE>
                    SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                      Fiscal
                                                                    ------------------------------------------
                                                                        2003           2002            2001
                                                                    ------------   ------------   ------------
<S>                                                                 <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES

  Net income (loss)                                                 $    15,045    $    (3,148)   $    16,516

  Adjustments to reconcile net income (loss) to net
    cash provided by operating activities:
    Depreciation and amortization                                        33,357         34,498         32,003
    Amortization of deferred gain                                       (10,143)       (10,239)       (10,276)
    Asset impairment expense                                                721            593          2,244
    Deferred income tax expense                                          10,115          1,066          8,263
    Loss (gain) on sale of property, plant and  equipment                    82         (3,069)           143
    Gain on sale of investment                                             (208)             -              -
    Write-off of assets                                                       -          7,996              -
  Changes in operating assets and liabilities (net of
    business acquisitions):
    Receivables                                                          (5,950)        17,581         (7,279)
    Inventories                                                          (1,006)         5,594         11,147
    Other current assets                                                  4,071         (4,168)        (2,958)
    Other assets                                                         (1,002)           444         (3,703)
    Accounts payable                                                     18,633          6,914        (12,241)
    Accrued payroll and related costs                                     6,183         (8,883)        (8,861)
    Other current liabilities                                            (4,145)        (6,550)         1,445
    Other liabilities                                                    (7,776)       (10,617)       (12,690)
    Other, net                                                             (125)           457             21
                                                                    ------------   ------------   ------------
      Net cash provided by operating activities                          57,852         28,469         13,774
                                                                    ------------   ------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES

  Additions to property, plant and equipment                            (13,770)       (21,206)       (31,701)
  Payments for business acquisitions                                          -              -        (40,665)
  Due to/from SF Holdings                                                     2            (64)           543
  Proceeds from sale of investment                                          330              -              -
  Proceeds from sale of property, plant and  equipment                       65          5,284            120
                                                                    ------------   ------------   ------------
      Net cash  used in investing activities                            (13,373)       (15,986)       (71,703)
                                                                    ------------   ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES

  Net (repayments) borrowings under credit  facilities                  (10,030)       200,254         66,427
  Repayments under credit facilities                                          -       (196,144)             -
  Repayments of other debt                                              (27,729)        (9,633)          (715)
  Borrowings                                                              2,000          2,000              -
  Debt issuance costs                                                    (6,231)       (12,549)        (1,287)
  Increase in cash escrow                                                  (385)        (4,589)           (17)
  Decrease in cash escrow                                                   308          4,597            309
                                                                    ------------   ------------   ------------
      Net cash (used in) provided by financing activities               (42,067)       (16,064)        64,717
                                                                    ------------   ------------   ------------

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                             2,412         (3,581)         6,788

CASH AND CASH EQUIVALENTS, beginning of year                              8,035         11,616          4,828
                                                                    ------------   ------------   ------------

CASH AND CASH EQUIVALENTS, end of year                              $    10,447    $     8,035    $    11,616
                                                                    ============   ============   ============

SUPPLEMENTAL CASH FLOW DISCLOSURES:

      Interest paid                                                 $    31,677    $    34,426    $    37,070
                                                                    ============   ============   ============

      Income taxes (received) paid                                  $    (3,121)   $       880    $     2,484
                                                                    ============   ============   ============
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                       35
<PAGE>
                    SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                     Accumulated
                                                                                     Other Comp-
                                  Class A    Class B    Additional                    rehensive        Total
                                   Common     Common     Paid-In      Accumulated      Income       Shareholder's
                                   Stock      Stock      Capital        Deficit        (Loss)         Equity
                                 ---------  ---------  ------------  -------------  -------------  ---------------
<S>                              <C>        <C>        <C>           <C>            <C>            <C>
Balance, September 25, 2000        $  10      $  44     $ 101,090     $  (53,945)    $  (2,125)      $   45,074

Net income                             -          -             -         16,516             -           16,516
Equity based compensation              -          -           167              -             -              167
Minimum pension  liability
  adjustment                           -          -             -              -        (5,234)          (5,234)

Translation adjustment                 -          -             -              -          (393)            (393)
                                   -----      -----     ----------    -----------    ----------      -----------


Balance, September 30, 2001           10         44       101,257        (37,429)       (7,752)          56,130

Net loss                               -          -             -         (3,148)            -           (3,148)
Elimination   of  gain  on
  equipment purchased from
  related party                        -          -          (183)             -             -             (183)
Equity based compensation              -          -            99              -             -               99
Minimum pension  liability
  adjustment                           -          -             -              -        (4,749)          (4,749)
Translation adjustment                 -          -             -              -          (912)            (912)
                                   -----      -----     ----------    -----------    ----------      -----------

Balance, September 29, 2002           10         44       101,173        (40,577)      (13,413)          47,237
Net income                             -          -             -         15,045             -           15,045
Equity based compensation              -          -            39              -             -               39
Minimum pension  liability
  adjustment                           -          -             -              -        (8,144)          (8,144)
Translation adjustment                 -          -             -              -           195              195

Balance, September 28, 2003        $  10      $  44     $ 101,212     $  (25,532)    $ (21,362)      $   54,372
                                   =====      =====     ==========    ===========    ==========      ===========
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.

                                       36
<PAGE>
                    SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         As used in these  notes,  unless the context  otherwise  requires,  the
"Company" shall refer to Sweetheart  Holdings Inc.  ("Sweetheart  Holdings") and
its subsidiaries, including Sweetheart Cup Company Inc. ("Sweetheart Cup").

         On March 25,  2002,  pursuant to an Agreement  and Plan of Merger,  The
Fonda Group,  Inc.  ("Fonda") was merged (the "Merger") with and into Sweetheart
Cup, with Sweetheart Cup as the surviving entity. In connection with the Merger,
all of the assets and operations of Fonda were assigned to, and all  liabilities
of Fonda were  assumed by,  Sweetheart  Cup by  operation  of law and all of the
outstanding  shares of Fonda  were  cancelled.  Sweetheart  Cup,  the  surviving
entity,  is a wholly owned  subsidiary of Sweetheart  Holdings which is a wholly
owned  subsidiary  of SF  Holdings  Group,  Inc.  ("SF  Holdings").  Pre-merger,
Sweetheart  Holdings and Fonda were under common  control,  and  therefore,  the
transaction    has   been   accounted   for   in   a   manner   similar   to   a
pooling-of-interests.

         The Company  believes it is one of the largest  producers and marketers
of disposable  foodservice and food packaging products in North America. In each
of Fiscal 2003, 2002 and 2001, the Company had net sales of  approximately  $1.3
billion.  The Company sells a broad line of disposable  paper,  plastic and foam
foodservice  and food  packaging  products at all major price  points under both
branded and  private  labels to  institutional  foodservice,  consumer  and food
packaging customers. The Company markets its products under its well recognized:
Sweetheart(R),  Lily(R), Trophy(R), Jazz(R),  Preference(TM),  Go Cup(R), Silent
Service(R),   Centerpiece(R),   Basix(R),   Guildware(R),   Simple  Elegance(R),
Sensations(R),  Hoffmaster(R),  Paper Art(R),  and Touch of Color(R) brands.  In
addition,  the  Company  designs,  manufactures  and  leases  container  filling
equipment  for use by  dairies  and other food  processors.  This  equipment  is
specifically  designed by the Company to fill and seal  containers in customers'
plants.  In Fiscal 2003, 2002 and 2001, no one customer  accounted for more than
10% of the Company's net sales.


1.   SIGNIFICANT ACCOUNTING POLICIES

         Business  Segments - The Company  operates within one business  segment
and accordingly does not report multiple business segments.  Included within net
sales for Fiscal  2003,  2002 and 2001 is $1.3  million,  $1.4  million and $1.6
million of lease revenue,  respectively.  Further identification of net sales by
product and service or group of similar products and services is not available.

         Fiscal  year end - The  Company's  fiscal year end is the 52 or 53 week
period ending on the last Sunday in September. Fiscal 2003 is the 52 week period
ended September 28, 2003.  Fiscal 2002 is the 52 week period ended September 29,
2002. Fiscal 2001 is the 53 week period ended September 30, 2001.

         Principles  of   Consolidation   and  Translation  -  The  consolidated
financial  statements  include  the  accounts  of  Sweetheart  Holdings  and its
subsidiaries.  Assets and  liabilities  denominated  in foreign  currencies  are
translated  at the  rates of  exchange  in  effect at the  balance  sheet  date.
Revenues  and  expenses are  translated  at the average of the monthly  exchange
rates.  The  cumulative  effect  of  translation  adjustments  is  deferred  and
classified as a cumulative  translation  adjustment in shareholder's  equity and
other comprehensive  income (loss). All inter-company  accounts and transactions
have been eliminated.

         The accounts of the Company's Mexican  subsidiary,  Global Cup, S.A. De
C.V.  ("Global Cup"), are consolidated as of and for the period ended August 24,
2003 due to the time needed to consolidate this  subsidiary.  No events occurred
related to this  subsidiary  in  September  2003 that  materially  affected  the
Company's consolidated financial position or results of operations.

         Cash, including Cash Equivalents,  Restricted Cash and Cash in Escrow -
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. Cash overdrafts are reclassified to
accounts  payable  and  accrued  payroll and  related  costs.  Cash  received as
proceeds from the sale of assets is restricted to qualified capital expenditures
under the terms of a lease  agreement  and is held in  escrow  with the  trustee
until utilized (See Note 10).

         Inventories  -  Inventories  are stated at the lower of cost or market,
using the first-in first-out method.

                                       37
<PAGE>
         Property,  Plant and  Equipment  -  Property,  plant and  equipment  is
recorded  at  cost  less  accumulated  depreciation  and is  depreciated  on the
straight-line method over the estimated useful lives of the assets.

         The asset lives of buildings  and  improvements  range between 2 and 50
years  and  have an  average  useful  life of 22.0  years.  The  asset  lives of
machinery and equipment  range between 5 and 13 years and have an average useful
life of 11.7 years.

         Costs related to  construction  in progress are accumulated as incurred
and transferred to property, plant and equipment when put into service, at which
time, the asset is depreciated over its useful life.

         Revenue  Recognition - Revenue is  recognized  upon shipment of product
and when collectability is reasonably  assured.  Also, the Company rents filling
equipment to certain of its customers and  recognizes  this income over the life
of the lease.  The Company's sales are evidenced and the sales price fixed based
upon either a purchase  order,  contract or buying  agreement with the customer.
The Company's  freight terms are either FOB shipping point or freight prepaid by
the customer.  The customer may also be eligible for  promotional  incentives or
rebates.  The  Company  at the time of sale  records  reserves  for  promotional
allowances,  rebates and other discounts based on historical  experience,  which
are charged to net sales.

         Shipping  and  Handling  Costs - Amounts  billed to  customers in sales
transactions  related to shipping  and  handling,  if any,  are  included in net
sales.  Shipping and handling costs incurred by the Company are included in cost
of sales.

         Goodwill - Goodwill  represents  the excess of the purchase  price over
the fair value of tangible and  identifiable  intangible net assets acquired and
was being  amortized on a  straight-line  basis over twenty years.  The carrying
value of goodwill is subject to an  impairment  test on an annual  basis or when
facts and  circumstances  suggest  that it may be  impaired.  See  "--Impact  of
Recently Issued Statement of Financial Accounting Standards ("SFAS") No. 142".

         Environmental  Cleanup  Costs  -  The  Company  expenses  environmental
expenditures  related  to  existing  conditions  resulting  from past or current
operations  and from  which no current or future  benefit  is  discernible.  The
Company determines its liability on a site by site basis and records a liability
at the time when it is probable and can be reasonably estimated.

         Income  Taxes  -  Deferred  income  taxes  are  provided  to  recognize
temporary differences between the financial reporting basis and the tax basis of
the Company's assets and liabilities.

         Deferred  Catalog Cost and Advertising  Expense - The Company  expenses
the costs of  advertising  as  incurred,  except for  catalog  costs,  which are
capitalized  and amortized over the expected period of future  benefits.  Direct
response advertising consists primarily of catalogs that include order forms for
the Company's products.  The everyday products catalog costs are expensed over a
period of twelve months, while the spring, fall and holiday season catalog costs
are  amortized  over  periods  ranging from four to six months  coinciding  with
shipments of products.

         At September  28, 2003 and  September  29, 2002,  $0.1 million and $0.2
million,  respectively,  of  unamortized  catalog  costs were  included in other
current assets. Catalog expense was $1.9 million in Fiscal 2003, $2.1 million in
Fiscal  2002,  and $1.6  million in Fiscal  2001.  Advertising  expense was $8.6
million in Fiscal  2003,  $6.3 million in Fiscal 2002 and $4.1 million in Fiscal
2001.

         Advanced  Royalties and Minimum License Guarantees - The Company enters
into licensing  agreements with third parties for the right to use their designs
and trademarks.  Certain agreements require minimum guarantees of royalties,  as
well as advance payments. Advance royalty payments are recorded as other current
assets and are  charged to expense as  royalties  are  earned.  Minimum  license
guarantees are recorded as an other asset,  with a corresponding  payable,  when
the agreement is executed and are charged to expense based on actual sales.  The
Company  charges to expense  remaining  advance  royalties  and minimum  license
guarantees  when  management  determines  that actual related  product sales are
significantly less than original estimates.

         As of September 28, 2003 and  September 29, 2002,  the Company had $0.1
million and $47,000 in minimum license guarantees and advance royalties,  net of
reserves,  respectively. There are no future minimum royalty payments or license
guarantees.

                                       38
<PAGE>
         Concentration of Credit Risk - Financial instruments, which potentially
subject  the  Company  to  credit  risk,  consist  principally  of  receivables.
Concentration  of credit risk with respect to  receivables  is  considered to be
limited due to the Company's  customer base and the diversity of its  geographic
sales areas. The Company  performs ongoing credit  evaluations of its customers'
financial  condition.  The Company  maintains a provision for  potential  credit
losses based upon expected collectibility of all receivables.

         Debt issuance costs - Costs  associated  with  obtaining  financing are
capitalized  and are included in other assets.  These costs are being  amortized
over the terms of the respective financing.

         Impact of Recently  Issued  Accounting  Standards  - In June 2001,  the
Financial  Accounting Standards Board ("FASB") issued SFAS No. 142, Goodwill and
Other  Intangible  Assets.  SFAS No.  142  applies  to all  goodwill  and  other
intangible  assets  recognized in an entity's  balance sheet  regardless of when
these assets were originally recognized. SFAS No. 142 requires that goodwill and
certain intangibles with an indefinite life not be amortized,  but be subject to
an impairment  test on an annual basis or when facts and  circumstances  suggest
such assets may be  impaired.  The Company  has adopted  SFAS No. 142  effective
September 30, 2002 and has ceased amortization of goodwill as of that date. SFAS
No. 142 also requires the Company to complete a transitional goodwill impairment
test no later than March 30, 2003. The transitional goodwill impairment test was
completed,  as required,  by March 30, 2003.  The carrying value of goodwill did
not exceed its fair value and, as a result, no transitional  impairment loss was
required.

         In  June 2001,  the FASB  issued  SFAS No.  143,  Accounting  for Asset
Retirement  Obligations.   SFAS  No.  143  addresses  financial  accounting  and
reporting for obligations  associated with the retirement of tangible long-lived
assets and the associated asset retirement  costs. SFAS No. 143 applies to legal
obligations associated with the retirement of long-lived assets that result from
the  acquisition,  construction,  development and (or) the normal operation of a
long-lived asset,  except for certain obligations of leases. The Company adopted
SFAS No. 143 effective  September 30, 2002. The adoption of SFAS No. 143 did not
have an impact on the consolidated financial statements.

         In October 2001,  the FASB issued SFAS No. 144,  Impairment or Disposal
of Long-Lived Assets. SFAS No. 144 addresses financial  accounting and reporting
for the  impairment  or disposal of long-lived  assets.  The Company has adopted
SFAS No. 144 effective  September 30, 2002. The adoption of SFAS No. 144 did not
have an impact on the consolidated financial statements.

         In April 2002,  the FASB issued SFAS No. 145,  Recission of FASB No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.  SFAS
No. 145 addresses,  among other items,  the  classification  of gains and losses
from extinguishment of debt. In accordance with the statement,  any gain or loss
on  extinguishment of debt that does not meet the criteria in APB No. 30 will no
longer be classified as an extraordinary  item. The Company has adopted SFAS No.
145 effective September 30, 2002.

         In July  2002,  the FASB  issued  SFAS No.  146,  Accounting  for Costs
Associated  with Exit or Disposal  Activities.  SFAS No. 146  replaces  Emerging
Issues Task Force Issue 94-3,  requiring a company to recognize costs associated
with exit or disposal  activities when they are incurred rather than at the date
of a  commitment  to  an  exit  or  disposal  plan.  SFAS  No.  146  is  applied
prospectively to exit or disposal activities initiated after December 31, 2002.

         In  November  2002,  the FASB issued  FASB  Interpretation  ("FIN") 45,
Guarantor's  Accounting and Disclosure  Requirements  for Guarantees,  Including
Indirect  Guarantees  of  Indebtedness  of Others.  FIN 45  requires  additional
disclosure  relating to guarantees and in some cases requires the recognition of
a liability  for the fair value of certain  guarantees.  FIN 45 is applicable to
guarantees  issued or modified  after  December 31, 2002. The adoption of FIN 45
had no  effect on the  Company,  as it does not  guarantee  the  liabilities  of
others.

         In December  2002,  the FASB issued SFAS No. 148,  Accounting for Stock
Based  Compensation.  SFAS No. 148 amends SFAS No.  123, to provide  alternative
methods of transition  for a voluntary  change to the fair value based method of
accounting for  stock-based  employee  compensation.  In addition,  SFAS No. 148
amends  the  disclosure  requirements  of  SFAS  No.  123 to  require  prominent
disclosures in both annual and interim financial  statements about the method of
accounting for stock-based  employee  compensation  and the effect of the method
used on reported results. The Company has implemented the disclosure  provisions
of SFAS No. 148.

                                       39
<PAGE>
         The Company  applies  Accounting  Principles  Board  Opinion No. 25 and
related  interpretations  in accounting for SF Holdings stock options granted to
employees of the Company (See Note 16). Had  compensation  costs for SF Holdings
stock options been determined  based on fair value at the option grant dates, in
accordance  with the provisions of SFAS No. 123, the Company's net income (loss)
for Fiscal 2003, Fiscal 2002 and Fiscal 2001 would have changed to the pro forma
amount indicated below (in thousands):

Net income (loss):    Fiscal 2003    Fiscal 2002    Fiscal 2001
                     -------------  -------------  -------------
  As reported          $  15,045      $ (3,148)      $  16,516
  Pro forma            $  15,037      $ (3,169)      $  16,480


         The weighted  average fair value of the SF Holdings stock options,  was
$0.4  million  in  Fiscal  2001  estimated  on  the  date  of  grant  using  the
Black-Scholes   options-pricing   model  with  the  following   weighted-average
assumptions:  dividend  yield of zero,  risk-free  interest  rate of 2.75%,  and
expected life of option grants of 3 years.  The effects of applying SFAS No. 123
in this pro forma disclosure are not indicative of future pro forma effects.

         In May 2003,  the FASB  issued  SFAS No.  150,  Accounting  for Certain
Financial  Instruments with  Characteristic of both Liabilities and Equity. SFAS
No. 150 establishes  standards for how an issuer classifies and measures certain
financial  instruments with  characteristics  of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some  circumstances).  Many of those  instruments
were  previously  classified as equity.  SFAS No. 150 is effective for financial
instruments  entered into or modified  after May 31, 2003.  The adoption of SFAS
No. 150 did not have an impact on the consolidated financial statements.

         In March  2003,  the  Emerging  Issues  Task  Force  issued  EITF 02-16
Accounting  by a Customer  (including  a  reseller)  for  Certain  Consideration
Received from a Vendor ("EITF 02-16").  Under EITF 02-16 rebates or refunds of a
specified  amount of cash  consideration  that is payable  pursuant to a binding
arrangement  only if the  customer  completes  a specified  cumulative  level of
purchases or remains a customer for as specified time period are recognized as a
reduction of the cost of sales based on a systematic and rational  allocation of
the cash  consideration  offered  to each of the  underlying  transactions  that
results in progress by the Company toward earning the rebate or refund  provided
the amounts are probable and reasonably estimable.  The Company has adopted EITF
02-16.  The  adoption  of EITF 02-16 did not have an impact on the  consolidated
financial statements.

         Use  of  Estimates  -  The  preparation  of  financial   statements  in
conformity with accounting principles generally accepted in the United States of
America  requires  management to make estimates and assumptions  that affect the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting fiscal years. Actual results could
differ from those estimates.


2.   INVENTORIES

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

                                        September 28,       September 29,
                                            2003                2002
                                       ---------------     ---------------

Raw materials and supplies                $  63,048           $  57,305
Finished  products                          147,075             150,925
Work in progress                             10,310              11,197
                                          ---------           ---------

  Total inventories                       $ 220,433           $ 219,427
                                          =========           =========


3.   INCOME TAXES

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

                                       40
<PAGE>
                                                     Fiscal
                                    ----------------------------------------
                                        2003          2002          2001
                                    ------------  ------------  ------------
Current:
  Federal                             $      -      $ (3,068)     $  2,471
  State                                      -             -           486
  Foreign                                    -             -             -
                                      ---------     ---------     ---------
    Total current                            -        (3,068)        2,957
                                      ---------     ---------     ---------
Deferred:
  Federal                                8,820         1,592         7,745
  State                                  1,260          (211)          947
  Foreign                                   35          (315)         (429)
                                      ---------     ---------     ---------

    Total deferred                      10,115         1,066         8,263
                                      ---------     ---------     ---------

Total income tax expense (benefit)    $ 10,115      $ (2,002)     $ 11,220
                                      =========     =========     =========

         The effective tax rate varied from the U.S. Federal tax rate of 35% for
Fiscal 2003, 2002 and 2001 as a result of the following:

                                                      Fiscal
                                    ----------------------------------------
                                        2003          2002          2001
                                    ------------  ------------  ------------

U.S. Federal tax rate                    35%           35%           35%
State income taxes, net of
  U.S. Federal tax impact                 4             4             4
Permanent difference, meals and
  entertainment                           1             1             1
                                         ---           ---           ---

    Effective tax rate                   40%           40%           40%
                                         ===           ===           ===

         Deferred income taxes reflect the net tax effects of net operating loss
carryforwards,  tax credit carryforwards,  and temporary differences between the
carrying amounts of assets and liabilities for financial  reporting purposes and
the amounts used for income tax  purposes.  The  significant  components  of the
Company's net deferred tax assets and liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
                                                          September 28,    September 29,
                                                              2003             2002
                                                         ---------------  ----------------
<S>                                                      <C>              <C>
Assets:
  Post-retirement health and pension benefits               $  29,863        $  26,742
  Employee benefits                                             7,479            7,651
  Net operating loss carryforwards                             17,007           20,700
  Deferred gain on sale-leaseback transaction                  29,613           33,670
  Alternative minimum tax credit carryforward                     354              354
  Deferred rent                                                 4,128            2,867
  Inventory adjustments                                         3,941            3,600
  Allowance for doubtful accounts and related reserves          8,284            6,628
  Charitable contributions carryforwards                        1,538              184
                                                            ----------       ----------
                                                              102,207          102,396
                                                            ----------       ----------
Liabilities:
     Depreciation                                             (51,492)         (50,157)
       Other                                                   (4,486)          (1,519)
                                                            ----------       ----------
                                                              (55,978)         (51,676)
                                                            ----------       ----------

Net deferred tax assets                                     $  46,229        $  50,720
                                                            ==========       ==========
</TABLE>

         As of September 28, 2003, the Company had  approximately $43 million of
net operating  loss  carryforwards  for federal income tax purposes of which $20
million will expire in 2018 and the  remaining  $23 million will expire in

                                       41
<PAGE>
2022.  Although future  earnings cannot be predicted with certainty,  management
currently believes that realization of the net deferred tax asset is more likely
than not.

         No provision has been made for U.S.  federal  deferred  income taxes on
approximately  $11  million of  accumulated  and  undistributed  earnings of the
Foreign  subsidiaries at September 28, 2003 since it is the present intention of
management  to  reinvest  the  undistributed   earnings  in  foreign  operations
indefinitely.  In addition, the determination of the amount of unrecognized U.S.
federal  deferred  income tax liability for unremitted  earnings  related to the
investments in the Foreign subsidiaries is not practicable.


4.   ASSETS HELD FOR SALE

         On February 20, 2001, the Company's  Board of Directors  approved plans
for  the  closure  and  sale of the  Somerville,  Massachusetts  facility.  This
facility was consolidated into the North Andover,  Massachusetts facility and is
not being used in operations.  On January 16, 2003, the Company  entered into an
agreement for the sale of the Somerville,  Massachusetts facility for a purchase
price of  approximately  $10.1 million.  This facility is classified as an asset
held for sale.  The closing is expected to occur on or before  January 16, 2004.
There can be no assurance that the sale will be consummated.


5.   OTHER CURRENT ASSETS

         The components of other current assets are as follows (in thousands):

                                        September 28,       September 29,
                                            2003                2002
                                       ---------------     ---------------

Spare parts                               $  23,068           $  22,652
Other                                         8,597              13,084
                                          ---------           ---------

  Total other current assets              $  31,665           $  35,736
                                          =========           =========


6.   PROPERTY, PLANT AND EQUIPMENT, NET

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

                                        September 28,       September 29,
                                            2003                2002
                                       ---------------     ---------------

Land                                      $  14,596           $  14,571
Buildings and improvements                  124,085             117,772
Machinery and equipment                     344,326             328,529
Construction in progress                      3,502               8,043
                                          ---------           ---------

  Total property, plant and equipment       486,509             468,915

Less - accumulated depreciation             245,534             216,424
                                          ---------           ---------

  Property, plant and equipment, net      $ 240,975           $ 252,491
                                          =========           =========


         Depreciation of property,  plant and equipment was $26.1 million, $27.6
million  and $27.8  million  in Fiscal  2003,  2002 and 2001,  respectively.  In
addition,  property,  plant and equipment includes buildings under capital lease
at a cost of $2.4  million and a net book value of $1.3 million and $1.4 million
at September 28, 2003 and September 29, 2002, respectively.

                                       42
<PAGE>
7.   GOODWILL AND INTANGIBLE ASSETS

         In accordance  with SFAS No. 142, prior periods' net income (loss) were
not restated.  A  reconciliation  of the previously  reported net loss in Fiscal
2002 and net income in Fiscal 2001 to the amounts  adjusted for the cessation of
goodwill  amortization  expense, net of related income tax effect, is as follows
(in thousands):

                                       Fiscal        Fiscal        Fiscal
                                        2003          2002          2001
                                     ------------  ------------  ------------

Net income (loss), as reported        $ 15,045      $ (3,148)     $ 16,516
Add back:  goodwill amortization,
  net of tax                                 -         1,209         1,142
                                      ---------     ---------     ---------

    Net income (loss), as adjusted    $ 15,045      $ (1,939)     $ 17,658
                                      =========     =========     =========


         In Fiscal 2002 and 2001,  goodwill  amortization  was $2.0  million and
$1.9 million,  respectively. In Fiscal 2003, 2002 and 2001, amortization expense
related to intangible  assets was $0.9  million,  $1.0 million and $0.3 million,
respectively.  Amortization expense is expected to range from approximately $0.9
million to $1.0 million each fiscal year for Fiscal 2004 through Fiscal 2008.

         Changes to goodwill and  intangible  assets,  including  the effects of
adopting the new accounting standard are as, follows (in thousands):

                                                                     Intangible
                                                         Goodwill      Assets
                                                       -----------  ------------

Balance at October 1, 2001, net of accumulated
  amortization                                          $  43,593      $ 3,904
Additions during the year                                       -           89
Amortization expense                                       (2,015)      (1,021)
Adjustments during the year                                  (346)        (160)
                                                        ----------     --------

Balance at September 29, 2002, net of accumulated
  amortization                                             41,232        2,812
Additions during the year                                       -           79
Amortization expense                                            -         (871)
                                                        ----------     --------

Balance at September 28, 2003, net of accumulated
  amortization                                          $  41,232      $ 2,020
                                                        ==========     ========


8.   OTHER ASSETS

         The components of other assets are as follows (in thousands):

                                        September 28,       September 29,
                                            2003                2002
                                       ---------------     ---------------

Debt issuance costs, net of
  accumulated amortization                $  13,583           $  14,664
Intangible assets                             2,020               2,812
Intangible pension asset
  (See Note 24)                               1,683               1,813
Deposits                                        966               1,307
Other                                         3,900               3,400
                                          ---------           ---------

  Total other assets                      $  22,152           $  23,996
                                          =========           =========

         Amortization and the write-off of debt issuance costs was $6.4 million,
$3.3 million and $1.7 million for Fiscal 2003, 2002 and 2001, respectively,  and
is included in interest expense.

                                       43
<PAGE>
9.   OTHER CURRENT LIABILITIES

         The  components  of  other  current  liabilities  are  as  follows  (in
thousands):

                                        September 28,       September 29,
                                            2003                2002
                                       ---------------     ---------------

Sales allowances                          $  20,300           $  17,583
Restructuring charges                           268                 816
Taxes, other than income taxes                3,603               3,220
Litigation, claims and assessments
  (See Note 26)                               1,485               1,642
Deferred rent payable                         7,254               7,708
Interest payable                              4,137               2,801
Other                                         2,808              10,230
                                          ---------           ---------
  Total other current liabilities         $  39,855           $  44,000
                                          =========           =========



10.  DEFERRED GAIN ON SALE OF ASSETS

         In connection with a sale-leaseback  transaction, on June 15, 2000, the
Company sold certain  production  equipment  located in Owings Mills,  Maryland,
Chicago, Illinois and Dallas, Texas for a fair market value of $212.3 million to
several owner  participants.  Pursuant to a lease dated as of June 1, 2000 ("the
Lease")  between  Sweetheart  Cup and State  Street  Bank and Trust  Company  of
Connecticut,  National  Association ("State Street"),  Sweetheart Cup will lease
such production  equipment from State Street, as owner trustee for several owner
participants,  through  November 9, 2010.  The  associated  property,  plant and
equipment  was  removed  from the  balance  sheet and a deferred  gain of $107.0
million was recorded and will be amortized  using the straight  line method over
125 months which is the term of the Lease.

         Annual  rental  expense  under the Lease  will be  approximately  $31.5
million.  Sweetheart  Cup may  renew  the  Lease  at its  option  for up to four
consecutive  renewal terms of two years.  The rent for each renewal term will be
determined at 105% of the fair market rental value of the  production  equipment
at the date of renewal.  The Lease does not contain  bargain  lease terms and no
penalties  or other  disincentives  if  Sweetheart  Cup  elects not to renew the
Lease.  If at the end of the lease term,  Sweetheart  Cup elects not to exercise
its  option to renew the Lease or  purchase  the  equipment,  Sweetheart  Cup is
obligated to return the  equipment to the lessor in good working  order with all
manuals, and to de-install the equipment, crate it and deliver it to the nearest
railhead.

                                       44
<PAGE>
11.  LONG-TERM OBLIGATIONS

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

                                        September 28,       September 29,
                                            2003                2002
                                       ---------------     ---------------

Senior Credit Facility                    $ 167,693           $ 186,117

Canadian Credit Facility                     14,720              15,452

12.0% Senior Notes                           93,825                   -

Sherwood Industries Notes                     3,902               3,498

9 1/2% Senior Subordinated Notes            120,000             120,000

State of Maryland Loan                        1,518               1,895

City of Chicago Loan                          2,000                   -

Other                                           221                 339

12.0% Senior Subordinated Notes                   -             110,000
                                          ---------           ---------
  Total debt                                403,879             437,301

Less - Current portion of long-term debt    116,948             119,853
                                          ---------           ---------

  Total long-term debt                    $ 286,931           $ 317,448
                                          =========           =========

         The aggregate annual maturities of long-term debt at September 28, 2003
are as follows (in thousands):

                 Fiscal 2004                  $   116,948
                 Fiscal 2005                        4,600
                 Fiscal 2006                          612
                 Fiscal 2007                      280,519
                 Fiscal 2008                          200
                 Thereafter                         1,000
                                              -----------
                                              $   403,879
                                              ===========

         Senior Credit Facility - On March 25, 2002, the Company  refinanced its
existing  Senior  Credit  Facility  with Bank of  America,  N.A.,  as agent (the
"Senior  Credit  Facility").  The Senior Credit  Facility has a maturity date of
March 25, 2007.  The Senior Credit  Facility was amended on February 28, 2003 to
require,  among other things,  the date by which the  refinancing,  repayment or
extension  of the  Company's  newly  issued 12.0% Senior Notes due July 15, 2004
(the "12.0% Senior  Notes") shall be December 31, 2003. If the Company is unable
to refinance, repay or extend the 12.0% Senior Notes prior to December 31, 2003,
the Senior  Credit  Facility,  unless  otherwise  amended,  will  become due and
payable (See Note 28). The Senior Credit  Facility  allows for a maximum  credit
borrowing of $235 million subject to borrowing base limitations and satisfaction
of other  conditions of borrowing.  The revolving  borrowings  have a maximum of
$215  million.  The term  loans have a maximum of $25  million  and are  payable
monthly through March 2005.  Borrowings under the Senior Credit Facility, at the
Company's  election,  bear  interest at either (i) a bank's base rate  revolving
loan  reference  rate plus 0.5% or (ii) LIBOR plus 2.5%.  For Fiscal  2003,  the
weighted  average annual interest rate for the Senior Credit Facility was 3.97%.
The indebtness of Sweetheart Cup under the Senior Credit  Facility is guaranteed
by Sweetheart Holdings and secured by a first priority perfect security interest
in accounts receivable, inventory, general intangibles and certain other assets.
The fee for  outstanding  letters  of  credit  is 2.00% per annum and there is a
commitment  fee of 0.375% per annum on the daily  average  unused  amount of the
commitments.  As of September 28, 2003,  $49.1  million was available  under the
Senior Credit Facility. As of September 28, 2003, LIBOR was 1.12% and the bank's
base rate was 4.50%.

         The Senior Credit Facility  contains  various  covenants that limit, or
restrict,  among  other  things,   indebtedness,   dividends,   leases,  capital
expenditures and the use of proceeds from asset sales and certain other business
activities.  Additionally,  the Company must maintain on a  consolidated  basis,
certain  specified ratios at specified  times,  including,  without  limitation,
maintenance of minimum fixed charge coverage ratio.  The Company is currently in
compliance  with all  covenants  under the Senior  Credit  Facility.  The Senior
Credit  Facility  provides for partial  mandatory

                                       45
<PAGE>
prepayments upon the sale of equipment  collateral  unless net proceeds are used
to purchase replacement collateral and full repayment upon any change of control
(as defined in the loan agreement governing the Senior Credit Facility).

         Canadian  Credit  Facility - The Company's  Canadian  subsidiary  has a
credit agreement (the "Canadian Credit Facility") which provides for a term loan
and a  credit  facility  with a  maximum  credit  borrowing  of Cdn $30  million
(approximately  US $22.1  million)  subject to borrowing  base  limitations  and
satisfaction of other  conditions of borrowing.  The term borrowings are payable
quarterly  through May 2004. Both the revolving  credit and term loan borrowings
have a final  maturity date of June 15, 2004.  The Canadian  Credit  Facility is
secured by all  existing and  thereafter  acquired  real and  personal  tangible
assets of the Company's Canadian  subsidiary and net proceeds on the sale of any
of the foregoing. Borrowings under the Canadian Credit Facility bear interest at
an index rate plus 1.75% with respect to the  revolving  credit  facility and an
index rate plus 2.00% with respect to the term loan borrowings. For Fiscal 2003,
the weighted  average annual  interest rate for the Canadian Credit Facility was
4.86%.  As of  September  28,  2003,  Cdn $2.1  million  (approximately  US $1.6
million) was available  under the  revolving  facility and the term loan balance
was Cdn $10.2 million  (approximately US $7.5 million) under the Canadian Credit
Facility.

         12.0%  Senior  Notes - On April 8, 2003,  the Company  consummated  its
offer to exchange (the "Exchange Offer") its newly issued 12.0% Senior Notes due
July  15,  2004,  for  all  of  its  outstanding  $110.0  million  12.0%  Senior
Subordinated Notes ("the 12.0% Senior  Subordinated  Notes") and solicitation of
consents  of  holders of the 12.0%  Senior  Subordinated  Notes to the  proposed
amendments to the indenture  governing the 12.0% Senior  Subordinated Notes (the
"Consent  Solicitation") (See Note 28). Sweetheart Cup, Sweetheart Holdings,  as
guarantor,  and Wells  Fargo Bank  Minnesota,  N.A.,  as trustee,  executed  the
indenture  governing  the 12.0%  Senior  Notes and $93.8  million  in  aggregate
principal  amount of the 12.0% Senior  Notes were issued under the  indenture in
exchange for a like amount of the 12.0% Senior  Subordinated  Notes.  Payment of
the consent payments to all holders of the 12.0% Senior  Subordinated  Notes who
timely  tendered  was made in April 2003 to the  trustee.  In Fiscal  2003,  the
Company recorded a $0.5 million loss on debt  extinguishment  in connection with
the Exchange Offer which consisted of the write-off of deferred financing costs.

         In September 2003,  $16.2 million in aggregate  principal amount of the
12.0% Senior Subordinated Notes that remained outstanding following the Exchange
Offer, including accrued interest thereon, was paid in full using funds borrowed
under the Senior Credit  Facility and the  indenture  governing the 12.0% Senior
Subordinated Notes has been satisfied and discharged.

         Sweetheart  Cup is the obligor and  Sweetheart  Holdings the  guarantor
with  respect to the 12.0% Senior  Notes.  Interest on the 12.0% Senior Notes is
payable  quarterly  on January 15, April 15, July 15 and October 15. The Company
may redeem, at any time, all or a part of the 12.0% Senior Notes upon notice not
less than 30 nor more than 60 days prior to the redemption date, at a redemption
price of 100% of principal  amount plus accrued and unpaid interest on the 12.0%
Senior Notes redeemed to the applicable  redemption date. The 12.0% Senior Notes
are  general  unsecured  obligations  of the  Company and are senior in right of
payment to all existing and future  subordinated  indebtedness  including  the 9
1/2% Senior Subordinated Notes due 2007; are pari passu in right of payment with
all  existing  and  future  senior   indebtedness   of  the  Company;   and  are
unconditionally guaranteed by Sweetheart Holdings . In addition, the obligations
under the June 1, 2000 lease between Sweetheart Cup and State Street are secured
by  a  significant  portion  of  the  Company's  existing  property,  plant  and
equipment.  The 12.0% Senior Notes contain various covenants which prohibit,  or
limit, among other things,  change of control,  asset sales,  dividend payments,
equity  repurchases  or redemption,  the incurrence of additional  indebtedness,
make any  restrictive  investments,  the  issuance of  disqualified  stock,  the
creation of additional liens, certain transactions with affiliates,  and certain
other business activities.

         Sherwood  Industries Notes - As part of a prior  acquisition on May 15,
2000,  the Company  issued to the sellers  promissory  notes due May 2005 in the
principal  amount of $5.0 million and a present value of $2.9 million.  On March
19, 2001,  the  principal  amount was reduced by $0.3 million as a result of the
working capital adjustment to $4.7 million and present value of $2.7 million.

         9 1/2% Senior  Subordinated  Notes - In Fiscal 1997, the Company issued
$120.0 million 9 1/2% Senior  Subordinated Notes due March 1, 2007 with interest
payable semi-annually (the "9 1/2% Senior Subordinated  Notes").  Payment of the
principal  and  interest  is  subordinate  in  right  to  payment  of all of the
Company's  senior debt,  including  borrowings under the Senior Credit Facility.
The Company may, at its election, redeem the 9 1/2% Senior Subordinated Notes at
any time  after  March  1,  2002 at a  redemption  price  equal to a  percentage
(104.750%

                                       46
<PAGE>
after March 1, 2002 and  declining  in annual steps to 100% after March 1, 2005)
of the  principal  amount  thereof  plus  accrued  interest.  The 9 1/2 % Senior
Subordinated  Notes provide that upon the  occurrence of a change of control (as
defined  therein),  the  holders  thereof  will have the option to  require  the
redemption  of the notes at a  redemption  price equal to 101% of the  principal
amount thereof plus accrued interest.  The 9 1/2% Senior  Subordinated Notes are
subordinated  in right of  payment  to the prior  payment  in full of all of the
Company's senior debt, including borrowings under the Senior Credit Facility. In
addition,  the obligations  under the June 1, 2000 lease between  Sweetheart Cup
and State Street are secured by a significant  portion of the Company's existing
property,  plant and  equipment.  The 9 1/2% Senior  Subordinated  Notes contain
various  covenants which prohibit,  or limit,  among other things,  asset sales,
change of control,  dividend  payments,  equity  repurchases or redemption,  the
incurrence  of  additional  indebtedness,  the issuance of  disqualified  stock,
certain  transaction  with  affiliates,  the  creation of  additional  liens and
certain other business activities.

         State of Maryland Loan - On June 10, 2002,  the Company  entered into a
loan  agreement  with the  Department  of Business and Economic  Development,  a
principal  department  of the State of  Maryland,  to borrow $2.0  million  (the
"Maryland  Loan").  The Maryland Loan bears interest at a rate ranging from 3.0%
to 8.0% per annum depending on certain  employment rates at the Company's Owings
Mills, Maryland facility. The Maryland Loan is payable in quarterly installments
through March 1, 2007.

         City of Chicago Loan - On October 1, 2002,  the Company  entered into a
loan agreement  with the City of Chicago to borrow $2.0 million.  The loan bears
no  interest  and is payable in equal  installments  of $100,000  commencing  on
February 1, 2004 and every six months thereafter.  The loan matures on the later
of August 1, 2014 or the date on which all  amounts  outstanding  under the loan
agreement have been paid in full.


12.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

         The  carrying  amounts of  financial  instruments  included  in current
assets and current liabilities approximate their estimated fair value because of
the relatively  short maturities of these  instruments.  All borrowing under the
Senior Credit Facility and the Canadian  Credit Facility have variable  interest
rates that fluctuate along with current market  conditions and thus the carrying
value approximates their fair value.

         The fair  value of the  12.0%  Senior  Notes is  estimated  to be $11.3
million  lower  than the  carrying  value at  September  28,  2003,  based  upon
independent third party information.

         The fair value of the 9 1/2% Senior  Subordinated Notes is estimated to
be $27.6 million  lower than the carrying  value at September 28, 2003 and $30.0
million  lower  than the  carrying  value at  September  29,  2002,  based  upon
independent third party information.


13.  OTHER  LIABILITIES

         The components of other liabilities are as follows (in thousands):

                                        September 28,       September 29,
                                            2003                2002
                                       ---------------     ---------------

Post-retirement health care benefits
  (See Note 24)                           $  42,506           $  49,321
Pensions (See Note 24)                       24,559              14,426
Other                                         2,707               2,201
                                          ---------           ---------
    Total other liabilities               $  69,772           $  65,948
                                          =========           =========


14.  MINORITY INTEREST IN SUBSIDIARY

         Minority interest  represents 20% of the total common stock interest in
Global Cup, not owned by the Company.

                                       47
<PAGE>
15.  SHAREHOLDER'S EQUITY

         Pursuant  to an  agreement,  dated as of March  22,  2002 by and  among
Dennis Mehiel, the Company's Chairman and Chief Executive Officer,  SF Holdings,
American  Industrial  Partners  Management  Company,  Inc.,  American Industrial
Partners  Capital Fund L.P.  ("AIP") and the other  stockholders  of  Sweetheart
Holdings signatory to that certain  Stockholders'  Agreement,  dated as of March
12, 1998,  (together with AIP and any permitted  transferee of shares of Class A
common stock or Class B common stock of Sweetheart Holdings ("the Shares"),  the
"Original Stockholders"),  all of the outstanding Shares not held by SF Holdings
(which  consisted  of 52% of the  voting  stock  of  Sweetheart  Holdings)  were
delivered to SF Holdings and exchanged for 96,000 shares of Class C common stock
of SF Holdings.  As a result,  SF Holdings became the sole  beneficial  owner of
100% of the issued and  outstanding  capital  stock of Sweetheart  Holdings.  In
addition and in connection  therewith,  the  Stockholders  Agreement and related
stockholders' right agreement were terminated.

         The Class A and Class B Common Stock have the same powers,  preferences
and rights,  except that the Class B Common Stock has no voting rights.  Class A
and Class B Common  Stock share the profits and losses  generated by the Company
on a pro-rata basis.  Each  outstanding  Class A Common Share is entitled to one
vote on any matter  submitted to a vote of  shareholders  and has no  cumulative
voting  rights.  Subject  to  Delaware  law  and  limitations  in  certain  debt
instruments  (12.0%  Senior  Notes,  9  1/2%  Senior   Subordinated  Notes,  and
borrowings under the Senior Credit Facility),  common  shareholders are entitled
to receive such dividends as may be declared by the Company's Board of Directors
out  of  funds  legally  available  thereof.  In  the  event  of a  liquidation,
dissolution or winding up of the Company,  common  shareholders  are entitled to
share ratably in all assets  remaining after payment or provision for payment of
debts or other liabilities of the Company.


16.  SF HOLDINGS STOCK OPTION PLAN

         In Fiscal 2001, SF Holdings  granted  options to purchase shares of its
common stock to certain employees of the Company. The options vest over a period
of three  years.  Certain of the  exercise  prices of the options were below the
fair market value of SF Holdings' common stock at the date of the grant.  During
the vesting  period,  these  discounts  of $0.3  million are being  amortized as
compensation  expense and credited to additional paid-in capital by the Company.
Amortization  expense  relating to SF Holdings' stock options was $38,158,  $0.1
million and $0.2 million for Fiscal 2003, 2002 and Fiscal 2001, respectively.

         A summary of SF Holdings stock option transactions  involving employees
of the Company are as follows:

                                       SF Holdings     Weighted Average
                                      Stock Options     Exercised Price
                                     ---------------  ------------------
Outstanding, September 25, 2000                -           $      -
  Granted                                 13,635             118.30
  Forfeited                                 (700)            117.38
                                         --------          --------
Outstanding, September 30, 2001           12,935             118.35
  Forfeited                               (1,119)            117.38
                                         --------          --------
Outstanding, September 29, 2002           11,816             118.44
  Forfeited                               (1,354)            117.69
                                         --------          --------
Outstanding, September 28, 2003           10,462           $ 118.54
                                         ========          ========
Exercisable, September 29, 2002            3,938           $ 118.44
                                         ========          ========
Exercisable, September 28, 2003            7,070           $ 118.52
                                         ========          ========

                                       48
<PAGE>
         The following  table  summarizes  information  about SF Holdings  stock
options granted to employees of the Company, outstanding at September 28, 2003:

<TABLE>
<CAPTION>
                                Options Outstanding                     Options Exercisable
                   ----------------------------------------------    ------------------------
<S>                <C>             <C>             <C>               <C>            <C>
                                      Weighted                                       Weighted
                       Number         Average         Weighted           Number      Average
    Range of       Outstanding as  Remaining Life      Average        Exercisable    Exercise
Exercise   Prices    of 09/28/03       (Years)     Exercise Price    as of 9/28/03    Price
-----------------  --------------  --------------  --------------    -------------  ---------
   $  93.75            4,989            7.0          $  93.75            3,374      $  93.75
     141.14            5,473            7.0            141.14            3,696        141.14
                      ------            ---          --------            -----      --------
                      10,462            7.0          $ 118.54            7,070      $ 118.52
                      ======            ===          ========            =====      ========
</TABLE>


17.  RELATED-PARTY TRANSACTIONS

         All of the affiliates  (other than Fibre Marketing  Group,  LLC ("Fibre
Marketing"),  the successor of Fibre  Marketing  Group,  Inc., a waste  recovery
business) referenced below are directly or indirectly under the common ownership
of the  Company's  Chairman and Chief  Executive  Officer,  Dennis  Mehiel.  The
Company  believes that the  transactions  entered into with related parties were
negotiated  on terms which are at least as favorable  as it could have  obtained
from unrelated third parties and were negotiated on an arm's length basis.

         Pursuant to a Management Services Agreement, as amended, SF Holdings is
entitled to receive from the Company an aggregate  annual fee of $1.85  million,
payable semi-annually,  and is reimbursed for out-of-pocket expenses. Under this
agreement,  SF Holdings has the right, subject to the direction of the Company's
Board  of  Directors,  to  manage  the  Company's  day  to day  operations.  The
outstanding  balance due to SF Holdings was $2.6  million at September  28, 2003
and $0.7 million at September 29, 2002, respectively.

         At September 29, 2002, the Company had a loan receivable from its Chief
Executive  Officer of $0.3  million plus  accrued  interest at 5.06%.  In Fiscal
2003,  the  Company's  Chief  Executive  Officer  repaid  the  outstanding  loan
receivable.  In Fiscal 2003,  Fiscal 2002 and Fiscal 2001,  the Company  forgave
$13,872, $16,021 and $51,637, respectively, of interest associated with the loan
to its Chief  Executive  Officer.  At September 29, 2002, the Company had a loan
receivable  from its  Chief  Operating  Officer  of $0.1  million  plus  accrued
interest at 5.39%. On February 28, 2003, the loan receivable was amended and the
rate  changed to the  federal  funds  rate.  At  September  28,  2003,  the loan
receivable is $0.1 million plus accrued interest.

         In Fiscal 1998,  the Company  purchased a 38.2%  ownership  interest in
Fibre Marketing from a director of the Company. In Fiscal 2000, the Company sold
a 13.2% interest in Fibre  Marketing to Mehiel  Enterprises,  Inc.,  retaining a
25.0% ownership interest in Fibre Marketing. On July 17, 2000, Box USA Holdings,
Inc.  ("Box  USA"),  a converter  and seller of interior  packaging,  corrugated
sheets and corrugated containers, in which the Company's Chief Executive Officer
beneficially  owns more than 10% of its outstanding  capital stock,  transferred
50.0% of its interest in Fibre  Marketing  to Mehiel  Enterprises,  Inc.  Mehiel
Enterprises,  Inc.  owns a  63.2%  interest  in  Fibre  Marketing.  The  Company
accounted for its ownership interest in Fibre Marketing using the equity method.
In Fiscal  2003,  the Company  sold its 25%  interest in Fibre  Marketing  to an
unrelated third party for $0.3 million which generated a gain of $0.2 million.

         On November 1, 2001,  Fibre Marketing  issued  promissory  notes to the
Company for $1.2 million in the aggregate,  in exchange for outstanding accounts
receivable from Fibre  Marketing,  at an annual interest rate of 7.0% payable in
36 monthly  installments.  As of September 29, 2002, $0.9 million was due to the
Company.  In Fiscal 2003,  Fibre Marketing  repaid the remaining  balance of the
outstanding promissory notes.

         In Fiscal  2003,  the Company  purchased  $13.6  million of  corrugated
containers  from Box USA. In Fiscal 2003, the Company  purchased $1.4 million of
travel  services from Emerald Lady, Inc, a company wholly owned by the Company's
Chief Executive  Officer  ("Emerald  Lady").  Included in accounts payable as of
September  28,  2003  is $0.5  million  due to Box  USA.  Other  purchases  from
affiliates in Fiscal 2003 were not significant.

                                       49
<PAGE>
         In Fiscal  2003,  the  Company  sold $9.0  million  of scrap  paper and
plastic to Fibre Marketing.  Included in accounts receivable as of September 28,
2003 is $1.0  million due from Fibre  Marketing.  Other sales to  affiliates  in
Fiscal 2003 were not significant.

         In Fiscal  2002,  the Company  purchased  $11.8  million of  corrugated
containers  from Box USA and $1.1 million of travel  services from Emerald Lady.
Included in accounts payable as of September 29, 2002 is $1.0 million due to Box
USA. Other purchases from affiliates in Fiscal 2002 were not significant.

         In Fiscal  2002,  the  Company  sold $8.9  million  of scrap  paper and
plastic to Fibre Marketing.  Included in accounts receivable as of September 29,
2002 is $1.3  million due from Fibre  Marketing.  Other sales to  affiliates  in
Fiscal 2002 were not significant.

         In Fiscal  2001,  the  Company  purchased  $7.6  million of  corrugated
containers  from Box USA and $1.0 million of travel  services from Emerald Lady.
Included in accounts payable as of September 30, 2001 is $0.6 million due to Box
USA. Other purchases from affiliates in Fiscal 2001 were not significant.

         In Fiscal  2001,  the  Company  sold $7.7  million  of scrap  paper and
plastic to Fibre Marketing.  Included in accounts receivable as of September 30,
2001 is $2.0  million due from Fibre  Marketing.  Other sales to  affiliates  in
Fiscal 2001 were not significant.

         In Fiscal 2001,  the Company began leasing a facility in North Andover,
Massachusetts  from D&L Andover Property,  LLC, an entity in which the Company's
Chief Executive  Officer  indirectly  owns 50%. In Fiscal 2003,  Fiscal 2002 and
Fiscal 2001,  rental  payments under this lease were $1.5 million,  $1.5 million
and $1.4 million,  respectively.  Annual rental payments under the 20-year lease
are  $1.5  million  in the  first  year,  escalating  at a rate of 2% each  year
thereafter.

         In Fiscal 2000,  the Company  entered into a lease  agreement  with D&L
Development,  LLC,  an entity in which the  Company's  Chief  Executive  Officer
indirectly owns 47%, to lease a warehouse  facility in Hampstead,  Maryland.  In
Fiscal 2003,  Fiscal 2002 and Fiscal 2001 rental  payments under this lease were
$3.7  million,  $3.7  million  and $3.6  million,  respectively.  Annual  rental
payments  under the 20-year lease are $3.7 million for the first 10 years of the
lease and $3.8 million annually, thereafter.

         The  Company  leases  a  building  in  Jacksonville,  Florida  from the
Company's  Chief  Executive  Officer.  Annual  payments under the lease are $0.2
million  plus  annual  increases  based on changes in the  Consumer  Price Index
("CPI")  through  December 31, 2014. In addition,  the Company's Chief Executive
Officer  can require the Company to  purchase  the  facility  for $1.5  million,
subject to a CPI-based  escalation,  until July 31, 2006.  In Fiscal  1998,  the
Company  terminated its operations at this facility and is currently  subleasing
the entire facility.  Rent expense, net of sublease income on the portion of the
premises subleased was $39,000,  $67,000 and $33,000 in Fiscal 2003, Fiscal 2002
and Fiscal 2001, respectively.


18.  LEASE COMMITMENTS

         The Company  leases  certain  transportation  vehicles,  warehouse  and
office  facilities  and  machinery  and  equipment  under  both  cancelable  and
non-cancelable  operating leases,  most of which expire within ten years and may
be renewed by the Company.  The full amount of lease rental payments are charged
to expense  using the  straight  line  method  over the term of the lease.  Rent
expense  under such  arrangements  was $60.9  million,  $61.3  million and $60.7
million  for Fiscal  Years 2003,  2002 and 2001,  respectively.  Future  minimum
rental commitments under non-cancelable  operating leases in effect at September
28, 2003 are as follows (in thousands):

                                       50
<PAGE>
                  Fiscal 2004            $   54,223
                  Fiscal 2005                52,377
                  Fiscal 2006                49,366
                  Fiscal 2007                47,278
                  Fiscal 2008                53,512
                  Thereafter                189,969
                                         ----------

                                         $  446,725
                                         ==========

         In connection with a sale-leaseback  transaction, on June 15, 2000, the
Company sold certain  production  equipment  located in Owings Mills,  Maryland;
Chicago,  Illinois;  and Dallas, Texas for a fair market value of $212.3 million
to several owner participants.

         Pursuant to the Lease dated as of June 1, 2000 between  Sweetheart  Cup
and State Street, Sweetheart Cup will lease such production equipment from State
Street,  as owner trustee for several  owner  participants  through  November 9,
2010.  Sweetheart  Cup  may  renew  the  Lease  at its  option  for  up to  four
consecutive  renewal terms of two years each.  Sweetheart  Cup may also purchase
such  equipment for fair market value either at the conclusion of the Lease term
or November 21, 2006,  at its option.  The Company's  obligations  in connection
with  the  Lease  are  collateralized  by  substantially  all of  the  Company's
property,  plant and equipment  owned as of June 15, 2000.  This lease  contains
various  covenants,  which  prohibit,  or limit,  among  other  things  dividend
payments,  equity  repurchases  or  redemption,  the  incurrence  of  additional
indebtedness and certain other business activities.

         The Company is accounting for this  transaction as an operating  lease,
expensing  the $31.5 million  annual rental  payments and removing the property,
plant and  equipment  sold from its  balance  sheet.  A deferred  gain of $107.0
million  was  realized  from this sale and is being  amortized  over 125 months,
which is the term of the Lease.

         The Company leases a warehouse  facility in Williamsburg,  Pennsylvania
which is being  accounted for as a capital  lease.  The term of this lease is 15
years,  expiring in Fiscal 2005. The initial cost of the lease was $2.2 million.
The future  minimum  lease  payments  are $0.1 million in Fiscal 2004 and Fiscal
2005. The present value of the future minimum lease payments is $0.2 million.


19.  BUSINESS INTERRUPTION CLAIM

         In  Fiscal  2001,  the  Company  experienced  a  casualty  loss  at its
Somerville,  Massachusetts  facility.  From January 2001 through  September  29,
2002,  the  Company  incurred  $11.6  million of expenses  associated  with this
casualty  loss. As of September  29, 2002,  the Company  received  $12.5 million
reimbursement  under the  casualty  and business  interruption  claim.  The $0.9
million of proceeds in excess of the expenses,  represents the net proceeds from
the business  interruption  claim, which were recorded as a reduction to cost of
sales in the fourth quarter of Fiscal 2002. In October 2002, the Company and its
insurance  provider  agreed to a final  settlement  of this  claim  whereby  the
Company  would  receive an  additional  $3.8  million of  business  interruption
proceeds.  In Fiscal  2003,  this  amount had been  received  and  recorded as a
reduction of cost of sales, net of $0.2 million of expenses.


20.  RESTRUCTURING CHARGE

         In the quarter  ended  September  28, 2003,  the Company  established a
restructuring  reserve of $0.6  million  resulting  from the  elimination  of 18
salaried  positions.  The plan was  approved by  management  on July 7, 2003 and
announced to employees on July 11, 2003.  In the fourth  quarter of Fiscal 2003,
the Company paid $0.3 million in severance payments.  The remaining $0.3 million
of severance  payments will be paid in the first three  quarters of Fiscal 2004.
The $0.3 million reserve has been included in the "Other current liabilities" on
the consolidated balance sheet as of September 28, 2003.

         In the quarter  ended  September  29, 2002,  the Company  established a
restructuring reserve of $0.3 million in conjunction with the planned closure of
the Company's Lafayette, Georgia facility from which 101 primarily manufacturing
positions were eliminated.  The plan was approved by management on September 24,
2002 and  announced to employees on September  29, 2002.  Severance  payments of
$0.1  million  and $0.2  million of vacated

                                       51
<PAGE>
building rent expense was paid in Fiscal 2003. The $0.3 million reserve has been
included in the "Other current liabilities" on the consolidated balance sheet as
of September 29, 2002.

         In  the  quarter  ended  June  30,  2002,  the  Company  established  a
restructuring  reserve of $1.6 million in conjunction with planned consolidation
initiatives  from which 475 primarily  manufacturing  positions were eliminated.
The plan was approved by  management on June 19, 2002 and announced to employees
on June 28, 2002.  In the fourth  quarter of Fiscal 2002,  the Company paid $1.0
million in severance payments.  The remaining $0.6 million of severance payments
was paid in Fiscal  2003.  The $0.6  million  reserve  has been  included in the
"Other current  liabilities" on the  consolidated  balance sheet as of September
29, 2002.

         In  the  quarter  ended  June  24,  2001,  the  Company  established  a
restructuring   reserve  of  $0.5  million  in  conjunction   with  the  planned
consolidation  of the  former  administrative  offices of  Creative  Expressions
Group, Inc. in Indianapolis,  Indiana into the Company's  administrative offices
in  Oshkosh,   Wisconsin.   This  consolidation   included  the  elimination  of
approximately  40 positions.  The plan was approved by management on October 30,
2000 and  announced  to  employees  on May 1, 2001.  The  effective  date of the
consolidation  and elimination of positions was delayed until the fourth quarter
of Fiscal  2001.  Severance  payments  of $0.1  million  were paid in the fourth
quarter of Fiscal 2001.


21.  ASSET IMPAIRMENT EXPENSE

         In Fiscal  2003,  the  Company  evaluated  the  usefulness  of  certain
equipment no longer in use at facilities  and wrote-off the remaining book value
of $0.7 million to operations.

         In Fiscal  2002,  the Company  approved  plans to close its  Lafayette,
Georgia facility.  As a result,  the Company evaluated the usefulness of certain
equipment no longer in use at this facility and  wrote-off  the  remaining  book
value of $0.6 million to operations.

         In  Fiscal  2001,  the  Company   approved  plans  to  consolidate  its
Manchester,  New  Hampshire  and  Springfield,  Missouri  operations  into other
existing  facilities  throughout the Company. As a result, the Company evaluated
the  usefulness of certain  equipment no longer in use at these  facilities  and
wrote-off the remaining book value of $2.2 million to operations.


22.  OTHER (INCOME) EXPENSE, NET

         In the Fiscal  2003,  the  Company  realized  $10.1  million due to the
amortization  of  the  deferred  gain  in  conjunction   with  a  sale-leaseback
transaction.  In  addition,  the Company  realized  $1.2  million  from  foreign
currency  transactions  gains and $0.2 million from the sale of its 25% interest
in Fibre  Marketing.  These gains were  partially  offset by (i) $0.8 million of
costs associated with the opening of a mid-west  distribution  center, (ii) $0.7
million  of  costs  associated  with  the  rationalization,   consolidation  and
improvement  of the Company's  manufacturing  facilities,  (iii) $0.8 million of
costs  associated  with the maintenance of  non-operational  facilities and (iv)
$0.9  million of costs  associated  with the  establishment  of new  information
systems.

         In  Fiscal  2002,  the  Company  realized  $10.2  million  due  to  the
amortization  of  the  deferred  gain  in  conjunction   with  a  sale-leaseback
transaction.  Also, in Fiscal 2002,  the Company  recognized a $3.0 million gain
associated with the sale of the Company's  manufacturing facility in Manchester,
New  Hampshire.  These gains were offset by (i) a $5.4 million  write-off of the
management services agreement between Sweetheart Holdings and SF Holdings, which
had been assigned and assumed by Fonda in 1998, (ii) a $2.6 million write-off of
assets related to business  initiatives  which were abandoned  subsequent to the
Merger,  (iii) $6.9  million of costs in  connection  with the  rationalization,
consolidation and process improvement of the Company's manufacturing  facilities
and (iv) $0.5 million of additional  costs of associated with the termination of
the Lily-Tulip, Inc. Salary Retirement Plan.

         In  Fiscal  2001,  the  Company  realized  $10.3  million  due  to  the
amortization  of  the  deferred  gain  in  conjunction   with  a  sale-leaseback
transaction. This amortization of the deferred gain was partially offset by $1.6
million in expenses  associated with the relocation of a manufacturing  facility
from Somerville, Massachusetts to North Andover, Massachusetts.

                                       52
<PAGE>
23.  LOSS ON DEBT EXTINGUISHMENT

         In Fiscal 2003,  in  connection  with the Exchange  Offer,  the Company
charged  $0.5  million to results of  operations  which  amount  represents  the
write-off of unamortized  deferred  financing fees associated with the Company's
12.0% Senior Subordinated Notes.

         In Fiscal 2002, in  conjunction  with the  refinancing of the Company's
Senior  Credit  Facility,  the  Company  charged  $1.8  million  to  results  of
operations  which  amount  represents  the  write-off  of  unamortized  deferred
financing fees and redemption fees pertaining to such debt.


24.  EMPLOYEE BENEFIT AND POST-RETIREMENT HEALTH CARE PLANS

         The Company  sponsors  various defined benefit  post-retirement  health
care plans that cover substantially all full-time employees.  The plans, in most
cases,  pay stated  percentages  of most medical  expenses  incurred by retirees
after  subtracting  payments by Medicare or other  providers  and after a stated
deductible has been met.  Participants  generally become eligible after reaching
age 60 with ten years of service.  The majority of such plans are  contributory,
with retiree contributions adjusted annually.

         The  Company  provides  certain  union  and  non-union  employees  with
retirement and disability  income  benefits under defined benefit pension plans.
Pension  costs are based  upon the  actuarially  determined  normal  costs  plus
interest  on and  amortization  of the  unfunded  liabilities.  The  benefit for
participants in certain of the Company's  non-union pension plans are frozen. In
Fiscal 1999,  the assets and  obligations  of a pension plan for a number of the
Company's  union  employees were  transferred to a  multi-employer  pension plan
resulting in a $0.2 million charge to income.  The Company's  policy has been to
fund annually the minimum contributions required by applicable  regulations.  In
Fiscal 2001, all assets of a discontinued  pension plan were distributed in full
settlement  of the  plan's  obligations.  A credit  to  income  of  $30,000  was
recognized as a result of this  settlement.  In Fiscal 2001,  the valuation date
for the plan assets and the contributions was changed from September to June and
resulted in no significant effect.

         A  majority  of the  Company's  employees  are  covered  under a 401(k)
defined  contribution  plan.  Effective  January 1, 2000, the Company provides a
matching  contribution of 100% on the first 2% of a participant's salary and 50%
on the next 4% of a  participant's  salary.  The  Company's  match is  currently
limited to participant  contributions up to 6% of the participant's salaries. In
addition,  the Company is allowed to make discretionary  contributions.  Certain
employees  are covered  under defined  benefit  plans.  On December 31, 2001 the
Fonda defined  contribution  plan was merged with and into the Sweetheart 401(k)
plan. Costs charged against  operations for this defined  contribution plan were
$6.1  million,  $6.4 million and $6.8  million for Fiscal 2003,  Fiscal 2002 and
Fiscal 2001, respectively.

         The Company  also  participates  in a  multi-employer  pension plan for
certain of its union  employees.  Contributions  to this plan, at a defined rate
per hour worked were $1.4  million in Fiscal  2003,  $1.4 million in Fiscal 2002
and $1.0 million in Fiscal 2001.

                                       53
<PAGE>
         Net periodic  cost for the  Company's  pension and other  benefit plans
consists of the following (in thousands):

                                                           Fiscal
                                           -------------------------------------
                                              2003         2002         2001
                                           -----------  -----------  -----------
Pension Benefits
Service cost                                $  1,151     $  1,277     $  1,449
Interest cost                                  5,655        5,403        5,122
Return on plan assets                         (5,821)      (6,081)      (5,988)
Net amortization and deferrals                   167          175         (111)
Amortization of transitional obligation         (198)        (172)        (174)
Additional amounts recognized                  1,142          635           66
Curtailment charge                                 -          734            -
                                            ---------    ---------    ---------
  Net periodic pension cost                 $  2,096     $  1,971     $    364
                                            =========    =========    =========
Other Benefits
Service cost                                $    979     $    822     $    818
Interest cost                                  2,714        2,762        3,220
Net amortization and deferrals                (1,396)        (799)        (799)
Amortization of transitional obligation           89           39           40
Net actuarial costs                             (588)      (1,356)      (1,051)
                                            ---------    ---------    ---------
  Net periodic benefit cost                 $  1,798     $  1,468     $  2,228
                                            =========    =========    =========

         The Company incurred a $0.7 million  curtailment  charge in Fiscal 2002
due to a reduction in workforce at the Springfield facility.

         The following table sets forth the change in benefit obligation for the
Company's benefit plans (in thousands):

<TABLE>
<CAPTION>
                                                      Pension Benefits                    Other Benefits
                                              --------------------------------  --------------------------------
                                               September 28,    September 29,    September 28,    September 29,
                                                   2003             2002             2003             2002
                                              ---------------  ---------------  ---------------  ---------------
<S>                                           <C>              <C>              <C>              <C>
Change in benefit obligation:
Benefit obligation at beginning of period        $  79,019        $  75,940        $  38,308        $  43,938
Service cost                                         1,151            1,277              979              822
Interest cost                                        5,655            5,403            2,714            2,762
Amendments                                               -                -           (4,540)               -
Actuarial loss or (gain)                            12,811              795           18,760              (82)
Participant contributions to the plan                  188              188                -                -
Benefits paid                                       (5,232)          (4,585)          (5,595)          (9,132)
Other                                                1,463                1            3,026                -
                                                 ----------       ----------       ----------       ----------
  Benefit obligation at end of year              $  95,055        $  79,019        $  53,652        $  38,308
                                                 ==========       ==========       ==========       ==========
Change in plan assets:
Fair value of plan assets at beginning of
  year                                           $  60,515        $  61,572        $       -        $       -
Actual return on plan assets                         1,749           (1,398)               -                -
Employer contributions to plan                       5,414            4,737            5,595            9,132
Participant contributions to plan                      188              188                -                -
Benefits paid                                       (5,232)          (4,585)          (5,595)          (9,132)
Other                                                1,485                1                -                -
                                                 ----------       ----------       ----------       ----------
  Fair value of plan assets at end of year       $  64,119        $  60,515        $       -        $       -
                                                 ==========       ==========       ==========       ==========


Funded status                                    $ (30,936)       $ (18,504)       $ (53,652)       $ (38,308)
Unrecognized prior service cost                      1,683            1,836           (5,516)          (4,805)
Unrecognized transition obligation                  (1,799)          (1,716)           1,056                -
Unrecognized loss (gain)                            34,634           18,499            7,632          (11,450)
                                                 ----------       ----------       ----------       ----------
  Net amount recognized                          $   3,582        $     115        $ (50,480)       $ (54,563)
                                                 ==========       ==========       ==========       ==========
</TABLE>

                                       54
<PAGE>
         The following sets forth the amounts  recognized  in  the  Consolidated
Balance Sheets (in thousands):

                                              Pension Benefits
                                     -------------------------------
                                      September 28,    September 29,
                                          2003             2002
                                     ---------------  --------------
Accrued benefit liability               $ (29,490)       $ (19,514)
Intangible asset                            1,683            1,813
Deferred income taxes                      12,555            7,126
Accrued other comprehensive loss           18,834           10,690
                                        ----------       ----------
  Net amount recognized                 $   3,582        $     115
                                        ==========       ==========


         The  assumptions  used in computing  the preceding  information  are as
follows:

<TABLE>
<CAPTION>
                                                          Fiscal
                                --------------------------------------------------------
                                       2003               2002               2001
                                ------------------  -----------------  -----------------
<S>                             <C>                 <C>                <C>
Pension Benefits
Discount rate                    6.00%  to  6.25%         7.25%              7.38%
Rate of return on plan assets    8.75%  to  9.00%    8.00% to 10.00%    8.00% to 10.00%

Other Benefits
Discount rate                    6.00%  to  6.25%    7.00% to  8.00%    7.38% to 8.00%
</TABLE>


         For  measurement  purposes,  a 9.0% to 9.5%  annual rate of increase in
health care  benefits  was  assumed for 2003.  The rate is assumed to be 8.0% to
8.5% in Fiscal 2004,  7.0% to 7.5% in Fiscal 2005,  6.0% to 6.5% in Fiscal 2006,
5.0% to 5.5% in Fiscal 2007 and 5.0% to 4.5% thereafter.

         A one  percentage  point  change in the assumed  health care cost trend
rate would have the following effects (in thousands):

                                  One Percentage     One Percentage
                                  Point Increase     Point Decrease
                                 ----------------   ----------------
Effect on accumulated post-
  retirement benefit obligation      $ 2,165           $ (1,892)
Effect on net periodic post-
  retirement benefit cost            $   234           $   (209)


25.  ACCUMULATED OTHER COMPREHENSIVE LOSS

         The components of accumulated other comprehensive loss, net of tax, are
as follows (in thousands):

                                        September 28,       September 29,
                                            2003                2002
                                       ---------------     ---------------

Foreign currency translation
  adjustment                              $  (2,528)          $  (2,723)
Minimum pension liability
  adjustment                                (18,834)            (10,690)
                                          ----------          ----------
Accumulated other comprehensive loss      $ (21,362)          $ (13,413)
                                          ==========          ==========


26.  CONTINGENCIES


         On July  13,  1999,  the  Company  received  a  letter  from  the  U.S.
Environmental  Protection Agency ("EPA") identifying the Company, among numerous
others, as a "potential responsible party" under the Comprehensive Environmental
Response,  Compensation and Liability Act of 1980, as amended  ("CERCLA"),  at a
site

                                       55
<PAGE>
in Baltimore,  Maryland.  The EPA letter is not a final determination by the EPA
concerning  the  liability of the Company or the  liability of any other entity.
The  Company  responded  to the EPA  that  upon  review  of its  files it had no
information  with respect to any dealings  with that site. On December 20, 1999,
the Company  received an information  request  letter from the EPA,  pursuant to
CERCLA,  regarding a Container  Recycling  Superfund Site in Kansas City, Kansas
and in January 2000 the Company  responded to such inquiry.  In both  instances,
the Company  has  received no further  communication  from the EPA.  The Company
denies liability and has no reason to believe the final outcome of these matters
will have a material  adverse  effect on the  Company's  financial  condition or
results of  operations.  However,  no assurance  can be given about the ultimate
effect on the Company, if any.

         The Company is subject to legal proceedings and other claims arising in
the ordinary course of its business. The Company maintains insurance coverage of
types and in amounts which it believes to be adequate. The Company believes that
it is not  presently  a party to any  litigation,  the  outcome  of which  could
reasonably  be  expected  to have a  material  adverse  effect on its  financial
condition or results of operations.


27.  SWEETHEART CUP COMPANY INC.

         All of the  outstanding  stock of Sweetheart Cup is owned by Sweetheart
Holdings  and thereby  Sweetheart  Holdings is the only  guarantor  of the 12.0%
Senior Notes, as amended. The guarantee is full and unconditional. The following
financial  information  for  Sweetheart  Cup  and its  subsidiaries,  Sweetheart
Holdings and the Company is presented in accordance with Rule 3-10 of Regulation
S-K (in thousands):

                                       56
<PAGE>
<TABLE>
<CAPTION>
                                                                Consolidated Balance Sheet
                                                                    September 28, 2003
                                                 ---------------------------------------------------------
                                                                                              Sweetheart
                                                  Sweetheart    Sweetheart      Holdings       Holdings
                                                     Cup         Holdings     Elimination    Consolidated
                                                 ------------  ------------  -------------  --------------
<S>                                              <C>           <C>           <C>            <C>

                     Assets
Current assets:
  Cash and cash equivalents                       $  10,447     $       -     $        -      $   10,447
  Cash in escrow                                         77             -              -              77
  Receivables                                       208,229             -        (49,738)        158,491
  Raw materials inventory                            63,048             -              -          63,048
  Work in progress inventory                         10,310             -              -          10,310
  Finished goods inventory                          147,075             -              -         147,075
  Assets held for sale                                    -         5,275              -           5,275
  Other current assets                               55,872         2,688         (2,688)         55,872
                                                  ----------    ----------    -----------     -----------
    Total current assets                            495,058         7,963        (52,426)        450,595

Property, plant and equipment, net                  240,975             -              -         240,975
Deferred income taxes                                33,852       (21,566)         9,736          22,022
Other assets                                         94,654       110,677       (110,677)         94,654
                                                  ----------    ----------    -----------     -----------

    Total assets                                  $ 864,539     $  97,074     $ (153,367)     $  808,246
                                                  ==========    ==========    ===========     ===========

      Liabilities and Shareholder's Equity
Current liabilities:
  Accounts payable                                $ 121,619     $       -     $        -      $  121,619
  Other current liabilities                          96,835             -         (2,688)         94,147
  Current portion of long-term debt                 116,948             -              -         116,948
                                                  ----------    ----------    -----------     -----------
    Total current liabilities                       335,402             -         (2,688)        332,714

Long-term debt                                      286,931        49,738        (49,738)        286,931
Other liabilities                                   197,003             -        (65,177)        131,826
                                                  ----------    ----------    -----------     -----------

    Total liabilities                               819,336        49,738       (117,603)        751,471
                                                  ----------    ----------    -----------     -----------

Minority interest                                     2,403             -              -           2,403
                                                  ----------    ----------    -----------     -----------

Shareholder's equity:
  Class A Common Stock                                    -            10              -              10
  Class B Common Stock                                    -            44              -              44
  Additional paid-in capital                        123,717        78,095       (100,600)        101,212
  Accumulated deficit                               (59,555)      (30,813)        64,836         (25,532)
  Accumulated other comprehensive loss              (21,362)            -              -         (21,362)
                                                  ----------    ----------    -----------     -----------

    Total shareholder's equity                       42,800        47,336        (35,764)         54,372
                                                  ----------    ----------    -----------     -----------


    Total liabilities and shareholder's equity    $ 864,539     $  97,074     $ (153,367)     $  808,246
                                                  ==========    ==========    ===========     ===========
</TABLE>

                                       57
<PAGE>
<TABLE>
<CAPTION>
                                                                  Consolidated Balance Sheet
                                                                       September 29, 2002
                                                 ---------------------------------------------------------
                                                                                              Sweetheart
                                                  Sweetheart    Sweetheart      Holdings       Holdings
                                                     Cup         Holdings     Elimination    Consolidated
                                                 ------------  ------------  -------------  --------------
<S>                                              <C>           <C>           <C>            <C>
                     Assets
Current assets:
  Cash and cash equivalents                       $   8,035     $       -     $        -      $    8,035
  Cash in escrow                                          -             -              -               -
  Receivables                                       199,512             -        (46,971)        152,541
  Raw materials inventory                            57,305             -              -          57,305
  Work in progress inventory                         11,197             -              -          11,197
  Finished goods inventory                          150,925             -              -         150,925
  Assets held for sale                                    -         5,275              -           5,275
  Other current assets                               56,577         2,551         (2,551)         56,577
                                                  ----------    ----------    -----------     -----------
    Total current assets                            483,551         7,826        (49,522)        441,855


Property, plant and equipment, net                  252,491             -              -         252,491
Deferred income taxes                                41,070       (20,927)         9,736          29,879
Other assets                                         96,618       106,450       (106,450)         96,618
                                                  ----------     ---------    -----------     -----------

    Total assets                                  $ 873,730     $  93,349     $ (146,236)     $  820,843
                                                  ==========    ==========    ===========     ===========

      Liabilities and Shareholder's Equity
Current liabilities:
  Accounts payable                                $ 102,986     $       -     $        -      $  102,986
  Other current liabilities                          94,763             -         (2,551)         92,212
  Current portion of long-term debt                 119,853             -              -         119,853
                                                  ----------    ---------     -----------     -----------
    Total current liabilities                       317,602             -         (2,551)        315,051

Long-term debt                                      317,448        46,971        (46,971)        317,448
Other liabilities                                   199,781             -        (60,950)        138,831
                                                  ----------    ----------    -----------     -----------

    Total liabilities                               834,831        46,971       (110,472)        771,330
                                                  ----------    ----------    -----------     -----------

Minority interest                                     2,276             -              -           2,276
                                                  ----------    ----------    -----------     -----------

Shareholder's equity:
  Class A Common Stock                                    -            10              -              10
  Class B Common Stock                                    -            44              -              44
  Additional paid-in capital                        123,678        78,095       (100,600)        101,173
  Accumulated deficit                               (73,642)      (31,771)        64,836         (40,577)
  Accumulated other comprehensive loss              (13,413)            -              -         (13,413)
                                                  ----------    ----------    -----------     -----------
    Total shareholder's equity                       36,623        46,378        (35,764)         47,237
                                                  ----------    ----------    -----------     -----------


    Total liabilities and shareholder's equity    $ 873,730     $  93,349     $ (146,236)     $  820,843
                                                  ==========    ==========    ===========     ===========
</TABLE>

                                       58
<PAGE>
<TABLE>
<CAPTION>
                                                             Consolidated Statement of Operations
                                                                          Fiscal 2003
                                                 ---------------------------------------------------------
                                                                                              Sweetheart
                                                  Sweetheart    Sweetheart      Holdings       Holdings
                                                     Cup         Holdings     Elimination    Consolidated
                                                 ------------  ------------  -------------  --------------
<S>                                              <C>           <C>           <C>            <C>
Net sales                                        $ 1,307,921    $       -     $        -     $ 1,307,921
Cost of sales                                      1,141,738            -              -       1,141,738
                                                 ------------   ----------    -----------    ------------

    Gross profit                                     166,183            -              -         166,183

Selling, general and administrative expenses         108,240            -              -         108,240
Restructuring charge                                     486            -              -             486
Asset impairment expense                                 721            -              -             721
Other income, net                                     (8,323)           -              -          (8,323)
                                                 ------------   ----------    -----------    ------------

    Operating income                                  65,059            -              -          65,059

Interest expense, net                                 40,894       (1,597)             -          39,297
Loss on debt extinguishment                              475            -              -             475
                                                 ------------   ----------    -----------    ------------

    Income before income tax and
    minority interest                                 23,690        1,597              -          25,287

Income tax expense                                     9,476          639              -          10,115
Minority interest in subsidiary                          127            -              -             127
                                                 ------------   ----------    -----------    ------------

    Net income                                   $    14,087    $     958     $        -     $    15,045
                                                 ============   ==========    ===========    ============

Other comprehensive income:

    Net income                                   $    14,087    $     958     $        -     $    15,045
    Foreign currency translation
      adjustment                                         195            -              -             195
    Minimum pension liability
      adjustment (net of income tax
      benefit of ($5,429))                            (8,144)           -              -          (8,144)
                                                 ------------   ----------    -----------    ------------

      Comprehensive income                       $     6,138    $     958     $        -     $     7,096
                                                 ============   ==========    ===========    ============
</TABLE>

                                       59
<PAGE>
<TABLE>
<CAPTION>
                                                             Consolidated Statement of Operations
                                                                          Fiscal 2002
                                                 ---------------------------------------------------------
                                                                                              Sweetheart
                                                  Sweetheart    Sweetheart      Holdings       Holdings
                                                     Cup         Holdings     Elimination    Consolidated
                                                 ------------  ------------  -------------  --------------
<S>                                              <C>           <C>           <C>            <C>
Net sales                                        $ 1,283,547    $ 116,485     $ (116,485)    $ 1,283,547
Cost of sales                                      1,141,214      106,760       (117,710)      1,130,264
                                                 ------------   ----------    -----------    ------------

    Gross profit                                     142,333        9,725          1,225         153,283

Selling, general and administrative expenses         113,893          930              -         114,823
Restructuring charge                                   1,893            -              -           1,893
Asset impairment expense                                 593            -              -             593
Other expense, net                                       877            -          1,225           2,102
                                                 ------------   ----------    -----------    ------------

    Operating income                                  25,077        8,795              -          33,872

Interest expense, net                                 35,061        2,018              -          37,079
Loss on debt extinguishment                            1,798            -              -           1,798
                                                 ------------   ----------    -----------    ------------

    Income  (loss)  before income tax and
    minority interest                                (11,782)       6,777              -          (5,005)

Income tax  (benefit) expense                         (4,713)       2,711              -          (2,002)
Minority interest in subsidiary                          145            -              -             145
                                                 ------------   ----------    -----------    ------------

    Net income  (loss)                           $    (7,214)   $   4,066     $        -     $    (3,148)
                                                 ============   ==========    ===========    ============

Other comprehensive income (loss):

    Net income (loss)                            $    (7,214)   $   4,066     $        -     $    (3,148)
    Foreign currency translation
      adjustment                                        (912)           -              -            (912)
    Minimum pension liability
      adjustment (net of income tax
      benefit of ($3,166))                            (4,749)           -              -          (4,749)
                                                 ------------   ----------    -----------    ------------

    Comprehensive income (loss)                  $   (12,875)   $   4,066     $        -     $    (8,809)
                                                 ============   ==========    ===========    ============
</TABLE>

                                       60
<PAGE>
<TABLE>
<CAPTION>
                                                             Consolidated Statement of Operations
                                                                          Fiscal 2001
                                                 ---------------------------------------------------------
                                                                                              Sweetheart
                                                  Sweetheart    Sweetheart      Holdings       Holdings
                                                     Cup         Holdings     Elimination    Consolidated
                                                 ------------  ------------  -------------  --------------
<S>                                              <C>           <C>           <C>            <C>
Net sales                                        $ 1,316,672    $ 237,595     $ (237,595)    $ 1,316,672
Cost of sales                                      1,166,458      217,788       (240,440)      1,143,806
                                                 ------------   ----------    -----------    ------------

    Gross profit                                     150,214       19,807          2,845         172,866

Selling, general and administrative expenses         111,277        1,954              -         113,231
Restructuring charge                                     504            -              -             504
Asset impairment expense                               2,244            -              -           2,244
Other income, net                                    (12,681)           -          2,845          (9,836)
                                                 ------------   ----------    -----------    ------------

    Operating income                                  48,870       17,853              -          66,723

Interest expense, net                                 34,806        4,113              -          38,919
                                                 ------------   ----------    -----------    ------------

    Income before income tax and
    minority interest                                 14,064       13,740              -          27,804

Income tax expense                                     5,724        5,496              -          11,220
Minority interest in subsidiary                           68            -              -              68
                                                 ------------   ----------    -----------    ------------

    Net income                                   $     8,272    $   8,244     $        -     $    16,516
                                                 ============   ==========    ===========    ============

Other comprehensive income:

    Net income                                   $     8,272     $  8,244     $        -     $    16,516
    Foreign currency translation
      adjustment                                        (393)           -              -            (393)
    Minimum pension liability
      adjustment  (net  of  income tax
      benefit of $(3,489))                            (5,234)           -              -          (5,234)
                                                 ------------   ----------    -----------    ------------

    Comprehensive income                         $     2,645    $   8,244     $        -     $    10,889
                                                 ============   ==========    ===========    ============
</TABLE>

                                       61
<PAGE>
<TABLE>
<CAPTION>
                                                                  Consolidated Statement of Cash Flows
                                                                               Fiscal 2003
                                                       ---------------------------------------------------------
                                                                                                    Sweetheart
                                                        Sweetheart    Sweetheart      Holdings       Holdings
                                                           Cup         Holdings     Elimination    Consolidated
                                                       ------------  ------------  -------------  --------------
<S>                                                    <C>           <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES

    Net cash provided by operating activities           $  57,852      $      -      $       -      $   57,852
                                                        ----------     ---------     ----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES

  Additions to property, plant and equipment              (13,770)            -              -         (13,770)
  Due to/from SF Holdings                                       2             -              -               2
  Proceeds from sale of investment                            330             -              -             330
  Proceeds from sale of property, plant and equipment          65             -              -              65
                                                        ----------     ---------     ----------     -----------
    Net cash used in investing activities                 (13,373)            -              -         (13,373)
                                                        ----------     ---------     ----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES

  Net repayments under credit  facilities                 (10,030)            -              -         (10,030)
  Repayment of other debt                                 (27,729)            -              -         (27,729)
  Borrowings                                                2,000             -              -           2,000
  Debt issuance costs                                      (6,231)            -              -          (6,231)
  Increase in cash escrow                                    (385)            -              -            (385)
  Decrease in cash escrow                                     308             -              -             308
                                                        ----------     ---------     ----------     -----------
    Net cash used in financing activities                 (42,067)            -              -         (42,067)
                                                        ----------     ---------     ----------     -----------

NET INCREASE  IN CASH AND CASH EQUIVALENTS                  2,412             -              -           2,412

CASH AND CASH EQUIVALENTS, beginning of year                8,035             -              -           8,035
                                                        ----------     ---------     ----------     -----------

CASH AND CASH EQUIVALENTS, end of year                  $  10,447      $      -      $       -      $   10,447
                                                        ==========     =========     ==========     ===========

SUPPLEMENTAL CASH FLOW DISCLOSURES:

    Interest paid                                       $  31,677      $      -      $       -      $   31,677
                                                        ==========     =========     ==========     ===========

    Income taxes received                               $  (3,121)     $      -      $       -      $   (3,121)
                                                        ==========     =========     ==========     ===========
</TABLE>

                                       62
<PAGE>
<TABLE>
<CAPTION>
                                                                    Consolidated Statement of Cash Flows
                                                                                 Fiscal 2002
                                                       ---------------------------------------------------------
                                                                                                     Sweetheart
                                                        Sweetheart    Sweetheart      Holdings        Holdings
                                                           Cup         Holdings     Elimination    Consolidated
                                                       ------------  ------------  -------------  --------------
<S>                                                    <C>           <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES

    Net cash provided by operating activities           $  28,469      $ 88,148      $ (88,148)     $   28,469
                                                        ----------     ---------     ----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES

  Additions to property, plant and equipment              (21,206)            -              -         (21,206)
  Due to/from SF Holdings                                     (64)            -              -             (64)
  Proceeds from sale of property, plant and equipment       5,284             -              -           5,284
                                                        ----------     ---------     ----------     -----------
    Net cash used in investing activities                 (15,986)            -              -         (15,986)
                                                        ----------     ---------     ----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES

  Net borrowings under credit  facilities                 200,254             -              -         200,254
  Repayments under credit  facilities                    (196,144)            -              -        (196,144)
  Repayment of  intercompany equipment financing                -       (88,148)        88,148               -
  Repayment of other debt                                  (9,633)            -              -          (9,633)
  Borrowings                                                2,000             -              -           2,000
  Debt issuance costs                                     (12,549)            -              -         (12,549)
  Increase in cash escrow                                  (4,589)            -              -          (4,589)
  Decrease in cash escrow                                   4,597             -              -           4,597
                                                        ----------     ---------     ----------     -----------
    Net cash used in financing activities                 (16,064)      (88,148)        88,148         (16,064)
                                                        ----------     ---------     ----------     -----------

NET DECREASE  IN CASH AND CASH EQUIVALENTS                 (3,581)            -              -          (3,581)

CASH AND CASH EQUIVALENTS, beginning of year               11,616             -              -          11,616
                                                        ----------     ---------     ----------     -----------

CASH AND CASH EQUIVALENTS, end of year                  $   8,035      $      -      $       -      $    8,035
                                                        =========      =========     ==========     ===========

SUPPLEMENTAL CASH FLOW DISCLOSURES:

    Interest paid                                       $  34,426      $      -      $       -      $   34,426
                                                        ==========     =========     ==========     ===========

    Income taxes paid                                   $     880      $      -      $      -       $      880
                                                        ==========     =========     ==========     ===========
</TABLE>

                                       63
<PAGE>
<TABLE>
<CAPTION>
                                                                    Consolidated Statement of Cash Flows
                                                                                 Fiscal 2001
                                                       ---------------------------------------------------------
                                                                                                    Sweetheart
                                                        Sweetheart    Sweetheart      Holdings       Holdings
                                                           Cup         Holdings     Elimination    Consolidated
                                                       ------------  ------------  -------------  --------------
<S>                                                    <C>           <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES

    Net cash  provided by operating activities          $  13,774      $ 17,130      $ (17,130)     $   13,774
                                                        ----------     ---------     ----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES

  Additions to property, plant and equipment              (31,701)            -              -         (31,701)
  Payment for business acquisition                        (40,665)            -              -         (40,665)
  Due to/from SF Holdings                                     543             -              -             543
  Proceeds from sale of property, plant and equipment         120             -              -             120
                                                        ----------     ---------     ----------     -----------
    Net cash used in investing activities                 (71,703)            -              -         (71,703)
                                                        ----------     ---------     ----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES

  Net borrowings under credit  facilities                  66,427             -              -          66,427
  Repayment of  intercompany equipment financing                -       (17,130)        17,130               -
  Repayments of other debt                                   (715)            -              -            (715)
  Debt issuance costs                                      (1,287)            -              -          (1,287)
  Increase in cash escrow                                     (17)            -              -             (17)
  Decrease in cash escrow                                     309             -              -             309
                                                        ----------     ---------     ----------     -----------
    Net cash provided by (used in)financing activities     64,717       (17,130)        17,130          64,717
                                                        ----------     ---------     ----------     -----------

NET INCREASE  IN CASH AND CASH EQUIVALENTS                  6,788             -              -           6,788

CASH AND CASH EQUIVALENTS, beginning of year                4,828             -              -           4,828
                                                        ----------     ---------     ----------     -----------

CASH AND CASH EQUIVALENTS, end of year                  $  11,616      $      -      $       -      $   11,616
                                                        ==========     =========     ==========     ===========

SUPPLEMENTAL CASH FLOW DISCLOSURES:

    Interest paid                                       $  37,070      $      -      $       -      $   37,070
                                                        ==========     =========     ==========     ===========

    Income taxes paid                                   $   2,484      $      -      $       -      $    2,484
                                                        ==========     =========     ==========     ===========
</TABLE>


28.  SUBSEQUENT EVENT

         Pursuant to a preliminary  offering  circular,  dated December 2, 2003,
the Company is proposing  to sell $100.0  million of senior  secured  notes in a
private placement.  In addition,  the Company is selling $20.0 million of junior
subordinated  notes  in a  separate  private  placement.  The  proceeds  of both
offerings  would be used to repay a portion of its Senior Credit Facility and to
redeem all of its  outstanding  12% Senior  Notes due 2004.  The senior  secured
notes would bear interest at a fixed rate that has not yet been  determined  and
would mature in 2007. The junior subordinated notes, which would be purchased by
International Paper Company, one of the Company's raw materials suppliers, would
bear interest at the rate of 9-1/2% and would mature in 2008. The senior secured
notes and the junior  subordinated notes are being offered in private placements
and will not be registered under the Securities Act of 1933. The Company intends
to complete the private placements and debt repayments by December 31, 2003.

                                       64
<PAGE>
                      INDEX TO FINANCIAL STATEMENT SCHEDULE




                                                                            Page

Independent Auditors' Report                                                66


Schedule II - Valuation and Qualifying Accounts                             67

                                       65
<PAGE>
INDEPENDENT AUDITORS' REPORT


To the Board of Directors of
Sweetheart Holdings Inc.

         We have audited the  consolidated  financial  statements  of Sweetheart
Holdings  Inc. and  subsidiaries  (the  "Company")  as of September 28, 2003 and
September  29, 2002,  and for each of the three fiscal years in the period ended
September 28, 2003,  and have issued our report  thereon dated  December 5, 2003
(which  report  expresses an  unqualified  opinion and  includes an  explanatory
paragraph  concerning  the  adoption of a new  accounting  principle in the year
ended September 28, 2003); such consolidated financial statements and report are
included in this Form 10-K.  Our audits also  included the  financial  statement
schedule listed in the accompanying  index. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an  opinion  based on our  audits.  In our  opinion,  such  financial  statement
schedule,  when  considered  in  relation  to the basic  consolidated  financial
statements taken as a whole,  presents  fairly,  in all material  respects,  the
information set forth therein.


/s/ DELOITTE & TOUCHE LLP
Baltimore, Maryland
December 5, 2003

                                       66
<PAGE>
                                                                     SCHEDULE II


                    SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                Additions
                                                   ----------------------------------
                                       Balance at
                                        beginning    Charged to          Charged                         Balance at
                                           of        costs and          to other                           end of
          Classifications                period       expenses         accounts (1)     Deductions (2)     period
          ---------------              ----------  -------------    -----------------  ---------------  -----------
<S>                                    <C>         <C>              <C>                <C>              <C>
Allowance for Doubtful Accounts:
Fiscal 2003                             $  3,741     $ 1,503            $    (69)         $ (1,294)       $ 3,881
Fiscal 2002                                3,395       3,708              (3,308)              (54)         3,741
Fiscal 2001                                3,531       1,930              (1,077)             (989)         3,395
</TABLE>


(1)      Includes  recoveries on accounts  previously  written-off,  translation
         adjustments and reclassifications.
(2)      Accounts written-off.


<TABLE>
<CAPTION>
                                       Balance at
                                        beginning                                                        Balance at
                                           of                  Additions                                   end of
          Classifications                period    Charged to costs and expenses (3)    Deductions (4)     period
          ---------------              ----------  ----------------------------------  ---------------  -----------
<S>                                    <C>         <C>                                 <C>              <C>
Inventory Allowances:
Fiscal 2003                             $ 10,776            $   1,126                    $  (2,512)       $ 9,390
Fiscal 2002                               12,744                2,506                       (4,474)        10,776
Fiscal 2001                               18,994                5,731                      (11,981)        12,744
</TABLE>


(3)      Includes translation adjustments
(4)      Inventory written-off.

                                       67
<PAGE>
                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned,  thereunto duly authorized, in the City of Owings
Mills, State of Maryland, on December 11, 2003.

                                           SWEETHEART HOLDINGS INC.
                                           (Registrant)

                                            By: /s/  DENNIS MEHIEL
                                                ------------------
                                            Dennis Mehiel
                                            Chairman and Chief Executive Officer



Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this report has been  signed on December  11,  2003,  by the  following
persons in the capacities indicated:

     Signature                                                   Title(s)

/s/ Dennis Mehiel                     Chairman and Chief Executive Officer
-----------------                     (Principal Executive Officer)
Dennis Mehiel

/s/ Thomas Uleau                      Chief Operating Officer and Vice Chairman
----------------
Thomas Uleau

/s/ Hans H. Heinsen                   Senior Vice President - Finance and Chief
-------------------                   Financial Officer (Principal Financial and
Hans H. Heinsen                       Accounting Officer)


/s/ John A. Catsimatidis              Director
------------------------
John A. Catsimatidis

/s/ Dennis Pilotti                    Director
------------------
Dennis Pilotti

/s/ G. William Seawright              Director
------------------------
G. William Seawright

                                       68
<PAGE>
                            CERTIFICATION PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002


I, Dennis Mehiel, certify that:


1.   I have reviewed this annual report on Form 10-K of Sweetheart Holdings Inc;

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

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

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

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

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

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


     Date:  December 11, 2003               SWEETHEART HOLDINGS INC.
            -----------------               (Registrant)

                                            By: /s/  DENNIS MEHIEL
                                            ----------------------
                                            Dennis Mehiel
                                            Chairman and Chief Executive Officer

                                       69
<PAGE>
                            CERTIFICATION PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002



I, Hans H. Heinsen, certify that:


1.   I have reviewed this annual report on Form 10-K of Sweetheart Holdings Inc;

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

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

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

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

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

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



     Date:  December 11, 2003       SWEETHEART HOLDINGS INC.
            -----------------       (Registrant)

                                    By: /s/  HANS H. HEINSEN
                                        --------------------
                                    Hans H. Heinsen
                                    Senior Vice President - Finance
                                    and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)

                                       70